-----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, C/qTc4q2/yifkMoOFY2dSalsx3bnb8yhFOrgoaazPPLzsnXqvBVtNiiPuXtzjIWt U7mgls8GBaTSLqN1zlm7mQ== 0000036029-98-000008.txt : 19980813 0000036029-98-000008.hdr.sgml : 19980813 ACCESSION NUMBER: 0000036029-98-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980812 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: 98683472 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 June 30, 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 8,663,243 shares of common stock outstanding as of August 3, 1998. TABLE OF CONTENTS PART I FINANCIAL INFORMATION Item Page 1. Consolidated Financial Statements and Notes to Consolidated Financial Statements 4 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Signatures 13 -2- PART I FINANCIAL INFORMATION Item 1. Consolidated Financial Statements. The consolidated balance sheets of First Financial Bankshares, Inc. at June 30, 1998 and 1997, and December 31, 1997, and the consolidated statements of earnings and comprehensive earnings for the three and six months ended June 30, 1998 and 1997, and the changes in shareholders' equity for the year ended December 31, 1997 and six months ended June 30, 1998, and the cash flows for the six months ended June 30, 1998 and 1997, follow on pages 4 through 8. -3- FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
June 30, --------------------------------- 1998 1997 December 31, (Unaudited) (Unaudited) 1997 --------------- --------------- --------------- ASSETS Cash and due from banks ............................................ $ 75,617,522 $ 73,704,757 $ 88,795,827 Interest-bearing deposits in banks ................................. 203,784 498,570 398,671 Federal funds sold ................................................. 91,116,729 41,806,275 114,485,839 Investment securities: Securities held to maturity (approximate market value of $389,840,873 and $473,314,208 at June 30, 1998 and 1997, and $414,160,027 at December 31, 1997) .............. 387,331,051 483,038,330 411,857,644 Securities available for sale, at approximate market value ..... 176,900,304 60,798,833 170,697,516 --------------- -------------- --------------- Total investment securities 564,231,355 543,837,163 582,555,160 Loans .............................................................. 734,817,728 615,716,780 716,792,426 Less: Allowance for loan losses .............................. 9,487,698 9,535,716 10,288,200 Unearned discount 6,610,286 8,290,767 7,853,724 --------------- -------------- --------------- Net loans ...................................................... 718,719,744 597,890,297 698,650,502 Bank premises and equipment - net .................................. 41,125,202 37,789,005 41,501,074 Goodwill ........................................................... 22,250,847 5,557,708 23,054,329 Other assets ....................................................... 23,852,128 21,961,655 24,067,522 --------------- -------------- --------------- TOTAL ASSETS .......................................................... $ 1,537,117,311 $ 1,323,045,430 $ 1,573,508,924 =============== ============== =============== LIABILITIES Noninterest-bearing deposits ....................................... $ 307,054,570 $ 244,437,303 $ 311,318,296 Interest-bearing demand deposits ................................... 391,758,810 324,217,003 399,745,364 Interest-bearing time deposits ..................................... 670,981,744 602,476,386 701,660,161 --------------- -------------- --------------- Total deposits ................................................. 1,369,795,124 1,171,130,692 1,412,723,821 Dividends payable .................................................. 2,382,342 2,103,784 2,162,899 Other short-term borrowings ........................................ 1,120,000 100,000 4,700,000 Other liabilities .................................................. 8,893,544 7,979,496 5,695,741 --------------- -------------- --------------- Total liabilities .............................................. 1,382,191,010 1,181,313,972 1,425,282,461 --------------- -------------- --------------- SHAREHOLDERS' EQUITY Capital stock - $10 par value; 20,000,000 shares authorized ..................................... 86,630,480 86,315,780 86,515,950 Capital surplus .................................................... 36,355,759 36,330,534 36,350,673 Retained earnings .................................................. 31,440,452 19,137,660 24,996,973 Unrealized gain (loss) on investment securities available for sale . 499,610 (52,516) 362,867 --------------- -------------- --------------- Total shareholders' equity ..................................... 154,926,301 141,731,458 148,226,463 --------------- -------------- --------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............................ $ 1,537,117,311 $ 1,323,045,430 $ 1,573,508,924 =============== =============== =============== See notes to consolidated financial statements.
