-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PlmxzrrlTV57/4O2o4iChDkgq/saVW9Vc1OrMeP63KkdAsj7oYp5rx9nLS8uj46v sWNYELbN8/Rfclb6a9HadQ== 0000036029-98-000006.txt : 19980514 0000036029-98-000006.hdr.sgml : 19980514 ACCESSION NUMBER: 0000036029-98-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 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: SEC FILE NUMBER: 000-07674 FILM NUMBER: 98617506 BUSINESS ADDRESS: STREET 1: 400 PINE STREET STREET 2: STE 600 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 March 31, 1998 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) 627-7155 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 . There were 8,662,462 shares of common stock outstanding as of May 5, 1998. TABLE OF CONTENTS PART I FINANCIAL INFORMATION Item Page 1. Financial Statements 4 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 March 31, 1998, December 31, 1997, and March 31, 1997, and the consolidated statement of earnings, the consolidated statement of changes in shareholders' equity, and the consolidated statement of cash flows for the three months ended March 31, 1998 and 1997, follow on pages 4 through 8. FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, 1998 1997 December 31, (Unaudited) (Unaudited) 1997 -------------- -------------- -------------- ASSETS Cash and due from banks $ 76,614,086 $ 68,928,254 $ 88,795,827 Interest-bearing deposits in banks 203,722 888,538 398,671 Federal funds sold 72,072,170 51,066,013 114,485,839 Investment securities: Securities held to maturity (market value of $438,956,376 and $476,233,788 at March 31, 1998 and 1997, and $414,160,027 at December 31, 1997) 436,284,683 476,906,262 411,857,644 Securities available for sale, at market value 155,909,377 60,798,833 170,697,516 -------------- -------------- -------------- Total investment securities 592,194,060 537,705,095 582,555,160 Loans 733,075,686 604,658,799 716,792,426 Less: Allowance for loan losses 9,921,476 9,715,947 10,288,200 Unearned discount 7,201,580 7,551,167 7,853,724 -------------- -------------- -------------- Net loans 715,952,630 587,391,685 698,650,502 Bank premises and equipment-net 41,507,344 38,434,228 41,501,074 Goodwill 22,652,589 5,659,397 23,054,329 Other assets 23,633,473 21,211,437 24,067,522 -------------- -------------- -------------- TOTAL ASSETS $ 1,544,830,074 $ 1,311,284,647 $ 1,573,508,924 ============== ============== ============== LIABILITIES Noninterest-bearing deposits $ 296,224,030 $ 241,645,804 $ 311,318,296 Interest-bearing demand deposits 401,206,811 319,497,588 399,745,364 Interest-bearing time deposits 680,182,870 598,629,532 701,660,161 -------------- -------------- -------------- Total deposits 1,377,613,711 1,159,772,924 1,412,723,821 Dividends payable 2,164,244 1,883,736 2,162,899 Other short-term borrowings 2,590,000 100,000 4,770,000 Other liabilities 10,966,859 11,176,564 5,625,741 -------------- -------------- -------------- Total liabilities 1,393,334,814 1,172,933,224 1,425,282,461 -------------- -------------- -------------- SHAREHOLDERS' EQUITY Capital stock-$10 par value; 20,000,000 shares authorized 86,569,770 69,440,720 86,515,950 Capital surplus 36,346,906 36,350,286 36,350,673 Retained earnings 28,213,490 33,025,844 24,996,973 Unrealized gain (loss) on investment securities available for sale 365,094 (465,427) 362,867 -------------- -------------- -------------- Total shareholders' equity 151,495,260 138,351,423 148,226,463 -------------- -------------- -------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,544,830,074 $ 1,311,284,647 $ 1,573,508,924 ============== ============== ==============
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED)
Three Months Ended March 31, -------------------------------- 1998 1997 ----------- ----------- INTEREST INCOME Loans, including fees $ 16,400,555 $ 13,905,156 Investment income-taxable 8,294,690 7,484,059 Investment income-tax exempt 551,980 385,358 Interest on interest-bearing deposits 5,006 12,845 Interest on federal funds sold and other 1,139,776 720,511 ----------- ----------- Total interest income 26,392,007 22,507,929 INTEREST EXPENSE Interest-bearing deposits 11,074,982 9,038,106 Short-term borrowings 81,417 1,089 ----------- ----------- Total interest expense 11,156,399 9,039,195 ----------- ----------- NET INTEREST INCOME 15,235,608 13,468,734 Provision for loan losses 151,500 243,000 ----------- ----------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 15,084,108 13,225,734 