0000036029-95-000007.txt : 19950816 0000036029-95-000007.hdr.sgml : 19950816 ACCESSION NUMBER: 0000036029-95-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950815 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST FINANCIAL BANKSHARES INC CENTRAL INDEX KEY: 0000036029 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 750944023 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-07674 FILM NUMBER: 95563967 BUSINESS ADDRESS: STREET 1: 400 PINE STREET THIRD FL STREET 2: P O BOX 701 CITY: ABILENE STATE: TX ZIP: 79601-0701 BUSINESS PHONE: 9156757155 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended Commission File Number June 30, 1995 0-7674 FIRST FINANCIAL BANKSHARES, INC. (Exact Name of Registrant as Specified in its Charter) Texas 75-0944023 (State of Incorporation) (I.R.S. Employer Identification No.) 400 Pine Street, Abilene, Texas 79601 (Address of Executive Offices) (Zip Code) Registrant's Telephone Number (915) 675-7155 Securities Registered Pursuant to Section 12(b) of the Act: None Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, Par Value $10.00 Per Share (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. 5,007,727 shares TABLE OF CONTENTS PART I FINANCIAL INFORMATION Item Page 1. Financial Statements 3 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Signatures 11 PART I FINANCIAL INFORMATION Item 1. Financial Statements. The consolidated balance sheets of First Financial Bankshares, Inc. at June 30, 1995, December 31, 1994, and June 30, 1994, and the consolidated statements of income, the consolidated statements of changes in stockholders'equity, and the consolidated statements of cash flows for the six months ended June 30, 1995 and 1994, follow on pages 4 through 10. FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - UNAUDITED
June 30, December 31, 1995 1994 1994 ASSETS Cash and due from banks $ 47,746,281 $ 51,097,002 $ 60,536,136 Interest-bearing deposits in banks 498,000 691,000 198,000 Federal funds sold 17,970,000 24,563,000 23,100,000 Investment securities: Securities held-to- maturity (approximate market value of $437,205,300 in 1995, $412,182,944 at June 30, 1994 and $418,895,098 at December 31, 1994) 438,419,072 420,426,418 435,212,460 Securities available- for-sale, at approximate market value 9,968,420 43,271,000 28,031,932 Total investment securities 448,387,492 463,697,418 463,244,392 Loans 450,931,752 411,378,162 432,609,308 Less: Allowance for loan losses 8,860,385 9,249,858 9,024,424 Unearned discount 7,359,168 6,865,665 7,048,685 Net loans 434,712,199 395,262,639 416,536,199 Bank premises and equipment-net 29,527,054 30,388,223 29,466,438 Goodwill 1,143,975 1,452,130 1,181,897 Other assets 17,888,467 18,349,557 18,350,085 TOTAL ASSETS $ 997,873,468 $ 985,500,969 $ 1,012,613,147 LIABILITIES Non interest- bearing deposits $ 182,748,354 $ 180,346,350 $ 200,912,655 Interest-bearing demand deposits 277,325,617 297,072,826 298,904,193 Interest-bearing time deposits 418,945,700 400,324,228 401,112,784 Total deposits 879,019,671 877,743,404 900,929,632 Short-term borrowings 180,000 100,000 90,000 Mortgage notes payable - 1,103,562 1,054,131 Dividends payable 1,552,395 1,394,795 1,399,220 Other liabilities 7,254,666 5,512,137 5,232,262 Total liabilities 888,006,732 885,853,898 908,705,245 SHAREHOLDERS' EQUITY Capital stock- $10 par value; 10,000,000 shares authorized 50,077,270 49,814,120 49,972,140 Capital surplus 36,864,005 36,849,510 36,863,701 Retained earnings 23,194,778 13,708,290 17,769,812 Unrealized (loss) on investment securities available- for-sale (269,317) (724,849) (697,751) Total Shareholders' Equity 109,866,736 99,647,071 103,907,902 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 997,873,468 $ 985,500,969 $ 1,012,613,147