-4- FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS - (UNAUDITED)
Three Months Ended Six Months Ended June 30, June 30, ------------------------- ------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- INTEREST INCOME Loans, including fees ................................. $16,884,847 $14,350,970 $33,285,403 $28,256,126 Investment income - taxable ........................... 8,030,444 7,802,425 16,325,132 15,286,485 Investment income - tax exempt ........................ 691,119 407,033 1,243,100 792,390 Interest on interest bearing deposits ................. 2,913 11,989 7,919 26,278 Interest on federal funds sold and other .............. 990,827 559,908 2,130,600 1,278,975 ----------- ----------- ----------- ----------- Total interest income .............................. 26,600,150 23,132,325 52,992,154 45,640,254 INTEREST EXPENSE Interest-bearing deposits ............................. 10,965,866 9,335,469 22,040,846 18,373,574 Short-term borrowings ................................. 45,281 3,817 126,698 4,905 ----------- ----------- ----------- ----------- Total interest expense ............................. 11,011,147 9,339,286 22,167,544 18,378,479 ----------- ----------- ----------- ----------- NET INTEREST INCOME ...................................... 15,589,003 13,793,039 30,824,610 27,261,775 Provision for loan losses ............................. 268,000 190,500 419,500 433,500 ----------- ----------- ----------- ----------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES ............................. 15,321,003 13,602,539 30,405,110 26,828,275 NONINTEREST INCOME Trust fees ............................................ 1,199,306 986,803 2,402,129 1,952,873 Service fees on deposit accounts ...................... 2,739,346 2,528,924 5,293,843 4,802,059 Other ................................................. 1,249,029 1,065,001 2,659,760 2,248,033 ----------- ----------- ----------- ----------- Total noninterest income ........................... 5,187,681 4,580,728 10,355,732 9,002,965 NONINTEREST EXPENSE Salaries and employee benefits ........................ 6,306,839 5,494,844 12,575,363 10,834,826 Net occupancy and equipment expenses .................. 992,704 874,849 1,930,502 1,744,111 Equipment expense ..................................... 969,867 845,520 1,914,466 1,626,284 Goodwill amortization ................................. 401,741 101,689 803,482 200,626 Other ................................................. 3,520,568 3,277,746 7,171,455 6,488,266 ----------- ----------- ----------- ----------- Total noninterest expense .......................... 12,191,719 10,594,648 24,395,268 20,894,113 ----------- ----------- ----------- ----------- EARNINGS BEFORE INCOME TAXES ............................. 8,316,965 7,588,619 16,365,574 14,937,127 Provision for income taxes ............................ 2,707,661 2,540,043 5,375,509 5,001,491 ----------- ----------- ----------- ----------- NET EARNINGS ............................................. $ 5,609,304 $ 5,048,576 $10,990,065 $ 9,935,636 =========== =========== =========== =========== BASIC EARNINGS PER SHARE ................................. $ 0.65 $ 0.59 $ 1.27 $ 1.16 EARNINGS PER SHARE, ASSUMING DILUTION .................... $ 0.64 $ 0.58 $ 1.26 $ 1.15 DIVIDENDS PER SHARE ...................................... $ 0.275 $ 0.25 $ 0.525 $ 0.47 See notes to consolidated financial statements.
-5- FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS - (UNAUDITED)
Three Months Ended Six Months Ended June 30, June 30, ------------------------- ------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- NET EARNINGS .................................................... $ 5,609,304 $ 5,048,576 $10,990,065 $ 9,935,636 Change in unrealized gain (loss) on investment securities available for sale, before tax 208,782 635,248 211,954 335,985 Less: reclassification adjustment for gains on investment securities included in net earnings 1,834 -- 1,580 -- ----------- ----------- ----------- ----------- OTHER COMPREHENSIVE EARNINGS, BEFORE TAX ......................................... 5,816,252 5,683,824 11,200,439 10,271,621 Income tax expense related to items included in other comprehensive earnings 72,432 222,337 73,631 117,595 ----------- ----------- ----------- ----------- COMPREHENSIVE EARNINGS .......................................... $ 5,743,820 $ 5,461,487 $11,126,808 $10,154,026 =========== =========== =========== =========== See notes to consolidated financial statements.
