☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2020
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Texas | 75-0944023 | ||
(State or incorporation or organization) | (I.R.S. Employer Identification No.) | ||
400 Pine Street, Abilene, Texas | 79601 | ||
(Address of | (Zip Code) | ||
Registrant’s telephone number, including area code: | (325) 627-7155 |
Registrant’s telephone number, including area code: (325)627-7155
Title of | Trading Symbol(s) | Name of on | ||||
Common Stock, par value $0.01 per share | FFIN | The Nasdaq Global Select Market |
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of RegulationS-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-K or any amendment to this Form10-K. ☐
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
Table of ContentsTABLE OF CONTENTS
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ITEM | 36 | |||||||||
ITEM 3. | 36 | |||||||||
ITEM 4. | 36 | |||||||||
PART II | ||||||||||
ITEM 5. |
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ITEM | 39 | |||||||||
ITEM 7. | ||||||||||
ITEM 7A. | ||||||||||
ITEM 8. | ||||||||||
ITEM 9. | ||||||||||
ITEM 9A. | ||||||||||
ITEM 9B. | ||||||||||
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PART III | ||||||||||
ITEM 10. | ||||||||||
ITEM 11. | ||||||||||
ITEM 12. | ||||||||||
ITEM 13. | ||||||||||
ITEM 14. | ||||||||||
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PART IV | ||||||||||
ITEM 15. | ||||||||||
ITEM 16. | 68 | |||||||||
68 |
FORWARD-LOOKING STATEMENTS
ITEM 1. | BUSINESS |
First Financial Bank, National Association, Abilene, Texas;
First Technology Services, Inc., Abilene, Texas, a wholly owned subsidiary of First Financial Bank, National Association, Abilene, Texas;
First Financial Trust & Asset Management Company, National Association, Abilene, Texas;
First Financial Insurance Agency, Inc., Abilene, Texas; and
First Financial Investments, Inc., Abilene, Texas.
Park.
In the past, we
Bridgeport and Wise County | 20.4% | Weatherford, Willow Park, Aledo and Parker County | 33.1% | |||
Fort Worth and Tarrant County | 19.1% | Stephenville and Erath County | 14.8% | |||
Cleburne and Johnson County | 13.4% | Conroe and Montgomery County | 41.7% | |||
Granbury and Hood County | 15.9% | *Source: U. S. Census Bureau |
2009-2019 by City and County*
Bridgeport and Wise County | 16.8 | % | ||
Bryan/College Station and Brazos County | 26.7 | % | ||
Cleburne and Johnson County | 11.9 | % | ||
Conroe and Montgomery County | 36.1 | % | ||
*Source: U. S. Census Bureau |
Fort Worth and Tarrant County | 16.8 | % | ||
Granbury and Hood County | 19.1 | % | ||
Stephenville and Erath County | 17.7 | % | ||
Weatherford, Willow Park, Aledo and Parker County | 23.8 | % |
When targeting a bank for acquisition, the subject bank generally needs to be well managed and profitable, while being located in the type of community that fits our profile. We seek to enter growing communities with good amenities – schools, infrastructure, commerce and lifestyle. We prefer$300$500 million and $1.0 billion in asset size fit our “sweet spot” for acquisition, but we would consider banks that are larger or smaller, or that are in other areas of Texas if we believe they would be a good fit for our Company.
budgeting;
Employees
Including
None of our employees are represented by collective bargaining agreements.
2018 of $664 thousand. No additional adjustment amounts were recorded for the years ended December 31, 2019 and 2020.
In November 2018, the banking regulators issued a proposal for a depository institution with assets less than $10 billion. The proposal would establish a Community Bank Leverage Ratio (CBLR) defined as total bank equity capital, excluding accumulated other comprehensive income, deferred tax assets and other intangible assets, divided by the average total consolidated assets. If the CBLR ratio is maintained at greater than nine percent, the depository organization will be considered to be in compliance with the Basel III capital requirements and exempt from calculating existing risk-based capital ratio requirements.
Rules.
2020.
regulators.
The CFPB has finalized rules relating to, among other things, remittance transfers under the Electronic Fund Transfer Act, which requires companies to provide consumers with certain disclosures before the consumer pays for a remittance transfer. These rules became effective in October 2013. The CFPB has also amended certain rules under Regulation C relating to home mortgage disclosure to reflect a change in theasset-size exemption threshold for depository institutions based on the annual percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers. In addition, on January 10, 2013, the CFPB released its final“Ability-to-Repay/Qualified Mortgage” rules, which amended the Truth in Lending Act (Regulation Z). Regulation Z prohibits a creditor from making a higher-priced mortgage loan without regard to the consumer’s ability to repay the loan. The final amended rule implemented sections 1411 and 1412 of the Dodd-Frank Act, which generally require creditors to make a reasonable, good faith determination of a consumer’s ability to repay any consumer credit transaction secured by a dwelling (excluding anopen-end credit plan, timeshare plan, reverse mortgage, or temporary loan) and establishes certain protections from liability under this requirement for “qualified mortgages.” The final rule also implemented section 1414 of the Dodd-Frank Act, which limits prepayment penalties. Finally, the final rule requires creditors to retain evidence of compliance with the rule for three years after a covered loan is consummated. This rule became effective January 10, 2014.
ITEM 1A. | RISK FACTORS |
General economic conditions impact the banking industry. The credit quality of our loan portfolio necessarily reflects, among other things, the general economic conditions in the areas in which we conduct our business. Our continued financial success depends somewhat on factors beyond our control, including:
general economic conditions, including national and localoperating results. Asset values, especially commercial real estate markets andas collateral, securities or other fixed rate earning assets, can decline significantly with relatively minor changes in interest rates. Conversely, decreases in interest rates can effect the priceamount of oil and gas, wind farm subsidies from the federal government and other commodity prices;
the supply of and demand for investable funds;
demand forinterest we earn on our loans and access to credit;
interest rates; and
federal, state and local laws affecting these matters.
Any substantial deterioration in any of the foregoing conditionsinvestment securities, which could have a material adverse effect on our financial condition, results of operations and liquidity, which would likely adversely affect the market price of our common stock.
Our business is concentrated in Texas and a downturn in the economy of Texas may adversely affect our business.
Our network of bank regions is concentrated in Texas, primarily in the Central, North Central, Southeast and Western regions of the state. Most of our customers and revenue are derived from this area. These economies include dynamic centers of higher education, agriculture, energy and natural resources, retail, military, healthcare, tourism, retirement living, manufacturing and distribution. Because we generally do not derive revenue or customers from other parts of the state or nation, our business and operations are dependent on economic conditions in our Texas markets. Any significant decline in one or more segments of the local economies could adversely affect our business, revenue, operations and properties.
The significant volatility in oil and gas prices has resulted in uncertainty about the Texas economy. While we consider our exposure to credits related to the oil and gas industry to not be significant, at approximately 2.86% of total loans as of December 31, 2018, should the price of oil and gas decline further and/or remain at low prices for an extended period, the general economic conditions in our Texas markets could be negatively affected, which could have a material adverse affect on our business,Company’s financial condition and results of operations.
Our Company lends primarily to small tomedium-sized businesses that may Although we have fewer resources to weather a downturnimplemented strategies which we believe reduce the potential effects of adverse changes in the economy, which could adversely impact the Company’s operating results.
The Company makes loans to privately-owned businesses, many of which are considered to be small tomedium-sized businesses. Small tomedium-sized businesses frequently have smaller market share than their competition, may be more vulnerable to economic downturns, often need additional capital to expand or compete and may experience more volatility in operating results. Any one or more of these factors may impair the borrower’s ability to repay a loan. In addition, the success of a small tomedium-sized businesses often dependsinterest rates on the management talents and efforts of a small group of persons, and the death, disability or resignation of one or more of these persons could have adverse impact on the business and its ability to repay our loans. Economic downturns, a sustained decline in commodity prices and other events that could negatively impact the businesses could cause the Company to incur credit losses that could negatively affect the Company’s results of operations, these strategies may not always be successful. Any of these events could adversely affect our results of operations, financial condition and liquidity.
Hurricanes, extended drought conditions, severe weather and natural disasters could significantly impact the Company’s business.
Hurricanes, extended drought conditions, severe weather and natural disasters and other adverse external events could have a significant impact on the Company’s ability to conduct business. In late August 2017 and continuing into the fourth quarter of 2017, Houston and the surrounding area around the Gulf Coast were significantly affected by Hurricane Harvey. Our Southeast Texas and Conroe regions of the Company are in these areas and were impacted by the severe winds and floods. See Management’s Discussion and Analysis of Financial Condition and Results of Operations beginning on page 34 for specific information of the impact of Hurricane Harvey on our Company. Such events affect the stability of the Company’s deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of the collateral securing our loans, cause significant property damage, result in loss of revenue and/or cause the Company to incur additional expenses. The occurrence of any such event in the future couldmay have a material adverse effectimpact on our financial condition or results of operations
Changes in economic conditions could cause an increase in delinquencies andnon-performing assets, including loan charge-offs, which could depress our net income and growth.
Our loan portfolio includes many real estate secured loans, demand for which may decrease during economic downturns as a result of, among other things, an increase in unemployment, a decrease in real estate values and a slowdown in housing. If we see negative economic conditions develop in the United States as a whole or in the portions of Texas that we serve, we could experience higher delinquencies and loan charge-offs, which would reduce our net income and adversely affect our financial condition. Furthermore, to the extent that real estate collateral is obtained through foreclosure, the costs of holding and marketing the real estate collateral, as well as the ultimate values obtained from disposition, could reduce our earnings and adversely affect our financial condition.
The value of real estate collateral may fluctuate significantly resulting in an under-collateralized loan portfolio.
The market value of real estate, particularly real estate held for investment, can fluctuate significantly in a short period of time as a result of market conditions in the geographic area in which the real estate is located. If the value of the real estate serving as collateral for our loan portfolio were to decline materially, a significant part of our loan portfolio could become under-collateralized. If the loans that are collateralized by real estate become troubled during a time when market conditions are declining or have declined, then, in the event of foreclosure, we may not be able to realize the amount of collateral that we anticipated at the time of originating the loan. This could have a material adverse effect on our provision for loan losses and our operating results and financial condition.
New lines of business or new products and services may subject the Company to additional risks.
From time to time, the Company may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or products and services the Company may invest significant time and resources. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. If we are unable to successfully manage these risks in the development and implementation of new lines of business or new products or services, it could have a material adverse effect on the Company’s business, financial condition and result of operations.
needed
On July 2, 2013, the
capital. The final rule became effective for us on January 1, 2015. As of December 31, 2018,2020, we met all of these new requirements, including the full capital conservation buffer.
The trust wealth management fees we receive may decrease as a result of poor investment performance, in either relative or absolute terms, which could decrease our revenues and net earnings.
Our trust company subsidiary derives its revenues primarily from investment management fees based on assets under management. Our ability to maintain or increase assets under management is subject to a number of factors, including investors’ perception of our past performance, in either relative or absolute terms, market and economic conditions, including changes in oil and gas prices, and competition from investment management companies. Financial markets are affected by many factors, all of which are beyond our control, including general economic conditions, including changes in oil and gas prices; securities market conditions; the level and volatility of interest rates and equity prices; competitive conditions; liquidity of global markets; international and regional political conditions; regulatory and legislative developments; monetary and fiscal policy; investor sentiment; availability and cost of capital; technological changes and events; outcome of legal proceedings; changes in currency values; inflation; credit ratings; and the size, volume and timing of transactions. A decline in the fair value of the assets under management, caused by a decline in general economic conditions, would decrease our wealth management fee income.
Investment performance is one of the most important factors in retaining existing clients and competing for new wealth management clients. Poor investment performance could reduce our revenues and impair our growth in the following ways:
existing clients may withdraw funds from our wealth management business in favor of better performing products;
asset-based management fees could decline from a decrease in assets under management;
our ability to attract funds from existing and new clients might diminish; and
our wealth managers and investment advisors may depart, to join a competitor or otherwise.
Even when market conditions are generally favorable, our investment performance may be adversely affected by the investment style of our wealth management and investment advisors and the particular investments that they make. To the extent our future investment performance is perceived to be poor in either relative or absolute terms, the revenues and profitability of our wealth management business will likely be reduced and our ability to attract new clients will likely be impaired. As such, fluctuations in the equity and debt markets can have a direct impact upon our net earnings. In addition, as approximately 17% of trust fees comes from management of oil and gas properties, a decline in the prices of oil and gas could lead to a loss of material amounts of our trust income.
Certain of our investment advisory and wealth management contracts are subject to termination on short notice, and termination of a significant number of investment advisory contracts could have a material adverse impact on our revenue.
Certain of our investment advisory and wealth management clients can terminate, with little or no notice, their relationships with us, reduce their aggregate assets under management, or shift their funds to other types of accounts with different rate structures for any number of reasons, including investment performance, changes in prevailing interest rates, inflation, changes in investment preferences of clients, changes in our reputation in the marketplace, change in management or control of clients, loss of key investment management personnel and financial market performance. We cannot be certain that our trust company subsidiary will be able to retain all of its clients. If its clients terminate their investment advisory and wealth management contracts, our trust company subsidiary, and consequently we, could lose a substantial portion of our revenues.
We are subject to possible claims and litigation pertaining to fiduciary responsibility.
From time to time, customers could make claims and take legal action pertaining to our performance of our fiduciary responsibilities. Whether customer claims and legal action related to our performance of our fiduciary responsibilities are founded or unfounded, if such claims and legal actions are not resolved in a manner favorable to us, they may result in significant financial liability and/or adversely affect our market perception of our products and services as well as impact customer demand for those products and services. Any financial liability or reputation damage could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.
Our business is subject to significant government regulation.
A new accounting standard will result in a significant change in how we recognize credit losses andAct, which may have a material impact on our financial condition or results of operations.
In June 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update, “Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the current “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the Current Expected Credit Loss (“CECL”) model. Under the CECL model, we will be required to present certain financial assets carried at amortized cost, such as loans held for investment andheld-to-maturity debt securities, at the net amount expected to be collected. The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement will take place at the time the financial asset is first added to the balance sheet and periodically thereafter. This differs significantly from the “incurred loss” model required under current generally accepted accounting principles (“GAAP”), which delays recognition until it is probable a loss has been incurred. Accordingly, we expect that the adoption of the CECL model will materially affect how we determine our allowance for loan losses and could require us to significantly increase our allowance. Moreover, the CECL model may create more volatility in the level of our allowance for loan losses. If we are required to materially increase our level of allowance for loan losses for any reason, such increase could adversely affect our business, financial condition and results of operations.
The new CECL standard will become effective for us on January 1, 2020 and for interim periods within that year. We are currently evaluating the impact the CECL model will have on our accounting, but we expect to recognize aone-time cumulative-effect adjustment to our allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, consistent with regulatory expectations set forth in interagency guidance issued at the end of 2016. We cannot yet determine the magnitude of any suchone-time cumulative adjustment or of the overall impact of the new standardadverse effect on our business, financial conditionconditions and results of operations.
We compete with many larger financial institutions which have substantially greater financial resources than we have.
Competition among financial institutions in Texas is intense. We compete with other bank holding companies, state and national commercial banks, savings and loan associations, consumer financial companies, credit unions, securities brokers, insurance companies, mortgage banking companies, money market mutual funds, asset-basednon-bank lenders and other financial institutions. Many
We are subject to interest rate risk.
Our profitability is dependent to a large extent on our net interest income, which is the difference between interest income we earn as a result of interest paid to us on loans and investments and interest we pay to third parties such as our depositors and those from whom we borrow funds. Like most financial institutions, we are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve Board. Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and securities and the amount of interest we pay on deposits and borrowings, but such changes could also affect (i) our ability to originate loans and obtain deposits, (ii) the fair value of our financial assets and liabilities, and (iii) the average duration of our securities portfolio. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and investments, our net interest income, and earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and investments fall more quickly than the interest rates paid on deposits and other borrowings.
The Federal Reserve began raising interest rates in late 2015 and have continued to increase through 2018. However, there is substantial uncertainty regarding the extent to which interest rates may increase in future periods and what the future effects of any such increases will be. There is no assurance that recent expectations of increasing interest rates in future periods will be realized. Increases in interest rates can have negative impacts on our business, including reducing our customers’ desire to borrow money from us or adversely affecting their ability to repay their outstanding loans by increasing their debt obligations through the periodic reset of adjustable interest rate loans. If our borrowers’ ability to pay their loans is impaired by increasing interest payment obligations, our level ofnon-performing assets would increase, producing an adverse effect on operating results. Asset values, especially commercial real estate as collateral, securities or other fixed rate earning assets, can decline significantly with relatively minor changes in interest rates. Although we have implemented strategies which we believe reduce the potential effects of adverse changes in interest rates on our results of operations, these strategies may not always be successful. Any of these events could adversely affect our results of operations, financial condition and liquidity.
We are subject to liquidity risk.
The Company requires liquidity to meet our deposit and other obligations as they come due. The Company’s access to funding sources in amounts adequate to finance its activities or on terms that are acceptable to it could be impaired by factors that affect it specifically or the financial services industry or the general economy. Factors that could reduce its access to liquidity sources include a downturn in the Texas market, difficult credit markets or adverse regulatory actions against the Company. The Company’s access to deposits may also be affected by the liquidity needs of its depositors. In particular, a substantial majority of the Company’s liabilities are demand, savings, interest checking and money market deposits, which are payable on demand or upon several days’ notice, while by comparison, a substantial portion of its assets are loans, which cannot be called or sold in the same time frame. The Company may not be able to replace maturing deposits and advances as necessary in the future, especially if a large number of its depositors sought to withdraw their accounts, regardless of the reason. A failure to maintain adequate liquidity could have a material adverse effect on the Company’s business, financial condition and result of operations.
The value of certain securities in our investment portfolio may be negatively affected by changes or disruptions in the market for these securities.
Our investment portfolio securities include obligations of, and mortgage-backed securities guaranteed by, government sponsored enterprises such as the Federal National Mortgage Association, referred to as Fannie Mae, the Government National Mortgage Association, referred to as Ginnie Mae, the Federal Home Loan Mortgage Corporation, referred to as Freddie Mac, and the Federal Home Loan Bank or otherwise backed by Federal Housing Administration or Veteran’s Administration guaranteed loans; however, volatility or illiquidity in financial markets may cause investment securities held within our investment portfolio to fall in value or become less liquid. The FRB’s actions to increase interest rates may cause a decline in the value of securities held by the Company. Uncertainty surrounding the credit risk associated with mortgage collateral or guarantors may cause material discrepancies in valuation estimates obtained from third parties. Volatile market conditions may reduce valuations due to the perception of heightened credit and liquidity risks in addition to interest rate risk typically associated with these securities. There can be no assurance that declines in market value associated with these disruptions will not result in impairments of these assets, which would lead to accounting charges that could have a material adverse effect on our results of operations, equity and capital ratios.
First Financial Bankshares, Inc. relies on dividends from its subsidiaries for most of its revenue.
First Financial Bankshares,Inc. is a separate and distinct legal entity from its subsidiaries. It receives substantially all of its revenue from dividends paid by its subsidiaries. These dividends are the principal source of funds to pay dividends on the Company’s common stock and interest and principal on First Financial Bankshares, Inc. debt (if we had balances outstanding). Various federal and/or state laws and regulations limit the amount of dividends that our bank and trust subsidiaries may pay to First Financial Bankshares, Inc. In the event our subsidiaries are unable to pay dividends to First Financial Bankshares, Inc., First Financial Bankshares, Inc. may not be able to service debt, if any, or pay dividends on the Company’s common stock. The inability to receive dividends from our subsidiaries could have a material adverse effect on the Company’s business, financial condition, results of operations and liquidity.
Our accounting estimates and risk management processes rely on analytical and forecasting models.
The processes we use to estimate our allowance for loan losses and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates depends upon the use of analytical and forecasting models. In addition, these models are used to calculate fair value of our assets and liabilities when we acquire other financial institutions. These models reflect assumptions that may not be accurate, particularly in times of market stress or other unforeseen circumstances. Even if these assumptions are adequate, the models may prove to be inadequate or inaccurate because of other flaws in their design or their implementation. If the models we use for interest rate risk and asset-liability management are inadequate, we may incur increased or unexpected losses upon changes in market interest rates or other market measures. If the models we use for determining our probable loan losses are inadequate, the allowance for loan losses may not be sufficient to support future charge-offs. If the models we use to measure the fair value financial instruments is inadequate, the fair value of such financial instruments may fluctuate unexpectedly or may not accurately reflect what we could realize upon sale or settlement of such financial instruments. Such failure in our analytical or forecasting models could have a material adverse effect on our business, financial condition and results of operations.
The value of our goodwill and other intangible assets may decline in the future.
As of December 31, 2018, we had $174.68 million of goodwill and other intangible assets. A significant decline in our financial condition, a significant adverse change in the business climate, slower growth rates or a significant and sustained decline in the price of our common stock may necessitate taking charges in the future related to the impairment of our goodwill and other intangible assets. If we were to conclude that a future write-down of goodwill and other intangible assets is necessary, we would record the appropriate charge, which could have a material adverse effect on our financial condition and results of operations.
The Company’s stock price can be volatile.
Stock price volatility may make it more difficult for our shareholders to resell their common stock when they want and at prices they find attractive. The Company’s stock price can fluctuate significantly in response to a variety
new technology used, or services offered, by competitors;
significant acquisitions or business combinations involving the Company or its competitors; and
changes in government regulations, including tax laws.
General market fluctuations, industry factors and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes or credit loss trends could also cause the Company’s stock price to decrease regardless of operational results.
We may not continue to pay dividends on our common stock in the future.
Holders of our common stock are only entitled to receive such dividends as our board of directors may declare out of funds legally available for such payments. Although we have historically declared cash dividends on our common stock, we are not required to do so and may reduce or eliminate our common stock dividends in the future. This could adversely affect the market price of our common stock. Also, we are a bank holding company, and our ability to declare and pay dividends is dependent on certain federal regulatory considerations, including the guidelines of the Federal Reserve Board regarding capital adequacy and dividends.
Certain banking laws may have an anti-takeover effect.
Provisions of federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire us, even if doing so would be perceived to be beneficial to our shareholders. These provisions effectively inhibit anon-negotiated merger or other business combination, which, in turn, could adversely affect the market price of our common stock.
The trading volume in our common stock is less than other larger financial institutions.
Although the Company’s common stock is listed for trading on the Nasdaq Global Select Market, the trading volume in our common stock is less than that of other, larger financial services companies although such volume has increased in recent years. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of the Company’s common stock at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which the Company has no control. Given the lower trading volume of the Company’s common stock, significant sales of the Company’s common stock, or the expectation of these sales, could cause the Company’s stock price to fall.
Our stock ownership has shifted to larger institutional shareholders.
Our ownership base has shifted over the past several years whereby the ownership in larger investors and indexed funds is a much larger percentage of our stock ownership base as compared to shareholders located in our footprint. These larger shareholders could decide to sell their holdings in our common stock and as such could result in lower market prices of our stock.
Breakdowns in our internal controls and procedures could have an adverse effect on us.
We believe our internal control system as currently documented and functioning is adequate to provide reasonable assurance over our internal controls. Nevertheless, because of the inherent limitation in administering a cost effective control system, misstatements due to error or fraud may occur and not be detected. Breakdowns in our internal controls and procedures could occur in the future, and any such breakdowns could have an adverse effect on us. See “Item 9A – Controls and Procedures” for additional information.
Our operations rely on certain external vendors.
We rely on certain external vendors to provide products and services necessary to maintain ourday-to-day operations. Accordingly, our operations are exposed to risk that these vendors will not perform in accordance with the contracted agreements under service level agreements. The failure of an external vendor to perform in accordance with the contracted arrangements under service level agreements, because of changes in the vendor’s organizational structure, financial condition, support for existing products or services or strategic focus or for any other reason, could be disruptive to our operations, which could have a material adverse effect on our business and, in turn, our financial condition and results of operations.
We compete in an industry that continually experiences technological change, and we may have fewer resources than many of our competitors to continue to invest in technological improvements.
The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services and new fintech companies. In addition to improving the ability to serve customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for conveniences, as well as to create additional efficiencies in our operations. Many of our larger competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers.
System failure or cybersecurity breaches of our network security could subject us to increased operating costs as well as litigation and other potential losses.
The computer systems and network infrastructure we use could be vulnerable to unforeseen hardware and cybersecurity issues, including “hacking” and “identity theft.” Our operations are dependent upon our ability to protect our computer equipment against damage from fire, power loss, telecommunications failure or a similar catastrophic event. Any damage or failure that causes an interruption in our operations could have an adverse effect on our financial condition and results of operations. In addition, our operations are dependent upon our ability to protect the computer systems and network infrastructure utilized by us, including our Internet banking activities, against damage from physicalbreak-ins, cybersecurity breaches and other disruptive problems caused by the Internet or other users. Such computerbreak-ins and other disruptions would jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability to us, damage our reputation and inhibit current and potential customers from our Internet banking services. Each year, we add additional security measures to our computer systems and network infrastructure to mitigate the possibility of cybersecurity breaches including firewalls and penetration testing. We continue to investigate cost effective measures as well as insurance protection.
Furthermore, our customers could incorrectly blame the Company and terminate their accounts with the Company for a cyber-incident which occurred on their own system or with that of an unrelated third party. In addition, a security breach could also subject us to additional regulatory scrutiny and expose us to civil litigation and possible financial liability.
Our business may be adversely affected by security breaches at third parties.
Our customers interact with their own and other third party systems, which pose operational risks to us. We may be adversely affected by data breaches at retailers and other third parties who maintain data relating to our customers that involve the theft of customers data, including the theft of customers’ debit card, merchant credit card, wire transfer and other identifying and/or access information used to make purchases or payments at such retailers and to other third parties.
In the event of a data breach at one or more retailers of considerable magnitude, the Company’s business, financial condition and results of operations may be adversely affected.
Our reputation and business could be damaged from negative publicity.
Reputation risk, or the risk to our earnings and capital from negative public opinion, is inherent in our business. Negative public opinion could adversely affect our ability to keep and attract customers and expose us to adverse legal and regulatory consequences. Negative public opinion could result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance, regulatory compliance, mergers and acquisitions, sharing or inadequate protection of customer information, and from actions taken by government regulators and community organizations in response to that conduct. Negative public opinion could also result from adverse news or publicity that impairs the reputation of the financial services industry.
We are subject to claims and litigation pertaining to intellectual property.
We rely on technology companies to provide information technology products and services necessary to support ourday-to-day operations. Technology companies frequently enter into litigation based on allegations of patent infringement or other violations of intellectual property rights. In addition, patent holding companies seek to monetize patents they have purchased or otherwise obtained. Competitors of our vendors, or other individuals or companies, have from time to time claimed to hold intellectual property sold to us by its vendors. Such claims may increase in the future as the financial services sector becomes more reliant on information technology vendors. The plaintiffs in these actions frequently seek injunctions and substantial damages.
Regardless of the scope or validity of such patents or other intellectual property rights, or the merits of any claims by potential or actual litigants, we may have to engage in litigation that could be expensive, time-consuming, disruptive to our operations, and distracting to management. If we are found to infringe one or more patents or other intellectual property rights, we may be required to pay substantial damages or royalties to a third-party. In certain cases, we may consider entering into licensing agreements for disputed intellectual property, although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur. These licenses may also significantly increase our operating expenses. If legal matters related to intellectual property claims were resolved against us or settled, we could be required to make payments in amounts that could have a material adverse effect on our business, financial condition and results of operations.
An investment in our common stock is not an insured deposit.
Our common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund, or by any other public or private entity. Investment in our common stock is inherently risky for the reasons described in this “Risk Factors” section and elsewhere in this Report. As a result, if you acquire our common stock, you may lose some or all of your investment.