NONINTEREST INCOME Trust fees 1,202,823 966,070 Service fees on deposit accounts 2,553,683 2,273,134 Other 1,410,731 1,182,904 ----------- ----------- Total noninterest income 5,167,237 4,422,108 NONINTEREST EXPENSE Salaries and employee benefits 6,268,522 5,339,981 Net occupancy and equipment expenses 937,794 869,260 Equipment expense 944,601 780,465 Goodwill amortization 401,742 101,690 Other 3,650,077 3,207,947 ----------- ----------- Total noninterest expense 12,202,736 10,299,343 ----------- ----------- EARNINGS BEFORE INCOME TAXES 8,048,609 7,348,499 Provision for income tax 2,667,848 2,461,448 ----------- ----------- NET EARNINGS $ 5,380,761 $ 4,887,051 =========== =========== BASIC EARNINGS PER SHARE (1) $ 0.62 $ 0.57 EARNINGS PER SHARE, ASSUMING DILUTION (1) $ 0.62 $ 0.57 DIVIDENDS PER SHARE (2) $ 0.25 $ 0.22 (1) Earnings per share are calculated using weighted average shares outstanding for each period presented with the prior period adjusted for 25% stock dividend issued June 2, 1997. (2) Dividends per share are calculated using actual number of shares outstanding at end of each period presented with the prior period adjusted for 25% stock dividend issued June 2, 1997.
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Unrealized Gain (Loss) On Investment Total Securities Share- Capital Stock Capital Retained Available holders' Shares Amount Surplus Earnings for Sale Equity ----------- ----------- ----------- ----------- ---------- ------------ Balances at December 31, 1996 6,718,886 $ 67,188,860 $ 36,874,707 $ 27,363,902 $ (266,623) $ 131,160,846 Adjustments for pooling of interests 216,442 2,164,420 (521,224) 2,658,712 (4,283) 4,297,625 ----------- ----------- ----------- ----------- ---------- ------------ Balances at January 1, 1997 6,935,328 69,353,280 36,353,483 30,022,614 (270,906) 135,458,471 Net earnings - - - 20,063,105 - 20,063,105 Stock issuances 34,873 348,730 (2,810) - - 345,920 Cash dividends declared - - - (8,274,806) - (8,274,806) Stock split effected in the form of a dividend 1,681,394 16,813,940 - (16,813,940) - - Change in unrealized gain (loss) - - - - 633,773 633,773 ----------- ----------- ----------- ----------- ---------- ------------ Balances at December 31, 1997 8,651,595 86,515,950 36,350,673 24,996,973 362,867 148,226,463 Net earnings - - - 5,380,761 - 5,380,761 Stock issuances 5,382 53,820 (3,767) - - 50,053 Cash dividends declared - - - (2,164,244) - (2,164,244) Change in unrealized gain (loss) - - - - 2,227 2,227 ----------- ----------- ----------- ----------- ---------- ------------ Balances at March 31, 1998 (unaudited) 8,656,977 $ 86,569,770 $ 36,346,906 $ 28,213,490 $ 365,094 $ 151,495,260 =========== =========== =========== =========== ========== ============
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS - (UNAUDITED)
Three Months Ended March 31, 1998 1997 -------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 5,380,761 $ 4,887,051 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,440,505 985,758 Provision for loan losses 151,500 243,000 Premium amortization, net of discount accretion 386,817 521,274 (Gain) loss on sale of assets (212,470) 1,079 Deferred federal income tax benefit (400,639) (8,083) Decrease (increase) in other assets 694,882 (38,552) Increase in other liabilities 5,341,118 3,867,067 -------------- ------------ Total adjustments 7,401,713 5,571,543 -------------- ------------ Net cash provided by operating activities 12,782,474 10,458,594 -------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES Net decrease in interest-bearing deposits in banks 194,949 99,956 Proceeds from sale of securities available for sale 2,482,066 179,403 Proceeds from maturity of securities available for sale 87,989,184 1,195,464 Proceeds from maturity of securities held to maturity 48,265,511 49,755,867 Purchase of securities available for sale (73,040,639) (13,544,392) Purchase of securities held to maturity (75,716,578) (54,064,035) Net increase in loans (17,466,129) 1,617,975 Capital expenditures (1,070,896) (2,132,038) Proceeds from sale of assets 387,604 104,370 -------------- ------------ Net cash used in investing activities (27,974,926) (16,787,430) -------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES Net decrease in noninterest-bearing deposits (15,094,266) (21,189,258) Net increase (decrease) in interest-bearing deposits (20,015,844) 12,514,774 Net decrease in other short-term borrowings (2,180,000) - Proceeds from stock issuances 50,053 