-6- FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Unrealized Gain (Loss) On Investment Capital Stock Securities Total --------------------------- Capital Retained Available Shareholders' 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 - - - 10,990,065 - 10,990,065 Stock issuances 11,453 114,530 5,086 - - 119,616 Cash dividends declared - - - (4,546,586) - (4,546,586) Change in unrealized gain (loss) - - - - 136,743 136,743 ------------ ------------ ------------ -------------- ------------- ------------- Balances at June 30,1998 (unaudited) 8,663,048 $ 86,630,480 $ 36,355,759 $ 31,440,452 $ 499,610 $ 154,926,301 ============ ============ ============ ============== ============= ============= See notes to consolidated financial statements.
-7- FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS - (UNAUDITED)
Six Months Ended June 30, ------------------------------ 1998 1997 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings ............................................................... $ 10,990,065 $ 9,935,277 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization .......................................... 2,941,189 2,010,018 Provision for loan losses .............................................. 419,500 433,500 Premium amortization, net of discount accretion ........................ 1,116,956 632,831 (Gain) loss on sale of assets .......................................... (1,643) 40,171 Deferred federal income tax benefit .................................... (365,207) (95,456) Decrease (increase) in other assets .................................... 387,567 (510,729) Increase in other liabilities .......................................... 3,197,803 666,327 ------------- ------------- Total adjustments 7,696,165 3,176,662 ------------- ------------- Net cash provided by operating activities .............................. 18,686,230 13,111,939 CASH FLOWS FROM INVESTING ACTIVITIES Net decrease in interest-bearing deposits in banks ......................... 194,887 489,924 Proceeds from sale of securities available for sale ........................ 3,141,319 3,821,309 Proceeds from maturity of securities available for sale .................... 89,731,569 1,228,691 Proceeds from maturity of securities held to maturity ...................... 121,032,394 91,862,415 Purchase of securities available for sale .................................. (97,362,339) (23,395,771) Purchase of securities held to maturity .................................... (99,127,300) (95,624,056) Net increase in loans ...................................................... (20,520,742) (8,927,571) Capital expenditures ....................................................... (1,787,696) (2,801,006) Proceeds from sale of assets ............................................... 180,487 103,424 ------------- ------------- Net cash used in investing activities .................................. (4,517,421) (33,242,641) CASH FLOWS FROM FINANCING ACTIVITIES Net decrease in noninterest-bearing deposits ............................... (4,263,726) (18,604,859) Net (decrease) increase in interest-bearing deposits ....................... (38,664,971) 21,079,043 Net decrease in other short-term borrowings ................................ (3,580,000) -- Proceeds from stock issuances .............................................. 119,616 157,072 Dividends paid ............................................................. (4,327,143) (3,784,154) ------------- ------------- Net cash used in financing activities .................................. (50,716,224) (1,152,898) ------------- ------------- Net decrease in cash and cash equivalents .................................. (36,547,415) (21,283,600) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .................................. 203,281,666 136,794,632 ------------- ------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................................... $ 166,734,251 $ 115,511,032 ============= ============= SUPPLEMENTAL INFORMATION AND NONCASH TRANSACTIONS Interest paid .............................................................. $ 21,802,909 $ 18,178,129 Federal income tax paid .................................................... 5,341,163 5,251,483 Assets acquired through foreclosure ........................................ 32,000 40,585 See notes to consolidated financial statements.
