SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
First Financial Bankshares, Inc.
(Name of Registrant As Specified in its Charter)
______________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:_____________
(2) Aggregate number of securities to which transaction applies:________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined): $_____________________________
(4) Proposed maximum aggregate value of transaction: $__________________________
(5) Total fee paid: $__________________________
[ ] Fee paid previously with preliminary materials: $__________________________
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid: $_____________________
(2) Form, Schedule or Registration Statement No.:_________________
(3) Filing Party:_______________________________
(4) Date Filed:_____________________________
FIRST FINANCIAL BANKSHARES, INC.
400 Pine Street
Abilene, Texas 79601
(915) 627-7155
NOTICE OF THE 2001 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 24, 2001
To our shareholders:
We cordially invite you to attend the annual meeting of our shareholders,
which will be held in the Abilene Civic Center, 1100 North 6th Street, Abilene,
Texas, at 10:30 a.m., Abilene time, on Tuesday, April 24, 2001, for the
following purposes:
(1) To elect 15 directors;
(2) To approve the appointment of Arthur Andersen LLP as our independent
accountants for the year ending December 31, 2001; and
(3) To act on such other business as may properly come before the annual
meeting, or any adjournment thereof. Your board of directors is not
aware of any other business to come before the meeting.
Only shareholders of record at the close of business on March 16, 2001, are
entitled to notice of and to vote at the annual meeting or any continuation of
the meeting if it is adjourned.
We have included, along with this notice and proxy statement, our 2000
annual report, which describes our activities during 2000 and contains our
financial statements for the year ended December 31, 2000. The annual report
does not form any part of the material for solicitation of proxies.
We hope that you will be present at the annual meeting and the luncheon to
be held immediately afterward. We respectfully urge you, whether or not you plan
to attend the annual meeting, to sign, date and mail the enclosed proxy card in
the envelope provided in order to eliminate any question of your vote being
counted. You can revoke your proxy in writing at any time before the annual
meeting, so long as your written request is received by our Corporate Secretary
before your proxy is voted. Alternatively, if you submitted a proxy and attend
the annual meeting in person, you may revoke the proxy and vote in person on all
matters submitted at the annual meeting.
By order of the Board of Directors,
KENNETH T. MURPHY, Chairman
March 30, 2001
FIRST FINANCIAL BANKSHARES, INC.
400 Pine Street
Abilene, Texas 79601
(915) 627-7155
PROXY STATEMENT
2001 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 24, 2001
INTRODUCTION
Your board of directors hereby solicits your proxy for use at the 2001
annual meeting of our shareholders and any continuation of this meeting if it is
adjourned. The annual meeting will be held in the Abilene Civic Center, 1100
North 6th Street, Abilene, Texas, at 10:30 a.m., Abilene time, on Tuesday, April
24, 2001.
Our principal executive office is located at 400 Pine Street, Abilene,
Texas 79601. Our telephone number is (915) 627-7155.
We mailed this proxy statement and the accompanying proxy card on March 30,
2001. The date of this proxy statement is March 30, 2001.
VOTING OF SECURITIES
Record Date
Your board of directors has established the close of business on March 16,
2001, as the record date for determining the shareholders entitled to notice of,
and to vote at, the annual meeting. On the record date, we had 9,852,192 shares
of our common stock outstanding.
Quorum
In order for any business to be conducted at the annual meeting, a quorum
consisting of shareholders having voting rights with respect to a majority of
our outstanding common stock on the record date must be present in person or by
proxy. Shares that are represented at the annual meeting but abstain from voting
on any or all matters and shares that are "broker non-votes" will be counted in
determining whether a quorum is present at our annual meeting. A "broker
non-vote" occurs when a broker or nominee votes on some matters on the proxy
card but not others because he does not have authority to do so.