84,243 Dividends paid (2,162,899) (1,881,288) -------------- ------------ Net cash used in financing activities (39,402,956) (10,471,529) -------------- ------------ Net decrease in cash and cash equivalents (54,595,410) (16,800,365) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 203,281,666 136,794,632 -------------- ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 148,686,256 $ 119,994,267 ============== ============ SUPPLEMENTAL INFORMATION ON CASH FLOWS AND NONCASH TRANSACTIONS Interest paid $ 10,743,327 $ 8,985,677 Federal income tax paid 200,000 4,888,040 Assets acquired through foreclosure 12,500 9,501 Change in unrealized gain (loss) on investment securities available for sale 3,426 (292,974)
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998 (UNAUDITED) 1. Basis of Presentation In the opinion of management, the financial statements reflect all adjustments necessary for a fair presentation of the Company's financial position and results of operations. All adjustments were of a normal recurring nature. However, the results of operations for the three months ended March 31, 1998 are not necessarily indicative of the results to be expected for the year ended December 31, 1998. 2. Effect of Adoption of Accounting Standard The Company adopted Statement of Financial Accounting Standards No. 130, "Reporting of Comprehensive Income," on January 1, 1998. The statement applies to fiscal years beginning after December 15, 1997. The statement requires that comprehensive income be reported in the basic financial statements. Comprehensive income refers to the change in equity during a period from transactions and events other than investments by and distributions to owners. For example, under current accounting literature, comprehensive income would include net income plus unrealized gains and losses on investments in available for sale securities. Comprehensive income for the three months ended March 31, 1998 amounted to $5,382,988. If the statement had been implemented in the three months ended March 31, 1997, comprehensive income for that period would have amounted to $4,692,530. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Operating Results - ----------------- Net income for the first quarter 1998 totaled $5.4 million, an increase of 10.1% over the $4.9 million earned in the first quarter last year. Higher net interest income and fee income were the primary factors contributing to the improved earnings. On a per share basis, earnings amounted to $ .62 per share as compared to $ .57 per share in 1997. Return on average assets and return on average equity amounted to 1.42% and 14.69%, respectively. For the same period in 1997, the Company reported return on average assets of 1.53% and return on average equity of 14.58%. Net interest income for the first quarter 1998 was $1.8 million above the same period last year and was due primarily to loan growth. The net interest margin for the first quarter was 4.50%, down from 4.65% for the first quarter 1997. The provision for loan losses in the first quarter amounted to $152 thousand as compared to $243 thousand for the same period in 1997. Total noninterest income for the first quarter amounted to $5.2 million, up from $4.4 million for the first quarter 1997. Trust fees increased $237 thousand, or 24.5%, and resulted from growth in Trust assets. Deposit service fees increased $281 thousand, or 12.3%, and reflects an increase in the number of accounts and account activity. Other noninterest income for 1998 included a $211 thousand gain on the sale of foreclosed assets as compared to a $2 thousand gain in 1997. Noninterest expense for the first quarter 1998 amounted to $12.2 million, an increase of $1.9 million, or 18.5% over the same period last year. Salaries and employee benefits were $928 thousand, or 17.4% above the first quarter 1997 amount. Higher advertising and business development expense, communication expense, and correspondent bank service charges were factors in the 1998 increase in miscellaneous other expense. Excluding the effect of the Company's purchase acquisition completed in September 1997, total noninterest expense increased approximately $600 thousand, or 5.8%. The Company's key indicator of operating efficiency, noninterest expense as a percent of net interest income and noninterest income, was 59.70% for the first quarter as compared to 57.01% for the first quarter in 1997. Balance Sheet Review - -------------------- Total assets at March 