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS - UNAUDITED
Three Months Ended Six Months Ended June 30, June 30, 1995 1994 1995 1994 INTEREST INCOME Loans, including fees $ 10,672,481 $ 8,597,795 $ 20,765,009 $ 16,821,571 Investment income- taxable 6,103,067 5,983,405 12,161,475 11,977,572 Investment income- tax exempt 171,208 218,580 351,755 436,289 Interest on interest- bearing deposits 5,048 11,348 7,601 22,158 Interest on federal funds sold and other 460,576 314,413 805,842 596,334 Total interest income 17,412,380 15,125,541 34,091,682 29,853,924 INTEREST EXPENSE Interest- bearing deposits 6,853,491 5,077,875 13,012,663 9,970,610 Short-term borrowings 4,075 1,668 8,585 2,391 Interest on mortgage notes payable - 26,264 6,323 52,798 Total interest expense 6,857,566 5,105,807 13,027,571 10,025,799 NET INTEREST INCOME 10,554,814 10,019,734 21,064,111 19,828,125 Provision for loan losses - 105,000 20,000 145,000 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 10,554,814 9,914,734 21,044,111 19,683,125 NONINTEREST INCOME Trust fees 768,872 746,422 1,538,309 1,521,235 Service fees on deposit accounts 1,437,098 1,385,745 2,813,358 2,698,354 Net gain (loss) on sale of foreclosed assets 2,035,010 (11,831) 2,035,010 2,527 Other 831,059 637,115 1,687,021 1,601,481 Total non interest income 5,072,039 2,757,451 8,073,698 5,823,597 NONINTEREST EXPENSE Salaries and employee benefits 4,184,647 4,113,821 8,257,408 8,294,621 Net occupancy and equipment expenses 632,161 624,713 1,230,692 1,284,677 Equipment expense 572,419 571,746 1,062,509 1,104,560 FDIC assessments 490,775 499,878 981,552 999,759 Correspondent bank service charges 219,412 228,616 432,263 457,781 Other 2,263,224 1,964,017 4,484,069 4,147,963 Total non interest expense 8,362,638 8,002,791 16,448,493 16,289,361 EARNINGS BEFORE INCOME TAXES 7,264,215 4,669,394 12,669,316 9,217,361 Provision for income tax 2,471,326 1,518,655 4,290,250 2,963,227 NET EARNINGS $ 4,792,889 $ 3,150,739 $ 8,379,066 $ 6,254,134 EARNINGS PER SHARE 1 $ 0.96 $ 0.63 $ 1.67 $ 1.26 DIVIDENDS PER SHARE 2 $ 0.31 $ 0.28 $ 0.59 $ 0.45 1 Earnings per share are calculated using weighted average shares outstanding for each period presented. 2 Dividends per share are calculated using actual number of shares outstanding at the end of each period presented.
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY-UNAUDITED
Unrealized (Loss) On Investment Total Securities Stock- Capital Stock Capital Retained Available- holders' Shares Amount Surplus Earnings for-Sale Equity Balances at December 31, 1993 1 3,978,767 $ 39,787,670 $ 15,948,384 $ 40,973,629 $ - $ 96,709,683 Initial unrealized gain recorded on investment securities available-for-sale 244,069 244,069 Net earnings-year-to-date 13,112,230 13,112,230 Cash dividends (5,462,207) (5,462,207) Exercise of stock options 23,695 236,950 25,525 262,475 Cash paid for fractional shares resulting from stock dividend (16,528) (16,528) Stock dividend 994,752 9,947,520 20,889,792 (30,837,312) Change in unrealized gain (loss) (941,820) (941,820) Balances at December 31, 1994 4,997,214 49,972,140 36,863,701 17,769,812 (697,751) 103,907,902 Net earnings-year-to-date 8,379,066 8,379,066 Cash dividends (2,954,100) (2,954,100) Exercise of stock options 10,513 105,130 304 105,434 Change in unrealized gain (loss) 428,434 428,434 Balances at June 30, 1995 5,007,727 $ 50,077,270 $ 36,864,005 $ 23,194,778 $(269,317) $109,866,736 1 Restated to reflect pooling of interests.