-8- FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 - Recent Accounting Pronouncements In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS 130"). FAS 130 establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general purpose financial statements. FAS 130 requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. The Company adopted FAS 130 on January 1, 1998. In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that all derivatives be recognized as either assets or liabilities in the statement of financial position and that those instruments be measured at fair value. The statement is effective for years beginning after December 15, 1999, with early application encouraged. The adoption of the statement will not have a significant impact on the Company. The Company plans to adopt FAS 133 on January 1, 2000 or earlier. Note 2 - Earnings Per Share Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of shares outstanding during the period. In computing diluted earnings per common share for the quarters and six-month periods ended June 30, 1998 and 1997, the Company assumes that all outstanding options to purchase common stock have been exercised at the beginning of the year (or time of issuance, if later). The dilutive effect of the outstanding options is reflected by application of the treasury stock method, whereby the proceeds from the exercised options are assumed to be used to purchase common stock at the average market price during the respective period. The weighted average common shares outstanding used in computing basic earnings per common share for the quarters ended June 30, 1998 and 1997, was 8,661,632 and 8,627,445 shares, respectively. The weighted average common shares outstanding used in computing basic earnings per share for the six-month periods ended June 30, 1998 and 1997, was 8,658,211 and 8,623,211 shares, respectively. The weighted average common shares outstanding used in computing diluted earnings per common share for the quarters ended June 30, 1998 and 1997, was 8,714,134 and 8,698,362 shares, respectively. The weighted average common shares outstanding used in computing diluted earnings per common share for the six-month periods ended June 30, 1998 and 1997, was 8,710,217 and 8,674,128 shares, respectively. Note 3 - Proposed Acquisition On July 27, 1998, First Financial Bankshares, Inc. (the "Company") executed a Letter of Intent with Cleburne State Bank ("CSB") to acquire all of the issued and outstanding shares of the common stock of CSB. The proposed acquisition is subject to negotiation, preparation and approval of a definitive written Stock Exchange Agreement between the Company and CSB. Acquisition of CSB by the Company is additionally subject to the approval by the Board of Governors of the Federal Reserve System and other federal and state regulatory authorities. Following execution of a definitive Stock Exchange Agreement and approval by appropriate regulatory authorities, it is anticipated that the Company would, pursuant to a Prospectus and upon or following the effective date of a Registration Statement to be filed with the Securities and Exchange Commission, offer to exchange 1.75 shares of its common stock for each outstanding share of CSB common stock. Completion of the anticipated transaction could reasonably be expected prior to year end, and thereafter it is anticipated that CSB would merge into the Company's affiliate, First National Bank in Cleburne. -9- CSB is a state chartered banking association chartered in 1980. CSB has total assets of $83,000,000 and deposits of $76,000,000, and operates two full service locations, one in Cleburne, Texas and a branch in nearby Alvarado, Texas. The Company's affiliated bank in Cleburne, Texas, First National Bank in Cleburne, has total assets of $100,000,000 and operates locations in Cleburne, Texas and Burleson, Texas. -10- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Operating Results For the six months ended June 30, 1998, the Company's net income amounted to $10.99 million, or $1.27 per basic share, compared to $9.94 million, or $1.16 per basic share, earned in the first half of 1997. Net income for the second quarter 1998 totaled $5.61 million, or $ .65 per basic share. In the second quarter 1997, the Company reported net income of $5.05 million, or $ .59 per basic share. Earnings for the second quarter and first six months of 1998 represent increases of 11.1% and 10.6%, respectively. Return on average assets and return on average equity for the six months ended June 30, 1998, amounted to 1.45% and 14.75%, respectively. The Company's return on average assets and return on average equity for the same period last year amounted to 1.54% and 14.74%, respectively. Net interest income for the six months ended June 30, 1998, was $3.53 million above 1997 and resulted primarily from loan growth. The net interest margin for the first six months of 1998 was 4.55% as compared to 4.65% for the same period last year. Higher average rates on interest bearing liabilities were the main factor in the lower net interest margin. Noninterest income for the six months ended June 30, 1998, amounted to $10.36 million as compared to $9.0 million for the same period last