ITEM 1B. | UNRESOLVED STAFF COMMENTS |
ITEM 2. | PROPERTIES |
ITEM 3. | LEGAL PROCEEDINGS |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Period Ending | ||||||||||||||||||||||||
Index | 12/31/13 | 12/31/14 | 12/31/15 | 12/31/16 | 12/31/17 | 12/31/18 | ||||||||||||||||||
First Financial Bankshares, Inc. | 100.00 | 92.04 | 94.84 | 144.96 | 147.06 | 191.13 | ||||||||||||||||||
Russell 3000 | 100.00 | 112.56 | 113.10 | 127.50 | 154.44 | 146.34 | ||||||||||||||||||
SNL Bank $5B-$10B Index | 100.00 | 103.01 | 117.34 | 168.11 | 167.48 | 151.57 | ||||||||||||||||||
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Period Ending | ||||||||||||||||||||||||
Index | 12/31/15 | 12/31/16 | 12/31/17 | 12/31/18 | 12/31/19 | 12/31/20 | ||||||||||||||||||
First Financial Bankshares, Inc. | 100.00 | 152.85 | 155.07 | 201.53 | 248.81 | 260.80 | ||||||||||||||||||
Russell 3000 Index | 100.00 | 112.74 | 136.56 | 129.40 | 169.54 | 204.95 | ||||||||||||||||||
SNL Bank $5B-$10B Index | 100.00 | 143.27 | 142.73 | 129.17 | 160.06 | 145.37 |
ITEM 6. | SELECTED FINANCIAL DATA |
Year Ended December 31, | ||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
(dollars in thousands, except per share data) | ||||||||||||||||||||
Summary Income Statement Information: | ||||||||||||||||||||
Interest income | $ | 291,690 | $ | 245,975 | $ | 232,288 | $ | 221,623 | $ | 198,539 | ||||||||||
Interest expense | 18,930 | 9,288 | 5,451 | 4,088 | 4,181 | |||||||||||||||
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Net interest income | 272,760 | 236,687 | 226,837 | 217,535 | 194,358 | |||||||||||||||
Provision for loan losses | 5,665 | 6,530 | 10,212 | 9,685 | 4,465 | |||||||||||||||
Noninterest income | 101,764 | 91,017 | 85,132 | 73,432 | 66,624 | |||||||||||||||
Noninterest expense | 190,684 | 173,986 | 165,830 | 149,464 | 137,925 | |||||||||||||||
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Earnings before income taxes | 178,175 | 147,188 | 135,927 | 131,818 | 118,592 | |||||||||||||||
Income tax expense | 27,537 | 26,817 | 31,153 | 31,437 | 29,033 | |||||||||||||||
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Net earnings | $ | 150,638 | $ | 120,371 | $ | 104,774 | $ | 100,381 | $ | 89,559 | ||||||||||
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Per Share Data: | ||||||||||||||||||||
Earnings per share, basic | $ | 2.23 | $ | 1.82 | $ | 1.59 | $ | 1.55 | $ | 1.40 | ||||||||||
Earnings per share, assuming dilution | 2.22 | 1.81 | 1.59 | 1.54 | 1.39 | |||||||||||||||
Cash dividends declared | 0.82 | 0.75 | 0.70 | 0.62 | 0.55 | |||||||||||||||
Book value atperiod-end | 15.55 | 13.93 | 12.68 | 12.20 | 10.63 | |||||||||||||||
Earnings performance ratios: | ||||||||||||||||||||
Return on average assets | 1.98 | % | 1.72 | % | 1.59 | % | 1.61 | % | 1.65 | % | ||||||||||
Return on average equity | 15.37 | 13.63 | 12.36 | 13.60 | 14.00 | |||||||||||||||
Summary Balance Sheet Data(Period-end): | ||||||||||||||||||||
Securities | $ | 3,158,777 | $ | 3,087,473 | $ | 2,860,958 | $ | 2,734,177 | $ | 2,416,297 | ||||||||||
Loans | 3,975,308 | 3,500,699 | 3,384,205 | 3,350,593 | 2,937,991 | |||||||||||||||
Total assets | 7,731,854 | 7,254,715 | 6,809,931 | 6,665,070 | 5,848,202 | |||||||||||||||
Deposits | 6,180,389 | 5,962,961 | 5,478,539 | 5,190,169 | 4,750,255 | |||||||||||||||
Total liabilities | 6,678,559 | 6,331,947 | 5,972,046 | 5,860,084 | 5,166,665 | |||||||||||||||
Total shareholders’ equity | 1,053,295 | 922,768 | 837,885 | 804,986 | 681,537 | |||||||||||||||
Asset quality ratios: | ||||||||||||||||||||
Allowance for loanlosses/period-end loans | 1.29 | % | 1.38 | % | 1.35 | % | 1.25 | % | 1.25 | % | ||||||||||
Nonperformingassets/period-end loans plus foreclosed assets | 0.75 | 0.57 | 0.86 | 0.89 | 0.74 | |||||||||||||||
Net charge offs/average loans | 0.07 | 0.12 | 0.19 | 0.15 | 0.06 | |||||||||||||||
Capital ratios: | ||||||||||||||||||||
Average shareholders’ equity/average assets | 12.89 | % | 12.65 | % | 12.85 | % | 11.86 | % | 11.78 | % | ||||||||||
Leverage ratio (1) | 11.85 | 11.09 | 10.71 | 9.96 | 9.89 | |||||||||||||||
Tier 1 risk-based capital (2) | 19.47 | 18.66 | 17.30 | 15.90 | 16.05 | |||||||||||||||
Common equity tier 1 capital (3) | 19.47 | 18.66 | 17.30 | 15.90 | N/A | |||||||||||||||
Total risk-based capital (4) | 20.61 | 19.85 | 18.45 | 16.97 | 17.16 | |||||||||||||||
Dividend payout ratio | 36.84 | 41.24 | 44.14 | 40.20 | 39.34 |
Year Ended December 31, | ||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
(dollars in thousands, except per share data) | ||||||||||||||||||||
Summary Income Statement Information: | ||||||||||||||||||||
Interest income | $ | 364,128 | $ | 319,192 | $ | 291,690 | $ | 245,975 | $ | 232,288 | ||||||||||
Interest expense | 14,243 | 30,102 | 18,930 | 9,288 | 5,451 | |||||||||||||||
Net interest income | 349,885 | 289,090 | 272,760 | 236,687 | 226,837 | |||||||||||||||
Provision for credit losses | 19,517 | 2,965 | 5,665 | 6,530 | 10,212 | |||||||||||||||
Noninterest income | 139,935 | 108,428 | 101,764 | 91,017 | 85,132 | |||||||||||||||
Noninterest expense | 227,938 | 196,521 | 190,684 | 173,986 | 165,830 | |||||||||||||||
Earnings before income taxes | 242,365 | 198,032 | 178,175 | 147,188 | 135,927 | |||||||||||||||
Income tax expense | 40,331 | 33,220 | 27,537 | 26,817 | 31,153 | |||||||||||||||
Net earnings | $ | 202,034 | $ | 164,812 | $ | 150,638 | $ | 120,371 | $ | 104,774 | ||||||||||
Per Share Data: | ||||||||||||||||||||
Earnings per share, basic | $ | 1.42 | $ | 1.22 | $ | 1.11 | $ | 0.91 | $ | 0.80 | ||||||||||
Earnings per share, diluted | 1.42 | 1.21 | 1.11 | 0.91 | 0.80 | |||||||||||||||
Cash dividends declared | 0.51 | 0.47 | 0.41 | 0.38 | 0.35 | |||||||||||||||
Book value at period-end | 11.80 | 9.03 | 7.77 | 6.97 | 6.34 | |||||||||||||||
Earnings performance ratios: | ||||||||||||||||||||
Return on average assets | 1.98 | % | 2.08 | % | 1.98 | % | 1.72 | % | 1.59 | % | ||||||||||
Return on average equity | 12.93 | 14.37 | 15.37 | 13.63 | 12.36 | |||||||||||||||
Dividend payout ratio | 35.88 | 38.31 | 36.84 | 41.24 | 44.14 | |||||||||||||||
Summary Balance Sheet Data (Period-end): | ||||||||||||||||||||
Securities | $ | 4,393,029 | $ | 3,413,317 | $ | 3,158,777 | $ | 3,087,473 | $ | 2,860,958 | ||||||||||
Loans, held-for-investment | 5,171,033 | 4,194,969 | 3,953,636 | 3,485,569 | 3,357,307 | |||||||||||||||
Total assets | 10,904,500 | 8,262,227 | 7,731,854 | 7,254,715 | 6,809,931 | |||||||||||||||
Deposits | 8,675,817 | 6,603,806 | 6,180,389 | 5,962,961 | 5,478,539 | |||||||||||||||
Total liabilities | 9,226,310 | 7,035,030 | 6,678,559 | 6,331,947 | 5,972,046 | |||||||||||||||
Total shareholders’ equity | 1,678,190 | 1,227,197 | 1,053,295 | 922,768 | 837,885 | |||||||||||||||
Asset quality ratios: | ||||||||||||||||||||
Allowance for credit losses/period-end loansheld-for-investment | 1.29 | % | 1.25 | % | 1.30 | % | 1.38 | % | 1.36 | % | ||||||||||
Nonperforming assets/period-end loansheld-for-investment plus foreclosed assets | 0.83 | 0.61 | 0.75 | 0.58 | 0.86 | |||||||||||||||
Net charge offs/average loans | 0.06 | 0.04 | 0.07 | 0.12 | 0.19 | |||||||||||||||
Capital ratios: | ||||||||||||||||||||
Average shareholders’ equity/average assets | 15.32 | % | 14.44 | % | 12.89 | % | 12.65 | % | 12.85 | % | ||||||||||
Leverage ratio (1) | 11.86 | 12.60 | 11.85 | 11.09 | 10.71 | |||||||||||||||
Tier 1 risk-based capital (2) | 20.79 | 20.06 | 19.47 | 18.66 | 17.30 | |||||||||||||||
Common equity tier 1 capital (3) | 20.79 | 20.06 | 19.47 | 18.66 | 17.30 | |||||||||||||||
Total risk-based capital (4) | 22.03 | 21.13 | 20.61 | 19.85 | 18.45 |
(1) | Calculated by dividing at period-end, shareholders’ equity (before accumulated other comprehensive earnings/loss) less intangible assets by fourth quarter average assets less intangible assets. |
(2) | Calculated by dividing at period-end, shareholders’ equity (before accumulated other comprehensive earnings/loss) less intangible assets by risk-adjusted assets. |
(3) | Calculated by dividing at period-end, shareholders’ equity (before accumulated other comprehensive earnings/loss) less intangible assets by risk-adjusted assets. |
(4) | Calculated by dividing at period-end, shareholders’ equity (before accumulated other comprehensive earnings/loss) less intangible assets plus allowance for loan losses to the extent allowed under regulatory guidelines by risk-adjusted assets. |
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Hurricane Harvey
Houston and the surrounding Gulf Coast region were significantly affected by Hurricane Harvey beginning in late August 2017 and continuing into the fourth quarter of 2017. Our Company has locations (i) north of Houston in Conroe, Willis, Tomball, Huntsville, Montgomery, Magnolia, New Waverly and Cut and Shoot and (ii) in Southeast Texas in Orange, Beaumont, Vidor, Newton, Mauriceville and Port Arthur. We continue to evaluate the effect of the hurricane on our branch facilities and our loan and investment portfolios. Our assessment of our physical buildings and equipment indicated damage primarily at our Mauriceville branch and amounts not covered by insurance were not significant. At December 31, 2018, we had loans totaling $474.42 million in our Conroe region and $405.79 million in the Southeast Texas/Orange region. We continue to evaluate these loans and the related collateral and business operations underlying such loans as we learn more information about the damage caused by the hurricane and the impact of such damage on our customers’ ability to repay loans in accordance with their contractual terms. Our tax exempt municipal bonds in the counties of Texas affected by the hurricane have also been evaluated, including insurance on the bonds. At December 31, 2018, our municipal bonds in these counties totaled $422.86 million, but only $109.36 million do not have bond insurance. Based on analysis of these bonds and the related municipality, at December 31, 2018, we do not believe we have any credit related losses other than temporary impairment.
Acquisition
Acquisitions
2020.
Net earnings in 2020 also include a provision for credit losses of $19.52 million compared to $2.97 million in 2019 and $5.67 million in 2018. The provision for credit losses in 2020 reflects primarily the stress on our loan portfolio from the increase in unemployment and economic effects of the COVID pandemic.
2018. The return on average tangible equity was 16.25% for 2020, as compared to 16.95% for 2019 and to 18.65% for 2018.
Table 1 allocates the change in
2018 Compared to 2017 | 2017 Compared to 2016 | |||||||||||||||||||||||
Change Attributable to | Total Change | Change Attributable to | Total Change | |||||||||||||||||||||
Volume | Rate | Volume | Rate | |||||||||||||||||||||
Short-term investments | $ | (636 | ) | $ | 583 | $ (53) | $ | 443 | $ | 899 | $ | 1,342 | ||||||||||||
Taxable investment securities | 10,082 | 7,145 | 17,227 | 3,464 | 1,735 | 5,199 | ||||||||||||||||||
Tax-exempt investment securities (1) | (10,184 | ) | (10,433 | ) | (20,617 | ) | 1,173 | 677 | 1,850 | |||||||||||||||
Loans (1) (2) | 19,293 | 13,362 | 32,655 | 4,998 | 851 | 5,849 | ||||||||||||||||||
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Interest income | 18,555 | 10,657 | 29,212 | 10,078 | 4,162 | 14,240 | ||||||||||||||||||
Interest-bearing deposits | 583 | 8,149 | 8,732 | 409 | 3,300 | 3,709 | ||||||||||||||||||
Short-term borrowings | (8 | ) | 917 | 909 | (223 | ) | 351 | 128 | ||||||||||||||||
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Interest expense | 575 | 9,066 | 9,641 | 186 | 3,651 | 3,837 | ||||||||||||||||||
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Net interest income | $ | 17,980 | $ | 1,591 | $ | 19,571 | $ | 9,892 | $ | 511 | $ | 10,403 | ||||||||||||
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2020 Compared to 2019 | 2019 Compared to 2018 | |||||||||||||||||||||||
Change Attributable to | Total Change | Change Attributable to | Total Change | |||||||||||||||||||||
Volume | Rate | Volume | Rate | |||||||||||||||||||||
Short-term investments | $ | 3,689 | $ | (4,628 | ) | $ | (939 | ) | $ | (106 | ) | $ | 367 | $ | 261 | |||||||||
Taxable investment securities | 3,812 | (8,026 | ) | (4,214 | ) | 4,045 | 1,573 | 5,618 | ||||||||||||||||
Tax-exempt investment securities (1) | 24,671 | (8,932 | ) | 15,739 | (2,634 | ) | (2,203 | ) | (4,837 | ) | ||||||||||||||
Loans (1) (2) | 59,719 | (20,900 | ) | 38,819 | 12,983 | 11,276 | 24,259 | |||||||||||||||||
Interest income | 91,891 | (42,486 | ) | 49,405 | 14,288 | 11,013 | 25,301 | |||||||||||||||||
Interest-bearing deposits | 6,379 | (20,382 | ) | (14,003 | ) | 654 | 9,523 | 10,177 | ||||||||||||||||
Short-term borrowings | 1,223 | (3,079 | ) | (1,856 | ) | (99 | ) | 1,095 | 996 | |||||||||||||||
Interest expense | 7,602 | (23,461 | ) | (15,859 | ) | 555 | 10,618 | 11,173 | ||||||||||||||||
Net interest income | $ | 84,289 | $ | (19,025 | ) | $ | 65,264 | $ | 13,733 | $ | 395 | $ | 14,128 | |||||||||||
(1) | Computed on a tax-equivalent basis assuming a marginal tax rate of 21% |
(2) |
Nonaccrual loans are included in loans. |
2020.
2018 | 2017 | 2016 | ||||||||||||||||||||||||||||||||||
Average Balance | Income/ Expense | Yield/ Rate | Average Balance | Income/ Expense | Yield/ Rate | Average Balance | Income/ Expense | Yield/ Rate | ||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||
Short-term investments (1) | $ | 90,374 | $ | 1,631 | 1.80 | % | $ | 144,464 | $ | 1,684 | 1.17 | % | $ | 63,882 | $ | 342 | 0.54 | % | ||||||||||||||||||
Taxable investment securities (2) | 1,934,160 | 50,052 | 2.59 | 1,479,698 | 32,825 | 2.22 | 1,314,820 | 27,626 | 2.10 | |||||||||||||||||||||||||||
Tax-exempt investment securities (2)(3) | 1,262,947 | 47,501 | 3.76 | 1,484,952 | 68,118 | 4.59 | 1,459,121 | 66,268 | 4.54 | |||||||||||||||||||||||||||
Loans (3)(4) | 3,828,040 | 201,498 | 5.26 | 3,435,447 | 168,843 | 4.91 | 3,333,241 | 162,994 | 4.89 | |||||||||||||||||||||||||||
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Total earning assets | 7,115,521 | $ | 300,682 | 4.23 | % | 6,544,561 | $ | 271,470 | 4.15 | % | 6,171,064 | $ | 257,230 | 4.17 | % | |||||||||||||||||||||
Cash and due from banks | 176,799 | 162,255 | 152,648 | |||||||||||||||||||||||||||||||||
Bank premises and equipment, net | 129,715 | 123,595 | 120,538 | |||||||||||||||||||||||||||||||||
Other assets | 62,595 | 56,007 | 55,694 | |||||||||||||||||||||||||||||||||
Goodwill and other intangible assets, net | 172,425 | 142,473 | 143,986 | |||||||||||||||||||||||||||||||||
Allowance for loan losses | (50,323 | ) | (47,380 | ) | (44,811 | ) | ||||||||||||||||||||||||||||||
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Total assets | $ | 7,606,732 | $ | 6,981,511 | $ | 6,599,119 | ||||||||||||||||||||||||||||||
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Liabilities and Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||
Interest-bearing deposits | $ | 4,052,614 | $ | 16,945 | 0.42 | % | $ | 3,783,960 | $ | 8,213 | 0.22 | % | $ | 3,469,005 | $ | 4,504 | 0.13 | % | ||||||||||||||||||
Short-term borrowings | 418,977 | 1,984 | 0.47 | 422,285 | 1,075 | 0.25 | 552,041 | 947 | 0.17 | |||||||||||||||||||||||||||
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Total interest-bearing liabilities | 4,471,591 | $ | 18,929 | 0.42 | % | 4,206,245 | $ | 9,288 | 0.22 | % | 4,021,046 | $ | 5,451 | 0.14 | % | |||||||||||||||||||||
Noninterest-bearing deposits | 2,124,004 | 1,843,973 | 1,666,598 | |||||||||||||||||||||||||||||||||
Other liabilities | 30,931 | 48,480 | 63,609 | |||||||||||||||||||||||||||||||||
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Total liabilities | 6,626,526 | 6,098,698 | 5,751,253 | |||||||||||||||||||||||||||||||||
Shareholders’ equity | 980,206 | 882,813 | 847,866 | |||||||||||||||||||||||||||||||||
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Total liabilities and shareholders’ equity | $ | 7,606,732 | $ | 6,981,511 | $ | 6,599,119 | ||||||||||||||||||||||||||||||
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Net interest income | $ | 281,753 | $ | 262,182 | $ | 251,779 | ||||||||||||||||||||||||||||||
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Rate Analysis: | ||||||||||||||||||||||||||||||||||||
Interest income/earning assets | 4.23 | % | 4.15 | % | 4.17 | % | ||||||||||||||||||||||||||||||
Interest expense/earning assets | 0.27 | 0.14 | 0.09 | |||||||||||||||||||||||||||||||||
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Net yield on earning assets | 3.96 | % | 4.01 | % | 4.08 | % | ||||||||||||||||||||||||||||||
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2020 | 2019 | 2018 | ||||||||||||||||||||||||||||||||||
Average Balance | Income/ Expense | Yield/ Rate | Average Balance | Income/ Expense | Yield/ Rate | Average Balance | Income/ Expense | Yield/ Rate | ||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||
Short-term investments (1) | $ | 251,086 | $ | 953 | 0.38 | % | $ | 84,430 | $ | 1,892 | 2.24 | % | $ | 90,374 | $ | 1,631 | 1.80 | % | ||||||||||||||||||
Taxable investment securities (2) | 2,233,634 | 51,456 | 2.30 | 2,090,490 | 55,670 | 2.66 | 1,934,160 | 50,052 | 2.59 | |||||||||||||||||||||||||||
Tax-exempt investment securities (2)(3) | 1,882,711 | 58,403 | 3.10 | 1,192,908 | 42,664 | 3.58 | 1,262,947 | 47,501 | 3.76 | |||||||||||||||||||||||||||
Loans (3)(4) | 5,152,531 | 264,576 | 5.13 | 4,074,667 | 225,757 | 5.54 | 3,828,040 | 201,498 | 5.26 | |||||||||||||||||||||||||||
Total earning assets | 9,519,962 | $ | 375,388 | 3.94 | % | 7,442,495 | $ | 325,983 | 4.38 | % | 7,115,521 | $ | 300,682 | 4.23 | % | |||||||||||||||||||||
Cash and due from banks | 189,849 | 175,417 | 176,799 | |||||||||||||||||||||||||||||||||
Bank premises and equipment, net | 139,880 | 133,239 | 129,715 | |||||||||||||||||||||||||||||||||
Other assets | 92,612 | 66,003 | 62,595 | |||||||||||||||||||||||||||||||||
Goodwill and other intangible assets, net | 318,818 | 174,138 | 172,425 | |||||||||||||||||||||||||||||||||
Allowance for credit losses | (67,606 | ) | (52,170 | ) | (50,323 | ) | ||||||||||||||||||||||||||||||
Total assets | $ | 10,193,515 | $ | 7,939,122 | $ | 7,606,732 | ||||||||||||||||||||||||||||||
Liabilities and Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||
Interest-bearing deposits | $ | 5,198,554 | $ | 13,119 | 0.25 | % | $ | 4,208,666 | $ | 27,122 | 0.64 | % | $ | 4,052,614 | $ | 16,945 | 0.42 | % | ||||||||||||||||||
Short-term borrowings | 561,505 | 1,124 | 0.20 | 398,142 | 2,980 | 0.75 | 418,977 | 1,984 | 0.47 | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 5,760,059 | $ | 14,243 | 0.25 | % | 4,606,808 | $ | 30,102 | 0.65 | % | 4,471,591 | $ | 18,929 | 0.42 | % | |||||||||||||||||||||
Noninterest-bearing deposits | 2,782,896 | 2,137,089 | 2,124,004 | |||||||||||||||||||||||||||||||||
Other liabilities | 88,550 | 48,658 | 30,931 | |||||||||||||||||||||||||||||||||
Total liabilities | 8,631,505 | 6,792,555 | 6,626,526 | |||||||||||||||||||||||||||||||||
Shareholders’ equity | 1,562,010 | 1,146,567 | 980,206 | |||||||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 10,193,515 | $ | 7,939,122 | $ | 7,606,732 | ||||||||||||||||||||||||||||||
Net interest income | $ | 361,145 | $ | 295,881 | $ | 281,753 | ||||||||||||||||||||||||||||||
Rate Analysis: | ||||||||||||||||||||||||||||||||||||
Interest income/earning assets | 3.94 | % | 4.38 | % | 4.23 | % | ||||||||||||||||||||||||||||||
Interest expense/earning assets | 0.15 | 0.40 | 0.27 | |||||||||||||||||||||||||||||||||
Net interest margin | 3.79 | % | 3.98 | % | 3.96 | % | ||||||||||||||||||||||||||||||
(1) | Short-term investments are comprised of |
(2) | Average balances include unrealized gains and losses on available-for-sale |
(3) | Computed on a tax-equivalent basis assuming a marginal tax rate of 21% |
(4) | Nonaccrual loans are included in loans. |
related stimulus programs.20182020 was $101.76$139.94 million, an increase of $10.75$31.51 million, or 11.81%29.06%, as compared to 2017.2019. Increases in certain categories of noninterest income included (1) trust fees (1) real estate mortgage operations income of $4.49$25.73 million, (2) gain on sale of$2.85$2.61 million, (4) miscellaneous income of $2.12 million which includes $1.40 million in Main Street Lending Program fees and (3) service charges on deposit accounts(5) trust fees of $2.25$1.13 million when compared to 2017.2019. The mortgage related income increase was mainly due to a significant increase in the volume of loans originated to $1.21 billion in 2020 up from $551.77 million in 2019 driven by the lower rate environment and a strong housing market in Texas. The increase in ATM, interchange and credit card fees was driven by continued growth in the number of debit cards issued as well as our TB&T acquisition. The increase in trust fees resulted from an increase in assets under management over the prior year and an increase in oil and gas production for the majority of 2018 that increased related to trust fees by $2.61 million over 2017.year. The fair value of our trust assets managed, which are not reflected in our consolidated balance sheets, totaled $5.60$7.51 billion at December 31, 2018,2020, as compared to $5.13$6.75 billion at December 31, 2017. The increases in ATM, interchange and credit card fees increased due to continued growth in debit cards and the Kingwood acquisition. Service charges on deposit accounts increased primarily due to continued growth in net new accounts, product and pricing changes made to better align the Company’s account offerings and the Kingwood acquisition.2019. Offsetting these increases were decreaseswas a decline in interest on net recoveriesservice charge revenue in 2020 when compared with 2019 of $190 thousand$1.47 million that was primarily driven by lower overdraft fees in the current year as a result of the effects of the pandemic and gains on sale ofavailable-for-sale securities of $474 thousand.20172019 was $91.02$108.43 million, an increase of $5.89$6.66 million, or 6.91%6.55%, as compared to 2016.2018. Increases in certain categories of noninterest income included (1) trust fees (1) real estate mortgage operations income of $4.06$2.99 million, (2) ATM, interchange and credit card fees of $1.78$1.33 million, and (3) interest on loan recoveries of $1.15 million, (4) service charges on deposit accounts of $1.03 million$376 thousand, and (5) trust fees of $220 thousand when compared to 2016.2018. The increase in real estate mortgage fees was a result of an increase in the volume of loans originated and the Company’s decision to move to mandatory delivery from best efforts. The increase in ATM, interchange and credit
ATM and interchange fees are charges that merchants pay to us and other card-issuing banks for processing electronic payment transactions. ATM and interchange fees consist of income from debit card usage, point of sale income for debit card transactions and ATM service fees. Federal Reserve rules applicable to financial institutions that have assets of $10 billion or more provide that the maximum permissible interchange fee for an electronic debit transaction inis limited to the sum of 21 cents per transaction and fiveplus 5 basis points multiplied by the value of the transaction. While we currently have assets under $10 billion, we are monitoringManagement has estimated the effectimpact of this reduction in per transaction fee income as we approachATM and interchange fees to approximate $14.00 million annually
threshold, due primarily to the effect of the Company’s participation in the PPP loan program and growth in deposits from related activities. However, on November 20, 2020, the federal bank regulatory agencies announced an interim final rule that provides temporary relief for certain community banking organizations that have crossed this threshold as of December 31, 2020 if they had less than $10 billion in assets as of December 31, 2019. Under the interim final rule, these banks, which includes us, will generally have until 2022 to either reduce their size, or to prepare for the regulatory and reporting standards under the Dodd-Frank Act. Management will continue to monitor the Company’s balance sheet levels and prepare for the effects of this future loss of debit card income.
2018 | Increase (Decrease) | 2017 | Increase (Decrease) | 2016 | ||||||||||||||||
Trust fees | $ | 28,181 | $ | 4,487 | $ | 23,694 | $ | 4,058 | $ | 19,636 | ||||||||||
Service charges on deposit accounts | 21,663 | 2,247 | 19,416 | 1,030 | 18,386 | |||||||||||||||
ATM, interchange and credit card fees | 28,532 | 2,846 | 25,686 | 1,776 | 23,910 | |||||||||||||||
Real estate mortgage operations | 15,157 | 48 | 15,109 | (977 | ) | 16,086 | ||||||||||||||
Net gain on sale ofavailable-for-sale securities | 1,354 | (474 | ) | 1,828 | 558 | 1,270 | ||||||||||||||
Net gain (loss) on sale of foreclosed assets | 116 | 166 | (50 | ) | (506 | ) | 456 | |||||||||||||
Net gain (loss) on sale of assets | (147 | ) | 249 | (396 | ) | (564 | ) | 168 | ||||||||||||
Interest on loan recoveries | 938 | (190 | ) | 1,128 | (984 | ) | 2,112 | |||||||||||||
Other: | ||||||||||||||||||||
Check printing fees | 216 | 43 | 173 | (17 | ) | 190 | ||||||||||||||
Safe deposit rental fees | 544 | 15 | 529 | (2 | ) | 531 | ||||||||||||||
Credit life and debt protection fees | 741 | 124 | 617 | (2 | ) | 619 | ||||||||||||||
Brokerage commissions | 1,707 | 417 | 1,290 | 717 | 573 | |||||||||||||||
Miscellaneous income | 2,762 | 769 | 1,993 | 798 | 1,195 | |||||||||||||||
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Total other | 5,970 | 1,368 | 4,602 | 1,494 | 3,108 | |||||||||||||||
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Total Noninterest Income | $ | 101,764 | $ | 10,747 | $ | 91,017 | $ | 5,885 | $ | 85,132 | ||||||||||
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2020 | Increase (Decrease) | 2019 | Increase (Decrease) | 2018 | ||||||||||||||||
Trust fees | $ | 29,531 | $ | 1,130 | $ | 28,401 | $ | 220 | $ | 28,181 | ||||||||||
Service charges on deposit accounts | 20,572 | (1,467 | ) | 22,039 | 376 | 21,663 | ||||||||||||||
ATM, interchange and credit card fees | 32,469 | 2,606 | 29,863 | 1,331 | 28,532 | |||||||||||||||
Gain on sale and fees of mortgage loans | 43,872 | 25,728 | 18,144 | 2,987 | 15,157 | |||||||||||||||
Net gain on sale of available-for-sale | 3,633 | 2,900 | 733 | (621 | ) | 1,354 | ||||||||||||||
Net gain (loss) on sale of foreclosed assets | 159 | (115 | ) | 274 | 158 | 116 | ||||||||||||||
Net gain (loss) on sale of assets | 112 | (207 | ) | 319 | 466 | (147 | ) | |||||||||||||
Interest on loan recoveries | 856 | (1,236 | ) | 2,092 | 1,154 | 938 | ||||||||||||||
Other: | ||||||||||||||||||||
Wire transfer fees | 1,153 | 141 | 1,012 | 110 | 902 | |||||||||||||||
Check printing fees | 293 | 82 | 211 | (5 | ) | 216 | ||||||||||||||
Safe deposit rental fees | 732 | 197 | 535 | (9 | ) | 544 | ||||||||||||||
Credit life and debt protection fees | 876 | (102 | ) | 978 | 237 | 741 | ||||||||||||||
Brokerage commissions | 1,310 | (271 | ) | 1,581 | (126 | ) | 1,707 | |||||||||||||
Miscellaneous income | 4,367 | 2,121 | 2,246 | 386 | 1,860 | |||||||||||||||
Total other | 8,731 | 2,168 | 6,563 | 593 | 5,970 | |||||||||||||||
Total Noninterest Income | $ | 139,935 | $ | 31,507 | $ | 108,428 | $ | 6,664 | $ | 101,764 | ||||||||||
2018. The reduction in the Company’s efficiency ratio during 2020 primarily resulted from the growth in the Company’s balance sheet and interest-earning assets as a result of the Company’s participation in the PPP loan program and the deferral of $3.62 million in noninterest expenses related to PPP loan origination costs during the second quarter of 2020.
medical insurance costs.
Salaries and employee benefits for 2017 totaled $95.29 million, an increase of $4.55 million, or 5.01%, aswhen compared to 2016. The increase was primarily driven by (i) annual merit pay increases that were effective March 1, 2017, (ii) an increase in our profit sharing expenses and (iii) an increase in stock option and stock grant expense due to the stock option grant in June 2017 and restricted stock grant in October 2017.
All other categories of noninterest expense for 2017 totaled $78.70 million, an increase of $3.61 million, or 4.80%, as compared to 2016. The increase in noninterest expense was largely attributable to increases in software amortization and expense of $1.29 million from thewrite-off of internally developed software, operational and other losses of $1.02 million due to fraud and weather related losses and professional and service fees of $1.19 million.2018. Offsetting these increases in 2017 werenoninterest expense for 2019 when compared to 2018 was a decrease of $463 thousand in FDIC insurance premiums of $1.24 million due to the lower rate charged by the FDIC beginning in the third quarterassessment credit previously discussed.
2018 | Increase (Decrease) | 2017 | Increase (Decrease) | 2016 | ||||||||||||||||
Salaries | $ | 79,474 | $ | 7,342 | $ | 72,132 | $ | 2,135 | $ | 69,997 | ||||||||||
Medical | 8,699 | 114 | 8,585 | (174 | ) | 8,759 | ||||||||||||||
Profit sharing | 7,049 | 2,314 | 4,735 | 1,514 | 3,221 | |||||||||||||||
Pension | (178 | ) | (305 | ) | 127 | (232 | ) | 359 | ||||||||||||
401(k) match expense | 2,588 | 196 | 2,392 | 61 | 2,331 | |||||||||||||||
Payroll taxes | 5,369 | 360 | 5,009 | 200 | 4,809 | |||||||||||||||
Stock option expense | 1,508 | (237 | ) | 1,745 | 863 | 882 | ||||||||||||||
Restricted stock expense | 680 | 118 | 562 | 181 | 381 | |||||||||||||||
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Total salaries and employee benefits | 105,189 | 9,902 | 95,287 | 4,548 | 90,739 | |||||||||||||||
Loss from partial settlement of pension plan | 1,546 | 1,546 | — | (267 | ) | 267 | ||||||||||||||
Net occupancy expense | 11,173 | 652 | 10,521 | 101 | 10,420 | |||||||||||||||
Equipment expense | 13,841 | 76 | 13,765 | 286 | 13,479 | |||||||||||||||
FDIC insurance premiums | 2,333 | 116 | 2,217 | (463 | ) | 2,680 | ||||||||||||||
ATM, interchange and credit card expenses | 9,282 | 1,830 | 7,452 | 221 | 7,231 | |||||||||||||||
Professional and service fees | 8,894 | 831 | 8,063 | 1,186 | 6,877 | |||||||||||||||
Printing, stationery and supplies | 1,997 | 8 | 1,989 | (104 | ) | 2,093 | ||||||||||||||
Amortization of intangible assets | 1,272 | 659 | 613 | (125 | ) | 738 | ||||||||||||||
Other: | ||||||||||||||||||||
Data processing fees | 1,462 | 343 | 1,119 | 656 | 463 | |||||||||||||||
Postage | 1,749 | 86 | 1,663 | (1 | ) | 1,664 | ||||||||||||||
Advertising | 3,603 | 88 | 3,515 | (21 | ) | 3,536 | ||||||||||||||
Correspondent bank service charges | 772 | (96 | ) | 868 | (96 | ) | 964 | |||||||||||||
Telephone | 3,562 | 454 | 3,108 | (145 | ) | 3,253 | ||||||||||||||
Public relations and business development | 3,061 | 242 | 2,819 | 71 | 2,748 | |||||||||||||||
Directors’ fees | 1,745 | 192 | 1,553 | 233 | 1,320 | |||||||||||||||
Audit and accounting fees | 1,625 | (4 | ) | 1,629 | (83 | ) | 1,712 | |||||||||||||
Legal fees | 1,148 | (632 | ) | 1,780 | (316 | ) | 2,096 | |||||||||||||
Regulatory exam fees | 1,275 | 98 | 1,177 | 46 | 1,131 | |||||||||||||||
Travel | 1,465 | 255 | 1,210 | (32 | ) | 1,242 | ||||||||||||||
Courier expense | 830 | (49 | ) | 879 | 31 | 848 | ||||||||||||||
Operational and other losses | 2,188 | (1,004 | ) | 3,192 | 1,022 | 2,170 | ||||||||||||||
Other real estate | 129 | (59 | ) | 188 | 6 | 182 | ||||||||||||||
Software amortization and expense | 2,297 | (998 | ) | 3,295 | 1,289 | 2,006 | ||||||||||||||
Other miscellaneous expense | 8,246 | 2,162 | 6,084 | 113 | 5,971 | |||||||||||||||
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Total other | 35,157 | 1,078 | 34,079 | 2,773 | 31,306 | |||||||||||||||
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Total Noninterest Expense | $ | 190,684 | $ | 16,698 | $ | 173,986 | $ | 8,156 | $ | 165,830 | ||||||||||
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2020 | Increase (Decrease) | 2019 | Increase (Decrease) | 2018 | ||||||||||||||||
Salaries | $ | 101,360 | $ | 17,079 | $ | 84,281 | $ | 4,807 | $ | 79,474 | ||||||||||
Medical | 10,406 | 1,281 | 9,125 | 426 | 8,699 | |||||||||||||||
Profit sharing | 10,740 | 3,079 | 7,661 | 612 | 7,049 | |||||||||||||||
Pension | — | (351 | ) | 351 | 529 | (178 | ) | |||||||||||||
401(k) match expense | 3,374 | 615 | 2,759 | 171 | 2,588 | |||||||||||||||
Payroll taxes | 6,565 | 890 | 5,675 | 306 | 5,369 | |||||||||||||||
Stock option expense | 1,377 | (112 | ) | 1,489 | (19 | ) | 1,508 | |||||||||||||
Restricted stock expense | 1,301 | 306 | 995 | 315 | 680 | |||||||||||||||
Total salaries and employee benefits | 135,123 | 22,787 | 112,336 | 7,147 | 105,189 | |||||||||||||||
Cost related to termination of pension plan | — | (2,673 | ) | 2,673 | 1,127 | 1,546 | ||||||||||||||
Net occupancy expense | 12,388 | 1,232 | 11,156 | (17 | ) | 11,173 | ||||||||||||||
Equipment expense | 8,396 | (656 | ) | 9,052 | (1,066 | ) | 10,118 | |||||||||||||
FDIC insurance premiums | 1,758 | 667 | 1,091 | (1,242 | ) | 2,333 | ||||||||||||||
ATM, interchange and credit card expenses | 11,235 | 1,379 | 9,856 | 574 | 9,282 | |||||||||||||||
Professional and service fees | 9,346 | 1,493 | 7,853 | (1,041 | ) | 8,894 | ||||||||||||||
Printing, stationery and supplies | 2,163 | 351 | 1,812 | (185 | ) | 1,997 | ||||||||||||||
Amortization of intangible assets | 1,990 | 974 | 1,016 | (256 | ) | 1,272 | ||||||||||||||
Other: | ||||||||||||||||||||
Data processing fees | 1,619 | 69 | 1,550 | 88 | 1,462 | |||||||||||||||
Postage | 1,446 | (101 | ) | 1,547 | (202 | ) | 1,749 | |||||||||||||
Advertising | 1,952 | (1,655 | ) | 3,607 | 4 | 3,603 | ||||||||||||||
Correspondent bank service charges | 908 | 201 | 707 | (65 | ) | 772 | ||||||||||||||
Telephone | 3,819 | 141 | 3,678 | 116 | 3,562 | |||||||||||||||
Public relations and business development | 2,650 | (556 | ) | 3,206 | 145 | 3,061 | ||||||||||||||
Directors’ fees | 2,363 | 391 | 1,972 | 227 | 1,745 | |||||||||||||||
Audit and accounting fees | 2,232 | 772 | 1,460 | (165 | ) | 1,625 | ||||||||||||||
Legal fees | 1,276 | 62 | 1,214 | 66 | 1,148 | |||||||||||||||
Regulatory exam fees | 1,105 | (74 | ) | 1,179 | (96 | ) | 1,275 | |||||||||||||
Travel | 967 | (674 | ) | 1,641 | 176 | 1,465 | ||||||||||||||
Courier expense | 855 | (3 | ) | 858 | 28 | 830 | ||||||||||||||
Operational and other losses | 2,462 | 583 | 1,879 | (309 | ) | 2,188 | ||||||||||||||
Other real estate | 83 | (119 | ) | 202 | 73 | 129 | ||||||||||||||
Software amortization and expense | 8,862 | 1,557 | 7,305 | 1,285 | 6,020 | |||||||||||||||
Other miscellaneous expense | 12,940 | 5,269 | 7,671 | (575 | ) | 8,246 | ||||||||||||||
Total other | 45,539 | 5,863 | 39,676 | 796 | 38,880 | |||||||||||||||
Total Noninterest Expense | $ | 227,938 | $ | 31,417 | $ | 196,521 | $ | 5,837 | $ | 190,684 | ||||||||||
On December 22, 2017, the Tax Cuts and Jobs Act was signed into law with sweeping modifications to the Internal Revenue Service Code. The primary change for the Company was to lower the corporate income tax rate to 21% from 35%. The Company’s deferred tax assets and liabilities wereIn 2018,However, the Company continued to analyze certain aspectsupdated its estimate of the Tax Cuts and Jobs Act resulting in refinement ofimpact to our deferred tax balances based on the calculationproposed regulations issued to date and recorded an additional reduction in its deferred tax balance of $664 thousand, which represents a reduction of income tax expense for the year ended December 31, 2018.