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS - UNAUDITED
Six Months Ended June 30, 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 8,379,066 $ 6,254,134 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,356,187 1,361,664 Provision for loan losses 20,000 145,000 Premium amortization, net of discount accretion 1,449,482 2,196,309 (Gain) loss on sale of foreclosed assets (2,035,010) (2,527) Loss on sale of investment securities 857 28,391 Deferred federal income tax benefit (1,979) (719,097) (Increase) decrease in other assets 341,310 (348,922) Increase in other liabilities 2,022,401 391,719 Total adjustments 3,065,955 3,052,537 Net cash provided by operating activities 11,445,021 9,306,671 CASH FLOWS FROM INVESTING ACTIVITIES: Net increase (decrease) in interest-bearing deposits in banks (300,000) 96,000 Proceeds from sale of investment securities 7,124,844 2,739,810 Proceeds from maturity of investment securities 71,041,117 57,097,697 Purchase of investment securities (64,180,606) (70,304,937) Net (increase) decrease in loans (18,241,882) 16,042,842 Capital expenditures (1,440,618) (1,642,457) Proceeds from sale of assets 2,201,849 6,207 Net cash provided by (used in) investing activities (3,795,296) 4,035,162 CASH FLOWS FROM FINANCING ACTIVITIES: Net decrease in noninterest- bearing deposits (18,164,301) (23,490,455) Net decrease in interest- bearing deposits (3,745,660) (12,115,699) Net decrease in other short-term borrowings 90,000 10,000 Repayment of long term debt (1,054,131) (47,426) Proceeds from stock issuances 105,434 118,919 Purchase of treasury stock - (16,528) Dividends paid (2,800,922) (2,861,490) Net cash used by financing activities (25,569,580) (38,402,679) Net decrease in cash and cash equivalents (17,919,855) (25,060,846) Six Months Ended June 30, 1995 1994 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 83,636,136 100,720,848 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 65,716,281 $ 75,660,002 SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Assets acquired through foreclosure $ 265,132 $ 28,100 Loans to finance sales of other real estate 219,250 248,965 Change in unrealized loss on investment securities available-for-sale 578,794 (932,840) 25% stock dividend increasing (decreasing) Capital stock - 9,947,520 Capital surplus - 20,889,792 Retained earnings - (30,837,312) The Company acquired substantially all of the capital stock of Concho Bancshares, Inc. in exchange for capital stock of the Company, increasing: Capital stock - 2,292,620 Capital surplus - 2,275,500 Retained earnings - 1,669,669 OTHER DISCLOSURES: Interest paid 12,296,832 10,137,001 Federal income tax paid 3,734,927 3,480,284
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Impaired Loans The Company adopted SFAS 114, "Accounting by Creditors for Impairment of a Loan, " and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosures," as of January 1, 1995. SFAS No. 114 requires that certain impaired loans be measured based on the present value of expected future cash flows discounted at the loan's original effective interest rate. As a practical expedient, impairment may be measured based on the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. When the measure of the impaired loan is less that the recorded investment in the loan, the impairment is recorded through a valuation allowance. On collateral dependent loans, the Company has adopted a policy which requires measurement of an impaired loan based on the fair value of the collateral. Other loan impairments will be measured based on the present value of expected future cash flows or the loan's observable market price. The Company had previously measured the allowance for credit losses using methods similar to those prescribed in SFAS No. 114. As a result of adopting these statements, no additional allowance for loan losses was required as of January 1, 1995. At June 30, 1995, all significant impaired loans have been determined to be collateral dependent and have been measured utilizing the fair value of the collateral. As of June 30, 1995, the Company's recorded investment in impaired loans and the related valuation allowance calculated under SFAS No. 114 are as follows:
Recorded Valuation Investment Allowance Impaired loans- Valuation allowance required $ 2,188,140 $ 687,512 No valuation allowance required - - Total impaired loans $ 2,188,140 $ 687,512