year. Trust fees and deposit accounts acquired through a purchase acquisition completed in September contributed to increases in Trust fees and deposit services of $449 thousand and $492 thousand, respectively. For the six months ended June 30, 1998, real estate mortgage fees and gain on sale of foreclosed assets increased $243 thousand and $208 thousand, respectively, over the 1997 amounts and were primary factors contributing to the improvement in other noninterest income. Noninterest expense for the first six months of 1998 totaled $24.40 million, an increase of $3.50 million over the same period last year. Higher employee costs and goodwill amortization were primary factors contributing to the increase. Communication expense, professional service fees, and correspondent bank service charges were factors in the higher level of other noninterest expense which increased $683 thousand from the 1997 first six months total. Excluding the effect of the Company's purchase acquisition completed in September 1997, total noninterest expense increased approximately $1.4 million, or 6.8%. The Company's key indicator of operating efficiency, noninterest expense as a percent of net interest income and noninterest income, for the first six months of 1998 was 58.79% as compared to 56.95% for the same period in 1997. Balance Sheet Review Total assets at June 30, 1998, amounted to $1.537 billion as compared to $1.574 billion at December 31, 1997, and $1.323 billion at June 30, 1997. Approximately $155 million of growth in assets over June 30, 1997, resulted from an acquisition finalized in September 1997. The June 30, 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 June 30, 1998, totaled $728 million as compared to $709 million at year-end 1997 and $607 million at June 30, 1997. The previously mentioned 1997 acquisition accounted for approximately $60 million in growth over the June 30, 1997, balance. Investment securities at June 30, 1998, totaled $564 million as compared to $583 million at year-end 1997 and $544 million at June 30, 1997. The net unrealized gain in the investment portfolio at June 30, 1998, amounted to $3.3 million as compared to a $2.9 million unrealized gain at December 31, 1997. With an overall yield of 6.20%, the investment portfolio continues to provide a positive contribution to the Company's earnings. Approximately $234 million, or 41%, of the portfolio matures within two years which protects the Company from signficant interest rate risk should interest rates move up. At June 30, 1998, the Company did not hold any CMOs that entail higher risks than standard mortgage-backed securities. Total investment securities at June 30, 1998, included structured notes with an amortized cost of $7.02 million and an approximate market value of $6.95 million. Total deposits at June 30, 1998, amounted to $1.370 billion as compared to $1.413 billion at year-end 1997 and $1.171 billion at June 30, 1997. The decrease from December 31, 1997, is considered temporary and not indicative of a downward trend in total deposits. The 1997 acquisition accounted for approximately $155 million in total deposit growth from June 30, 1997. -11- Nonperforming assets at June 30, 1998, totaled $3.9 million, or .53% of loans and foreclosed assets, and were down $900 thousand from the December 31, 1997, amount. At June 30, 1998, the allowance for loan losses amounted to 244.2% 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. During 1998, the markets in which the subsidiary banks operate have experienced a lack of rainfall. Management continues to assess the impact this may have to its agricultural lending and, if required, will provide adjustments to the allowance when the impact is known. Liquidity and Capital The Company's consolidated statements of cash flows are presented on page 7 of this report. At June 30, 1998, the balance sheet reflects adequate liquidity, and the parent company had $9 million available under its $10 million line of credit. Total equity capital amounted to $154.9 million at June 30, 1998, which was up from $148.2 million at year-end 1997 and $141.7 million at June 30, 1997. The Company's risk-based capital and leverage ratios at June 30, 1998, were 16.21% and 8.76%, respectively. The second quarter cash dividend of $ .275 per share totaled $2.4 million and represented 42.5% of earnings. On July 28, 1998, the Company declared a $ .275 per share cash dividend which is payable October 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. -12- 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 August 12, 1998 By:/S/CURTIS R. HARVEY - ------------------------ ---------------------------- Curtis R. Harvey Executive Vice President and Chief Financial Officer Date August 12, 1998 By:/S/SANDY LESTER - ------------------------ ---------------------------- Sandy Lester Secretary-Treasurer -13- EX-27 2 FDS --
9 1,000 6-MOS DEC-31-1998 JUN-30-1998 75,618 204 91,117 0 176,900 387,331 389,841 728,208 9,488 1,537,117 1,369,795 1,090 11,306 0 0 0 86,630 68,296 1,537,117 33,285 17,568 2,139 52,992 22,041 22,168 30,824 419 0 24,395 16,366 10,990 0 0 10,990 1.27 1.26 4.55 3,093 186 0 376 10,288 1,796 577 9,488 9,488 0 0
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