2018 of $664 thousand. No additional adjustment amounts were recorded for the years ended December 31, 2019 and 2020.
December 31, | ||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
Commercial | $ | 844,953 | $ | 684,099 | $ | 674,410 | $ | 696,163 | $ | 639,954 | ||||||||||
Agricultural | 96,677 | 94,543 | 84,021 | 102,351 | 105,694 | |||||||||||||||
Real estate | 2,639,346 | 2,302,998 | 2,189,844 | 2,136,233 | 1,822,854 | |||||||||||||||
Consumer | 372,660 | 403,929 | 409,032 | 382,303 | 360,686 | |||||||||||||||
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Total loansheld-for-investment | $ | 3,953,636 | $ | 3,485,569 | $ | 3,357,307 | $ | 3,317,050 | $ | 2,929,188 | ||||||||||
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As
December 31, | ||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Commercial: | ||||||||||||||||||||
C&I | $ | 1,131,382 | $ | N/A | $ | N/A | $ | N/A | $ | N/A | ||||||||||
Municipal | 181,325 | N/A | N/A | N/A | N/A | |||||||||||||||
Total Commercial | 1,312,707 | 856,326 | 844,953 | 684,099 | 674,410 | |||||||||||||||
Agricultural | 94,864 | 103,640 | 96,677 | 94,543 | 84,021 | |||||||||||||||
Real Estate: | ||||||||||||||||||||
Construction & Development | 553,959 | N/A | N/A | N/A | N/A | |||||||||||||||
Farm | 152,237 | N/A | N/A | N/A | N/A | |||||||||||||||
Non-Owner Occupied CRE | 617,686 | N/A | N/A | N/A | N/A | |||||||||||||||
Owner Occupied CRE | 746,974 | N/A | N/A | N/A | N/A | |||||||||||||||
Residential | 1,248,409 | N/A | N/A | N/A | N/A | |||||||||||||||
Total Real Estate | 3,319,265 | 2,823,372 | 2,639,346 | 2,302,998 | 2,189,844 | |||||||||||||||
Consumer: | ||||||||||||||||||||
Auto | 353,595 | N/A | N/A | N/A | N/A | |||||||||||||||
Non-Auto | 90,602 | N/A | N/A | N/A | N/A | |||||||||||||||
Total Consumer | 444,197 | 411,631 | 372,660 | 403,929 | 409,032 | |||||||||||||||
Total | $ | 5,171,033 | $ | 4,194,969 | $ | 3,953,636 | $ | 3,485,569 | $ | 3,357,307 | ||||||||||
One Year or less | After One Year Through Five Years | After Five Years | Total | |||||||||||||
Commercial and agricultural | $ | 378,169 | $ | 296,735 | $ | 266,726 | $ | 941,630 | ||||||||
Real estate - construction | 201,081 | 70,327 | 205,271 | 476,679 |
Maturities After One Year | ||||
Loans with fixed interest rates | $ | 446,838 | ||
Loans with floating or adjustable interest rates | 392,221 |
2020:
One Year or less | After One Year Through Five Years | After Five Years | Total | |||||||||||||
Commercial and agricultural | $ | 362,416 | $ | 803,779 | $ | 241,376 | $ | 1,407,571 | ||||||||
Real estate – construction and development | 255,960 | 91,816 | 206,183 | 553,959 |
Maturities After One Year | ||||||
Loans with fixed interest rates | $ | 892,141 | ||||
Loans with floating or adjustable interest rates | 451,013 |
2018,2020, the Company’s exposure to the oil and gas industry was 2.86%2.27% of grossloans$113.54$106.24 million, compared to 1.72%2.86% of gross loans$60.16$119.79 million at December 31, 2017. The increase in 2018 was primarily a result of the Kingwood acquisition.2019. These oil and gas loans consisted (based on collateral supporting the loan) of (i) development and production loans of 0.34%11.99%, (ii) oil and gas field servicing loans of 8.52%6.62%, (iii) real estate loans of 40.78%57.40%, (iv) accounts receivable and inventory of 2.50%4.04%, (v) automobile of 39.64%12.09% and (vi) other of 8.22%7.86%. These loans have experienced increased stress due to lowerwarranted additional scrutiny because of fluctuating oil and gas prices although such prices improved in 2018.and the COVID pandemic. The Company instituted additional monitoring procedures for these loans and has classified and downgraded andcharged-off loans as appropriate. The following oil and gas information is as of and for the years ended December 31, 20182020 and 2017:
December 31, | ||||||||
2018 | 2017 | |||||||
Oil and gas related loans | $ | 113,536 | $ | 60,164 | ||||
Oil and gas related loans as a % of total loans | 2.86 | % | 1.72 | % | ||||
Classified oil and gas related loans | $ | 3,894 | $ | 20,346 | ||||
Nonaccrual oil and gas related loans | 1,048 | 1,414 | ||||||
Net charge-offs for oil and gas related loans | — | 50 | ||||||
Allowance for oil and gas related loans as a % of oil and gas loans | 3.23 | % | 7.90 | % |
2019:
December 31, | ||||||||
2020 | 2019 | |||||||
Oil and gas related loans, excluding PPP loans | $ | 106,237 | $ | 119,789 | ||||
Oil and gas related loans as a % of total loans held-for-investment, | 2.27 | % | 2.86 | % | ||||
Classified oil and gas related loans | $ | 13,298 | $ | 7,041 | ||||
Nonaccrual oil and gas related loans | $ | 4,774 | $ | 481 | ||||
Net charge-offs for oil and gas related loans for year then ended | $ | 825 | $ | — |
December 31, 2020 | ||||
Retail loans | $ | 216,244 | ||
Restaurant loans | 48,618 | |||
Hotel loans | 71,716 | |||
Other hospitality loans | 21,970 | |||
Travel loans | 780 | |||
Total Retail/Restaurant/Hospitality loans, excluding PPP loans | $ | 359,328 | ||
Retail/Restaurant/Hospitality loans as a % of total loans held-for-investment, | 7.67 | % | ||
Classified Retail/Restaurant/Hospitality loans | $ | 31,192 | ||
Nonaccrual Retail/Restaurant/Hospitality loans | 5,975 | |||
Net Charge-Offs for Retail/Restaurant/Hospitality loans | 895 |
At December 31, | ||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
Nonaccrual loans* | $ | 27,534 | $ | 17,670 | $ | 27,371 | $ | 28,601 | $ | 20,194 | ||||||||||
Loans still accruing and past due 90 days or more | 1,008 | 288 | 284 | 341 | 261 | |||||||||||||||
Troubled debt restructured loans** | 513 | 627 | 701 | 199 | 226 | |||||||||||||||
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Nonperforming loans | 29,055 | 18,585 | 28,356 | 29,141 | 20,681 | |||||||||||||||
Foreclosed assets | 577 | 1,532 | 644 | 627 | 1,035 | |||||||||||||||
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|
|
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| |||||||||||
Total nonperforming assets | $ | 29,632 | $ | 20,117 | $ | 29,000 | $ | 29,768 | $ | 21,716 | ||||||||||
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|
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| |||||||||||
As a % of loans and foreclosed assets | 0.75 | % | 0.57 | % | 0.86 | % | 0.89 | % | 0.74 | % | ||||||||||
As a % of total assets | 0.38 | 0.28 | 0.43 | 0.45 | 0.37 |
At December 31, | ||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Nonaccrual loans | $ | 42,619 | $ | 24,582 | $ | 27,534 | $ | 17,670 | $ | 27,371 | ||||||||||
Loans still accruing and past due 90 days or more | 113 | 153 | 1,008 | 288 | 284 | |||||||||||||||
Troubled debt restructured loans* | 24 | 26 | 513 | 627 | 701 | |||||||||||||||
Nonperforming loans | 42,756 | 24,761 | 29,055 | 18,585 | 28,356 | |||||||||||||||
Foreclosed assets | 142 | 1,009 | 577 | 1,532 | 644 | |||||||||||||||
Total nonperforming assets | $ | 42,898 | $ | 25,770 | $ | 29,632 | $ | 20,117 | $ | 29,000 | ||||||||||
As a % of loans held-for-investment | 0.83 | % | 0.61 | % | 0.75 | % | 0.58 | % | 0.86 | % | ||||||||||
As a % of total assets | 0.39 | 0.31 | 0.38 | 0.28 | 0.43 |
* |
|
Troubled debt restructured loans of $7.41 million, $4.79 million, $3.84 million, $4.63 million |
See Note 3 to the Consolidated Financial Statements beginning on pageF-18 for more information on these assets.
Provision and Allowance for Loan Losses. The allowance for loan losses is the amount we determine as of a specific date to be appropriate to absorb probable losses on existing loans in which full collectability is unlikely based on our review and evaluation of the loan portfolio. For a discussion of our methodology, see our accounting policies in Note 1 to the Consolidated Financial Statements beginning on pageF-8. The provision for loan losses was $5.67 million in 2018, as compared to $6.53 million in 2017 and $10.21 million in 2016. The continued provision for loan losses in 2018 reflects the continued growth in the loan portfolio and the continued levels of gross charge-offs. As a percent of average loans, net loan charge-offs were 0.07% during 2018, 0.12% during 2017 and 0.19% during 2016. The allowance for loan losses as a percent of loans was 1.29% as of December 31, 2018, as compared to 1.38% as of December 31, 2017 and 1.35% as of December 31, 2016. Included in Tables 8 and 9 are further analysis of our allowance for loan losses.
Although we believe we use the best information available to make loan loss allowance determinations, future adjustments could be necessary if circumstances or economic conditions differ substantially from the assumptions used in making our initial determinations. A downturn in the economy or lower employment could result in increased levels of nonaccrual, past due 90 days or more and still accruing, restructured loans, foreclosed assets, charge-offs, increased loan loss provisions and reductions in income. Additionally, as an integral part of their examination process, bank regulatory agencies periodically review the adequacy of our allowance for loan losses. The banking agencies could require additions to the loan loss allowance based on their judgment of information available to them at the time of their examinations of our bank subsidiary.
Table 8 — Loan Loss Experience and Allowance for Loan Losses (in thousands, except percentages):
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
Balance at January 1, | $ | 48,156 | $ | 45,779 | $ | 41,877 | $ | 36,824 | $ | 33,900 | ||||||||||
Charge-offs: | ||||||||||||||||||||
Commercial | 1,418 | 3,018 | 6,990 | 3,734 | 583 | |||||||||||||||
Agricultural | — | 71 | 219 | 164 | 2 | |||||||||||||||
Real estate | 1,479 | 1,215 | 682 | 441 | 1,075 | |||||||||||||||
Consumer | 1,550 | 1,517 | 1,925 | 1,700 | 1,222 | |||||||||||||||
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|
|
|
|
|
|
|
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| |||||||||||
Total charge-offs | 4,447 | 5,821 | 9,816 | 6,039 | 2,882 | |||||||||||||||
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| |||||||||||
Recoveries: | ||||||||||||||||||||
Commercial | 839 | 942 | 952 | 344 | 346 | |||||||||||||||
Agricultural | 15 | 33 | 25 | 55 | 18 | |||||||||||||||
Real estate | 462 | 192 | 2,021 | 558 | 505 | |||||||||||||||
Consumer | 512 | 501 | 508 | 450 | 472 | |||||||||||||||
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|
|
|
|
|
|
| |||||||||||
Total recoveries | 1,828 | 1,668 | 3,506 | 1,407 | 1,341 | |||||||||||||||
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| |||||||||||
Net charge-offs | 2,619 | 4,153 | 6,310 | 4,632 | 1,541 | |||||||||||||||
Provision for loan losses | 5,665 | 6,530 | 10,212 | 9,685 | 4,465 | |||||||||||||||
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|
|
|
|
|
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|
| |||||||||||
Balance at December 31, | $ | 51,202 | $ | 48,156 | $ | 45,779 | $ | 41,877 | $ | 36,824 | ||||||||||
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| |||||||||||
Loans atyear-end | $ | 3,975,308 | $ | 3,500,699 | $ | 3,384,205 | $ | 3,350,593 | $ | 2,937,991 | ||||||||||
Average loans | 3,828,040 | 3,435,447 | 3,333,241 | 3,090,538 | 2,786,011 | |||||||||||||||
Net charge-offs/average loans | 0.07 | % | 0.12 | % | 0.19 | % | 0.15 | % | 0.06 | % | ||||||||||
Allowance for loanlosses/year-end loans* | 1.29 | 1.38 | 1.35 | 1.25 | 1.25 | |||||||||||||||
Allowance for loan losses/nonaccrual, past due 90 days still accruing and restructured loans | 176.22 | 259.11 | 161.44 | 143.70 | 178.06 |
|
Table 9 — Allocation of Allowance for Loan Losses (in thousands):
At December 31, | ||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
Allocation Amount | Allocation Amount | Allocation Amount | Allocation Amount | Allocation Amount | ||||||||||||||||
Commercial | $ | 11,948 | $ | 10,865 | $ | 11,707 | $ | 12,644 | $ | 7,990 | ||||||||||
Agricultural | 1,446 | 1,305 | 1,101 | 1,191 | 527 | |||||||||||||||
Real estate | 32,342 | 29,896 | 26,864 | 24,375 | 26,657 | |||||||||||||||
Consumer | 5,466 | 6,090 | 6,107 | 3,667 | 1,650 | |||||||||||||||
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|
|
|
|
|
|
|
| |||||||||||
Total | $ | 51,202 | $ | 48,156 | $ | 45,779 | $ | 41,877 | $ | 36,824 | ||||||||||
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|
|
|
Percent of Loans in Each Category of Total Loans:
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
Commercial | 23.34 | % | 19.63 | % | 20.09 | % | 20.99 | % | 21.84 | % | ||||||||||
Agricultural | 2.82 | 2.71 | 2.50 | 3.09 | 3.61 | |||||||||||||||
Real estate | 63.17 | 66.07 | 65.23 | 64.40 | 62.23 | |||||||||||||||
Consumer | 10.67 | 11.59 | 12.18 | 11.52 | 12.32 |
Included in our loan portfolio are certain other loans not included in Table 7 that are deemed to be potential problem loans. Potential problem loans are those loans that are currently performing, but for which known information about trends, uncertainties or possible credit problems of the borrowers causes management to have serious doubts as to the ability of such borrowers to comply with present repayment terms, possibly resulting in the transfer of such loans to nonperforming status. These potential problem loans totaled $3.04$10.76 million as of December 31, 2020.
The provision for credit losses in 2020 reflects primarily the stress on our loan portfolio from the increase in unemployment and economic effects of the COVID pandemic. As a percent of average loans, net loan charge-offs were 0.06% during 2020, 0.04% during 2019 and 0.07% during 2018. The allowance for credit losses as a percent of loans
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Balance at January 1, | $ | 52,499 | $ | 51,202 | $ | 48,156 | $ | 45,779 | $ | 41,877 | ||||||||||
Impact of adopting ASC 326 | (619 | ) | — | — | — | — | ||||||||||||||
Initial allowance on acquired TB&T PCD loans | 1,678 | — | — | — | — | |||||||||||||||
Charge-offs: | ||||||||||||||||||||
Commercial: | ||||||||||||||||||||
C&I | 2,516 | N/A | N/A | N/A | N/A | |||||||||||||||
Municipal | — | N/A | N/A | N/A | N/A | |||||||||||||||
Total Commercial | 2,516 | 1,545 | 1,418 | 3,018 | 6,990 | |||||||||||||||
Agricultural | 372 | 319 | — | 71 | 219 | |||||||||||||||
Real estate: | ||||||||||||||||||||
Construction & Development | — | N/A | N/A | N/A | N/A | |||||||||||||||
Farm | — | N/A | N/A | N/A | N/A | |||||||||||||||
Non-Owner Occupied CRE | 563 | N/A | N/A | N/A | N/A | |||||||||||||||
Owner Occupied CRE | 567 | N/A | N/A | N/A | N/A | |||||||||||||||
Residential real estate | 373 | N/A | N/A | N/A | N/A | |||||||||||||||
Total real estate | 1,503 | 1,335 | 1,479 | 1,215 | 682 | |||||||||||||||
Consumer: | ||||||||||||||||||||
Auto | 548 | N/A | N/A | N/A | N/A | |||||||||||||||
Non-Auto | 375 | N/A | N/A | N/A | N/A | |||||||||||||||
Total Consumer | 923 | 927 | 1,550 | 1,517 | 1,925 | |||||||||||||||
Total charge-offs | 5,314 | 4,126 | 4,447 | 5,821 | 9,816 | |||||||||||||||
Recoveries: | ||||||||||||||||||||
Commercial: | ||||||||||||||||||||
C&I | 1,315 | N/A | N/A | N/A | N/A | |||||||||||||||
Municipal | — | N/A | N/A | N/A | N/A | |||||||||||||||
Total Commercial | 1,315 | 1,364 | 839 | 942 | 952 | |||||||||||||||
Agricultural | 31 | 158 | 15 | 33 | 25 | |||||||||||||||
Real estate: | ||||||||||||||||||||
Construction & Development | — | N/A | N/A | N/A | N/A | |||||||||||||||
Farm | 157 | N/A | N/A | N/A | N/A | |||||||||||||||
Non-Owner Occupied CRE | 131 | N/A | N/A | N/A | N/A | |||||||||||||||
Owner Occupied CRE | 17 | N/A | N/A | N/A | N/A | |||||||||||||||
Residential real estate | 151 | N/A | N/A | N/A | N/A | |||||||||||||||
Total Real Estate | 456 | 404 | 462 | 192 | 2,021 | |||||||||||||||
Consumer: | ||||||||||||||||||||
Auto | 269 | N/A | N/A | N/A | N/A | |||||||||||||||
Non-Auto | 171 | N/A | N/A | N/A | N/A | |||||||||||||||
Total Consumer | 440 | 532 | 512 | 501 | 508 | |||||||||||||||
Total recoveries | 2,242 | 2,458 | 1,828 | 1,668 | 3,506 | |||||||||||||||
Net charge-offs | 3,072 | 1,668 | 2,619 | 4,153 | 6,310 | |||||||||||||||
Provision for credit losses (excluding provision for unfunded commitment) | 16,048 | 2,965 | 5,665 | 6,530 | 10,212 | |||||||||||||||
Balance at December 31, | $ | 66,534 | $ | 52,499 | $ | 51,202 | $ | 48,156 | $ | 45,779 | ||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Loans, held-for-investment year-end | $ | 5,171,033 | $ | 4,194,969 | $ | 3,953,636 | $ | 3,485,569 | $ | 3,357,307 | ||||||||||
Average loans | 5,152,531 | 4,074,667 | 3,828,040 | 3,435,447 | 3,333,241 | |||||||||||||||
Net charge-offs/average loans | 0.06 | % | 0.04 | % | 0.07 | % | 0.12 | % | 0.19 | % | ||||||||||
Allowance for credit losses/year-end loansheld-for- | 1.29 | % | 1.25 | % | 1.30 | % | 1.38 | % | 1.36 | % | ||||||||||
Allowance for credit losses/nonaccrual, past due 90 days still accruing and restructured loans | 155.61 | 212.02 | 176.22 | 259.11 | 161.44 |
At December 31, | ||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Allocation Amount | Allocation Amount | Allocation Amount | Allocation Amount | Allocation Amount | ||||||||||||||||
Commercial: | ||||||||||||||||||||
C&I | $ | 13,609 | $ | N/A | $ | N/A | $ | N/A | $ | N/A | ||||||||||
Municipal | 1,552 | N/A | N/A | N/A | N/A | |||||||||||||||
Total Commercial | 15,161 | 12,122 | 11,948 | 10,865 | 11,707 | |||||||||||||||
Agricultural | 1,255 | 1,206 | 1,446 | 1,305 | 1,101 | |||||||||||||||
Real estate: | ||||||||||||||||||||
Construction & Development | 13,512 | N/A | N/A | N/A | N/A | |||||||||||||||
Farm | 1,876 | N/A | N/A | N/A | N/A | |||||||||||||||
Non-Owner Occupied CRE | 8,391 | N/A | N/A | N/A | N/A | |||||||||||||||
Owner Occupied CRE | 12,347 | N/A | N/A | N/A | N/A | |||||||||||||||
Residential real estate | 12,601 | N/A | N/A | N/A | N/A | |||||||||||||||
Total Real Estate | 48,727 | 33,974 | 32,342 | 29,896 | 26,864 | |||||||||||||||
Consumer: | ||||||||||||||||||||
Auto | 1,020 | N/A | N/A | N/A | N/A | |||||||||||||||
Non-Auto | 371 | N/A | N/A | N/A | N/A | |||||||||||||||
Total Consumer | 1,391 | 5,197 | 5,466 | 6,090 | 6,107 | |||||||||||||||
Total | $ | 66,534 | $ | 52,499 | $ | 51,202 | $ | 48,156 | $ | 45,779 | ||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
Commercial: | ||||||||||||||||||||
C&I | 21.78 | % | N/A | N/A | N/A | N/A | ||||||||||||||
Municipal | 3.51 | % | N/A | N/A | N/A | N/A | ||||||||||||||
Total Commercial | 25.29 | % | 20.41 | % | 21.37 | % | 19.63 | % | 20.09 | % | ||||||||||
Agricultural | 1.83 | % | 2.47 | % | 2.45 | % | 2.71 | % | 2.50 | % | ||||||||||
Real estate: | ||||||||||||||||||||
Construction & Development | 10.72 | % | N/A | N/A | N/A | N/A | ||||||||||||||
Farm | 2.94 | % | N/A | N/A | N/A | N/A | ||||||||||||||
Non-Owner Occupied CRE | 10.55 | % | N/A | N/A | N/A | N/A | ||||||||||||||
Owner Occupied CRE | 14.45 | % | N/A | N/A | N/A | N/A | ||||||||||||||
Residential real estate | 25.59 | % | N/A | N/A | N/A | N/A | ||||||||||||||
Total Real Estate | 64.25 | % | 67.31 | % | 66.75 | % | 66.07 | % | 65.23 | % | ||||||||||
Consumer: | ||||||||||||||||||||
Auto | 6.89 | % | N/A | N/A | N/A | N/A | ||||||||||||||
Non-Auto | 1.74 | % | N/A | N/A | N/A | N/A | ||||||||||||||
Total Consumer | 8.63 | % | 9.81 | % | 9.43 | % | 11.59 | % | 12.18 | % | ||||||||||
Total | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | ||||||||||
2019.
Maturing | ||||||||||||||||||||||||||||||||||||||||
One Year or Less | After One Year Through Five Years | After Five Years Through Ten Years | After Ten Years | Total | ||||||||||||||||||||||||||||||||||||
Available-for-Sale: | Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | ||||||||||||||||||||||||||||||
U. S. Treasury securities | $ | — | – | % | $ | 9,962 | 2.52 | % | $ | — | – | % | $ | — | – | % | $ | 9,962 | 2.52 | % | ||||||||||||||||||||
Obligations of U.S. government sponsored enterprises and agencies | 301 | 1.83 | — | — | — | — | — | — | 301 | 1.83 | ||||||||||||||||||||||||||||||
Obligations of states and political subdivisions | 184,033 | 5.00 | 553,499 | 4.22 | 518,317 | 3.97 | 2,022 | 5.65 | 1,257,871 | 4.23 | ||||||||||||||||||||||||||||||
Corporate bonds and other securities | 4,580 | 2.21 | 218 | 2.65 | — | — | — | — | 4,798 | 2.23 | ||||||||||||||||||||||||||||||
Mortgage-backed securities | 26,749 | 2.17 | 1,119,800 | 2.51 | 727,640 | 3.06 | 11,656 | 3.01 | 1,885,845 | 2.72 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | $ | 215,663 | 4.59 | % | $ | 1,683,479 | 3.07 | % | $ | 1,245,957 | 3.44 | % | $ | 13,678 | 3.40 | % | $ | 3,158,777 | 3.32 | % | ||||||||||||||||||||
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|
|
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|
Maturing | ||||||||||||||||||||||||||||||||||||||||
One Year or Less | After One Year Through Five Years | After Five Years Through Ten Years | After Ten Years | Total | ||||||||||||||||||||||||||||||||||||
Available-for-Sale: | Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | ||||||||||||||||||||||||||||||
Obligations of states and political subdivisions | $ | 98,345 | 4.71 | % | $ | 673,036 | 4.01 | % | $ | 1,647,476 | 2.85 | % | $ | 8,019 | 2.39 | % | $ | 2,426,876 | 3.25 | % | ||||||||||||||||||||
Corporate bonds and other securities | 4,557 | 1.86 | — | — | — | — | — | — | 4,557 | 1.86 | ||||||||||||||||||||||||||||||
Mortgage-backed securities | 186,698 | 2.02 | 1,514,743 | 2.27 | 260,155 | 1.68 | — | — | 1,961,596 | 2.17 | ||||||||||||||||||||||||||||||
Total | $ | 289,600 | 2.93 | % | $ | 2,187,779 | 2.81 | % | $ | 1,907,631 | 2.69 | % | $ | 8,019 | 2.39 | % | $ | 4,393,029 | 2.76 | % | ||||||||||||||||||||
2018 | 2017 | 2016 | ||||||||||||||||||||||
Average Balance | Average Rate | Average Balance | Average Rate | Average Balance | Average Rate | |||||||||||||||||||
Noninterest-bearing deposits | $ | 2,124,004 | — | $ | 1,843,973 | — | $ | 1,666,598 | — | |||||||||||||||
Interest-bearing deposits | ||||||||||||||||||||||||
Interest-bearing checking | 2,025,810 | 0.53 | % | 1,902,699 | 0.27 | % | 1,713,498 | 0.12 | % | |||||||||||||||
Savings and money market accounts | 1,558,889 | 0.28 | 1,401,804 | 0.13 | 1,195,671 | 0.09 | ||||||||||||||||||
Time deposits under $100,000 | 204,929 | 0.25 | 267,754 | 0.13 | 237,419 | 0.18 | ||||||||||||||||||
Time deposits of $100,000 or more | 262,987 | 0.48 | 211,703 | 0.40 | 322,417 | 0.31 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total interest-bearing deposits | 4,052,615 | 0.42 | % | 3,783,960 | 0.22 | % | 3,469,005 | 0.13 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total average deposits | $ | 6,176,619 | $ | 5,627,933 | $ | 5,135,603 | ||||||||||||||||||
|
|
|
|
|
|
As of December 31, 2018 | ||||
Three months or less | $ | 88,404 | ||
Over three through six months | 55,969 | |||
Over six through twelve months | 68,808 | |||
Over twelve months | 34,990 | |||
|
| |||
Total time deposits of $100,000 or more | $ | 248,171 | ||
|
|
2020 | 2019 | 2018 | ||||||||||||||||||||||
Average Balance | Average Rate | Average Balance | Average Rate | Average Balance | Average Rate | |||||||||||||||||||
Noninterest-bearing deposits | $ | 2,782,896 | — | % | $ | 2,137,089 | — | % | $ | 2,124,005 | — | % | ||||||||||||
Interest-bearing deposits | ||||||||||||||||||||||||
Interest-bearing checking | 2,513,627 | 0.21 | 2,097,109 | 0.68 | 2,025,810 | 0.53 | ||||||||||||||||||
Savings and money market accounts | 2,214,569 | 0.20 | 1,679,168 | 0.54 | 1,558,889 | 0.28 | ||||||||||||||||||
Time deposits under $100,000 | 195,425 | 0.43 | 186,709 | 0.70 | 204,929 | 0.25 | ||||||||||||||||||
Time deposits of $100,000 or more | 274,933 | 0.88 | 245,680 | 1.04 | 262,986 | 0.48 | ||||||||||||||||||
Total interest-bearing deposits | 5,198,554 | 0.25 | % | 4,208,666 | 0.64 | % | 4,052,614 | 0.42 | % | |||||||||||||||
Total average deposits | $ | 7,981,450 | $ | 6,345,755 | $ | 6,176,619 | ||||||||||||||||||
Total cost of deposits | 0.16 | % | 0.42 | % | 0.27 | % | ||||||||||||||||||
As of December 31, 2020 | ||||
Three months or less | $ | 109,096 | ||
Over three through six months | 54,915 | |||
Over six through twelve months | 79,159 | |||
Over twelve months | 43,142 | |||
Total time deposits of $100,000 or more | $ | 286,312 | ||
Total shareholders’ equity was $1.05$1.68 billion, or 13.62%15.39% of total assets at December 31, 2018,2020, as compared to $922.77 million,$1.23 billion, or 12.72%14.85% of total assets at December 31, 2017.2019. Included in shareholders’ equity at December 31, 2020 and 2019 were $170.40 million and $67.51 million, respectively, in unrealized gains on investment securities
2019.
We performed an assessment and believe the Company and Bank meet the requirements upon full implementation of the Basel III rules that will be effective in 2019.
2019.
Payment Due by Period | ||||||||||||||||||||
Total Amounts | Less than 1 year | More than 1 year but less than 3 years | More than 3 years but less than 5 years | Over 5 years | ||||||||||||||||
Deposits with stated maturity dates | $ | 442,161 | $ | 373,359 | $ | 54,207 | $ | 14,541 | $ | 54 | ||||||||||
Pension obligation | 4,613 | 837 | 706 | 731 | 2,339 | |||||||||||||||
Operating leases | 1,275 | 610 | 633 | 32 | — | |||||||||||||||
Outsourcing service contracts | 2,858 | 2,201 | 657 | — | — | |||||||||||||||
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|
| |||||||||||
Total Contractual Obligations | $ | 450,907 | $ | 377,007 | $ | 56,203 | $ | 15,304 | $ | 2,393 | ||||||||||
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|
Payment Due by Period | ||||||||||||||||||||
Total Amounts | Less than 1 year | More than 1 year but less than 3 years | More than 3 years but less than 5 years | Over 5 years | ||||||||||||||||
Deposits with stated maturity dates | $ | 475,425 | $ | 391,638 | $ | 64,495 | $ | 19,267 | $ | 25 | ||||||||||
Operating leases | 2,577 | 1,094 | 870 | 535 | 78 | |||||||||||||||
Outsourcing service contracts | 15,278 | 7,469 | 6,002 | 1,807 | — | |||||||||||||||
Total Contractual Obligations | $ | 493,280 | $ | 400,201 | $ | 71,367 | $ | 21,609 | $ | 103 | ||||||||||
The above table also does not include balances related to the Company’s interest rate locks commitments (“IRLCs”) and forward mortgage-backed security trades.