This valuation allowance is included in the allowance for loan losses on the balance sheet. The average recorded investment in impaired loans for the six month period ended June 30, 1995, was $2,806,544. The Company had $2,429,508 in nonperforming assets at June 30, 1995, of which $1,579,959 represented recorded investments in impaired loans. Interest payments received on impaired loans are recorded as interest income unless collections of the remaining recorded investment is doubtful at which time payments received are recorded as reductions of principal. The Company recognized interest income on impaired loans of $178,615 during the six month period ended June 30, 1995, of which $100,911 represented cash interest payments received and recorded as interest income. If interest on impaired loans had been recognized on a full accrual basis in the period ended June 30, 1995, such income would have approximated $280,680. FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Allowance for Loan Losses The allowance for loan losses as of June 30, 1995, is presented below. Management has evaluated the adequacy of the allowance for loan losses by estimating the probable losses in various categories of the loan portfolio which are identified below: Allowance for loan losses provided for: Loans specifically evaluated as impaired $ 687,512 Unidentified impaired loans 8,172,873 Total allowance for loan losses $ 8,860,385
The allowance for loan losses is maintained at a level considered adequate to provide for estimated probable incurred losses resulting from loans. The allowance is reviewed periodically, and as losses are incurred and the amounts become estimable, they are charged to operations in the periods that they become known. The activity in the allowance for loan losses was as follows:
June 30, 1995 1994 Balance at beginning of year $ 9,024,424 $ 9,013,387 Provision for credit losses 20,000 145,000 Write-downs (546,198) (700,536) Recoveries 362,159 792,007 Balance at end of period $ 8,860,385 $ 9,249,858
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Review of Operating Results For the six months ended June 30,1995, the Company's earnings amounted to $8.38 million, or $1.67 per share, compared to $6.25 million, or $1.26 per share, earned in the first half of 1994. The 1995 results include net after-tax nonrecurring gains of $1.29 million, or $ .26 per share,generated from the second quarter sale of foreclosed assets (First Tule Bancorp, Inc. common stock and real estate) which had been acquired in prior years through debt settlement arrangements. Excluding these gains, 1995 year-to-date net income from operations was 13% higher than the amount earned in the same period last year. Excluding nonrecurring gains, return on average assets and return on average equity for the six months ended June 30, 1995, amounted to 1.44% and 13.31%, respectively. For the same period last year the Company reported return on average assets of 1.25% and return on average equity of 12.84%. Net income for the second quarter 1995 totaled $4.79 million compared to $3.15 million for the second quarter of 1994. Earnings per share for the second quarter 1995 amounted to $ .96 compared to $ .63 for the second quarter 1994. Year-to-date net interest income was $1.24 million above the 1994 amount and resulted primarily from loan growth. The increase in average loans is reflected in the net interest margin which averaged 4.72% for the first six months of 1995 as compared to 4.49% for the same period last year. Total year-to-date noninterest income for 1995 amounted to $8.1 million, as compared to the 1994 total of $5.8 million. As previously mentioned, the 1995 amount includes nonrecurring gains which, on a before-tax basis, totaled $2.0 million. Trust fees, service fees on deposit accounts, and other noninterest income all reflect modest increases over prior year amounts. For the first six months of 1995 and 1994 realized securities gains or losses were insignificant. Noninterest expense for the first six months of 1995 totaled $16.4 million, which was slightly above the prior year amount of $16.3 million. Excluding the effect of nonrecurring gains, the Company's 1995 efficiency ratio (noninterest expense as a percent of net interest income plus noninterest income) was 60.34%, which was down from the 1994 ratio of 62.81%. Balance