31, 1998, amounted to $1.545 billion as compared to $1.574 billion at December 31, 1997, and $1.311 billion at March 31, 1997. Approximately $155 million of growth in assets over March 31, 1997, resulted from an acquisition finalized in September 1997. The March 31, 1998, decline in total assets from the year-end 1997 balance reflects a seasonal decrease in total deposits. The balance sheets presented reflect normal recurring adjustments and accruals. Loans at March 31, 1998, net of unearned discount, totaled $726 million as compared to $709 million at year-end 1997 and $595 million at March 31, 1997. The previously mentioned 1997 acquisition accounted for approximately $60 million in growth over the March 31, 1997, balance. Investment securities at March 31, 1998, totaled $592 million as compared to $583 million at year-end 1997 and $538 million at March 31, 1997. The net unrealized gain in the investment portfolio at March 31, 1998, amounted to $3.2 million as compared to a $2.9 million gain at December 31, 1997. With an overall yield of 6.23%, the investment portfolio continues to provide a positive contribution to the Company's earnings. Approximately $178 million, or 30%, of the portfolio matures within one year which protects the Company from signficant interest rate risk should interest rates move up. At March 31, 1998, the Company did not hold any CMOs that entail higher risks than standard mortgage-backed securities. Total investment securities at March 31, 1998, included structured notes with an amortized cost of $11.5 million and an approximate market value of $11.4 million. Total deposits at March 31, 1998, amounted to $1.378 billion as compared to $1.413 billion at year-end 1997 and $1.160 billion at March 31, 1997. The decrease from December 31, 1997, is considered seasonal and not indicative of a downward trend in total deposits. The 1997 acquisition accounted for approximately $155 million in total deposit growth from March 31, 1997. Nonperforming assets at March 31, 1998, totaled $3.8 million, or .53% of loans and foreclosed assets, and were down $1.0 million from the December 31, 1997, amount. At March 31, 1998, the allowance for loan losses amounted to 258.3% 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 of this report. At March 31, 1998, the balance sheet reflects adequate liquidity, and the parent company had $7.5 million available under its $10 million line of credit. Total equity capital amounted to $151.5 million at March 31, 1998, which was up from $148.2 million at year-end 1997 and $138.4 million at March 31, 1997. The Company's risk-based capital and leverage ratios at March 31, 1998, were 16.25% and 8.50%, respectively. The first quarter cash dividend of $ .25 per share totaled $2.2 million and represented 40.2% of earnings. On April 28, 1998, the Company declared a $ .275 per share cash dividend which is payable July 1, 1998. Interest Rate Risk - ------------------ Interest rate risk results when the maturity or repricing intervals of interest-earning assets and interest-bearing liabilities are different. The Company's exposure to interest rate risk is managed primarily through the Company's strategy of selecting the types and terms of interest-earning assets and interest-bearing liabilities which generate favorable earnings, while limiting the potential negative effects of changes in market interest rates. The Company uses no off-balance-sheet financial instruments to manage interest rate risk. Each subsidiary bank has an asset/liability committee which monitors interest rate risk and compliance with investment policies. Interest-sensitivity gap and simulation analysis are among the ways that the subsidiary banks track interest rate risk. Since year-end 1997, there has been no material change in interest rates or the Company's interest rate risk. 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: 5-11-98 By:/S/ CURTIS R. HARVEY ------- -------------------- Curtis R. Harvey Executive Vice President and Chief Financial Officer Date: 5-11-98 By:/S/ SANDY LESTER ------- ----------------- Sandy Lester Secretary-Treasurer EX-27 2 FDS --
9 1,000 3-MOS MAR-31-1998 MAR-31-1998 76,614 204 72,072 0 155,909 436,285 438,956 725,874 9,921 1,544,830 1,377,614 2,590 13,131 0 0 0 86,570 64,925 1,544,830 16,401 8,846 1,145 26,392 11,075 11,156 15,236 151 0 12,203 8,049 5,381 0 0 5,381 0.62 0.62 4.50 3,044 135 0 529 10,288 840 322 9,921 9,921 0 0
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