At December 31, 2020, the Company’s reserve for unfunded commitments totaled $5.49 million which is recorded in other liabilities.
Total Notional Amounts Committed | Less than 1 year | More than 1 year but less than 3 years | More than 3 years but less than 5 years | Over 5 years | ||||||||||||||||
Unfunded lines of credit | $ | 632,667 | $ | 568,882 | $ | 25,927 | $ | 31,033 | $ | 6,825 | ||||||||||
Unfunded commitments to extend credit | 301,616 | 193,416 | 8,270 | 18,755 | 81,175 | |||||||||||||||
Standby letters of credit | 26,641 | 21,882 | 4,660 | 99 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Commercial Commitments | $ | 960,924 | $ | 784,180 | $ | 38,857 | $ | 49,887 | $ | 88,000 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Total Notional Amounts Committed | Less than 1 year | More than 1 year but less than 3 years | More than 3 years but less than 5 years | Over 5 years | ||||||||||||||||
Unfunded lines of credit | $ | 871,960 | $ | 608,972 | $ | 152,592 | $ | 20,846 | $ | 89,550 | ||||||||||
Unfunded commitments to extend credit | 742,538 | 426,108 | 42,010 | 51,757 | 222,663 | |||||||||||||||
Standby letters of credit | 40,050 | 36,849 | 3,166 | 5 | 30 | |||||||||||||||
Total Commercial Commitments | $ | 1,654,548 | $ | 1,071,929 | $ | 197,768 | $ | 72,608 | $ | 312,243 | ||||||||||
The above table also does not include balances related to the Company’s IRLCs and forward mortgage-backed security trades.
2019.
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
2018 | ||||||||||||||||
4th | 3rd | 2nd | 1st | |||||||||||||
(dollars in thousands, except per share amounts) | ||||||||||||||||
Summary Income Statement Information: | ||||||||||||||||
Interest income | $ | 76,481 | $ | 74,049 | $ | 72,078 | $ | 69,082 | ||||||||
Interest expense | 6,207 | 4,623 | 4,467 | 3,633 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net interest income | 70,274 | 69,426 | 67,611 | 65,449 | ||||||||||||
Provision for loan losses | 1,800 | 1,450 | 1,105 | 1,310 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net interest income after provision for loan losses | 68,474 | 67,976 | 66,506 | 64,139 | ||||||||||||
Noninterest income | 24,789 | 26,997 | 25,421 | 23,202 | ||||||||||||
Net gain on securities transactions | 8 | 58 | 67 | 1,221 | ||||||||||||
Noninterest expense | 48,235 | 47,506 | 47,144 | 47,798 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Earnings before income taxes | 45,036 | 47,525 | 44,850 | 40,764 | ||||||||||||
Income tax expense | 6,599 | 7,475 | 7,217 | 6,245 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net earnings | $ | 38,437 | $ | 40,050 | $ | 37,633 | $ | 34,519 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Per Share Data: | ||||||||||||||||
Earnings per share, basic | $ | 0.57 | $ | 0.59 | $ | 0.56 | $ | 0.51 | ||||||||
Earnings per share, assuming dilution | 0.56 | 0.59 | 0.55 | 0.51 | ||||||||||||
Cash dividends declared | 0.21 | 0.21 | 0.21 | 0.19 | ||||||||||||
Book value atperiod-end | 15.55 | 14.71 | 14.57 | 14.34 | ||||||||||||
Common stock sales price: | ||||||||||||||||
High | $ | 66.83 | $ | 61.86 | $ | 56.35 | $ | 49.60 | ||||||||
Low | 53.45 | 50.55 | 45.05 | 44.05 | ||||||||||||
Close | 57.69 | 59.10 | 50.90 | 46.30 |
2017 | ||||||||||||||||
4th | 3rd | 2nd | 1st | |||||||||||||
(dollars in thousands, except per share amounts) | ||||||||||||||||
Summary Income Statement Information: | ||||||||||||||||
Interest income | $ | 63,456 | $ | 62,554 | $ | 61,182 | $ | 58,783 | ||||||||
Interest expense | 2,562 | 2,866 | 2,097 | 1,763 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net interest income | 60,894 | 59,688 | 59,085 | 57,020 | ||||||||||||
Provision for loan losses | 1,440 | 1,415 | 1,725 | 1,950 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net interest income after provision for loan losses | 59,454 | 58,273 | 57,360 | 55,070 | ||||||||||||
Noninterest income | 22,298 | 23,185 | 22,423 | 21,283 | ||||||||||||
Net gain on securities transactions | 3 | 1,075 | 747 | 3 | ||||||||||||
Noninterest expense | 44,095 | 43,964 | 43,775 | 42,152 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Earnings before income taxes | 37,660 | 38,569 | 36,755 | 34,204 | ||||||||||||
Income tax expense | 1,517 | 9,195 | 8,500 | 7,605 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net earnings | $ | 36,143 | $ | 29,374 | $ | 28,255 | $ | 26,599 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Per Share Data: | ||||||||||||||||
Earnings per share, basic | $ | 0.55 | $ | 0.44 | $ | 0.43 | $ | 0.40 | ||||||||
Earnings per share, assuming dilution | 0.54 | 0.44 | 0.43 | 0.40 | ||||||||||||
Cash dividends declared | 0.19 | 0.19 | 0.19 | 0.18 | ||||||||||||
Book value atperiod-end | 13.93 | 13.69 | 13.41 | 12.99 | ||||||||||||
Common stock sales price: | ||||||||||||||||
High | $ | 48.85 | $ | 46.00 | $ | 44.80 | $ | 46.45 | ||||||||
Low | 43.05 | 37.31 | 36.85 | 37.55 | ||||||||||||
Close | 45.05 | 45.20 | 44.20 | 40.10 |
2020 | ||||||||||||||||
4 th | 3 rd | 2 nd | 1 st | |||||||||||||
(dollars in thousands, except per share amounts) | ||||||||||||||||
Summary Income Statement Information: | ||||||||||||||||
Interest income | $ | 92,457 | $ | 91,373 | $ | 92,197 | $ | 88,100 | ||||||||
Interest expense | 1,920 | 2,163 | 2,962 | 7,198 | ||||||||||||
Net interest income | 90,537 | 89,210 | 89,235 | 80,902 | ||||||||||||
Provision for credit losses | (8,033 | ) | 9,000 | 8,700 | 9,850 | |||||||||||
Net interest income after provision for credit losses | 98,570 | 80,210 | 80,535 | 71,052 | ||||||||||||
Noninterest income | 35,686 | 38,539 | 35,407 | 26,670 | ||||||||||||
Net gain on securities transactions | 23 | 36 | 1,512 | 2,062 | ||||||||||||
Noninterest expense | 63,705 | 55,593 | 53,321 | 55,318 | ||||||||||||
Earnings before income taxes | 70,574 | 63,192 | 64,133 | 44,466 | ||||||||||||
Income tax expense | 12,099 | 10,335 | 10,663 | 7,234 | ||||||||||||
Net earnings | $ | 58,475 | $ | 52,857 | $ | 53,470 | $ | 37,232 | ||||||||
Per Share Data: | ||||||||||||||||
Earnings per share, basic | $ | 0.41 | $ | 0.37 | $ | 0.38 | $ | 0.26 | ||||||||
Earnings per share, diluted | 0.41 | 0.37 | 0.38 | 0.26 | ||||||||||||
Cash dividends declared | 0.13 | 0.13 | 0.13 | 0.12 | ||||||||||||
Book value at period-end | 11.80 | 11.40 | 11.14 | 9.03 | ||||||||||||
Common stock sales price: | ||||||||||||||||
High | $ | 36.43 | $ | 32.80 | $ | 33.81 | $ | 35.94 | ||||||||
Low | 27.49 | 26.71 | 23.44 | 20.70 | ||||||||||||
Close | 36.17 | 27.91 | 28.89 | 26.84 |
2019 | ||||||||||||||||
4 th | 3 rd | 2 nd | 1 st | |||||||||||||
(dollars in thousands, except per share amounts) | ||||||||||||||||
Summary Income Statement Information: | ||||||||||||||||
Interest income | $ | 82,123 | $ | 80,591 | $ | 79,576 | $ | 76,901 | ||||||||
Interest expense | 6,801 | 7,953 | 7,961 | 7,387 | ||||||||||||
Net interest income | 75,322 | 72,638 | 71,615 | 69,514 | ||||||||||||
Provision for loan losses | 950 | 450 | 600 | 965 | ||||||||||||
Net interest income after provision for loan losses | 74,372 | 72,188 | 71,015 | 68,549 | ||||||||||||
Noninterest income | 27,342 | 28,617 | 27,300 | 24,437 | ||||||||||||
Net gain on securities transactions | 5 | 52 | 676 | — | ||||||||||||
Noninterest expense | 51,938 | 48,910 | 48,304 | 47,367 | ||||||||||||
Earnings before income taxes | 49,781 | 51,947 | 50,687 | 45,619 | ||||||||||||
Income tax expense | 8,393 | 8,867 | 8,594 | 7,367 | ||||||||||||
Net earnings | $ | 41,388 | $ | 43,080 | $ | 42,093 | $ | 38,252 | ||||||||
Per Share Data: | ||||||||||||||||
Earnings per share, basic | $ | 0.30 | $ | 0.32 | $ | 0.31 | $ | 0.28 | ||||||||
Earnings per share, diluted | 0.30 | 0.32 | 0.31 | 0.28 | ||||||||||||
Cash dividends declared | 0.12 | 0.12 | 0.12 | 0.11 | ||||||||||||
Book value at period-end | 9.03 | 8.87 | 8.58 | 8.16 | ||||||||||||
Common stock sales price: | ||||||||||||||||
High | $ | 36.45 | $ | 33.97 | $ | 31.54 | $ | 32.65 | ||||||||
Low | 32.01 | 29.50 | 28.00 | 27.13 | ||||||||||||
Close | 35.10 | 33.33 | 30.79 | 28.89 |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A. | CONTROLS AND PROCEDURES |
2020.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ITEM 9B. | OTHER INFORMATION |
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. | EXECUTIVE COMPENSATION |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Number of Securities | ||||||||||||
Remaining Available | ||||||||||||
For Future Issuance | ||||||||||||
Number of Securities | Under Equity | |||||||||||
To be Issued Upon | Weighted Average | Compensation Plans | ||||||||||
Exercise of | Exercise Price of | (Excluding Securities | ||||||||||
Outstanding Options, | Outstanding Options, | Reflected in | ||||||||||
Warrants and Rights | Warrants and Rights | Far Left Column) | ||||||||||
Equity compensation plans approved by security holders | 1,085,543 | $ | 34.54 | 2,295,448 | ||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | 1,085,543 | $ | 34.54 | 2,295,448 | ||||||||
|
|
|
|
|
|
2020. Additional information regarding stock-based compensation plans is presented in Note 18 – Stock Option Plan and Restricted Stock Plan in the notes to consolidated financial statements.
Number of Shares To be Issued Upon Exercise of Outstanding Awards | Weighted Average Exercise Price of Outstanding Awards | Number of Shares Remaining Available For Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Far Left Column) | ||||||||||
Equity compensation plans approved by security holders | 1,928,945 | (1) | $ | 20.85 | (2) | 4,177,826 | ||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | 1,928,945 | $ | 20.85 | 4,177,826 | ||||||||
(1) | Includes 1,833,057 shares related to the Company’s stock option plan and 95,888 shares related to the Company’s restricted stock plan. |
(2) | Excludes outstanding restricted stock which are granted for no consideration. |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
ITEM 15. |
EXHIBIT AND FINANCIAL STATEMENT SCHEDULES |
(a) | The following documents are filed as part of this report: |
(1) | Financial Statements: |
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2018 and 2017
Consolidated Statements of Earnings for the years ended December 31, 2018, 2017 and 2016
Consolidated Statements of Comprehensive Earnings for the years ended December 31, 2018, 2017 and 2016
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2018, 2017 and 2016
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016
Notes to Consolidated Financial Statements
(2) | Financial Statement Schedules: |
(3) | Exhibits: |
The information required by this Item 15(a)(3) is set forth in the Exhibit Index immediately following our signature pages. The exhibits listed herein will be furnished upon written request to J. Bruce Hildebrand, Executive Vice President, First Financial Bankshares, Inc., 400 Pine Street, Abilene, Texas 79601, and payment of a reasonable fee that will be limited to our reasonable expense in furnishing such exhibits.
The following exhibits are filed as partincluded or incorporated by reference in this Annual Report on Form
* | Filed herewith. |
+ | Furnished herewith. This Exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section, and shall not be deemed to be incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934. |
++ | Management contract or compensatory plan on arrangement. |
ITEM 16. | FORM 10-K SUMMARY |
FIRST FINANCIAL BANKSHARES, INC. | ||||||
Date: February | By: | /s/ F. | ||||
F. SCOTT DUESER | ||||||
Chairman of the Board, Director, President and | ||||||
Chief Executive Officer | ||||||
(Principal Executive Officer) |
Name | Title | Date | ||
/s/ F. Scott Dueser F. Scott Dueser | Chairman of the Board, Director, President, and Chief Executive Officer (Principal Executive Officer) | February 22, 2021 | ||
/s/
James R. Gordon |
Executive Vice President and Chief Financial Officer,
| February | ||
/s/
|
| |||
April K. Anthony April K. Anthony | Director | February | ||
/s/
Vianei Lopez Braun | Director | February | ||
/s/
Tucker S. Bridwell | Director | February | ||
/s/
David L. Copeland | Director | February |
Name | Title | Date | ||
/s/
Michael B. Denny | Director | February | ||
/s/
Murray H. Edwards | Director | February | ||
/s/
I. Tim Lancaster | Director | February | ||
/s/
Kade Matthews | Director | February | ||
/s/
Robert C. Nickles | Director | February | ||
/s/ Johnny Trotter Johnny Trotter | Director | February 22, 2021 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Allowance for Loan Losses | ||
Description of the Matter | As of December 31, 2020, the Company’s loan portfolio totaled $5.2 billion and the related allowance for loan losses (ALL) was $66.5 million. As noted above and in Note 1, as of January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses, which introduces a forward-looking expected loss model (the “Current Expected Credit Losses (CECL)” model) to estimate credit losses over the remaining expected life of the Company’s loan portfolio. As discussed in Notes 1 and 3 of the consolidated financial statements, the ALL is an amount which represents management’s best estimate of expected credit losses over the contractual life of the Company’s loan portfolio as of the balance sheet date. The ALL includes credit loss estimates for loans evaluated using common risk characteristics such as financial asset type, collateral type and industry of the borrower. Historical losses are correlated to economic variables that are determined to be the most relevant indicators of expected losses. Those economic variables are forecasted over the reasonable and supportable forecast period to determine the current expected credit losses. Qualitative adjustments are then made to account for factors that management does not believe are captured in the CECL quantitative models. Management applies judgment in estimating the ALL and, in particular, in identifying and quantifying qualitative adjustments included within the ALL.Auditing management’s estimate of the allowance for loan losses involved a high degree of subjectivity due to the complexity of the models and the qualitative adjustments included in the estimate. Management’s identification and measurement of the qualitative adjustments is highly judgmental and could have a significant impact on the allowance for loan losses. | |
How We Addressed the Matter in Our Audit | We obtained an understanding of the Company’s process for establishing the allowance for loan losses, including the models used and the qualitative adjustments made to the ALL. We evaluated the design and tested the operating effectiveness of the controls and governance over the model methodology and qualitative adjustment methodology, including the validation and monitoring procedures performed over the models, the identification and the assessment of the need for qualitative adjustments, the reliability and accuracy of data used to estimate the various components of the qualitative adjustments, and management’s review and approval of the qualitative adjustments. To test the models, with the support of specialists, we evaluated the model methodology and design, including the Company’s selection of economic variables that were deemed to be the most relevant indicators of expected credit losses, as well as performed procedures over the Company’s correlation of those economic variables to historical losses. On a sample basis, we independently tested and agreed the key inputs used in the models to internal and external sources. Additionally, on a sample basis, we performed an independent recalculation of the models’ output. To test the qualitative adjustments, we evaluated the identification and measurement of the adjustments, including the basis for concluding the adjustments were warranted when considering the model methodology and the historical data used in the adjustments. We tested the completeness and accuracy of data used by the Company to estimate the qualitative adjustments by agreeing underlying data to internal sources and recalculated the analyses used by the Company to measure the adjustments. We also reviewed peer-bank allowance coverage ratios and subsequent event information and considered whether it corroborated or contradicted the Company’s overall estimate of the ALL. |
2019
2018 | 2017 | |||||||
ASSETS | ||||||||
CASH AND DUE FROM BANKS | $ | 207,835 | $ | 209,583 | ||||
INTEREST-BEARING DEPOSITS IN BANKS | 40,812 | 162,764 | ||||||
|
|
|
| |||||
Total cash and cash equivalents | 248,647 | 372,347 | ||||||
INTEREST-BEARING TIME DEPOSITS IN BANKS | 1,458 | 1,458 | ||||||
SECURITIESAVAILABLE-FOR-SALE, at fair value | 3,158,777 | 3,087,473 | ||||||
LOANS: | ||||||||
Held-for-investment | 3,953,636 | 3,485,569 | ||||||
Less – allowance for loan losses | (51,202 | ) | (48,156 | ) | ||||
|
|
|
| |||||
Net loans held for investment | 3,902,434 | 3,437,413 | ||||||
Held-for-sale ($19,185 at fair value at December 31, 2018; none at December 31, 2017) | 21,672 | 15,130 | ||||||
|
|
|
| |||||
Net loans | 3,924,106 | 3,452,543 | ||||||
BANK PREMISES AND EQUIPMENT, net | 133,421 | 124,026 | ||||||
INTANGIBLE ASSETS | 174,683 | 141,143 | ||||||
OTHER ASSETS | 90,762 | 75,725 | ||||||
|
|
|
| |||||
Total assets | $ | 7,731,854 | $ | 7,254,715 | ||||
|
|
|
| |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
NONINTEREST-BEARING DEPOSITS | $ | 2,116,107 | $ | 2,041,650 | ||||
INTEREST-BEARING DEPOSITS | 4,064,282 | 3,921,311 | ||||||
|
|
|
| |||||
Total deposits | 6,180,389 | 5,962,961 | ||||||
DIVIDENDS PAYABLE | 14,227 | 12,589 | ||||||
BORROWINGS | 468,706 | 331,000 | ||||||
OTHER LIABILITIES | 15,237 | 25,397 | ||||||
|
|
|
| |||||
Total liabilities | 6,678,559 | 6,331,947 | ||||||
|
|
|
| |||||
COMMITMENTS AND CONTINGENCIES | ||||||||
SHAREHOLDERS’ EQUITY: | ||||||||
Common stock - $0.01 par value; authorized 120,000,000 shares; 67,753,133 and 66,260,444 shares issued at December 31, 2018 and 2017, respectively | 678 | 663 | ||||||
Capital surplus | 443,114 | 378,062 | ||||||
Retained earnings | 606,658 | 517,257 | ||||||
Treasury stock (shares at cost: 467,811 and 495,964 at December 31, 2018 and 2017, respectively) | (7,507 | ) | (7,148 | ) | ||||
Deferred Compensation | 7,507 | 7,148 | ||||||
Accumulated other comprehensive earnings | 2,845 | 26,786 | ||||||
|
|
|
| |||||
Total shareholders’ equity | 1,053,295 | 922,768 | ||||||
|
|
|
| |||||
Total liabilities and shareholders’ equity | $ | 7,731,854 | $ | 7,254,715 | ||||
|
|
|
|
2020 | 2019 | |||||||
ASSETS | ||||||||
CASH AND DUE FROM BANKS | $ | 211,113 | $ | 231,534 | ||||
FEDERAL FUNDS SOLD | — | 3,150 | ||||||
INTEREST-BEARING DEMAND DEPOSITS IN BANKS | 517,971 | 47,920 | ||||||
Total cash and cash equivalents | 729,084 | 282,604 | ||||||
SECURITIES AVAILABLE-FOR-SALE, securities was $4,177,179 and$3,327,805 as of December 31, 2020 and 2019, respectively) | 4,393,029 | 3,413,317 | ||||||
LOANS: | ||||||||
Held-for-investment | 5,171,033 | 4,194,969 | ||||||
Less – allowance for loan losses | (66,534 | ) | (52,499 | ) | ||||
Net loans held - for- investment | 5,104,499 | 4,142,470 | ||||||
Held-for-sale 2019 respectively), | 83,969 | 28,228 | ||||||
BANK PREMISES AND EQUIPMENT, net | 142,269 | 131,022 | ||||||
INTANGIBLE ASSETS , net | 318,392 | 173,667 | ||||||
OTHER ASSETS | 133,258 | 90,919 | ||||||
Total assets | $ | 10,904,500 | $ | 8,262,227 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
NONINTEREST-BEARING DEPOSITS | $ | 2,982,697 | $ | 2,065,128 | ||||
INTEREST-BEARING DEPOSITS | 5,693,120 | 4,538,678 | ||||||
Total deposits | 8,675,817 | 6,603,806 | ||||||
DIVIDENDS PAYABLE | 18,484 | 16,306 | ||||||
BORROWINGS | 430,093 | 381,356 | ||||||
OTHER LIABILITIES | 101,916 | 33,562 | ||||||
Total liabilities | 9,226,310 | 7,035,030 | ||||||
COMMITMENTS AND CONTINGENCIES | 0 | 0 | ||||||
SHAREHOLDERS’ EQUITY: | ||||||||
Common stock—$0.01 par value; authorized 200,000,000 shares; 142,161,834 and 135,891,755 shares issued at December 31, 2020 and 2019, respectively | 1,422 | 1,359 | ||||||
Capital surplus | 669,644 | 450,676 | ||||||
Retained earnings | 836,729 | 707,656 | ||||||
Treasury stock (shares at cost: 938,591 and 927,408 at | ||||||||
December 31, 2020 and 2019, respectively) | (9,126 | ) | (8,222 | ) | ||||
Deferred c ompensation | 9,126 | 8,222 | ||||||
Accumulated other comprehensive earnings | 170,395 | 67,506 | ||||||
Total shareholders’ equity | 1,678,190 | 1,227,197 | ||||||
Total liabilities and shareholders’ equity | $ | 10,904,500 | $ | 8,262,227 | ||||
2018
2018 | 2017 | 2016 | ||||||||||
INTEREST INCOME: | ||||||||||||
Interest and fees on loans | $ | 200,347 | $ | 166,807 | $ | 161,018 | ||||||
Interest on investment securities: | ||||||||||||
Taxable | 50,052 | 32,825 | 27,626 | |||||||||
Exempt from federal income tax | 39,661 | 44,659 | 43,302 | |||||||||
Interest on federal funds sold and interest-bearing deposits in banks | 1,630 | 1,684 | 342 | |||||||||
|
|
|
|
|
| |||||||
Total interest income | 291,690 | 245,975 | 232,288 | |||||||||
|
|
|
|
|
| |||||||
INTEREST EXPENSE: | ||||||||||||
Interest on deposits | 16,946 | 8,213 | 4,503 | |||||||||
Other | 1,984 | 1,075 | 948 | |||||||||
|
|
|
|
|
| |||||||
Total interest expense | 18,930 | 9,288 | 5,451 | |||||||||
|
|
|
|
|
| |||||||
Net interest income | 272,760 | 236,687 | 226,837 | |||||||||
PROVISION FOR LOAN LOSSES | 5,665 | 6,530 | 10,212 | |||||||||
|
|
|
|
|
| |||||||
Net interest income after provision for loan losses | 267,095 | 230,157 | 216,625 | |||||||||
|
|
|
|
|
| |||||||
NONINTEREST INCOME: | ||||||||||||
Trust fees | 28,181 | 23,694 | 19,636 | |||||||||
Service charges on deposit accounts | 21,663 | 19,416 | 18,386 | |||||||||
ATM, interchange and credit card fees | 28,532 | 25,686 | 23,910 | |||||||||
Real estate mortgage operations | 15,157 | 15,109 | 16,086 | |||||||||
Net gain on sale ofavailable-for-sale securities (includes $1,354, $1,828 and $1,270 for the years ended December 31, 2018, 2017 and 2016, respectively, related to accumulated comprehensive earnings reclassifications) | 1,354 | 1,828 | 1,270 | |||||||||
Net gain (loss) on sale of foreclosed assets | 116 | (50 | ) | 456 | ||||||||
Net gain (loss) on sale of assets | (147 | ) | (396 | ) | 168 | |||||||
Interest on loan recoveries | 938 | 1,128 | 2,112 | |||||||||
Other | 5,970 | 4,602 | 3,108 | |||||||||
|
|
|
|
|
| |||||||
Total noninterest income | 101,764 | 91,017 | 85,132 | |||||||||
|
|
|
|
|
| |||||||
NONINTEREST EXPENSE: | ||||||||||||
Salaries and employee benefits | 105,189 | 95,287 | 90,739 | |||||||||
Loss from partial settlement of pension plan | 1,546 | — | 267 | |||||||||
Net occupancy expense | 11,173 | 10,521 | 10,420 | |||||||||
Equipment expense | 13,841 | 13,765 | 13,479 | |||||||||
FDIC insurance premiums | 2,333 | 2,217 | 2,680 | |||||||||
ATM, interchange and credit card expenses | 9,282 | 7,452 | 7,231 | |||||||||
Professional and service fees | 8,894 | 8,063 | 6,877 | |||||||||
Printing, stationery and supplies | 1,997 | 1,989 | 2,093 | |||||||||
Operational and other losses | 2,188 | 3,192 | 2,170 | |||||||||
Amortization of intangible assets | 1,272 | 613 | 738 | |||||||||
Other | 32,969 | 30,887 | 29,136 | |||||||||
|
|
|
|
|
| |||||||
Total noninterest expense | 190,684 | 173,986 | 165,830 | |||||||||
|
|
|
|
|
| |||||||
EARNINGS BEFORE INCOME TAXES | 178,175 | 147,188 | 135,927 | |||||||||
INCOME TAX EXPENSE (includes $284, $640 and $445 for the years ended December 31, 2018, 2017 and 2016, respectively, related to income tax expense from reclassification items) | 27,537 | 26,817 | 31,153 | |||||||||
|
|
|
|
|
| |||||||
NET EARNINGS | $ | 150,638 | $ | 120,371 | $ | 104,774 | ||||||
|
|
|
|
|
| |||||||
NET EARNINGS PER SHARE, BASIC | $ | 2.23 | $ | 1.82 | $ | 1.59 | ||||||
|
|
|
|
|
| |||||||
NET EARNINGS PER SHARE, ASSUMING DILUTION | $ | 2.22 | $ | 1.81 | $ | 1.59 | ||||||
|
|
|
|
|
|
2020 | 2019 | 2018 | ||||||||||
INTEREST INCOME: | ||||||||||||
Interest and fees on loans | $ | 263,320 | $ | 224,556 | $ | 200,347 | ||||||
Interest on investment securities: | ||||||||||||
Taxable | 51,456 | 55,670 | 50,052 | |||||||||
Exempt from federal income tax | 48,399 | 37,075 | 39,661 | |||||||||
Interest on federal funds sold and interest-bearing deposits in banks | 953 | 1,891 | 1,630 | |||||||||
364,128 | 319,192 | 291,690 | ||||||||||
INTEREST EXPENSE: | ||||||||||||
Interest on deposits | 13,118 | 27,122 | 16,946 | |||||||||
Other | 1,125 | 2,980 | 1,984 | |||||||||
Total interest expense | 14,243 | 30,102 | 18,930 | |||||||||
349,885 | 289,090 | 272,760 | ||||||||||
PROVISION FOR CREDIT LOSSES | 19,517 | 2,965 | 5,665 | |||||||||
330,368 | 286,125 | 267,095 | ||||||||||
NONINTEREST INCOME: | ||||||||||||
Trust fees | 29,531 | 28,401 | 28,181 | |||||||||
Service charges on deposit accounts | 20,572 | 22,039 | 21,663 | |||||||||
ATM, interchange and credit card fees | 32,469 | 29,863 | 28,532 | |||||||||
Gain on sale and fees on mortgage loans | 43,872 | 18,144 | 15,157 | |||||||||
Net gain on sale of available-for-sale | 3,633 | 733 | 1,354 | |||||||||
Net gain (loss) on sale of foreclosed assets | 159 | 274 | 116 | |||||||||
Net gain (loss) on sale of assets | 112 | 319 | (147 | ) | ||||||||
Interest on loan recoveries | 856 | 2,092 | 938 | |||||||||
Other | 8,731 | 6,563 | 5,970 | |||||||||
139,935 | 108,428 | 101,764 | ||||||||||
NONINTEREST EXPENSE: | ||||||||||||
Salaries and employee benefits | 135,123 | 112,336 | 105,189 | |||||||||
Cost related to termination of pension plan | — | 2,673 | 1,546 | |||||||||
Net occupancy expense | 12,388 | 11,156 | 11,173 | |||||||||
Equipment expense | 8,396 | 9,052 | 10,118 | |||||||||
FDIC insurance premiums | 1,758 | 1,091 | 2,333 | |||||||||
ATM, interchange and credit card expenses | 11,235 | 9,856 | 9,282 | |||||||||
Professional and service fees | 9,346 | 7,853 | 8,894 | |||||||||
Printing, stationery and supplies | 2,163 | 1,812 | 1,997 | |||||||||
Operational and other losses | 2,462 | 1,879 | 2,188 | |||||||||
Software amortization and expense | 8,862 | 7,305 | 6,020 | |||||||||
Amortization of intangible assets | 1,990 | 1,016 | 1,272 | |||||||||
Other | 34,215 | 30,492 | 30,672 | |||||||||
227,938 | 196,521 | 190,684 | ||||||||||
EARNINGS BEFORE INCOME TAXES | 242,365 | 198,032 | 178,175 | |||||||||
INCOME TAX EXPENSE | 40,331 | 33,220 | 27,537 | |||||||||
NET EARNINGS | $ | 202,034 | $ | 164,812 | $ | 150,638 | ||||||
NET EARNINGS PER SHARE, BASIC | $ | 1.42 | $ | 1.22 | $ | 1.11 | ||||||
NET EARNINGS PER SHARE, DILUTED | $ | 1.42 | $ | 1.21 | $ | 1.11 | ||||||
2018
2018 | 2017 | 2016 | ||||||||||
NET EARNINGS | $ | 150,638 | $ | 120,371 | $ | 104,774 | ||||||
OTHER ITEMS OF COMPREHENSIVE EARNINGS (LOSS): | ||||||||||||
Change in unrealized gain (loss) on investment securitiesavailable-for-sale, before income tax | (38,185 | ) | 23,266 | (44,679 | ) | |||||||
Reclassification adjustment for realized losses (gains) on investment securities included in net earnings, before income tax | (1,354 | ) | (1,828 | ) | (1,270 | ) | ||||||
Minimum liability pension adjustment, before income tax | 1,970 | 257 | 1,410 | |||||||||
|
|
|
|
|
| |||||||
Total other items of comprehensive earnings (losses) | (37,569 | ) | 21,695 | (44,539 | ) | |||||||
Income tax benefit (expense) related to: | ||||||||||||
Investment securities | 8,303 | (13,774 | ) | 16,082 | ||||||||
Minimum liability pension adjustment | (414 | ) | 420 | (493 | ) | |||||||
|
|
|
|
|
| |||||||
Total income tax benefit (expense) | 7,889 | (13,354 | ) | 15,589 | ||||||||
|
|
|
|
|
| |||||||
COMPREHENSIVE EARNINGS | $ | 120,958 | $ | 128,712 | $ | 75,824 | ||||||
|
|
|
|
|
|
2020 | 2019 | 2018 | ||||||||||
NET EARNINGS | $ | 202,034 | $ | 164,812 | $ | 150,638 | ||||||
OTHER ITEMS OF COMPREHENSIVE EARNINGS (LOSS): | ||||||||||||
Change in unrealized gain (loss) on investment securities available-for-sale, | 133,872 | 80,906 | (38,185 | ) | ||||||||
Reclassification adjustment for realized gains on investment securities included in net earnings, before income tax | (3,633 | ) | (733 | ) | (1,354 | ) | ||||||
Minimum liability pension adjustment, before income tax | — | 1,676 | 1,970 | |||||||||
Total other items of comprehensive earnings (losses) | 130,239 | 81,849 | (37,569 | ) | ||||||||
Income tax benefit (expense) related to: | ||||||||||||
Investment securities | (28,113 | ) | (16,990 | ) | 8,019 | |||||||
Reclassification adjustment for realized gains on investment securities included in net earnings | 763 | 154 | 284 | |||||||||
Minimum liability pension adjustment | — | (352 | ) | (414 | ) | |||||||
Total income tax benefit (expense) | (27,350 | ) | (17,188 | ) | 7,889 | |||||||
COMPREHENSIVE EARNINGS | $ | 304,923 | $ | 229,473 | $ | 120,958 | ||||||
2018
Accumulated | ||||||||||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||||||||||
Comprehensive | Total | |||||||||||||||||||||||||||||||||||
Common Stock | Capital | Retained | Treasury Stock | Deferred | Earnings | Shareholders’ | ||||||||||||||||||||||||||||||
Shares | Amount | Surplus | Earnings | Shares | Amounts | Compensation | (Losses) | Equity | ||||||||||||||||||||||||||||
BALANCE, December 31, 2015 | 65,990,234 | $ | 660 | $ | 368,925 | $ | 388,006 | (520,651 | ) | $ | ( 6,296 | ) | $ | 6,296 | $ | 47,395 | $ | 804,986 | ||||||||||||||||||
Net earnings | — | — | — | 104,774 | — | — | — | — | 104,774 | |||||||||||||||||||||||||||
Stock option exercises | 82,871 | 1 | 1,259 | — | — | — | — | — | 1,260 | |||||||||||||||||||||||||||
Restricted Stock grant | 21,590 | — | 809 | — | — | — | — | — | 809 | |||||||||||||||||||||||||||
Cash dividends declared, $0.70 per share | — | — | — | (46,246 | ) | — | — | — | — | (46,246 | ) | |||||||||||||||||||||||||
Minimum liability pension adjustment, net of related income taxes | — | — | — | — | — | — | — | 917 | 917 | |||||||||||||||||||||||||||
Change in unrealized gain (loss) in investment securitiesavailable-for-sale, net of related income taxes | — | — | — | — | — | — | — | (29,867 | ) | (29,867 | ) | |||||||||||||||||||||||||
Additional tax benefit related to directors’ deferred compensation plan | — | — | 370 | — | — | — | — | — | 370 | |||||||||||||||||||||||||||
Shares purchased in connection with directors’ deferred compensation plan, net | — | — | — | — | 13,242 | (375 | ) | 375 | — | — | ||||||||||||||||||||||||||
Stock option expense | — | — | 882 | — | — | — | — | — | 882 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
BALANCE, December 31, 2016 | 66,094,695 | $ | 661 | $ | 372,245 | $ | 446,534 | (507,409 | ) | $ | (6,671 | ) | $ | 6,671 | $ | 18,445 | $ | 837,885 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net earnings | — | — | — | 120,371 | — | — | — | — | 120,371 | |||||||||||||||||||||||||||