Sheet Review Total assets of $998 million at June 30, 1995, represent a $12 million increase from the prior year and a $15 million decrease from December 31, 1994. The balance sheets presented reflect normal recurring adjustments and accruals. Compared to June 30, 1994, loans have increased $38 million and investment securities have decreased $15 million. Approximately one-half of the increase in loans has occurred during the first six months of 1995, with commercial loans increasing $9.3 million and consumer loans increasing $8.5 million. Total net unrealized losses in the investment portfolio at June 30, 1995, amounted to approximately $1.6 million, as compared to net unrealized losses of approximately $17.4 million at December 31, 1994. The reduction in the unrealized loss resulted from the maturity of low-yielding securities and lower market interest rates in 1995. The unrealized loss at June 30, 1995 can be attributed to low-yielding securities purchased during the period of record low interest rates, and which have relatively short remaining maturities. In total, the investment portfolio yields 5.68% which has a positive impact on earnings. At June 30, 1995, the Company did not hold any CMO's that entail higher risks than standard mortgage-backed securities. Total investment securities at June 30, 1995, included structured notes with an amortized cost of $19.0 million and an approximate market value of $18.1 million. Total deposits at June 30, 1995, amounted to $879 million, slightly higher than the prior year and $22 million below the December 31, 1994, balance. The 1995 decline in deposits is attributed to both competition within the industry and the availability of higher-yielding non bank investment products. Loan growth during the first six months of 1995 was funded with maturing investment securities and internally-generated capital and resulted in increased net interest income. This has, to some extent, offset the effect that the decrease in deposits may have otherwise had on net interest income. The Company, therefore, has managed to stay within a deposit interest rate structure that has kept the cost of funds at or near expected rates. Nonperforming assets at June 30, 1995, totaled $2.4 million, down from $3.4 million at June 30, 1994, but up slightly from the year-end 1994 total of $2.2 million. Since year-end 1994, nonaccrual loans have increased $200 thousand and foreclosed assets are virtually unchanged. Due to the current level held, the net cost of operation of other real estate continues to be immaterial. At June 30, 1995, the allowance for loan losses amounted to 364.7% of nonperforming assets. Management is not aware of any material classified credit not properly disclosed as nonperforming and considers the allowance for loan losses to be adequate. Liquidity and Capital The Company's consolidated statements of cash flows are presented on page 7 in this report. At June 30, 1995, the balance sheet reflects adequate liquidity, and the parent company has no funded debt under its line of credit, which was increased to $10 million during the second quarter. Total equity capital amounted to $109.9 million at June 30, 1995, which was up from $103.9 million at December 31, 1994, and $99.6 million at June 30, 1994. The ratio of equity capital to assets at June 30, 1995, was 11.0%, as compared to 10.3% at year-end 1994 and 10.1% at June 30, 1994. The Company's risk-based capital ratio of 21.73% at June 30, 1995, was well above the regulatory guidelines of 8%. The 1995 second quarter dividend of $ .31 per share totaled $1.5 million and represented 32.4% of second quarter earnings. Total dividends declared during 1995 have amounted to $3.0 million, or 35.3% of 1995 year-to-date earnings. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRST FINANCIAL BANKSHARES, INC. Date By: Curtis R. Harvey Executive Vice President and Chief Financial Officer Date By: Sandy Lester Secretary-Treasurer EX-27 2
9 6-MOS DEC-31-1995 JUN-30-1995 47,746,281 498,000 17,970,000 0 9,968,420 438,419,072 437,205,300 443,572,584 8,860,385 997,873,468 879,019,671 180,000 8,807,061 0 50,077,270 0 0 59,789,466 997,873,468 20,765,009 12,513,230 813,443 34,091,682 13,012,663 13,027,571 21,064,111 20,000 0 16,448,493 12,669,316 8,379,066 0 0 8,379,066 1.67 1.67 4.74 1,579,959 82,529 0 390,876 9,024,424 546,198 362,159 8,860,385 8,860,385 0 0