Stock option exercises | 140,250 | 2 | 2,933 | — | — | — | — | 2,935 | ||||||||||||||||||||||||||||
Restricted Stock grant | 25,499 | — | 1,139 | — | — | — | — | — | 1,139 | |||||||||||||||||||||||||||
Cash dividends declared, $0.75 per share | — | — | — | (49,648 | ) | — | — | — | — | (49,648 | ) | |||||||||||||||||||||||||
Minimum liability pension adjustment, net of related income taxes | — | — | — | — | — | — | — | 677 | 677 | |||||||||||||||||||||||||||
Change in unrealized gain (loss) in investment securitiesavailable-for-sale, net of related income taxes | — | — | — | — | — | — | — | 7,664 | 7,664 | |||||||||||||||||||||||||||
Shares purchased (redeemed) in connection with directors’ deferred compensation plan, net | — | — | — | — | 11,445 | (477 | ) | 477 | — | — | ||||||||||||||||||||||||||
Stock option expense | — | — | 1,745 | — | — | — | — | — | 1,745 | |||||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
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|
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|
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|
|
| |||||||||||||||||||
BALANCE, December 31, 2017 | 66,260,444 | $ | 663 | $ | 378,062 | $ | 517,257 | (495,964 | ) | $ | (7,148 | ) | $ | 7,148 | $ | 26,786 | $ | 922,768 | ||||||||||||||||||
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|
(Continued)
F-5
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity
Years Ended December 31, 2018, 2017 and 2016
(Dollars in thousands)
Net earnings | — | — | — | 150,638 | — | — | — | — | 150,638 | |||||||||||||||||||||||||||
Stock option exercises | 173,822 | 2 | 3,861 | — | — | — | — | — | 3,863 | |||||||||||||||||||||||||||
Restricted stock grant, net | 29,496 | — | 1,609 | — | — | — | — | — | 1,609 | |||||||||||||||||||||||||||
Cash dividends declared, $0.82 per share | — | — | — | (55,499 | ) | — | — | — | — | (55,499 | ) | |||||||||||||||||||||||||
Stock issued in acquisition of Commercial Bancshares, Inc. | 1,289,371 | 13 | 58,074 | — | — | — | — | — | 58,087 | |||||||||||||||||||||||||||
Minimum liability pension adjustment, net of related income taxes | — | — | — | — | — | — | — | 1,556 | 1,556 | |||||||||||||||||||||||||||
Change in unrealized gain (loss) in investment securitiesavailable-for-sale, net of related income taxes | — | — | — | — | — | — | — | (31,235 | ) | (31,235 | ) | |||||||||||||||||||||||||
Shares purchased (redeemed) in connection with directors’ deferred compensation plan, net | — | — | — | — | 28,153 | (359 | ) | 359 | — | — | ||||||||||||||||||||||||||
Stock option expense | — | — | 1,508 | — | — | — | — | — | 1,508 | |||||||||||||||||||||||||||
Reclassification of certain income tax effects related to the change in the U.S. statutory federal income tax rate under the Tax Cuts and Jobs Acts to retained earnings | — | — | — | (5,759 | ) | — | — | — | 5,759 | — | ||||||||||||||||||||||||||
Reclassification of unrealized gain in equity securities at December 31, 2017 from accumulated other comprehensive earnings to retained earnings | — | — | — | 21 | — | — | — | (21 | ) | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
BALANCE, December 31, 2018 | 67,753,133 | $678 | $ | 443,114 | $ | 606,658 | (467,811 | ) | $ | (7,507 | ) | $ | 7,507 | $ | 2,845 | $ | 1,053,295 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock | Capital Surplus | Retained Earnings | Treasury Stock | Deferred Compensation | Accumulated Other Total Comprehensive Earnings (Losses) | Shareholders’ Equity | ||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amounts | |||||||||||||||||||||||||||||||||
BALANCE, December 31, 2017 | 66,260,444 | $ | 663 | $ | 378,062 | $ | 517,257 | (495,964 | ) | $ | (7,148 | ) | $ | 7,148 | $ | 26,786 | $ | 922,768 | ||||||||||||||||||
Net earnings | — | — | — | 150,638 | — | — | — | — | 150,638 | |||||||||||||||||||||||||||
Stock option exercises | 173,822 | 2 | 3,861 | — | — | — | 3,863 | |||||||||||||||||||||||||||||
Restricted stock grant, net | 29,496 | — | 1,609 | — | — | — | — | 1,609 | ||||||||||||||||||||||||||||
Cash dividends declared, $0.41 per share | — | — | — | (55,499 | ) | — | — | — | — | (55,499 | ) | |||||||||||||||||||||||||
Stock issued in acquisition of Bancshares, Inc. | 1,289,371 | 13 | 58,074 | — | — | — | — | — | 58,087 | |||||||||||||||||||||||||||
Minimum liability pension adjustment, net of related income taxes | — | — | — | — | — | — | — | 1,556 | 1,556 | |||||||||||||||||||||||||||
Change in unrealized gain (loss) in investment securities available-for-sale, | — | — | — | — | — | — | — | (31,235 | ) | (31,235 | ) | |||||||||||||||||||||||||
Shares purchased in connection with directors’ deferred compensation plan, net | — | — | — | — | 28,153 | (359 | ) | 359 | — | — | ||||||||||||||||||||||||||
Stock option expense | — | — | 1,508 | — | — | — | — | — | 1,508 | |||||||||||||||||||||||||||
Reclassification of certain income tax effects related to the U.S. statutory federal income tax rate under the Tax Cuts and Jobs Acts to retained earnings | — | — | — | (5,759 | ) | — | — | 0 | 5,759 | — | ||||||||||||||||||||||||||
Reclassification of unrealized gain in equity securities At December 31, 2017 from accumulated other Comprehensive earnings to retained earnings | — | — | — | 21 | — | — | — | (21 | ) | — | ||||||||||||||||||||||||||
BALANCE, December 31, 2018 | 67,753,133 | $ | 678 | $ | 443,114 | $ | 606,658 | (467,811 | ) | $ | (7,507 | ) | $ | 7,507 | $ | 2,845 | $ | 1,053,295 | ||||||||||||||||||
Net earnings | — | — | — | 164,812 | — | — | — | — | 164,812 | |||||||||||||||||||||||||||
Stock option exercises | 241,725 | 2 | 4,291 | — | — | — | — | — | 4,293 | |||||||||||||||||||||||||||
Restricted stock grant, net | 56,687 | — | 1,782 | — | — | — | — | — | 1,782 | |||||||||||||||||||||||||||
Cash dividends declared, $0.47 per share | — | — | — | (63,135 | ) | — | — | — | — | (63,135 | ) | |||||||||||||||||||||||||
Minimum liability pension adjustment, net of related income taxes | — | — | — | — | — | — | — | 1,324 | 1,324 | |||||||||||||||||||||||||||
Change in unrealized gain in investment securities available-for-sale, | — | — | — | — | — | — | — | 63,337 | 63,337 | |||||||||||||||||||||||||||
Shares purchased in connection with directors’ deferred compensation plan, net | — | — | — | — | 4,742 | (715 | ) | 715 | — | — | ||||||||||||||||||||||||||
Stock option expense | — | — | 1,489 | — | — | — | — | — | 1,489 | |||||||||||||||||||||||||||
Two-for-one | 67,840,210 | 679 | — | (679 | ) | (464,339 | ) | — | — | 0 | — | |||||||||||||||||||||||||
BALANCE, December 31, 2019 | 135,891,755 | $ | 1,359 | $ | 450,676 | $ | 707,656 | (927,408 | ) | $ | (8,222 | ) | �� | $ | 8,222 | $ | 67,506 | $ | 1,227,197 |
Shareholders’ Equity
2018
2018 | 2017 | 2016 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net earnings | $ | 150,638 | $ | 120,371 | $ | 104,774 | ||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 12,549 | 12,916 | 11,573 | |||||||||
Provision for loan losses | 5,665 | 6,530 | 10,212 | |||||||||
Securities premium amortization, net | 27,467 | 30,310 | 29,005 | |||||||||
Gain on sale of assets, net | (1,216 | ) | (1,167 | ) | (1,894 | ) | ||||||
Deferred federal income tax expense (benefit) | (250 | ) | (53 | ) | 673 | |||||||
Change in loans held for sale | (5,791 | ) | 11,769 | 6,645 | ||||||||
Change in other assets | (1,697 | ) | 9,313 | 2,397 | ||||||||
Change in other liabilities | 1,621 | 285 | (2,643 | ) | ||||||||
|
|
|
|
|
| |||||||
Total adjustments | 38,348 | 69,903 | 55,968 | |||||||||
|
|
|
|
|
| |||||||
Net cash provided by operating activities | 188,986 | 190,274 | 160,742 | |||||||||
|
|
|
|
|
| |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Cash received in acquisition of Commercial Bancshares, Inc., net | 18,653 | — | — | |||||||||
Net decrease in interest-bearing time deposits in banks | — | 249 | 1,788 | |||||||||
Activity inavailable-for-sale securities: | ||||||||||||
Sales | 220,259 | 120,576 | 40,510 | |||||||||
Maturities | 3,439,028 | 4,392,131 | 3,509,113 | |||||||||
Purchases | (3,731,821 | ) | (4,768,420 | ) | (3,737,865 | ) | ||||||
Activity inheld-to-maturity securities – maturities | — | 124 | 157 | |||||||||
Net increase in loans | (205,238 | ) | (134,627 | ) | (48,836 | ) | ||||||
Purchases of bank premises and equipment and other assets | (17,646 | ) | (14,162 | ) | (20,399 | ) | ||||||
Proceeds from sale of bank premises and equipment and other assets | 844 | 6,085 | 3,572 | |||||||||
|
|
|
|
|
| |||||||
Net cash used in investing activities | (275,921 | ) | (398,044 | ) | (251,960 | ) | ||||||
|
|
|
|
|
| |||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Net increase (decrease) in noninterest-bearing deposits | (87,583 | ) | 323,928 | (28,230 | ) | |||||||
Net increase (decrease) in interest-bearing deposits | (36,891 | ) | 160,494 | 316,600 | ||||||||
Net increase (decrease) in borrowings | 137,706 | (114,770 | ) | (169,905 | ) | |||||||
Common stock transactions: | ||||||||||||
Proceeds from stock issuances | 3,864 | 2,934 | 1,260 | |||||||||
Dividends paid | (53,861 | ) | (48,955 | ) | (44,907 | ) | ||||||
|
|
|
|
|
| |||||||
Net cash provided by (used in) financing activities | (36,765 | ) | 323,631 | 74,818 | ||||||||
|
|
|
|
|
| |||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (123,700 | ) | 115,861 | (16,400 | ) | |||||||
CASH AND CASH EQUIVALENTS, beginning of year | 372,347 | 256,486 | 272,886 | |||||||||
|
|
|
|
|
| |||||||
CASH AND CASH EQUIVALENTS, end of year | $ | 248,647 | $ | 372,347 | $ | 256,486 | ||||||
|
|
|
|
|
|
Cumulative effect of adopting ASC 326 on January 1, 2020, net of related income taxes | — | — | — | (466 | ) | — | — | — | — | (466 | ) | |||||||||||||||||||||||||
Total shareholders’ equity at beginning of period, as adjusted | 135,891,755 | 1,359 | 450,676 | 707,190 | (927,408 | ) | (8,222 | ) | 8,222 | 67,506 | 1,226,731 | |||||||||||||||||||||||||
Stock issued in acquisition of TB&T Bancshares, Inc. | 6,275,574 | 63 | 220,210 | — | — | — | — | — | 220,273 | |||||||||||||||||||||||||||
Net earnings | — | — | — | 202,034 | — | — | — | — | 202,034 | |||||||||||||||||||||||||||
Stock option exercises | 295,093 | 3 | 4,714 | — | — | — | — | — | 4,717 | |||||||||||||||||||||||||||
Restricted stock grant, net | 24,214 | — | 672 | — | — | — | — | — | 672 | |||||||||||||||||||||||||||
Cash dividends declared, $0.51 per share | — | — | — | (72,495 | ) | — | — | — | — | (72,495 | ) | |||||||||||||||||||||||||
Change in unrealized gain in investment securities available-for-sale, | — | — | — | — | — | — | — | 102,889 | 102,889 | |||||||||||||||||||||||||||
Shares purchased in connection with directors’ deferred compensation plan, net | — | — | — | — | (11,183 | ) | (904 | ) | 904 | — | — | |||||||||||||||||||||||||
Stock option expense | — | — | 1,377 | — | — | — | — | — | 1,377 | |||||||||||||||||||||||||||
Shares repurchased and retired under stock repurchase authorization | (324,802 | ) | (3 | ) | (8,005 | ) | — | — | — | — | — | (8,008 | ) | |||||||||||||||||||||||
BALANCE, December 31, 2020 | 142,161,834 | $ | 1,422 | $ | 669,644 | $ | 836,729 | (938,591 | ) | $ | (9,126 | ) | $ | 9,126 | $ | 170,395 | $ | 1,678,190 |
2020 | 2019 | 2018 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net earnings | $ | 202,034 | $ | 164,812 | $ | 150,638 | ||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 12,793 | 11,665 | 12,549 | |||||||||
Provision for credit losses | 19,517 | 2,965 | 5,665 | |||||||||
Securities premium amortization, net | 41,959 | 25,788 | 27,467 | |||||||||
Discount accretion on purchased loans | (3,780 | ) | (1,666 | ) | (2,636 | ) | ||||||
Gain on sale of assets, net | (4,001 | ) | (1,477 | ) | (1,216 | ) | ||||||
Deferred federal income tax (expense) benefit | (5,249 | ) | (29 | ) | (250 | ) | ||||||
Change in loans held-for-sale | (53,494 | ) | (5,830 | ) | (5,791 | ) | ||||||
Change in other assets | (23,233 | ) | 1,851 | (1,697 | ) | |||||||
Change in other liabilities | 24,122 | 4,374 | 1,621 | |||||||||
Total adjustments | 8,634 | 37,641 | 35,712 | |||||||||
Net cash provided by operating activities | 210,668 | 202,453 | 186,350 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Cash received in acquisition of TB&T Bancshares, Inc., net | 61,028 | — | — | |||||||||
Cash received in acquisition of Commercial Bancshares, Inc., net | — | — | 18,653 | |||||||||
Net decrease in interest-bearing time deposits in banks | — | 1,458 | — | |||||||||
Activity in available-for-sale | ||||||||||||
Sales | 263,042 | 67,414 | 220,259 | |||||||||
Maturities | 6,075,017 | 4,460,703 | 3,439,028 | |||||||||
Purchases | (7,117,151 | ) | (4,727,430 | ) | (3,731,821 | ) | ||||||
Net increase in loans held-for-investment | (529,144 | ) | (243,524 | ) | (202,602 | ) | ||||||
Purchases of bank premises and equipment | (16,450 | ) | (8,671 | ) | (17,646 | ) | ||||||
Proceeds from sale of bank premises and equipment and other assets | 1,456 | 2,249 | 844 | |||||||||
Net cash used in investing activities | (1,262,202 | ) | (447,801 | ) | (273,285 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Net increase (decrease) in noninterest-bearing deposits | 679,744 | (50,979 | ) | (87,583 | ) | |||||||
Net increase (decrease) in interest-bearing deposits | 843,142 | 474,396 | (36,891 | ) | ||||||||
Net increase (decrease) in borrowings | 48,737 | (87,350 | ) | 137,706 | ||||||||
Common stock transactions: | ||||||||||||
Proceeds from stock option exercises | 4,717 | 4,294 | 3,864 | |||||||||
Dividends paid | (70,318 | ) | (61,056 | ) | (53,861 | ) | ||||||
Repurchase of stock | (8,008 | ) | — | — | ||||||||
Net cash provided by (used in) financing activities | 1,498,014 | 279,305 | (36,765 | ) | ||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 446,480 | 33,957 | (123,700 | ) | ||||||||
CASH AND CASH EQUIVALENTS, beginning of year | 282,604 | 248,647 | 372,347 | |||||||||
CASH AND CASH EQUIVALENTS, end of year | $ | 729,084 | $ | 282,604 | $ | 248,647 | ||||||
2018
Split and Increase in Authorized Shares
2020.
2018
Effective January 1, 2018, in accordance with ASU2016-01 (see note 1), increases or decreases in the fair value of equity securities are recorded in earnings. Prior to January 1, 2018, such increases or decreases were recorded similar to increases or decreases in debt securities.
year ended December 31, 2020.
When the fair value of a debt security is below its amortized cost, and depending on the length of time the condition exists and the extent the fair value is below amortized cost, additional analysis is performed to determine whether an other-than-temporary impairment condition exists.Available-for-sale andheld-to-maturity debt securities are analyzed quarterly for possible other-than-temporary impairment. The analysis considers (i) whether we have the intent to sell debt our securities prior to recovery and/or maturity, (ii) whether it is more likely than not that we will have to sell our debt securities prior to recovery and/or maturity, (iii) the length of time and extent to which the fair value has been less than amortized cost, and (iv) the financial condition of the issuer. Often, the information available to conduct these assessments is limited and rapidly changing, making estimates of fair value subject to judgment. If actual information or conditions are different than estimated, the extent of the impairment of the debt security may be different than previously estimated, which could have a material effect on the Company’s results of operations and financial condition.
LoansHeld-for-Investment and
Loans held –
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2018, 2017 and 2016
The allowance for loan losses is an amount which represents management’s best estimate of probable losses that are inherent in the Company’s loan portfoliointerest payments have not been received as of the balance sheet date. The allowance for loan losses is comprised of three elements: (i) specific reserves determined baseddate such payments were due. Loans are placed on probable losses on specific classified loans; (ii) a historical valuation reserve component that considers historical loss rates and estimated loss emergence periods; and (iii) qualitative reserves based upon general economic conditions and other qualitative risk factors both internal and externalnonaccrual status when, in management’s opinion, the borrower may be unable to the Company. The allowance for loan losses is increased by charges to income and decreased bycharge-offs (net of recoveries). Management’s periodic evaluation of the appropriateness of the allowance is based on general economic conditions, the financial condition of borrowers, the value and liquidity of collateral, delinquency, prior loan loss experience, and the results of periodic reviews of the portfolio. For purposes of determining our historical valuation reserve, the loan portfolio, less cash secured loans, government guaranteed loans and classified loans, is multiplied by the Company’s historical loss rate adjusted for the estimated loss emergence period. Specific allocations are increased or decreased in accordance with deterioration or improvement in credit quality and a corresponding increase or decrease in risk of loss on a particular loan. In addition, we adjust our allowance for qualitative factors suchmeet payment obligations as current local economic conditions and trends, including, without limitations, unemployment, oil and gas prices, drought conditions, changes in lending staff, policies and procedures, changes in credit concentrations, changes in the trends and severity of problem loans and changes in trends in volume and terms of loans. This qualitative reserve serves to estimate for additional areas of losses inherent in our portfolio that are not reflected in our historic loss factors.
Although we believe we use the best information available to make loan loss allowance determinations, future adjustments could be necessary if circumstances or economic conditions differ substantially from the assumptions used in making our initial determinations. A decline in the economy could result in increased levels ofnon-performing assets and charge-offs, increased loan provisions and reductions in income. Additionally, bank regulatory agencies periodically review our allowance for loan losses and methodology and could require, in accordance with U.S. GAAP, additional provisions to the allowance for loan losses based on their judgment of information available to them at the time of their examinationthey become due, as well as changeswhen required by regulatory provisions. In determining whether or not a borrower may be unable to meet payment obligations for each class of loans, we consider the borrower’s debt service capacity through the analysis of current financial information, if available, and/or current information with regards to our methodology.
Accrualcollateral position. Regulatory provisions would typically require the placement of a loan on nonaccrual status if principal or interest has been in default for a period of 90 days or more unless the loan is both well secured and in the process of collection or full payment of principal and interest is not expected. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income on a loan andnonaccrual loans is recognized only to the extent that cash payments are applied toreceived in excess of principal when management believes, after considering economic and business conditions and collection efforts, the borrower’s financial condition is such that collection of interest is doubtful. Except consumer loans, generally all loans past due greater than 90 days, based on contractual terms, are placed onnon-accrual. Loans aredue. A loan may be returned to accrual status when all the principal and interest amounts contractually due are brought current and future paymentsprincipal and interest amounts contractually due are reasonably assured. Consumer
Loans are consideredwere reported as impaired when, based on then current information and events, management determines that it iswas probable we willwould be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impairment was evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans. If a loan iswas impaired, a specific valuation allowance iswas allocated, if necessary.necessary, so that the loan was reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment was expected solely from the collateral. Interest payments on impaired loans arewere typically applied to principal unless collectabilitycollectibility of the principal amount iswas reasonably assured, in which case interest iswas recognized on a cash basis. Impaired loans, or portions thereof, arewere charged off when deemed uncollectable.
uncollectible.
From time to time,expected credit losses within our loan pools. These qualitative factor
The Company originates certain mortgage loans for sale2018
Loans acquired, including loans acquiredour lending management and staff, (v) changes in a business combination, are initially recorded at fair value with no valuation allowance. Acquired loans are segregated between those considered to be credit impairedvolume and those deemed performing. To make this determination, management considers such factors asseverity of past due status,non-accrual statusfinancial assets, the volume of nonaccrual assets, and the volume and severity of adversely classified or graded assets, (vi) changes in the quality of our credit risk ratings. The fairreview function, (vii) changes in the value of acquired performingthe underlying collateral for loans is determined by discounting expected cash flows, both principalthat are
Purchased credit impaired loans are those loans that showed evidenceallowance requires significant judgment, and estimates of deterioration of credit quality since origination and for which it is probable, at acquisition, that the Company will be unable to collect all amounts contractually owed. Their acquisition fair value, which includes a credit component at the acquisition date, was based on the estimate of cash flows, both principal and interest, expected to be collected or estimated collateral values if cash flows are not estimable, discounted at prevailing market rates of interest. The difference between the discounted cash flows expected at acquisition and the investmentlifetime losses in the loan is recognized asportfolio can vary significantly from the amounts actually observed. While management uses available information to recognize expected losses, future additions to the allowance may be necessary based on changes in the loans comprising the portfolio, changes in the current and forecasted economic conditions, changes to the interest income on a level-yield method overrate environment which may directly impact prepayment and curtailment rate assumptions, and changes in the lifefinancial condition of borrowers.
2020, the Company’s reserve for unfunded commitments totaled $5,486,000.
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2018, 2017 and 2016
2018. There were 0 amounts under the minimum pension liability at December 31, 2020 or 2019 (see Note 14). vesting period which generally is six years. The Company also grants restricted stock for a fixed number of $171,565,000$313,481,000 and $139,971,000, respectively$171,565,000, at December 31, 20182020 and 2017.2019, respectively. There was no0 impairment recorded for the years ended December 31, 2018, 20172020, 2019 and 2016.$22,526,000$16,048,000 and $26,618,000$18,680,000 at December 31, 20182020 and 2017,2019, respectively, and is deductible for federal income tax purposes.For the year ended December 31, 2017, the Company sold its mortgage servicing rights totaling $1,795,000 to an unrelated third party resulting in a loss on sale of approximately $215,000.$4,169,000$170,395,000 and $29,156,000$67,506,000 at December 31, 20182020 and 2017, respectively, and the minimum pension liability (after applicable income tax benefit) totaling ($1,324,000) and ($2,370,000) at December 31, 2018 and 2017,2019, respectively, are included in accumulated other comprehensive income.Company recorded stock option expense totaling $1,508,000, $1,745,000, and $882,000, forgrant date fair value is amortized over the years ended December 31, 2018, 2017 and 2016, respectively.shares. The Company recorded expenses associated with its director and officer restricted stock grants totaling $560,000 and $680,000, respectively,shares which generally vests over periods of one to three years. See Note 18 for the year ended December 31, 2018, $483,000 and $562,000, respectively, for the year ended December 31, 2017, and $278,000 and $381,000, respectively, for the year ended December 31, 2016.
See Note 17 for further information.
Advertising Costs
Advertising costs are expensed as incurred.
2018
Net Earnings (in thousands) | Weighted Average Shares | Per Share Amount | ||||||||||
For the year ended December 31, 2018: | ||||||||||||
Net earnings per share, basic | $ | 150,638 | 67,609,367 | $ | 2.23 | |||||||
Effect of stock options and stock grants | — | 373,647 | (0.01 | ) | ||||||||
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| |||||||
Net earnings per share, assuming dilution | $ | 150,638 | 67,983,014 | $ | 2.22 | |||||||
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| |||||||
For the year ended December 31, 2017: | ||||||||||||
Net earnings per share, basic | $ | 120,371 | 66,126,863 | $ | 1.82 | |||||||
Effect of stock options and stock grants | — | 197,467 | (0.01 | ) | ||||||||
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| |||||||
Net earnings per share, assuming dilution | $ | 120,371 | 66,324,330 | $ | 1.81 | |||||||
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| |||||||
For the year ended December 31, 2016: | ||||||||||||
Net earnings per share, basic | $ | 104,774 | 66,013,004 | $ | 1.59 | |||||||
Effect of stock options and stock grants | — | 89,882 | — | |||||||||
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| |||||||
Net earnings per share, assuming dilution | $ | 104,774 | 66,102,886 | $ | 1.59 | |||||||
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For the year ended December 31, 2020: | Net Earnings (in thousands) | Weighted Average Shares | Per Share Amount | |||||||||
Net earnings per share, basic | $ | 202,034 | 142,032,420 | $ | 1.42 | |||||||
Effect of stock options and stock grants | 0 | 512,571 | 0 | |||||||||
Net earnings per share, diluted | $ | 202,034 | 142,544,991 | $ | 1.42 | |||||||
For the year ended December 31, 2019: | ||||||||||||
Net earnings per share, basic | $ | 164,812 | 135,647,354 | $ | 1.22 | |||||||
Effect of stock options and stock grants | 0 | 698,665 | (0.01 | ) | ||||||||
Net earnings per share, diluted | $ | 164,812 | 136,346,019 | $ | 1.21 | |||||||
For the year ended December 31, 2018: | ||||||||||||
Net earnings per share, basic | $ | 150,638 | 135,218,734 | $ | 1.11 | |||||||
Effect of stock options and stock grants | 0 | 747,294 | 0 | |||||||||
Net earnings per share, diluted | $ | 150,638 | 135,966,028 | $ | 1.11 | |||||||
Accounting Standards Update (“ASU”)2014-09, “Revenue from Contracts with Customers.”
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2018, 2017 and 2016
ASU2016-01, ASU2016-01 “Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU2016-01, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and (vii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related toavailable-for-sale securities. ASU2016-1 became effective for the Company on January 1, 2018 and did not have a significant impact on the Company’s financial statements.
ASU2016-02, “Leases.” ASU2016-02 will amend current lease accounting to require lessees to recognize (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) aright-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. The amended guidance will be effective in the first quarter of 2019 and will require transition using a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company evaluated the provision of the new lease standard and, due to the small dollar amounts and number of lease agreements, all considered operating leases, the effect for the Company on January 1, 2019 was not significant.
ASU2016-09, “Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting.” ASU2016-09 amends current guidance such that all excess tax benefits and tax deficiencies related to share-based payment awards will be recognized as income tax expense or benefit in the income statement during the period in which they occur. Previously, such amounts were recorded in capital surplus. Additionally, excess tax benefits will be classified along with other income tax cash flows as an operating activity rather than a financing activity, as was previously the case. ASU2016-09 also provides that any entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest, which is the current requirement, or account for forfeitures when they occur. ASU2016-09 became effective January 1, 2017 and did not have a significant impact on the Company’s financial statements.
ASU2016-13, “Financial Instruments – Credit Losses.” ASU2016-13 implements a comprehensive change in estimating the allowances for loan losses from the current model of losses inherent in the loan portfolio to a current expected credit loss model that generally is expected to result in earlier recognition of allowances for losses. Additionally, purchase accounting rules have been modified as well as credit losses onheld-to-maturity debt securities. ASU2016-13 will be effective in the first quarter of 2020. While the Company generally expects that the implementation of ASU2016-13 will increase their allowance for loan losses balance, the Company is continuing to evaluate the potential impact on the Company’s financial statements.
ASU2017-04, “Intangibles“Intangibles – Goodwill and Other.Other.”
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes
December 31, 2018, 2017the Disclosure Requirements for Fair Value Measurement.”
ASU2017-07, “Compensation – Retirement Benefits, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-Retirement Benefit Cost.” ASU2017-17 will require employers that sponsor defined benefit pension plans to present the service cost component of net periodic benefit cost in the same income statement line itemadd disclosure requirements identified as other employee compensation costs arising from services rendered during the period. Other components of the net periodic benefit cost will be presented separately from the service cost component. relevant.
ASU2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassificationstatements and related disclosures.
A summary2018
December 31, 2018 | ||||||||||||||||
Amortized Cost Basis | Gross Unrealized Holding Gains | Gross Unrealized Holding Losses | Estimated Fair Value | |||||||||||||
Securitiesavailable-for-sale: | ||||||||||||||||
U.S. Treasury securities | $ | 9,970 | $ | — | $ | (8 | ) | $ | 9,962 | |||||||
Obligations of U.S. government sponsored enterprises and agencies | 301 | — | — | 301 | ||||||||||||
Obligations of state and political subdivisions | 1,229,828 | 30,013 | (1,970 | ) | 1,257,871 | |||||||||||
Corporate bonds and other | 4,875 | — | (77 | ) | 4,798 | |||||||||||
Residential mortgage-backed securities | 1,472,228 | 3,928 | (21,611 | ) | 1,454,545 | |||||||||||
Commercial mortgage-backed securities | 436,366 | 670 | (5,736 | ) | 431,300 | |||||||||||
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| |||||||||
Total securitiesavailable-for-sale | $ | 3,153,568 | $ | 34,611 | $ | (29,402 | ) | $ | 3,158,777 | |||||||
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December 31, 2017 | ||||||||||||||||
Amortized Cost Basis | Gross Unrealized Holding Gains | Gross Unrealized Holding Losses | Estimated Fair Value | |||||||||||||
Securitiesavailable-for-sale: | ||||||||||||||||
Obligations of U.S. government sponsored enterprises and agencies | $ | 60,516 | $ | — | $ | (186 | ) | $ | 60,330 | |||||||
Obligations of state and political subdivisions | 1,369,295 | 52,491 | (936 | ) | 1,420,850 | |||||||||||
Corporate bonds and other | 11,421 | 43 | (5 | ) | 11,459 | |||||||||||
Residential mortgage-backed securities | 1,223,452 | 4,561 | (8,916 | ) | 1,219,097 | |||||||||||
Commercial mortgage-backed securities | 377,934 | 263 | (2,460 | ) | 375,737 | |||||||||||
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| |||||||||
Total securitiesavailable-for-sale | $ | 3,042,618 | $ | 57,358 | $ | (12,503 | ) | $ | 3,087,473 | |||||||
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2020 | ||||||||||||||||
Amortized Cost Basis | Gross Unrealized Holding Gains | Gross Unrealized Holding Losses | Estimated Value | |||||||||||||
Securities available-for-sale: | ||||||||||||||||
Obligations of state and political subdivisions | $ | 2,283,616 | $ | 143,339 | $ | (79 | ) | $ | 2,426,876 | |||||||
Residential mortgage-backed securities | 1,421,922 | 50,473 | (115 | ) | 1,472,280 | |||||||||||
Commercial mortgage-backed securities | 467,243 | 22,077 | (4 | ) | 489,316 | |||||||||||
Corporate bonds and other | 4,398 | 159 | 0 | 4,557 | ||||||||||||
Total securities available-for-sale | $ | 4,177,179 | $ | 216,048 | $ | (198 | ) | $ | 4,393,029 | |||||||
December 31, 2019 | ||||||||||||||||
Amortized Cost Basis | Gross Unrealized Holding Gains | Gross Unrealized Holding Losses | Estimated Fair Value | |||||||||||||
Securities available-for-sale: | ||||||||||||||||
U.S. Treasury securities | $ | 9,997 | $ | 22 | $ | — | $ | 10,019 | ||||||||
Obligations of state and | 1,231,619 | 57,764 | (400 | ) | 1,288,983 | |||||||||||
Corporate bonds and other | 4,643 | 65 | — | 4,708 | ||||||||||||
Residential mortgage-backed securities | 1,586,872 | 23,139 | (1,148 | ) | 1,608,863 | |||||||||||
Commercial mortgage-backed securities | 494,674 | 6,356 | (286 | ) | 500,744 | |||||||||||
Total securities available-for-sale | $ | 3,327,805 | $ | 87,346 | $ | (1,834 | ) | $ | 3,413,317 | |||||||
2019.
Amortized Cost Basis | Estimated Fair Value | |||||||
Due within one year | $ | 187,600 | $ | 188,914 | ||||
Due after one year through five years | 547,868 | 563,679 | ||||||
Due after five years through ten years | 507,792 | 518,317 | ||||||
Due after ten years | 1,714 | 2,022 | ||||||
Mortgage-backed securities | 1,908,594 | 1,885,845 | ||||||
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| |||||
Total | $ | 3,153,568 | $ | 3,158,777 | ||||
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|
|
Amortized Cost Basis | Estimated Fair Value | |||||||
Due within one year | $ | 285,774 | $ | 289,600 | ||||
Due after one year through five years | 2,078,388 | 2,187,779 | ||||||
Due after five years through ten years | 1,805,324 | 1,907,631 | ||||||
Due after ten years | 7,693 | 8,019 | ||||||
Total | $ | 4,177,179 | $ | 4,393,029 | ||||
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
December 31, 2018 | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | ||||||||||||||||||
U.S. Treasury securities | $ | 9,962 | $ | 8 | $ | — | $ | — | $ | 9,962 | $ | 8 | ||||||||||||
Obligations of U.S. government sponsored enterprises and agencies | — | — | 301 | — | 301 | — | ||||||||||||||||||
Obligations of state and political subdivisions | 27,489 | 107 | 114,461 | 1,863 | 141,950 | 1,970 | ||||||||||||||||||
Corporate bonds and other | 4,348 | 68 | 450 | 9 | 4,798 | 77 | ||||||||||||||||||
Residential mortgage-backed securities | 119,584 | 483 | 922,289 | 21,128 | 1,041,873 | 21,611 | ||||||||||||||||||
Commercial mortgage-backed securities | 1,994 | 5 | 343,015 | 5,731 | 345,009 | 5,736 | ||||||||||||||||||
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| |||||||||||||
Total | $ | 163,377 | $ | 671 | $ | 1,380,516 | $ | 28,731 | $ | 1,543,893 | $ | 29,402 | ||||||||||||
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Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
December 31, 2017 | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | ||||||||||||||||||
Obligations of U.S. government sponsored enterprises and agencies | $ | 60,329 | $ | 186 | $ | — | $ | — | $ | 60,329 | $ | 186 | ||||||||||||
Obligations of state and political subdivisions | 66,361 | 219 | 44,938 | 717 | 111,299 | 936 | ||||||||||||||||||
Corporate bonds and other | 224 | 2 | 237 | 3 | 461 | 5 | ||||||||||||||||||
Residential mortgage-backed securities | 701,252 | 3,988 | 239,641 | 4,928 | 940,893 | 8,916 | ||||||||||||||||||
Commercial mortgage-backed securities | 239,548 | 1,500 | 92,549 | 960 | 332,097 | 2,460 | ||||||||||||||||||
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Total | $ | 1,067,714 | $ | 5,895 | $ | 377,365 | $ | 6,608 | $ | 1,445,079 | $ | 12,503 | ||||||||||||
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2018, 2017 and 2016
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
December 31, 2020 | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | ||||||||||||||||||
Obligations of state and political subdivisions | $ | 25,214 | $ | 79 | $ | 0 | $ | 0 | $ | 25,214 | $ | 79 | ||||||||||||
Residential mortgage-backed securities | 36,017 | 96 | 3,156 | 19 | 39,173 | 115 | ||||||||||||||||||
Commercial mortgage-backed securities | 16,218 | 4 | 0 | 0 | 16,218 | 4 | ||||||||||||||||||
Total | $ | 77,449 | $ | 179 | $ | 3,156 | $ | 19 | $ | 80,605 | $ | 198 | ||||||||||||
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
December 31, 2019 | Fair | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | ||||||||||||||||||
Obligations of state and political subdivisions | $ | 65,787 | $ | 400 | | $ | 326 | $ | 0 | $ | 66,113 | $ | 400 | |||||||||||
Residential mortgage-backed securities | 100,004 | 306 | 103,983 | 842 | 203,987 | 1,148 | ||||||||||||||||||
Commercial mortgage-backed securities | 74,560 | 178 | 35,178 | 108 | 109,738 | 286 | ||||||||||||||||||
Total | $ | 240,351 | $ | 884 | $ | 139,487 | $ | 950 | $ | 379,838 | $ | 1,834 | ||||||||||||
Loansheld-for-investment
December 31, | ||||||||
2018 | 2017 | |||||||
Commercial | $ | 844,953 | $ | 684,099 | ||||
Agricultural | 96,677 | 94,543 | ||||||
Real estate | 2,639,346 | 2,302,998 | ||||||
Consumer | 372,660 | 403,929 | ||||||
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| |||||
Total loansheld-for-investment | $ | 3,953,636 | $ | 3,485,569 | ||||
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December 31, | ||||||||
2020 | 2019 | |||||||
Commercial: | ||||||||
C&I | $ | 1,131,382 | $ | N/A | ||||
Municipal | 181,325 | N/A | ||||||
Total Commercial | 1,312,707 | 856,326 | ||||||
Agricultural | 94,864 | 103,640 | ||||||
Real Estate: | ||||||||
Construction & Development | 553,959 | N/A | ||||||
Farm | 152,237 | N/A | ||||||
Non-Owner OccupiedCRE | 617,686 | N/A | ||||||
Owner Occupied CRE | 746,974 | N/A | ||||||
Residential | 1,248,409 | N/A | ||||||
Total Real Estate | 3,319,265 | 2,823,372 | ||||||
Consumer: | ||||||||
Auto | 353,595 | N/A | ||||||
Non-Auto | 90,602 | N/A | ||||||
Total Consumer | 444,197 | 411,631 | ||||||
Total Loans | 5,171,033 | 4,194,969 | ||||||
Less: Allowance for credit losses | (66,534 | ) | (52,499 | ) | ||||
Loans, net | $ | 5,104,499 | $ | 4,142,470 |
December 31, | ||||||||
2018 | 2017 | |||||||
Non-accrual loans* | $ | 27,534 | $ | 17,670 | ||||
Loans still accruing and past due 90 days or more | 1,008 | 288 | ||||||
Troubled debt restructured loans** | 513 | 627 | ||||||
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| |||||
Total | $ | 29,055 | $ | 18,585 | ||||
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December 31, | ||||||||
2020 | 2019 | |||||||
Nonaccrual loans | $ | 42,619 | $ | 24,582 | ||||
Loans still accruing and past due 90 days or more | 113 | 153 | ||||||
Troubled debt restructured loans* | 24 | 26 | ||||||
Total | $ | 42,756 | $ | 24,761 | ||||
* |
Troubled debt restructured loans of $7,407,000 and |
|
The Company’s recorded investment in impaired loans and the related valuation allowance are as follows (dollars in thousands):
December 31, 2018 | December 31, 2017 | |||||||||||
Recorded Investment | Valuation Allowance | Recorded Investment | Valuation Allowance | |||||||||
$ 27,534 | $ | 4,069 | $ | 17,670 | $ | 3,996 | ||||||
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2018
December 31, | ||||||||
2018 | 2017 | |||||||
Commercial | $ | 9,334 | $ | 3,612 | ||||
Agricultural | 759 | 134 | ||||||
Real Estate | 16,714 | 12,838 | ||||||
Consumer | 727 | 1,086 | ||||||
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Total | $ | 27,534 | $ | 17,670 | ||||
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No
December 31, | ||||||||
2020 | 2019 | |||||||
Commercial: | ||||||||
C&I | $ | 5,015 | $ | N/A | ||||
Municipal | — | N/A | ||||||
Total Commercial | 5,015 | 3,093 | ||||||
Agricultural | 1,076 | 1,376 | ||||||
Real Estate: | ||||||||
Construction & Development | 3,838 | N/A | ||||||
Farm | 7,299 | N/A | ||||||
Non-Owner OccupiedCRE | 5,243 | N/A | ||||||
Owner Occupied CRE | 10,797 | N/A | ||||||
Residential | 8,851 | N/A | ||||||
Total Real Estate | 36,028 | 19,787 | ||||||
Consumer: | ||||||||
Auto | 407 | N/A | ||||||
Non-Auto | 93 | N/A | ||||||
Total Consumer | 500 | 326 | ||||||
$ | 42,619 | $ | 24,582 | |||||
The Company’s impaired loans and related2020.
December 31, 2020 | C&I | Municipal | Agricultural | Construction & Development | Farm | |||||||||||||||
Beginning balance, prior to adoption of ASC 326 | $ | 11,010 | $ | 1,112 | $ | 1,206 | $ | 6,045 | $ | 663 | ||||||||||
Impact of adopting ASC 326 | (155 | ) | (16 | ) | (8 | ) | (75 | ) | (8 | ) | ||||||||||
Initial allowance on acquired TB&T PCD loans | — | — | — | — | 727 | |||||||||||||||
Provision for loan losses | 3,955 | 456 | 398 | 7,542 | 337 | |||||||||||||||
Recoveries | 1,315 | — | 31 | — | 157 | |||||||||||||||
Charge-offs | (2,516 | ) | — | (372 | ) | — | — | |||||||||||||
Ending balance | $ | 13,609 | $ | 1,552 | $ | 1,255 | $ | 13,512 | $ | 1,876 | ||||||||||
December 31, 2018 | Unpaid Contractual Principal Balance | Recorded Investment With No Allowance* | Recorded Investment With Allowance | Total Recorded Investment | Related Allowance | 12 Month Average Recorded Investment | ||||||||||||||||||
Commercial | $ | 10,808 | $ | 6,728 | $ | 2,606 | $ | 9,334 | $ | 1,133 | $ | 7,986 | ||||||||||||
Agricultural | 799 | 213 | 546 | 759 | 170 | 842 | ||||||||||||||||||
Real Estate | 24,072 | 6,699 | 10,015 | 16,714 | 2,409 | 16,042 | ||||||||||||||||||
Consumer | 935 | 101 | 626 | 727 | 357 | 914 | ||||||||||||||||||
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| |||||||||||||
Total | $ | 36,614 | $ | 13,741 | $ | 13,793 | $ | 27,534 | $ | 4,069 | $ | 25,784 | ||||||||||||
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December 31, 2017 | Unpaid Contractual Principal Balance | Recorded Investment With No Allowance* | Recorded Investment With Allowance | Total Recorded Investment | Related Allowance | 12 Month Average Recorded Investment | ||||||||||||||||||
Commercial | $ | 5,597 | $ | 518 | $ | 3,094 | $ | 3,612 | $ | 1,194 | $ | 4,849 | ||||||||||||
Agricultural | 147 | — | 134 | 134 | 31 | 120 | ||||||||||||||||||
Real Estate | 16,823 | 2,348 | 10,490 | 12,838 | 2,316 | 13,835 | ||||||||||||||||||
Consumer | 1,284 | 143 | 943 | 1,086 | 455 | 1,258 | ||||||||||||||||||
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| |||||||||||||
Total | $ | 23,851 | $ | 3,009 | $ | 14,661 | $ | 17,670 | $ | 3,996 | $ | 20,062 | ||||||||||||
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The Company recognized interest income2018
December 31, 2020 (continued) | Non-Owner Occupied CRE | Owner Occupied CRE | Residential | Auto | Non- Auto | Total | ||||||||||||||||||
Beginning balance, prior to adoption of ASC 326 | $ | 7,341 | $ | 9,533 | $ | 10,392 | $ | 3,900 | $ | 1,297 | $ | 52,499 | ||||||||||||
Impact of adopting ASC 326 | (91 | ) | (118 | ) | (129 | ) | (14 | ) | (5 | ) | (619 | ) | ||||||||||||
Initial allowance on acquired TB&T PCD loans | — | 847 | 104 | — | — | 1,678 | ||||||||||||||||||
Provision for loan losses | 1,573 | 2,635 | 2,456 | (2,587 | ) | (717 | ) | 16,048 | ||||||||||||||||
Recoveries | 131 | 17 | 151 | 269 | 171 | 2,242 | ||||||||||||||||||
Charge-offs | (563 | ) | (567 | ) | (373 | ) | (548 | ) | (375 | ) | (5,314 | ) | ||||||||||||
Ending balance | $ | 8,391 | $ | 12,347 | $ | 12,601 | $ | 1,020 | $ | 371 | $ | 66,534 | ||||||||||||
December 31, 2019 | Commercial | Agricultural | Real Estate | Consumer | Total | |||||||||||||||
Beginning balance | $ | 11,948 | $ | 1,446 | $ | 32,342 | $ | 5,466 | $ | 51,202 | ||||||||||
Provision for loan losses | 398 | (79 | ) | 2,520 | 126 | 2,965 | ||||||||||||||
Recoveries | 1,364 | 158 | 404 | 532 | 2,458 | |||||||||||||||
Charge-offs | (1,588 | ) | (319 | ) | (1,292 | ) | (927 | ) | (4,126 | ) | ||||||||||
Ending balance | $ | 12,122 | $ | 1,206 | $ | 33,974 | $ | 5,197 | $ | 52,499 | ||||||||||
December 31, 2020 | Collateral Dependent Loans Individually Evaluated for Credit Losses Without an Allowance | Collateral Dependent Loans Individually Evaluated for Credit Losses With an Allowance | Non-Collateral Dependent Loans Individually Evaluated for Credit Losses | Total Loans Individually Evaluated for Credit Losses | Related Allowance on Collateral Dependent Loans | Related Allowance on Non- Collateral Dependent Loans | Total Allowance for Credit Losses on Loans Individually Evaluated for Credit Losses | |||||||||||||||||||||
Commercial: | ||||||||||||||||||||||||||||
C&I | $ | 1,544 | $ | 3,471 | $ | 25,629 | $ | 30,644 | $ | 799 | $ | 4,592 | $ | 5,391 | ||||||||||||||
Municipal | — | — | 9,439 | 9,439 | — | 1,435 | 1,435 | |||||||||||||||||||||
Total Commercial | 1,544 | 3,471 | 35,068 | 40,083 | 799 | 6,027 | 6,826 | |||||||||||||||||||||
Agricultural | 470 | 606 | 5,572 | 6,648 | 96 | 886 | 982 | |||||||||||||||||||||
Real Estate: | ||||||||||||||||||||||||||||
Construction & Development | 1,176 | 2,661 | 11,368 | 15,205 | 35 | 617 | 652 | |||||||||||||||||||||
Farm | 2,614 | 4,685 | 3,349 | 10,648 | 654 | 658 | 1,312 | |||||||||||||||||||||
Non-Owner OccupiedCRE | 4,009 | 1,234 | 17,383 | 22,626 | 500 | 1,421 | 1,921 | |||||||||||||||||||||
Owner Occupied CRE | 7,279 | 3,518 | 51,933 | 62,730 | 657 | 5,172 | 5,829 | |||||||||||||||||||||
Residential | 4,347 | 4,504 | 28,196 | 37,047 | 676 | 2,431 | 3,107 | |||||||||||||||||||||
Total Real Estate | 19,425 | 16,602 | 112,229 | 148,256 | 2,522 | 10,299 | 12,821 | |||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||
Auto | — | 407 | 1,523 | 1,930 | 1 | 5 | 6 | |||||||||||||||||||||
Non-Auto | — | 94 | 440 | 534 | 1 | 1 | 2 | |||||||||||||||||||||
Total Consumer | — | 501 | 1,963 | 2,464 | 2 | 6 | 8 | |||||||||||||||||||||
Total | $ | 21,439 | $ | 21,180 | $ | 154,832 | $ | 197,451 | $ | 3,419 | $ | 17,218 | $ | 20,637 | ||||||||||||||
December 31, 2019 | Unpaid Contractual Principal Balance | Recorded Investment With No Allowance | Recorded Investment With Allowance | Total Recorded Investment | Related Allowance | 12 Month Average Recorded Investment | ||||||||||||||||||
Commercial | $ | 4,511 | $ | 630 | $ | 2,463 | $ | 3,093 | $ | 1,042 | $ | 3,488 | ||||||||||||
Agricultural | 1,603 | 658 | 718 | 1,376 | 235 | 1,644 | ||||||||||||||||||
Real Estate | 27,366 | 7,081 | 12,706 | 19,787 | 1,950 | 21,726 | ||||||||||||||||||
Consumer | 469 | — | 326 | 326 | 1 | 449 | ||||||||||||||||||
Total | $ | 33,949 | $ | 8,369 | $ | 16,213 | $ | 24,582 | $ | 3,228 | $ | 27,307 | ||||||||||||
December 31, 2020 | C&I | Municipal | Agricultural | Construction & Development | Farm | ||||||||||||||||||
Loans individually evaluated for credit losses | $ | 5,391 | $ | 1,435 | $ | 982 | $ | 652 | $ | 1,312 | |||||||||||||
Loans collectively evaluated for credit losses | 8,218 | 117 | 273 | 12,860 | 564 | ||||||||||||||||||
Total | $ | 13,609 | $ | 1,552 | $ | 1,255 | $ | 13,512 | $ | 1,876 | |||||||||||||
December 31, 2020 (continued) | Non-Owner Occupied C RE | Owner Occupied C R E | Residential | Auto | Non-Auto | Total | ||||||||||||||||||
Loans individually evaluated for credit losses | $ | 1,921 | $ | 5,829 | $ | 3,107 | $ | 6 | $ | 2 | $ | 20,637 | ||||||||||||
Loans collectively evaluated for credit losses | 6,470 | 6,518 | 9,494 | 1,014 | 369 | 45,897 | ||||||||||||||||||
Total | $ | 8,391 | $ | 12,347 | $ | 12,601 | $ | 1,020 | $ | 371 | $ | 66,534 | ||||||||||||
December 31, 2019 | Commercial | Agricultural | Real | Consumer | Total | ||||||||||||||||||
Loans individually evaluated for impairment | $ | 1,042 | $ | 235 | $ | 1,950 | $ | 1 | $ | 3,228 | |||||||||||||
Loan collectively evaluated for impairment | 11,080 | 971 | 32,024 | 5,196 | 49,271 | ||||||||||||||||||
Total | $ | 12,122 | $ | 1,206 | $ | 33,974 | $ | 5,197 | $ | 52,499 | |||||||||||||
December 31, 2020 | C&I | Municipal | Agriculture | Construction & Development | Farm | ||||||||||||||||||
Loans individually evaluated for credit losses | $ | 30,644 | $ | 9,439 | $ | 6,648 | $ | 15,205 | $ | 10,648 | |||||||||||||
Loans collectively evaluated for credit losses | 1,100,738 | 171,886 | 88,216 | 538,754 | 141,589 | ||||||||||||||||||
Total | $ | 1,131,382 | $ | 181,325 | $ | 94,864 | $ | 553,959 | $ | 152,237 | |||||||||||||
December 31, 2020 (continued) | Non - OwnerOccupied CRE | Owner Occupied CRE | Residential | Auto | Non-Auto | Total | ||||||||||||||||||
Loans individually evaluated for credit losses | $ | 22,626 | $ | 62,730 | $ | 37,047 | $ | 1,930 | $ | 534 | $ | 197,451 | ||||||||||||
Loans collectively evaluated for credit losses | 595,060 | 684,244 | 1,211,362 | 351,665 | 90,068 | 4,973,582 | ||||||||||||||||||
Total | $ | 617,686 | $ | 746,974 | $ | 1,248,409 | $ | 353,595 | $ | 90,602 | $ | 5,171,033 | ||||||||||||
December 31, 2019 | Commercial | Agricultural | Real Estate | Consumer | Total | |||||||||||||||
Loans individually evaluated for impairment | $ | 3,093 | $ | 1,376 | $ | 19,787 | $ | 326 | $ | 24,582 | ||||||||||
Loan collectively evaluated for impairment | 853,233 | 102,264 | 2,803,585 | 411,305 | 4,170,387 | |||||||||||||||
Total | $ | 856,326 | $ | 103,640 | $ | 2,823,372 | $ | 411,631 | $ | 4,194,969 | ||||||||||
nonaccrual.
December 31, 2018 | Pass | Special Mention | Substandard | Doubtful | Total | |||||||||||||||
Commercial | $ | 804,584 | $ | 23,392 | $ | 16,977 | $ | — | $ | 844,953 | ||||||||||
Agricultural | 92,864 | 46 | 3,767 | — | 96,677 | |||||||||||||||
Real Estate | 2,559,379 | 26,626 | 53,341 | — | 2,639,346 | |||||||||||||||
Consumer | 370,510 | 315 | 1,835 | — | 372,660 | |||||||||||||||
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| |||||||||||
Total | $ | 3,827,337 | $ | 50,379 | $ | 75,920 | $ | — | $ | 3,953,636 | ||||||||||
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December 31, 2017 | Pass | Special Mention | Substandard | Doubtful | Total | |||||||||||||||
Commercial | $ | 649,166 | $ | 6,282 | $ | 28,651 | $ | — | $ | 684,099 | ||||||||||
Agricultural | 90,457 | 1,527 | 2,559 | — | 94,543 | |||||||||||||||
Real Estate | 2,227,302 | 29,089 | 46,607 | — | 2,302,998 | |||||||||||||||
Consumer | 401,434 | 181 | 2,314 | — | 403,929 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 3,368,359 | $ | 37,079 | $ | 80,131 | $ | — | $ | 3,485,569 | ||||||||||
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December 31, | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans Amort Cost Basis | Total | ||||||||||||||||||||||||
C&I | ||||||||||||||||||||||||||||||||
Risk rating: | ||||||||||||||||||||||||||||||||
Pass | $ | 874 | $ | 101 | $ | 70 | $ | 28 | $ | 10 | $ | 16 | $ | — | $ | 1,099 | ||||||||||||||||
Special mention | 9 | 2 | — | 1 | — | — | — | 12 | ||||||||||||||||||||||||
Substandard | 12 | 4 | 4 | — | — | — | — | 20 | ||||||||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Total | $ | 895 | $ | 107 | $ | 74 | $ | 29 | $ | 10 | $ | 16 | $ | — | $ | 1,131 | ||||||||||||||||
2018
December 31, | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans Amort Cost Basis | Total | |||||||||||||||||||||||||
Municipal | |||||||||||||||||||||||||||||||||
Risk rating: | |||||||||||||||||||||||||||||||||
Pass | $ | 26 | $ | 19 | $ | 29 | $ | 14 | $ | 13 | $ | 71 | $ | — | $ | 172 | |||||||||||||||||
Special mention | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Substandard | 2 | — | — | 5 | 1 | 1 | — | 9 | |||||||||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Total | $ | 28 | $ | 19 | $ | 29 | $ | 19 | $ | 14 | $ | 72 | $ | — | $ | 181 | |||||||||||||||||
December 31, | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans Amort Cost | Total | |||||||||||||||||||||||||
Agricultural | |||||||||||||||||||||||||||||||||
Risk rating: | |||||||||||||||||||||||||||||||||
Pass | $ | 57 | $ | 19 | $ | 9 | $ | 3 | $ | 1 | $ | — | $ | — | $ | 89 | |||||||||||||||||
Special mention | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Substandard | 6 | — | — | — | — | — | — | 6 | |||||||||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Total | $ | 63 | $ | 19 | $ | 9 | $ | 3 | $ | 1 | $ | 0 | $ | — | $ | 95 | |||||||||||||||||
December 31, | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans Amort Cost Basis | Total | |||||||||||||||||||||||||
Construction & Development | |||||||||||||||||||||||||||||||||
Risk rating: | |||||||||||||||||||||||||||||||||
Pass | $ | 371 | $ | 97 | $ | 36 | $ | 19 | $ | 7 | $ | 9 | $ | — | $ | 539 | |||||||||||||||||
Special mention | 2 | 4 | — | — | — | — | — | 6 | |||||||||||||||||||||||||
Substandard | 4 | 1 | — | 3 | — | 1 | — | 9 | |||||||||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Total | $ | 377 | $ | 102 | $ | 36 | $ | 22 | $ | 7 | $ | 10 | $ | — | $ | 554 | |||||||||||||||||
December 31, | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans Amort Cost Basis | Total | |||||||||||||||||||||||||
Farm | |||||||||||||||||||||||||||||||||
Risk rating: | |||||||||||||||||||||||||||||||||
Pass | $ | 57 | $ | 22 | $ | 18 | $ | 11 | $ | 11 | $ | 23 | $ | — | $ | 142 | |||||||||||||||||
Special mention | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Substandard | 7 | 1 | 0 | 1 | — | 1 | — | 10 | |||||||||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Total | $ | 64 | $ | 23 | $ | 18 | $ | 12 | $ | 11 | $ | 24 | $ | — | $ | 152 | |||||||||||||||||
December 31, | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans Amort Cost Basis | Total | ||||||||||||||||||||||||
Non-Owner Occupied CRE | ||||||||||||||||||||||||||||||||
Risk rating: | ||||||||||||||||||||||||||||||||
Pass | $ | 197 | $ | 117 | $ | 93 | $ | 44 | $ | 55 | $ | 88 | $ | — | $ | 594 | ||||||||||||||||
Special mention | 1 | — | 1 | 8 | 1 | — | — | 11 | ||||||||||||||||||||||||
Substandard | — | 2 | — | — | — | 11 | — | 13 | ||||||||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | 0 | ||||||||||||||||||||||||
Total | $ | 198 | $ | 119 | $ | 94 | $ | 52 | $ | 56 | $ | 99 | $ | — | $ | 618 | ||||||||||||||||
December 31, | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans Amort Cost Basis | Total | ||||||||||||||||||||||||
Owner Occupied CRE | ||||||||||||||||||||||||||||||||
Risk rating: | ||||||||||||||||||||||||||||||||
Pass | $ | 176 | $ | 132 | $ | 105 | $ | 75 | $ | 65 | $ | 132 | $ | — | $ | 685 | ||||||||||||||||
Special mention | 5 | 5 | 2 | 4 | 1 | 1 | — | 18 | ||||||||||||||||||||||||
Substandard | 5 | 4 | 20 | 4 | 1 | 10 | — | 44 | ||||||||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Total | $ | 186 | $ | 141 | $ | 127 | $ | 83 | $ | 67 | $ | 143 | $ | — | $ | 747 | ||||||||||||||||
December 31, | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans Amort Cost Basis | Total | ||||||||||||||||||||||||
Residential | ||||||||||||||||||||||||||||||||
Risk rating: | ||||||||||||||||||||||||||||||||
Pass | $ | 373 | $ | 172 | $ | 134 | $ | 101 | $ | 101 | $ | 237 | $ | 93 | $ | 1,211 | ||||||||||||||||
Special mention | 3 | 1 | 1 | 1 | 1 | 3 | — | 10 | ||||||||||||||||||||||||
Substandard | 5 | 3 | 3 | 3 | 1 | 10 | 2 | 27 | ||||||||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Total | $ | 381 | $ | 176 | $ | 138 | $ | 105 | $ | 103 | $ | 250 | $ | 95 | $ | 1,248 | ||||||||||||||||
December 31, | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans Amort Cost Basis | Total | ||||||||||||||||||||||||
Auto | ||||||||||||||||||||||||||||||||
Risk rating: | ||||||||||||||||||||||||||||||||
Pass | $ | 177 | $ | 104 | $ | 39 | $ | 21 | $ | 9 | $ | 2 | $ | — | $ | 352 | ||||||||||||||||
Special mention | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Substandard | 1 | 1 | — | — | — | — | — | 2 | ||||||||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Total | $ | 178 | $ | 105 | $ | 39 | $ | 21 | $ | 9 | $ | 2 | $ | — | $ | 354 | ||||||||||||||||
December 31, | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans Amort Cost Basis | Total | ||||||||||||||||||||||||
Non-Auto | ||||||||||||||||||||||||||||||||
Risk rating: | ||||||||||||||||||||||||||||||||
Pass | $ | 48 | $ | 21 | $ | 7 | $ | 4 | $ | 1 | $ | 2 | $ | 7 | $ | 90 | ||||||||||||||||
Special mention | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Substandard | — | — | — | — | — | 1 | — | 1 | ||||||||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Total | $ | 48 | $ | 21 | $ | 7 | $ | 4 | $ | 1 | $ | 3 | $ | 7 | $ | 91 | ||||||||||||||||
December 31, | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans Amort Cost Basis | Total | ||||||||||||||||||||||||
Total Loans | ||||||||||||||||||||||||||||||||
Risk rating: | ||||||||||||||||||||||||||||||||
Pass | $ | 2,356 | $ | 804 | $ | 540 | $ | 320 | $ | 273 | $ | 580 | $ | 100 | $ | 4,973 | ||||||||||||||||
Special mention | 20 | 12 | 4 | 14 | 3 | 4 | — | 57 | ||||||||||||||||||||||||
Substandard | 42 | 16 | 27 | 16 | 3 | 35 | 2 | 141 | ||||||||||||||||||||||||
Doubtful | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Total | $ | 2,417 | $ | 834 | $ | 571 | $ | 349 | $ | 280 | $ | 619 | $ | 102 | $ | 5,171 | ||||||||||||||||
December 31, 2019 | Pass | Special Mention | Substandard | Doubtful | Total | |||||||||||||||
Commercial | $ | 825 | $ | 21 | $ | 10 | $ | — | $ | 856 | ||||||||||
Agricultural | 102 | — | 2 | — | 104 | |||||||||||||||
Real Estate | 2,717 | 42 | 64 | — | 2,823 | |||||||||||||||
Consumer | 411 | — | 1 | — | 412 | |||||||||||||||
Total | $ | 4,055 | $ | 63 | $ | 77 | $ | — | $ | 4,195 | ||||||||||
December 31, 2018 | 15-59 Days Past Due* | 60-89 Days Past Due | Greater Than 90 Days | Total Past Due | Total Current | Total Loans | Total 90 Days Past Due Still Accruing | |||||||||||||||||||||
Commercial | $ | 3,546 | $ | 682 | $ | 677 | $ | 4,905 | $ | 840,048 | $ | 844,953 | $ | — | ||||||||||||||
Agricultural | 791 | 19 | 26 | 836 | 95,841 | 96,677 | — | |||||||||||||||||||||
Real Estate | 13,185 | 881 | 2,020 | 16,086 | 2,623,260 | 2,639,346 | 960 | |||||||||||||||||||||
Consumer | 782 | 263 | 54 | 1,099 | 371,561 | 372,660 | 48 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | $ | 18,304 | $ | 1,845 | $ | 2,777 | $ | 22,926 | $ | 3,930,710 | $ | 3,953,636 | $ | 1,008 | ||||||||||||||
|
|
|
|
|
|
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|
|
|
|
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|
|
December 31, 2017 | 15-59 Days Past Due* | 60-89 Days Past Due | Greater Than 90 Days | Total Past Due | Total Current | Total Loans | Total 90 Days Past Due Still Accruing | |||||||||||||||||||||
Commercial | $ | 2,039 | $ | 1,104 | $ | 1,081 | $ | 4,224 | $ | 679,875 | $ | 684,099 | $ | 7 | ||||||||||||||
Agricultural | 640 | — | — | 640 | 93,903 | 94,543 | — | |||||||||||||||||||||
Real Estate | 12,308 | 511 | 1,198 | 14,017 | 2,288,981 | 2,302,998 | 216 | |||||||||||||||||||||
Consumer | 1,360 | 361 | 135 | 1,856 | 402,073 | 403,929 | 65 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | $ | 16,347 | $ | 1,976 | $ | 2,414 | $ | 20,737 | $ | 3,464,832 | $ | 3,485,569 | $ | 288 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020 | 15-59 Days Past Due* | 60-89 Days Past | Greater Than Days | Total Due | Current | Total Loans | 90 Days Past Due Still Accruing | |||||||||||||||||||||
Commercial: | ||||||||||||||||||||||||||||
C&I | $ | 3,647 | $ | 406 | $ | 576 | $ | 4,629 | $ | 1,126,753 | $ | 1,131,382 | $ | 21 | ||||||||||||||
Municipal | — | — | — | — | 181,325 | 181,325 | — | |||||||||||||||||||||
Total Commercial | 3,647 | 406 | 576 | 4,629 | 1,308,078 | 1,312,707 | 21 | |||||||||||||||||||||
Agricultural | 193 | 95 | 0 | 288 | 94,576 | 94,864 | — | |||||||||||||||||||||
Real Estate: | ||||||||||||||||||||||||||||
Construction & Development | 4,775 | 44 | — | 4,819 | 549,140 | 553,959 | — | |||||||||||||||||||||
Farm | 708 | — | — | 708 | 151,529 | 152,237 | — | |||||||||||||||||||||
Non-Owner OccupiedCRE | 613 | — | — | 613 | 617,073 | 617,686 | — | |||||||||||||||||||||
Owner Occupied CRE | 1,393 | 322 | 133 | 1,848 | 745,126 | 746,974 | — | |||||||||||||||||||||
Residential | 8,072 | 18 | 275 | 8,365 | 1,240,044 | 1,248,409 | 33 | |||||||||||||||||||||
Total Real Estate | 15,561 | 384 | 408 | 16,353 | 3,302,912 | 3,319,265 | 33 | |||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||
Auto | 551 | 158 | 75 | 784 | 352,811 | 353,595 | 59 | |||||||||||||||||||||
Non-Auto | 214 | 24 | — | 238 | 90,364 | 90,602 | — | |||||||||||||||||||||
Total Consumer | 765 | 182 | 75 | 1,022 | 443,175 | 444,197 | 59 | |||||||||||||||||||||
Total | $ | 20,166 | $ | 1,067 | $ | 1,059 | $ | 22,292 | $ | 5,148,741 | $ | 5,171,033 | $ | 113 | ||||||||||||||
December 31, 2019 | 15-59 Days Past | 60-89 Days Past Due | Greater Than 90 Days | Total Past Due | Current | Total Loans | Total 90 Days e StillAccruing | |||||||||||||||||||||
Commercial | $ | 3,257 | $ | 557 | $ | 722 | $ | 4,536 | $ | 851,790 | $ | 856,326 | $ | 112 | ||||||||||||||
Agricultural | 183 | 44 | 400 | 627 | 103,013 | 103,640 | — | |||||||||||||||||||||
Real Estate | 12,890 | 288 | 195 | 13,373 | 2,809,999 | 2,823,372 | — | |||||||||||||||||||||
Consumer | 572 | 151 | 45 | 768 | 410,863 | 411,631 | 41 | |||||||||||||||||||||
Total | $ | 16,902 | $ | 1,040 | $ | 1,362 | $ | 19,304 | $ | 4,175,665 | $ | 4,194,969 | $ | 153 | ||||||||||||||
* | The Company monitors commercial, agricultural and real estate loans after such loans are 15 days past due. Consumer loans are monitored after such loans are 30 days past due. |
The following table details the allowance for loan losses at December 31, 2018 and 2017 by portfolio segment (in thousands). There were no allowances for purchased credit impaired loans at December 31, 2018 or 2017. Allocation
Changes2018
December 31, 2018 | Commercial | Agricultural | Real Estate | Consumer | Total | |||||||||||||||
Beginning balance | $ | 10,865 | $ | 1,305 | $ | 29,896 | $ | 6,090 | $ | 48,156 | ||||||||||
Provision for loan losses | 1,662 | 126 | 3,463 | 414 | 5,665 | |||||||||||||||
Recoveries | 839 | 15 | 462 | 512 | 1,828 | |||||||||||||||
Charge-offs | (1,418 | ) | — | (1,479 | ) | (1,550 | ) | (4,447 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ending balance | $ | 11,948 | $ | 1,446 | $ | 32,342 | $ | 5,466 | $ | 51,202 | ||||||||||
|
|
|
|
|
|
|
|
|
|
December 31, 2017 | Commercial | Agricultural | Real Estate | Consumer | Total | |||||||||||||||
Beginning balance | $ | 11,707 | $ | 1,101 | $ | 26,864 | $ | 6,107 | $ | 45,779 | ||||||||||
Provision for loan losses | 1,233 | 243 | 4,055 | 999 | 6,530 | |||||||||||||||
Recoveries | 943 | 32 | 192 | 501 | 1,668 | |||||||||||||||
Charge-offs | (3,018 | ) | (71 | ) | (1,215 | ) | (1,517 | ) | (5,821 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ending balance | $ | 10,865 | $ | 1,305 | $ | 29,896 | $ | 6,090 | $ | 48,156 | ||||||||||
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|
|
|
|
|
|
|
|
The Company’s recorded investment in loans as of December 31, 2018 and 2017 relatedother actions intended to the balance in the allowance for loan losses on the basis of the Company’s impairment methodology was as follows (in thousands). Purchased credit impaired loans of $827,000 and $618,000, respectively, at December 31, 2018 and 2017 are included in loans individually evaluated for impairment.
December 31, 2018 | Commercial | Agricultural | Real Estate | Consumer | Total | |||||||||||||||
Loans individually evaluated for impairment | $ | 9,334 | $ | 759 | $ | 16,714 | $ | 727 | $ | 27,534 | ||||||||||
Loan collectively evaluated for impairment | 835,619 | 95,918 | 2,622,632 | 371,933 | 3,926,102 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 844,953 | $ | 96,677 | $ | 2,639,346 | $ | 372,660 | $ | 3,953,636 | ||||||||||
|
|
|
|
|
|
|
|
|
|
December 31, 2017 | Commercial | Agricultural | Real Estate | Consumer | Total | |||||||||||||||
Loans individually evaluated for impairment | $ | 3,612 | $ | 134 | $ | 12,838 | $ | 1,086 | $ | 17,670 | ||||||||||
Loan collectively evaluated for impairment | 680,487 | 94,409 | 2,290,160 | 402,843 | 3,467,899 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 684,099 | $ | 94,543 | $ | 2,302,998 | $ | 403,929 | $ | 3,485,569 | ||||||||||
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|
|
minimize potential losses.
Year Ended December 31, 2018 | Year Ended December 31, 2017 | |||||||||||||||||||||||
Number | Pre-Modification Recorded Investment | Post- Modification Recorded Investment | Number | Pre-Modification Recorded Investment | Post- Modification Recorded Investment | |||||||||||||||||||
Commercial | 4 | $ | 864 | $ | 864 | 11 | $ | 895 | $ | 895 | ||||||||||||||
Agricultural | 1 | 4 | 4 | — | — | — | ||||||||||||||||||
Real Estate | 5 | 643 | 643 | 5 | 625 | 625 | ||||||||||||||||||
Consumer | 8 | 209 | 209 | 1 | 25 | 25 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 18 | $ | 1,720 | $ | 1,720 | 17 | $ | 1,545 | $ | 1,545 | ||||||||||||||
|
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|
|
|
|
|
|
|
Year Ended December 31, 2020 | ||||||||||||
Pre-Modification | Post- Modification | |||||||||||
Recorded | Recorded | |||||||||||
Number | Investment | Investment | ||||||||||
Commercial: | ||||||||||||
C&I | 11 | $ | 1,151 | $ | 1,151 | |||||||
Municipal | — | — | — | |||||||||
Total Commercial | 11 | 1,151 | 1,151 | |||||||||
Agricultural | 1 | 134 | 134 | |||||||||
Real Estate: | ||||||||||||
Construction & Development | 1 | 81 | 81 | |||||||||
Farm | — | — | — | |||||||||
Non-Owner OccupiedCRE | — | — | — | |||||||||
Owner Occupied CRE | 3 | 3,508 | 3,508 | |||||||||
Residential | 2 | 152 | 152 | |||||||||
Total Real Estate | 6 | 3,741 | 3,741 | |||||||||
Consumer: | ||||||||||||
Auto | — | — | — | |||||||||
Non-Auto | 1 | 14 | 14 | |||||||||
Total Consumer | 1 | 14 | 14 | |||||||||
Total | 19 | $ | 5,040 | $ | 5,040 | |||||||
Year Ended December 31, 2019 | ||||||||||||
Number | Pre-Modification Recorded Investment | Post- Modification Recorded Investment | ||||||||||
Commercial | 7 | $ | 551 | $ | 551 | |||||||
Agricultural | 11 | 812 | 812 | |||||||||
Real Estate | 7 | 1,397 | 1,397 | |||||||||
Consumer | — | — | — | |||||||||
Total | 25 | $ | 2,760 | $ | 2,760 | |||||||
2018
Year Ended December 31, 2018 | Year Ended December 31, 2017 | |||||||||||||||||||||||
Adjusted Interest Rate | Extended Maturity | Combined Rate and Maturity | Adjusted Interest Rate | Extended Maturity | Combined Rate and Maturity | |||||||||||||||||||
Commercial | $ | — | $ | 529 | $ | 335 | $ | — | $ | 195 | $ | 700 | ||||||||||||
Agricultural | — | — | 4 | — | — | — | ||||||||||||||||||
Real Estate | — | 280 | 363 | — | 312 | 313 | ||||||||||||||||||
Consumer | — | — | 209 | — | 25 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | — | $ | 809 | $ | 911 | $ | — | $ | 532 | $ | 1,013 | ||||||||||||
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|
|
|
|
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|
|
Year Ended December 31, 2020 | ||||||||||||
Adjusted | Combined | |||||||||||
Interest | Extended | Rate and | ||||||||||
Rate | Maturity | Maturity | ||||||||||
Commercial: | ||||||||||||
C&I | $ | — | $ | 918 | $ | 233 | ||||||
Municipal | — | — | — | |||||||||
Total Commercial | — | 918 | 233 | |||||||||
Agricultural | — | 134 | — | |||||||||
Real Estate: | ||||||||||||
Construction & Development | — | — | 81 | |||||||||
Farm | — | — | — | |||||||||
Non-Owner OccupiedCRE | — | — | — | |||||||||
Owner OccupiedCRE | — | 1,546 | 1,962 | |||||||||
Residential | — | — | 152 | |||||||||
Total Real Estate | — | 1,546 | 2,195 | |||||||||
Consumer: | ||||||||||||
Auto | — | — | — | |||||||||
Non-Auto | — | 14 | — | |||||||||
Total Consumer | — | 14 | — | |||||||||
Total | $ | — | $ | 2,612 | $ | 2,428 | ||||||
Year Ended December 31, 2019 | ||||||||||||
Adjusted Interest Rate | Extended Maturity | Combined Rate and Maturity | ||||||||||
Commercial | $ | — | $ | 389 | $ | 162 | ||||||
Agricultural | — | 354 | 458 | |||||||||
Real Estate | — | 494 | 903 | |||||||||
Consumer | — | — | — | |||||||||
Total | $ | — | $ | 1,237 | $ | 1,523 | ||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | |||||||||||||||
Number | Balance | Number | Balance | |||||||||||||
Commercial | 1 | $ | 491 | 2 | $ | 88 | ||||||||||
Agriculture | — | — | — | — | ||||||||||||
Real Estate | — | — | — | — | ||||||||||||
Consumer | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 1 | $ | 491 | 2 | $ | 88 | ||||||||||
|
|
|
|
|
|
|
|
As of
Year Ended December 31, 2019 | ||||||||
Number | Balance | |||||||
Commercial | — | $ | — | |||||
Agriculture | 7 | 267 | ||||||
Real Estate | — | — | ||||||
Consumer | — | — | ||||||
Total | 7 | $ | 267 | |||||
Beginning Balance | Additional Loans | Payments | Ending Balance | |||||||||||||
Year ended December 31, 2018 | $ | 55,904 | $ | 55,678 | $ | 44,188 | $ | 67,394 |
Beginning Balance | Additional Loans | Payments | Ending Balance | |||||||||||||
Year ended December 31, 2020 | $ | 85,364 | $ | 107,837 | $ | 102,237 | $ | 90,964 |
Our subsidiary bank has established a line of credit with the Federal Home Loan Bank of Dallas (FHLB) to provide liquidity and meet pledging requirements for those customers eligible to have securities pledged to secure certain uninsured deposits. At December 31, 2018, $2,495,150,000 in loans held by our bank subsidiary were subject to blanket liens as security for this line of credit. At December 31, 2018, there was $55,000,000 outstanding under this line of credit.
Note 4—LoansHeld-for-Sale
The Company originates certain mortgage loans for sale in the secondary market. The mortgage loan sales contracts contain indemnification clauses should the loans default, generally in the first three to nine months, or if documentation is determined not to be in compliance with regulations. The Company’s historic losses as a result of these indemnities have been insignificant.
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2018, 2017 and 2016
Note 5—Derivative Financial Instruments
Beginning in the second quarter of 2018, the
made in the aggregate.
liabilities, through earnings in the statement of earnings.
The impact of these forward contracts is included in gain on sale and fees on mortgage loans in the statement of earnings.
December 31, 2018: | Outstanding Notional Balance | Asset Derivative Fair Value | Liability Derivative Fair Value | |||||||||
IRLCs | $ | 37,088 | $ | 765 | $ | — | ||||||
Forward mortgage-backed securities trades | 45,500 | — | 403 |
December 31, 2017: | Outstanding Notional Balance | Asset Derivative Fair Value | Liability Derivative Fair Value | |||||||||
IRLCs | $ | 37,589 | $ | 500 | $ | — |
December 31, 2020: | Outstanding Notional Balance | Asset Derivative Fair Value | Liability Derivative Fair Value | |||||||||
IRLCs | $ | 202,906 | $ | 4,618 | $ | 0 | ||||||
Forward mortgage-backed securities trades | 198,000 | 0 | 1,560 |
December 31, 2019: | Outstanding Notional Balance | Asset Derivative Fair Value | Liability Derivative Fair Value | |||||||||
IRLCs | $ | 47,415 | $ | 886 | $ | 0 | ||||||
Forward mortgage-backed securities trades | 78,500 | 0 | 152 |
2018
Useful Life | December 31, | |||||||||
2018 | 2017 | |||||||||
Land | – | $ | 31,190 | $ | 29,508 | |||||
Buildings | 20 to 40 years | 135,335 | 119,728 | |||||||
Furniture and equipment | 3 to 10 years | 58,969 | 58,672 | |||||||
Leasehold improvements | Lesser of lease term or 5 to 15 years | 3,557 | 4,118 | |||||||
|
|
|
| |||||||
229,051 | 212,026 | |||||||||
Less- accumulated depreciation and amortization | (95,630 | ) | (88,000 | ) | ||||||
|
|
|
| |||||||
Total Bank Premises and Equipment | $ | 133,421 | $ | 124,026 | ||||||
|
|
|
|
Useful Life | December 31, | |||||||||||
2020 | 2019 | |||||||||||
Land | – | $ | 34,266 | $ | 30,800 | |||||||
Buildings | 20 to 40 years | 148,630 | 138,110 | |||||||||
Furniture and equipment | 3 to 10 years | 57,283 | 60,200 | |||||||||
Leasehold improvements | Lesser of lease or 5 to 15 years | 3,016 | 3,364 | |||||||||
243,195 | 232,474 | |||||||||||
Less : accumulated depreciation and amortization | (100,926 | ) | (101,452 | ) | ||||||||
Total Bank Premises and Equipment | $ | 142,269 | $ | 131,022 | ||||||||
During the years ended December 31, 2018, 2017 and 2016, the Company recorded gains (losses) on sale of the bank premises and equipment totaling ($147,000), ($396,000) and $168,000. In 2017, the Company sold its San Angelo main region branch building for $1,586,000 and recorded a gain of $210,000 and cancelled its San Angelo grocery store branch lease and recorded a write off of leasehold improvements of $360,000. In 2016, the Company sold its Weatherford and Orange main region branch building for $1,385,000 and $2,000,000 and recorded a gain of $560,000 and a loss of $31,000, respectively.
respectivel
Year ending December 31, | ||||
2019 | $ | 373,359 | ||
2020 | 42,801 | |||
2021 | 11,406 | |||
2022 | 8,066 | |||
2023 | 6,475 | |||
Thereafter | 54 | |||
|
| |||
$442,161 | ||||
|
|
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2018, 2017 and 2016
Year ending December 31, | ||||
2021 | $ | 391,638 | ||
2022 | 46,762 | |||
2023 | 17,733 | |||
2024 | 9,838 | |||
2025 | 9,429 | |||
Thereafter | 25 | |||
$ | 475,425 | |||
December 31, | ||||||||
2018 | 2017 | |||||||
Securities sold under agreements with customers to repurchase | $ | 409,631 | $ | 320,450 | ||||
Federal funds purchased | 4,075 | 10,550 | ||||||
Advances from Federal Home Loan Bank of Dallas | 55,000 | — | ||||||
|
|
|
| |||||
Total | $ | 468,706 | $ | 331,000 | ||||
|
|
|
|
December 31, | ||||||||
2020 | 2019 | |||||||
Securities sold under agreements with customers to repurchase. | $ | 412,743 | $ | 375,106 | ||||
Federal funds purchased | 17,350 | 6,250 | ||||||
Advances from Federal Home Loan Bank of Dallas | 0 | 0 | ||||||
Total | $ | 430,093 | $ | 381,356 |
At December 31, 2018, the Company had advances from the Federal Home Loan Bank of Dallas of $55,000,000 that will be repaid in 2019. The interest rate on this advance was 2.65% at December 31, 2018. There were no such advances outstanding at December 31, 2017.
2019.
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
the years ended December 31, 2018, 20172020 and 2016
2019.
Year Ended December 31 , | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Current federal income tax | $ | 28,359 | $ | 34,421 | $ | 30,381 | ||||||
Current state income tax | 92 | 99 | 99 | |||||||||
Deferred federal income tax expense (benefit) | (250 | ) | (53 | ) | 673 | |||||||
Restatement of net deferred tax liability due to change in income tax rate | (664 | ) | (7,650 | ) | — | |||||||
|
|
|
|
|
| |||||||
Income tax expense | $ | 27,537 | $ | 26,817 | $ | 31,153 | ||||||
|
|
|
|
|
|
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Current federal income tax | $ | 45,133 | $ | 33,099 | $ | 28,359 | ||||||
Current state income tax | 447 | 150 | 92 | |||||||||
Deferred federal income tax expense (benefit) | (5,249 | ) | (29 | ) | (250 | ) | ||||||
Restatement of net deferred tax liability due to change in income tax rate | — | — | (664 | ) | ||||||||
Income tax expense | $ | 40,331 | $ | 33,220 | $ | 27,537 | ||||||
As a Percent of Pretax Earnings | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Statutory federal income tax rate | 21.0 | % | 35.0 | % | 35.0 | % | ||||||
Restatement of net deferred tax liability due to change in income tax rate | (0.4 | ) | (5.3 | ) | — | |||||||
Reductions in tax rate resulting from interest income exempt from federal income tax | (5.2 | ) | (11.5 | ) | (12.1 | ) | ||||||
Effect of state income tax | 0.1 | 0.1 | 0.1 | |||||||||
ESOP tax deduction | (0.1 | ) | (0.2 | ) | (0.2 | ) | ||||||
Other | 0.1 | 0.1 | 0.1 | |||||||||
|
|
|
|
|
| |||||||
Effective income tax rate | 15.5 | % | 18.2 | % | 22.9 | % | ||||||
|
|
|
|
|
|
As a Percent of Pretax Earnings | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Statutory federal income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | ||||||
Restatement of net deferred tax liability due to change in income tax rate | — | — | (0.4 | ) | ||||||||
Reductions in tax rate resulting from interest income exempt from federal income tax | (4.6 | ) | (4.5 | ) | (5.2 | ) | ||||||
Effect of state income tax | 0.2 | 0.1 | 0.1 | |||||||||
ESOP tax deduction | (0.1 | ) | (0.1 | ) | (0.1 | ) | ||||||
Other | 0.1 | 0.3 | 0.1 | |||||||||
Effective income tax rate | 16.6 | % | 16.8 | % | 15.5 | % | ||||||
2018 | 2017 | |||||||
Deferred tax assets: | ||||||||
Tax basis of loans in excess of financial statement basis | $ | 12,010 | $ | 10,550 | ||||
Minimum liability in defined benefit plan | 352 | 766 | ||||||
Recognized for financial reporting purposes but not yet for tax purposes: | ||||||||
Deferred compensation | 2,056 | 1,818 | ||||||
Write-downs and adjustments to other real estate owned and repossessed assets | 49 | 11 | ||||||
Other deferred tax assets | 208 | 79 | ||||||
|
|
|
| |||||
Total deferred tax assets | $ | 14,675 | $ | 13,224 | ||||
|
|
|
| |||||
Deferred tax liabilities: | ||||||||
Financial statement basis of fixed assets in excess of tax basis | $ | 4,182 | 3,343 | |||||
Intangible asset amortization deductible for tax purposes, but not for financial reporting purposes | 11,263 | 9,926 | ||||||
Recognized for financial reporting purposes but not yet for tax purposes: | ||||||||
Accretion on investment securities | 745 | 1,039 | ||||||
Pension plan contributions | 816 | 1,086 | ||||||
Net unrealized gain on investment securitiesavailable-for-sale | 1,111 | 9,420 | ||||||
Other deferred tax liabilities | 34 | 31 | ||||||
|
|
|
| |||||
Total deferred tax liabilities | $ | 18,151 | $ | 24,845 | ||||
|
|
|
| |||||
Net deferred tax asset (liability) | $ | (3,476 | ) | $ | (11,621 | ) | ||
|
|
|
|
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2018, 2017 and 2016
2020 | 2019 | |||||||
Deferred tax assets: | ||||||||
Tax basis of loans in excess of financial statement basis | $ | 19,193 | $ | 12,245 | ||||
Recognized for financial reporting purposes but not yet for tax purposes: Deferred compensation | 2,479 | 2,254 | ||||||
Write-downs and adjustments to other real estate owned and repossessed assets | — | 48 | ||||||
Other deferred tax assets | 746 | 157 | ||||||
Total deferred tax assets | $ | 22,418 | $ | 14,704 | ||||
Deferred tax liabilities: | ||||||||
Financial statement basis of fixed assets in excess of tax basis | $ | 5,712 | $ | 4,651 | ||||
Intangible asset amortization deductible for tax purposes, but not for financial reporting purposes | 13,400 | 11,935 | ||||||
Recognized for financial reporting purposes but not yet for tax purposes: | ||||||||
Accretion on investment securities | 698 | 755 | ||||||
Net unrealized gain on investment securities available-for-sale | 45,295 | 17,945 | ||||||
Other deferred tax liabilities | 46 | 51 | ||||||
Total deferred tax liabilities | $ | 65,151 | $ | 35,337 | ||||
Net deferred tax asset (liability) | $ | (42,733 | ) | $ | (20,633 | ) | ||
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2018, 2017 and 2016
trades.
2018.
December 31, 2018 | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Total Fair Value | ||||||||||||
Available-for-sale investment securities: | ||||||||||||||||
U.S Treasury securities | $ | 9,962 | $ | — | $ | — | $ | 9,962 | ||||||||
Obligations of U. S. government sponsored enterprises and agencies | — | 301 | — | 301 | ||||||||||||
Obligations of state and political subdivisions | — | 1,257,871 | — | 1,257,871 | ||||||||||||
Corporate bonds | — | 450 | — | 450 | ||||||||||||
Residential mortgage-backed securities | — | 1,454,545 | — | 1,454,545 | ||||||||||||
Commercial mortgage-backed securities | — | 431,300 | — | 431,300 | ||||||||||||
Other securities | 4,348 | — | — | 4,348 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 14,310 | $ | 3,144,467 | $ | — | $ | 3,158,777 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Loansheld-for-sale | $ | — | $ | 19,185 | $ | — | $ | 19,185 | ||||||||
IRLCs | $ | — | $ | 765 | $ | — | $ | 765 | ||||||||
Forward mortgage-backed securities traded | $ | — | $ | 403 | $ | — | $ | 403 |
December 31, 2020 | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Total Fair Value | ||||||||||||
Available-for-sale | ||||||||||||||||
Obligations of state and political subdivisions | $ | — | $ | 2,426,876 | $ | — | $ | 2,426,876 | ||||||||
Residential mortgage-backed securities | — | 1,472,280 | — | 1,472,280 | ||||||||||||
Commercial mortgage-backed securities | — | 489,316 | — | 489,316 | ||||||||||||
Other securities | 4,557 | — | — | 4,557 | ||||||||||||
Total | $ | 4,557 | $ | 4,388,472 | $ | — | $ | 4,393,029 | ||||||||
Loans held-for-sale | $ | — | $ | 79,585 | $ | — | $ | 79,585 | ||||||||
IRLCs | $ | — | $ | 4,618 | $ | — | $ | 4,618 | ||||||||
Forward mortgage-backed securities traded | $ | — | $ | (1,560 | ) | $ | — | $ | (1,560 | ) |
December 31, 2019 | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Total Fair Value | ||||||||||||
Available-for-sale | ||||||||||||||||
U.S Treasury securities | $ | 10,019 | $ | — | $ | — | $ | 10,019 | ||||||||
Obligations of state and political subdivisions | — | 1,288,983 | — | 1,288,983 | ||||||||||||
Corporate bonds | — | 230 | — | 230 | ||||||||||||
Residential mortgage-backed securities | — | 1,608,863 | — | 1,608,863 | ||||||||||||
Commercial mortgage-backed securities | — | 500,744 | — | 500,744 | ||||||||||||
Other securities | 4,478 | — | — | 4,478 | ||||||||||||
Total | $ | 14,497 | $ | 3,398,820 | $ | — | $ | 3,413,317 | ||||||||
Loans held-for-sale | $ | — | $ | 23,076 | $ | — | $ | 23,076 | ||||||||
IRLCs | $ | — | $ | 886 | $ | — | $ | 886 | ||||||||
Forward mortgage-backed securities traded | $ | — | $ | (152 | ) | $ | — | $ | (152 | ) |
December 31, | ||||||||
2020 | 2019 | |||||||
Unpaid principal balance on loans held-for-sale | $ | 76,602 | $ | 22,340 | ||||
Net unrealized gains on loans held-for-sale | 2,983 | 736 | ||||||
Loans held-for-sale | $ | 79,585 | $ | 23,076 | ||||
Years ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Realized gain on sale and fees on mortgage loans* | $ | 39,378 | $ | 17,748 | $ | 14,595 | ||||||
Change in fair value on loans held-for-sale | 5,900 | 145 | 919 | |||||||||
Change in forward mortgage-backed securities trades | (1,406 | ) | 251 | (357 | ) | |||||||
Total gain on sale of mortgage loans | $ | 43,872 | $ | 18,144 | $ | 15,157 | ||||||
December 31, 2017 | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Total Fair Value | ||||||||||||
Available-for-sale investment securities: | ||||||||||||||||
Obligations of U. S. government sponsored enterprises and agencies | $ | — | $ | 60,330 | $ | — | $ | 60,330 | ||||||||
Obligations of state and political subdivisions | — | 1,420,850 | — | 1,420,850 | ||||||||||||
Corporate bonds | — | 7,031 | — | 7,031 | ||||||||||||
Residential mortgage-backed securities | — | 1,219,097 | — | 1,219,097 | ||||||||||||
Commercial mortgage-backed securities | — | 375,737 | — | 375,737 | ||||||||||||
Other securities | 4,428 | — | — | 4,428 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 4,428 | $ | 3,083,045 | $ | — | $ | 3,087,473 | ||||||||
|
|
|
|
|
|
|
| |||||||||
IRLCs | $ | — | $ | 500 | $ | — | $ | 500 |
lower of cost or market.
Impaired Loans – Impaired loans are reported at the fair value of the underlying collateral less selling costs if repayment is expected solely from the collateral. Collateral values are estimated using Level 2 inputs based on observable market data. At December 31, 2018, impaired loans with a carrying value of $13,793,000 were reduced by specific valuation reserves totaling $4,069,000 resulting in a net fair value of $9,724,000. The Company also had impaired loans of $13,741,000 with no specific valuation reserve at December 31, 2018, due to the loans carrying value generally being lower than the value of the collateral associated with the loan.
LoansHeld-for-Sale – Loansheld-for-sale are reported at the lower of cost or fair value. The Company originates conforming loans that are sold in the secondary market in which loan pricing is available. These loans are considered Level 2 of the fair value hierarchy. See note 4 related to the determination of fair value. At December 31, 2018, these loans were reported at $2,487,000 and had a fair value of $2,594,000.
Certainnon-financial assets andnon-financial liabilities measured at fair value on anon-recurring basis include other real estate owned, goodwill and other intangible assets and othernon-recurring nonrecurring basis during the yearyears ended December 31, 20182020 and 20172019 include other real estate owned which, subsequent to their initial transfer to other real estate owned from loans, were Reevaluation The following table presentsThere were no other real estate owned properties that were(dollars in thousands):
Year Ended | ||||||||
December 31, | ||||||||
2018 | 2017 | |||||||
Carrying value of other real estate owned prior tore-measurement | $ | 1,046 | $ | 1,067 | ||||
Write-downs included in gain (loss) on sale of other real estate owned | (236 | ) | (306 | ) | ||||
|
|
|
| |||||
Fair value | $ | 810 | $ | 761 | ||||
|
|
|
|
during the years ended December 31, 2020 and 2019.
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2018, 2017 and 2016
hierarch
2018 | 2017 | |||||||||||||||||
Carrying | Estimated | Carrying | Estimated | Fair Value | ||||||||||||||
Value | Fair Value | Value | Fair Value | Hierarchy | ||||||||||||||
Cash and due from banks | $ | 207,835 | $ | 207,835 | $ | 209,583 | $ | 209,583 | Level 1 | |||||||||
Interest-bearing deposits in banks | 40,812 | 40,812 | 162,764 | 162,764 | Level 1 | |||||||||||||
Interest-bearing time deposits in banks | 1,458 | 1,458 | 1,458 | 1,458 | Level 2 | |||||||||||||
Available-for-sale securities | 3,158,777 | 3,158,777 | 3,087,473 | 3,087,473 | Levels 1 and 2 | |||||||||||||
Loansheld-for-investment | 3,902,434 | 3,947,391 | 3,437,413 | 3,455,003 | Level 3 | |||||||||||||
Loansheld-for-sale | 21,672 | 21,779 | 15,130 | 15,314 | Level 2 | |||||||||||||
Accrued interest receivable | 36,765 | 36,765 | 36,081 | 36,081 | Level 2 | |||||||||||||
Deposits with stated maturities | 442,161 | 441,727 | 451,255 | 452,000 | Level 2 | |||||||||||||
Deposits with no stated maturities | 5,738,228 | 5,738,228 | 5,511,706 | 5,511,706 | Level 1 | |||||||||||||
Borrowings | 468,706 | 468,706 | 331,000 | 331,000 | Level 2 | |||||||||||||
Accrued interest payable | 408 | 408 | 197 | 197 | Level 2 | |||||||||||||
IRLCs | 765 | 765 | 500 | 500 | Level 2 | |||||||||||||
Forward mortgage-backed securities traded | 403 | 403 | — | — | Level 2 |
2020 | 2019 | |||||||||||||||||||
Carrying | Estimated | Carrying | Estimated | Fair Value | ||||||||||||||||
Value | Fair Value | Value | Fair Value | Hierarchy | ||||||||||||||||
Cash and due from banks | $ | 211,113 | $ | 211,113 | $ | 231,534 | $ | 231,534 | Level 1 | |||||||||||
Federal funds sold | — | — | 3,150 | 3,150 | Level 1 | |||||||||||||||
Interest-bearing demand deposits in banks | 517,971 | 517,971 | 47,920 | 47,920 | Level 1 | |||||||||||||||
Available-for-sale | 4,393,029 | 4,393,029 | 3,413,317 | 3,413,317 | Levels 1 and 2 | |||||||||||||||
Loans held-for-investment, | 5,104,499 | 5,109,885 | 4,142,470 | 4,157,327 | Level 3 | |||||||||||||||
Loans held-for-sale | 83,969 | 84,233 | 28,228 | 28,343 | Level 2 | |||||||||||||||
Accrued interest receivable | 53,433 | 53,433 | 36,894 | 36,894 | Level 2 | |||||||||||||||
Deposits with stated maturities | 475,542 | 477,218 | 420,013 | 421,397 | Level 2 | |||||||||||||||
Deposits with no stated maturities | 8,200,275 | 8,200,275 | 6,183,793 | 6,183,793 | Level 1 | |||||||||||||||
Borrowings | 430,093 | 430,093 | 381,356 | 381,356 | Level 2 | |||||||||||||||
Accrued interest payable | 377 | 377 | 628 | 628 | Level 2 | |||||||||||||||
IRLCs | 4,618 | 4,618 | 886 | 886 | Level 2 | |||||||||||||||
Forward mortgage-backed securities trades | (1,560 | ) | (1,560 | ) | (152 | ) | (152 | ) | Level 2 |
2018
thereafter - $78,000.
At December 31, 2020, the Company’s reserve for unfunded commitments totaled $5,486,000 which is recorded in other liabilities.
December 31, 2018 | ||||
(in thousands) | ||||
Financial instruments whose contract amounts represent credit risk: | ||||
Unfunded lines of credit | $ | 632,667 | ||
Unfunded commitments to extend credit | 301,616 | |||
Standby letters of credit | 26,641 | |||
|
| |||
Total commercial commitments | $ | 960,924 | ||
|
|
December 31, 2020 (in thousands) | ||||
Financial instruments whose contract amounts represent credit risk: | ||||
Unfunded lines of credit | $ | 871,960 | ||
Unfunded commitments to extend credit | 742,538 | |||
Standby letters of credit | 40,050 | |||
Total commercial commitments | $ | 1,654,548 | ||
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2018, 2017 and 2016
We believe we have no other
PLAN:
In December 2018 due to the rising interest rate environment, the Company determined it was in the best interest of its shareholders to settlework toward terminating its pension obligation to its retiree group in payout,obligation. The Company annuitized approximately 53% of the pension benefit obligation onat that date,time and recorded a loss on settlement totaling $1,546,000 for the year ended December 31, 2018. In 2019, the Company begancontinued to take steps to completely settle and terminate its remaining pension obligation and settlerecorded loss associated with the final termination of $2,673,000. The loss incurred included unrealized loss previously recorded in other comprehensive income and refunding to remaining obligation in its pension plan. Termination ofparticipants for funding balance overages offset by a gain on hedging instrument entered into to minimize interest rate movement during the plan is expected to be in late 2019 but is subject to regulatory approval and changes in interest rates and, therefore there is no certainty that it will be consummated.
Using an actuarial measurement date oftermination period. At December 31, 2018 and 2017, benefit obligation activity and fair value of plan assets for the years ended December 31, 2018 and 2017, and a statement of the funded status as of December 31, 2018 and 2017, are as follows (dollars in thousands):
2018 | 2017 | |||||||
Reconciliation of benefit obligations: | ||||||||
Benefit obligation at January 1 | $ | 15,531 | $ | 15,453 | ||||
Interest cost on projected benefit obligation | 523 | 635 | ||||||
Actuarial (gain) loss | (811 | ) | 486 | |||||
Benefits paid, including settlement of certain participant balances | (8,630 | ) | (1,043 | ) | ||||
|
|
|
| |||||
Benefit obligation at December 31 | $ | 6,613 | $ | 15,531 | ||||
|
|
|
| |||||
Reconciliation of fair value of plan assets: | ||||||||
Fair value of plan assets at January 1 | $ | 17,046 | $ | 15,787 | ||||
Actual return on plan assets | 365 | 2,302 | ||||||
Employer contributions | — | — | ||||||
Benefits paid, including settlement of certain participant balances | (8,630 | ) | (1,043 | ) | ||||
|
|
|
| |||||
Fair value of plan assets at December 31 | 8,781 | 17,046 | ||||||
|
|
|
| |||||
Funded status | $ | 2,168 | $ | 1,515 | ||||
|
|
|
|
Amounts recognized as a component of accumulated other comprehensive earnings as ofyear-end that have not been recognized as a component of the net period benefit cost of the Company’s defined benefit pension plan are as follows (dollars in thousands):
2018 | 2017 | |||||||
Net actuarial loss | $ | (1,717 | ) | $ | (3,597 | ) | ||
Deferred tax benefit | 393 | 1,227 | ||||||
|
|
|
| |||||
Amounts included in accumulated other comprehensive earnings, net of tax | $ | (1,324 | ) | $ | (2,370 | ) | ||
|
|
|
|
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2018, 2017 and 2016
Net periodic benefit cost for the years ended December 31, 2018, 2017 and 2016, are as follows (dollars in thousands):
Year Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Service cost—benefits earned during the period | $ | — | $ | — | $ | — | ||||||
Interest cost on projected benefit obligation | 523 | 635 | 665 | |||||||||
Expected return on plan assets | (1,028 | ) | (974 | ) | (912 | ) | ||||||
Amortization of unrecognized net loss | 186 | 249 | 375 | |||||||||
Recognized loss on partial settlement of certain participant balances | 1,546 | — | 267 | |||||||||
|
|
|
|
|
| |||||||
Net periodic pension benefit expense (benefit) | $ | 1,227 | $ | (90 | ) | $ | 395 | |||||
|
|
|
|
|
|
The following table sets forth the rates used in the actuarial calculations of the present value of benefit obligations and net periodic pension cost and the rate of return on plan assets:
2018 | 2017 | 2016 | ||||||||||
Weighted average discount rate | 4.25 | % | 3.50 | % | 4.25 | % | ||||||
Expected long-term rate of return on assets | 6.25 | % | 6.25 | % | 6.25 | % |
The weighted average discount rate is estimated based on setting a discount rate to establish an obligation for pension benefits equivalent to an amount that, if invested in high quality fixed income securities, would produce a return that matches the expected benefit payment stream. The expected long-term rate of return on plan assets is based on historical returns and expectations of future returns based on asset mix, after consultation with our investment advisors and actuaries.
The major type of plan assets2019, all balances in the pension plan were zero and the targeted allocation percentage as of December 31, 2018 and 2017 is as follows:
December 31, 2018 Allocation | December 31, 2017 Allocation | Targeted Allocation | ||||||||||
Equity securities | 72 | % | 75 | % | 75 | % | ||||||
Debt securities | 27 | % | 24 | % | 25 | % | ||||||
Cash and equivalents | 1 | % | 1 | % | — |
The range and weighted average final maturities of debt securities held in the pension plan as of December 31, 2018 are 2.54 to 18.76 years and approximately 6.91 years, respectively. Assets held in the pension plan are considered either Level 1 consisting of the money market funds, publicly traded common stocks and publically traded mutual funds or Level 2 consisting of obligations of state and political subdivisions, corporate bonds and mortgage-backed securities. There were no Level 3 securities. See note 10 for a discussion of the fair value hierarchy. The breakdown by level is as follows (dollars in thousands):
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2018, 2017 and 2016
Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Total Fair Value | |||||||||||||
Money market fund | $ | 87 | $ | — | $ | — | $ | 87 | ||||||||
Obligations of state and political subdivisions | — | 208 | — | 208 | ||||||||||||
Corporate bonds | — | 449 | — | 449 | ||||||||||||
Mortgage-backed securities | — | 901 | — | 901 | ||||||||||||
Corporate stocks and mutual funds | 7,136 | — | — | 7,136 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 7,223 | $ | 1,558 | $ | — | $ | 8,781 | ||||||||
|
|
|
|
|
|
|
|
First Financial Trust & Asset Management Company, National Association, a wholly owned subsidiary of the Company, manages the pension plan assets as well as the profit sharing plan assets (see below). The investment strategy and targeted allocations are based on similar strategies First Financial Trust & Asset Management Company, National Association employs for most of its managed accounts whereby appropriate diversification is achieved. First Financial Trust & Asset Management Company, National Association is prohibited from holding investments deemed to be high risk by the Office of the Comptroller of the Currency.
An estimate of the undiscounted projected future payments to eligible participants for the next five years and the following five years in the aggregate is as follows (dollars in thousands):
Year Ending December 31, | ||||
2019 | $ | 837 | ||
2020 | $ | 318 | ||
2021 | $ | 388 | ||
2022 | $ | 398 | ||
2023 | $ | 333 | ||
2024 forward | $ | 2,339 |
As of December 31, 2018 and 2017, the pension plan’s total assets included First Financial Bankshares, Inc. common stock valued at approximately $3,373,000 and $2,776,000, respectively.
15.DIVIDENDS FROM SUBSIDIARIES:
As of December 31, 2020 and 2019, the rabbi trust held 938,591 and 927,408 shares, respectively, in trust for the Company’s directors
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2018, 2017 and 2016
16.17.
Actual | Minimum Capital Required Under Basel IIIPhase-In | Minimum Capital Required-Basel III FullyPhased-In | Required to be Considered Well- Capitalized | |||||||||||||||||||||||||||||
As of December 31, 2018: | Amount | Ratio | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||
Total Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||||||||||
Consolidated | $ | 940,026 | 20.61 | % | $ | 450,459 | 9.875 | % | $ | 478,969 | 10.50 | % | — | N/A | ||||||||||||||||||
First Financial Bank, N.A | $ | 824,428 | 18.12 | % | $ | 449,350 | 9.875 | % | $ | 477,790 | 10.50 | % | $ | 455,038 | 10.00 | % | ||||||||||||||||
Tier 1 Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||||||||||
Consolidated | $ | 888,015 | 19.47 | % | $ | 359,226 | 7.875 | % | $ | 387,737 | 8.50 | % | — | N/A | ||||||||||||||||||
First Financial Bank, N.A | $ | 772,417 | 16.97 | % | $ | 358,342 | 7.875 | % | $ | 386,782 | 8.50 | % | $ | 364,030 | 8.00 | % | ||||||||||||||||
Common Equity Tier 1 Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||||||||||
Consolidated | $ | 888,015 | 19.47 | % | $ | 290,802 | 6.375 | % | $ | 319,312 | 7.00 | % | — | N/A | ||||||||||||||||||
First Financial Bank, N.A | $ | 772,417 | 16.97 | % | $ | 290,087 | 6.375 | % | $ | 318,526 | 7.00 | % | $ | 295,775 | 6.50 | % | ||||||||||||||||
Leverage Ratio: | ||||||||||||||||||||||||||||||||
Consolidated | $ | 888,015 | 11.85 | % | $ | 299,682 | 4.00 | % | $ | 299,682 | 4.00 | % | — | N/A | ||||||||||||||||||
First Financial Bank, N.A | $ | 772,417 | 10.35 | % | $ | 298,576 | 4.00 | % | $ | 298,576 | 4.00 | % | $ | 373,220 | 5.00 | % |
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2018, 2017 and 2016
Actual | Minimum Capital Required Under Basel IIIPhase-In | Minimum Capital Required-Basel III FullyPhased-In | Required to be Considered Well- Capitalized | |||||||||||||||||||||||||||||
As of December 31, 2017: | Amount | Ratio | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||
Total Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||||||||||
Consolidated | $ | 814,634 | 19.85 | % | $ | 379,578 | 9.250 | % | $ | 430,872 | 10.50 | % | — | N/A | ||||||||||||||||||
First Financial Bank, N.A | $ | 723,563 | 17.68 | % | $ | 378,614 | 9.250 | % | $ | 429,777 | 10.50 | % | $ | 409,312 | 10.00 | % | ||||||||||||||||
Tier 1 Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||||||||||
Consolidated | $ | 765,882 | 18.66 | % | $ | 297,507 | 7.250 | % | $ | 348,801 | 8.50 | % | — | N/A | ||||||||||||||||||
First Financial Bank, N.A | $ | 674,811 | 16.49 | % | $ | 296,751 | 7.250 | % | $ | 347,915 | 8.50 | % | $ | 327,450 | 8.00 | % | ||||||||||||||||
Common Equity Tier 1 Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||||||||||
Consolidated | $ | 765,882 | 18.66 | % | $ | 235,954 | 5.750 | % | $ | 287,248 | 7.00 | % | — | N/A | ||||||||||||||||||
First Financial Bank, N.A | $ | 674,811 | 16.49 | % | $ | 235,354 | 5.750 | % | $ | 286,518 | 7.00 | % | $ | 266,053 | 6.50 | % | ||||||||||||||||
Leverage Ratio: | ||||||||||||||||||||||||||||||||
Consolidated | $ | 765,882 | 11.09 | % | $ | 276,296 | 4.000 | % | $ | 276,296 | 4.00 | % | — | N/A | ||||||||||||||||||
First Financial Bank, N.A | $ | 674,811 | 9.80 | % | $ | 275,320 | 4.000 | % | $ | 275,320 | 4.00 | % | $ | 344,151 | 5.00 | % |
We have performed a preliminary assessment using the regulatory capital estimation tool made available by the OCC and believe the Company and Bank are prepared to meet the new requirements upon full adoption of Basel III that will be effective in 2019.
Actual | Minimum Capital Required-Basel III Fully Phased-In* | Required to be Considered Well- Capitalized | ||||||||||||||||||||||
As of December 31, 2020: | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||
Total Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||
Consolidated | $ | 1,273,749 | 22.03 | % | $ | 607,038 | 10.50 | % | $ | 578,131 | 10.00 | % | ||||||||||||
First Financial Bank, N.A | $ | 1,123,275 | 19.47 | % | $ | 605,830 | 10.50 | % | $ | 576,981 | 10.00 | % | ||||||||||||
Tier 1 Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||
Consolidated | $ | 1,201,729 | 20.79 | % | $ | 491,412 | 8.50 | % | $ | 346,879 | 6.00 | % | ||||||||||||
First Financial Bank, N.A | $ | 1,051,255 | 18.22 | % | $ | 490,434 | 8.50 | % | $ | 461,585 | 8.00 | % | ||||||||||||
Common Equity Tier 1 Capital | ||||||||||||||||||||||||
Consolidated | $ | 1,201,729 | 20.79 | % | $ | 404,692 | 7.00 | % | — | N/A | ||||||||||||||
First Financial Bank, N.A | $ | 1,051,255 | 18.22 | % | $ | 403,887 | 7.00 | % | $ | 375,038 | 6.50 | % | ||||||||||||
Leverage Ratio: | ||||||||||||||||||||||||
Consolidated | $ | 1,201,729 | 11.86 | % | $ | 405,268 | 4.00 | % | — | N/A | ||||||||||||||
First Financial Bank, N.A | $ | 1,051,255 | 10.41 | % | $ | 404,002 | 4.00 | % | $ | 505,002 | 5.00 | % |
*At | December 31, 2020 the Capital Conservative Buffer Basel III has been fully phased-in. |
Actual | Minimum Capital Required-Basel III Fully Phased-In* | Required to be Considered Well- Capitalized | ||||||||||||||||||||||
As of December 31, 2019: | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||
Total Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||
Consolidated | $ | 1,051,029 | 21.13 | % | $ | 522,275 | 10.50 | % | $ | 497,405 | 10.00 | % | ||||||||||||
First Financial Bank, N.A | $ | 908,778 | 18.31 | % | $ | 521,081 | 10.50 | % | $ | 496,268 | 10.00 | % | ||||||||||||
Tier 1 Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||
Consolidated | $ | 997,721 | 20.06 | % | $ | 422,794 | 8.50 | % | $ | 298,443 | 6.00 | % | ||||||||||||
First Financial Bank, N.A | $ | 855,470 | 17.24 | % | $ | 421,828 | 8.50 | % | $ | 397,014 | 8.00 | % | ||||||||||||
Common Equity Tier 1 Capital | ||||||||||||||||||||||||
Consolidated | $ | 997,721 | 20.06 | % | $ | 348,184 | 7.00 | % | — | N/A | ||||||||||||||
First Financial Bank, N.A | $ | 855,470 | 17.24 | % | $ | 347,388 | 7.00 | % | $ | 322,574 | 6.50 | % | ||||||||||||
Leverage Ratio: | ||||||||||||||||||||||||
Consolidated | $ | 997,721 | 12.60 | % | $ | 316,850 | 4.00 | % | — | N/A | ||||||||||||||
First Financial Bank, N.A | $ | 855,470 | 10.84 | % | $ | 315,570 | 4.00 | % | $ | 394,463 | 5.00 | % |
$33,513,000.
17.balance required was
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2018, 2017 and 2016
Shares | Weighted- Average Ex. Price | Weighted- Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value ($000) | |||||||||||||
Outstanding, beginning of year | 1,325,965 | $ | 33.01 | |||||||||||||
Granted | — | — | ||||||||||||||
Exercised | (173,822 | ) | 22.23 | |||||||||||||
Cancelled | (66,600 | ) | 36.25 | |||||||||||||
|
|
|
| |||||||||||||
Outstanding, end of year | 1,085,543 | 34.54 | 6.55 | $ | 25,135 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Exercisable at end of year | 407,463 | $ | 27.41 | 4.65 | $ | 12,337 | ||||||||||
|
|
|
|
|
|
|
|
Shares | Weighted- Average Ex. Price | Weighted- Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value ($000) | |||||||||||||
Outstanding, beginning of year | 2,138,196 | $ | 20.12 | |||||||||||||
Granted | 11,250 | 34.55 | ||||||||||||||
Exercised | (294,645 | ) | 15.96 | |||||||||||||
Cancelled | (21,744 | ) | 22.04 | |||||||||||||
Outstanding, end of year | 1,833,057 | 20.85 | 5.81 | $ | 28,098 | |||||||||||
Exercisable at end of year | 892,957 | $ | 17.20 | 4.46 | $ | 16,936 | ||||||||||
split
Exercise Price | Number Outstanding | Remaining Contracted Life (Years) | Number Vested | |||||||||||
$ | 16.78 | 29,823 | 0.4 | 29,823 | ||||||||||
15.73 | 90,265 | 2.8 | 90,265 | |||||||||||
30.85 | 211,355 | 4.8 | 161,135 | |||||||||||
33.89 | 341,250 | 6.8 | 126,240 | |||||||||||
$ | 42.35 | 412,850 | 8.5 | — |
2020:
Exercise Price | Number Outstanding | Remaining Contracted Life (Years) | Number Vested | |||||||||||
$ | 7.87 | 42,020 | 0.8 | 42,020 | ||||||||||
$ | 15.43 | 258,507 | 2.8 | 258,507 | ||||||||||
$ | 16.95 | 477,294 | 4.8 | 355,654 | ||||||||||
$ | 21.18 | 656,736 | 6.4 | 236,776 | ||||||||||
$ | 29.70 | 388,050 | 8.5 | — | ||||||||||
$ | 34.55 | 11,250 | 9.1 | — |
The aggregate intrinsic value$888,000.
On July 21, 2015, uponre-election of existing directors, 7,070 shares with a
For the year ended | For the year ended | For the year ended | ||||||||||||||||||||||
2020 | 2019 | 2018 | ||||||||||||||||||||||
Restricted Stock Outstanding | Weighted Average Grant Date Fair Value | Restricted Stock Outstanding | Weighted Average Grant Date Fair Value | Restricted Stock Outstanding | Weighted Average Grant Date Fair Value | |||||||||||||||||||
Balance at beginning of period | 105,309 | $ | 29.93 | 97,192 | $ | 25.45 | 94,679 | $ | 20.12 | |||||||||||||||
Grants | 56,480 | 29.22 | 67,331 | 31.80 | 73,470 | 26.95 | ||||||||||||||||||
Vesting | (65,662 | ) | 29.39 | (57,406 | ) | 31.49 | (65,411 | ) | 25.79 | |||||||||||||||
Forfeited/expired | (239 | ) | 29.70 | (1,808 | ) | 27.67 | (5,546 | ) | 22.85 | |||||||||||||||
Balance at end of period | 95,888 | $ | 29.89 | 105,309 | $ | 29.93 | 97,192 | $ | 25.45 |
ASSETS | 2020 | 2019 | ||||||
Cash in subsidiary bank (1) | $ | 67,904 | $ | 44,422 | ||||
Cash in unaffiliated banks (1) | 2 | 2 | ||||||
Interest-bearing deposits in subsidiary bank (1) | 68,760 | 80,652 | ||||||
Total cash and cash equivalents | 136,666 | 125,076 | ||||||
Securities available-for-sale, | 2,610 | 6,297 | ||||||
Investment in and advances to subsidiaries, at equity (1) | 1,558,851 | 1,111,955 | ||||||
Intangible assets | 723 | 723 | ||||||
Other assets | 2,982 | 2,701 | ||||||
Total assets | $ | 1,701,832 | $ | 1,246,752 | ||||
On October 27, 2015, the Company granted 31,273 shares with a total value of $1,060,000 to certain officers that is being expensed over the vesting period of three years. On October 25, 2016, the Company granted 15,405 shares with a total value of $560,000 to certain officers that is being expensed over the vesting period of three years. On October 24, 2017, the Company granted 14,191 restricted shares with a total value of $655,000 to certain officers that is being expensed over the vesting period of one to three years. On October 23, 2018 the Company granted 26,021 restricted shares with a total value of $1,440,000 to certain officers that will be expensed over a three year vesting period. The Company recorded restricted stock expense for officers of $680,000, $562,000 and $381,000, respectively, for the year ended December 31, 2018, 2017 and 2016.
18.CONDENSED FINANCIAL INFORMATION—PARENT COMPANY:
Condensed Balance Sheets-December 31, 2018 and 2017
2018 | 2017 | |||||||
ASSETS | ||||||||
Cash in subsidiary bank | $ | 16,981 | $ | 14,272 | ||||
Cash in unaffiliated banks | 2 | 2 | ||||||
Interest-bearing deposits in subsidiary bank | 84,279 | 64,195 | ||||||
|
|
|
| |||||
Total cash and cash equivalents | 101,262 | 78,469 | ||||||
Securitiesavailable-for-sale, at fair value | 6,276 | 8,515 | ||||||
Investment in and advances to subsidiaries, at equity | 959,352 | 847,445 | ||||||
Intangible assets | 723 | 723 | ||||||
Other assets | 2,647 | 2,654 | ||||||
|
|
|
| |||||
Total assets | $ | 1,070,260 | $ | 937,806 | ||||
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|
| |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Total liabilities | $ | 16,965 | $ | 15,038 | ||||
Shareholders’ equity: | ||||||||
Common stock | 678 | 663 | ||||||
Capital surplus | 443,114 | 378,062 | ||||||
Retained earnings | 606,658 | 517,257 | ||||||
Treasury stock | (7,507 | ) | (7,148 | ) | ||||
Deferred compensation | 7,507 | 7,148 | ||||||
Accumulated other comprehensive earnings | 2,845 | 26,786 | ||||||
|
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|
| |||||
Total shareholders’ equity | 1,053,295 | 922,768 | ||||||
|
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|
| |||||
Total liabilities and shareholders’ equity | $ | 1,070,260 | $ | 937,806 | ||||
|
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|
|
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2018, 2017 and 2016
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Total liabilities | $ | 23,642 | $ | 19,555 | ||||
Shareholders’ equity: | ||||||||
Common stock | 1,422 | 1,359 | ||||||
Capital surplus | 669,644 | 450,676 | ||||||
Retained earnings | 836,729 | 707,656 | ||||||
Treasury stock | (9,126 | ) | (8,222 | ) | ||||
Deferred compensation | 9,126 | 8,222 | ||||||
Accumulated other comprehensive earnings | 170,395 | 67,506 | ||||||
Total shareholders’ equity | 1,678,190 | 1,227,197 | ||||||
Total liabilities and shareholders’ equity | $ | 1,701,832 | $ | 1,246,752 | ||||
(1) | Eliminates in consolidation. |
2018 | 2017 | 2016 | ||||||||||
Income: | ||||||||||||
Cash dividends from subsidiaries | $ | 74,100 | $ | 30,800 | $ | 48,800 | ||||||
Excess of earnings over dividends of subsidiaries | 82,323 | 92,929 | 58,809 | |||||||||
Other | 7,269 | 6,590 | 4,184 | |||||||||
|
|
|
|
|
| |||||||
Total income | 163,692 | 130,319 | 111,793 | |||||||||
|
|
|
|
|
| |||||||
Expenses: | ||||||||||||
Salaries and employee benefits | 9,966 | 8,606 | 5,655 | |||||||||
Other operating expenses | 4,781 | 3,871 | 3,531 | |||||||||
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|
|
|
| |||||||
Total expense | 14,747 | 12,477 | 9,186 | |||||||||
|
|
|
|
|
| |||||||
Earnings before income taxes | 148,945 | 117,842 | 102,607 | |||||||||
Income tax benefit | 1,693 | 2,529 | 2,167 | |||||||||
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|
|
|
| |||||||
Net earnings | $ | 150,638 | $ | 120,371 | $ | 104,774 | ||||||
|
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|
|
2020 | 2019 | 2018 | ||||||||||
Income: | ||||||||||||
Cash dividends from subsidiaries (1) | $ | 87,500 | $ | 84,500 | $ | 74,100 | ||||||
Excess of earnings over dividends of subsidiaries (1) | 122,997 | 86,956 | 82,323 | |||||||||
Other | 8,368 | 7,937 | 7,269 | |||||||||
Total income | 218,865 | 179,393 | 163,692 | |||||||||
Expenses: | ||||||||||||
Salaries and employee benefits | 13,795 | 11,963 | 9,966 | |||||||||
Other operating expenses | 5,599 | 4,756 | 4,781 | |||||||||
Total expense | 19,394 | 16,719 | 14,747 | |||||||||
Earnings before income taxes | 199,471 | 162,674 | 148,945 | |||||||||
Income tax benefit | 2,563 | 2,138 | 1,693 | |||||||||
Net earnings | $ | 202,034 | $ | 164,812 | $ | 150,638 | ||||||
(1) | Eliminates in consolidation. |
2018
2018 | 2017 | 2016 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net earnings | $ | 150,638 | $ | 120,371 | $ | 104,774 | ||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||
Excess of earnings over dividends of subsidiary bank | (82,323 | ) | (92,929 | ) | (58,809 | ) | ||||||
Depreciation and amortization, net | 331 | 207 | 208 | |||||||||
Decrease (increase) in other assets | 560 | 438 | 1,702 | |||||||||
Increase (decrease) in other liabilities | 1,932 | 183 | (1,374 | ) | ||||||||
Other | (2 | ) | 2 | 8 | ||||||||
|
|
|
|
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| |||||||
Net cash provided by operating activities | 71,136 | 28,272 | 46,509 | |||||||||
|
|
|
|
|
| |||||||
Cash flows from investing activities: | ||||||||||||
Cash received in connection with acquisition of banks | — | — | — | |||||||||
Maturity ofavailable-for-sale security | 2,000 | 2,997 | — | |||||||||
Purchases of bank premises and equipment and software | (346 | ) | (30 | ) | (94 | ) | ||||||
Other | — | — | 10 | |||||||||
|
|
|
|
|
| |||||||
Net cash provided by (used in) investing activities | 1,654 | 2,967 | (84 | ) | ||||||||
|
|
|
|
|
| |||||||
Cash flows from financing activities: | ||||||||||||
Proceeds of stock issuances | 3,864 | 2,934 | 1,260 | |||||||||
Cash dividends paid | (53,861 | ) | (48,955 | ) | (44,907 | ) | ||||||
|
|
|
|
|
| |||||||
Net cash used in financing activities | (49,997 | ) | (46,021 | ) | (43,647 | ) | ||||||
|
|
|
|
|
| |||||||
Net increase (decrease) in cash and cash equivalents | 22,793 | (14,782 | ) | 2,778 | ||||||||
Cash and cash equivalents, beginning of year | 78,469 | 93,251 | 90,473 | |||||||||
|
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|
| |||||||
Cash and cash equivalents, end of year | $ | 101,262 | $ | 78,469 | $ | 93,251 | ||||||
|
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|
|
|
2020 | 2019 | 2018 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net earnings | $ | 202,034 | $ | 164,812 | $ | 150,638 | ||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||
Excess of earnings over dividends of subsidiary bank | (122,997 | ) | (86,956 | ) | (82,323 | ) | ||||||
Depreciation and amortization, net | 198 | 246 | 331 | |||||||||
Gain on sale of assets, net | (38 | ) | — | — | ||||||||
Decrease (increase) in other assets | 164 | 1,508 | 560 | |||||||||
Increase (decrease) in other liabilities | 2,083 | 990 | 1,932 | |||||||||
Other | 35 | — | (2 | ) | ||||||||
81,479 | 80,600 | 71,136 | ||||||||||
Cash flows from investing activities: | ||||||||||||
Maturity of available-for-sale | 3,720 | — | 2,000 | |||||||||
Purchases of bank premises and equipment and software | — | (24 | ) | (346 | ) | |||||||
Net cash provided by (used in) investing activities | 3,720 | (24 | ) | 1,654 | ||||||||
Cash flows from financing activities: | ||||||||||||
Proceeds of stock issuances | 4,717 | 4,294 | 3,864 | |||||||||
Cash dividends paid | (70,318 | ) | (61,056 | ) | (53,861 | ) | ||||||
Repurchase of stock | (8,008 | ) | — | — | ||||||||
Net cash used in financing activities | (73,609 | ) | (56,762 | ) | (49,997 | ) | ||||||
Net increase in cash and cash equivalents | 11,590 | 23,814 | 22,793 | |||||||||
Cash and cash equivalents, beginning of year | 125,076 | 101,262 | 78,469 | |||||||||
Cash and cash equivalents, end of year | $ | 136,666 | $ | 125,076 | $ | 101,262 | ||||||
19.CASH FLOW INFORMATION:
2018
20. | CASH FLOW INFORMATION: |
Year Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Supplemental cash flow information: | ||||||||||||
Interest paid | $ | 18,709 | $ | 9,316 | $ | 5,465 | ||||||
Federal income taxes paid | 26,578 | 29,695 | 28,348 | |||||||||
Schedule of noncash investing and financing activities: | ||||||||||||
Assets acquired through foreclosure | 126 | 2,211 | 2,269 | |||||||||
Investment securities purchased but not settled | — | — | 12,381 | |||||||||
Restricted stock grant to officers and directors | 1,609 | 1,139 | 810 |
20.ACQUISITION
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Supplemental cash flow information: | ||||||||||||
Interest paid | $ | 14,494 | $ | 29,882 | $ | 18,709 | ||||||
Federal income taxes paid | 44,381 | 30,726 | 26,578 | |||||||||
Schedule of noncash investing and financing activities: | ||||||||||||
Assets acquired through foreclosure | 164 | 1,463 | 126 | |||||||||
Investment securities purchased but not settled | 14,641 | — | — | |||||||||
Restricted stock granted to officers and directors | 672 | 1,782 | 1,609 | |||||||||
Stock issued in acquisition of TB&T Bancshares, Inc. | 220,273 | — | — | |||||||||
Stock issued in acquisition of Commercial Bancshares, Inc. | — | — | 58,087 |
21. | ACQUISITIONS |
2018
Fair value of consideration paid: | ||||
Common stock issued (1,289,371 shares) | $ | 58,087 | ||
Fair value of identifiable assets acquired: | ||||
Cash and cash equivalents | 18,653 | |||
Securities available-for-sale | 64,501 | |||
Loans | 266,327 | |||
Identifiable intangible assets | 3,167 | |||
Other assets | 15,375 | |||
Total identifiable assets acquired | 368,023 | |||
Fair value of liabilities assumed: | ||||
Deposits | 341,902 | |||
Other liabilities | (373 | ) | ||
Total liabilities assumed | 341,529 | |||
Fair value of net identifiable assets acquired | 26,494 | |||
Goodwill resulting from acquisition | $ | 31,593 | ||
F-43
Fair value of consideration paid: | ||||
Common stock issued (6,275,574 shares) | $ | 220,273 | ||
Fair value of identifiable assets acquired: | ||||
Cash and cash equivalents | $ | 61,028 | ||
Securities available-for-sale | 93,967 | |||
Loans | 447,702 | |||
Identifiable intangible assets | 4,798 | |||
Other assets | 25,377 | |||
Total identifiable assets acquired | $ | 632,872 | ||
Fair value of liabilities assumed: | ||||
Deposits | $ | 549,125 | ||
Other liabilities | 5,397 | |||
Total liabilities assumed | $ | 554,522 | ||
Fair value of net identifiable assets acquired | 78,350 | |||
Goodwill resulting from acquisition | $ | 141,923 | ||