Required Vote
To elect a nominee for director, the affirmative vote of a majority of
shares entitled to vote at the annual meeting is required. Therefore, if you
abstain from voting or withhold authority to vote in the election of a director,
your abstention or withholding will have the effect of a negative vote with
respect to such election because the election requires the affirmative vote of a
majority of shares entitled to vote. To approve the appointment by your board of
directors of Arthur Andersen LLP as our independent accountants for the year
ended December 31, 2001, the affirmative vote of a majority of votes cast with
respect to this appointment is required. Abstentions will be included in
determining the number of votes cast. Therefore, if you return your proxy card
and expressly abstain from voting on this proposal, your abstention will have
the effect of a negative vote with respect to this proposal because this
proposal requires the affirmative vote of a majority of votes cast with respect
to this proposal. Broker non-votes will be treated as present with respect to
each applicable proposal. But, because broker non-votes are not votes cast for,
against, or as expressly abstained, they will have no effect on the outcome of
any proposal.
1
Shareholder List
A list of shareholders entitled to vote at the annual meeting, which will
be arranged in alphabetical order and which will show each shareholder's address
and the number of shares registered in his or her name, will be open to any
shareholder to examine for any purpose related to the annual meeting. Any
shareholder may examine this list during ordinary business hours commencing
March 30, 2001, and continuing through the date of the annual meeting at our
principal office, 400 Pine Street, Abilene, Texas 79601.
SOLICITATION AND REVOCABILITY OF PROXIES
Solicitation
We will bear the expense to solicit proxies, which will include
reimbursement of expenses incurred by brokerage firms and other custodians,
nominees and fiduciaries to forward solicitation materials regarding the annual
meeting to beneficial owners. Our officers may further solicit proxies from
shareholders and other persons by telephone or oral communication. We will not
pay these officers any extra compensation for participating in this
solicitation.
Proxies and Revocation
Each executed and returned proxy card will be voted according to the
directions indicated on that proxy card. If no direction is indicated, the proxy
will be voted according to the board of directors' recommendations, which are
contained in this proxy statement. Your board of directors does not intend to
present, and has no information that others will present, any business at the
annual meeting that requires a vote on any other matter. If any other matter
requiring a vote properly comes before the annual meeting, the proxies will be
voted in the discretion of the proxyholders named on the proxy.
Each shareholder giving a proxy has the power to revoke it at any time
before the shares of our common stock it represents are voted. This revocation
is effective upon receipt, at any time before the annual meeting is called to
order, by our Corporate Secretary of either (i) an instrument revoking the proxy
or (ii) a duly executed proxy bearing a later date than the preceding proxy.
Additionally, a shareholder may change or revoke a previously executed proxy by
voting in person at the annual meeting.
2
PROPOSAL 1
ELECTION OF DIRECTORS
General
Your board of directors currently consists of 15 directors. At the annual
meeting, 15 directors are to be elected, each for a term of one year. Under our
bylaws, an individual may not stand for election or reelection as a director
upon attaining 72 years of age, unless he owns at least 1% of the outstanding
shares of our common stock and is less than 75 years of age. While our bylaws
fix the number of directors at a number not less than three nor more than 30,
the board of directors has fixed the number of directors at 15. Although we do
not contemplate that any of the nominees will be unable to serve, if such a
situation arises before the annual meeting, the proxies will be voted to elect
any substitute nominee or nominees designated by your board of directors.
Nominees
The names and principal occupations of the nominees, together with the
length of service as a director and the number of shares of our common stock
beneficially owned by each of them on March 8, 2001, are as follows:
Shares of
Years as Bankshares Percent
Director Principal Occupation Beneficially of Shares
Name Age (1) During Last Five Years Owned Outstanding
- ---- --- --- ---------------------- ----- -----------
Joseph E. Canon 59 5 Executive Director, 5,591 0.06
Dodge Jones Foundation
Mac A. Coalson 61 5 Real Estate and Ranching 106,071 1.08
David Copeland 45 3 President, Shelton Family 5,121 0.05
Foundation
F. Scott Dueser 48 10 President and Chief Executive 85,019 0.86
Officer, First National
Bank of Abilene*
Derrell E. Johnson 61 1 Senior Vice President, Kimley- 18,526 0.19
Horn and Associates, Inc.
Kade L. Matthews 43 3 Ranching and Investments 77,626 0.79
Raymond A. McDaniel, Jr. 67 9 Investments 42,226 0.43
Bynum Miers 64 9 Ranching 23,122 0.23
Kenneth T. Murphy 63 30 See "Executive Officers" on 123,626 1.25
page 4
Dian Graves Stai 61 8 Investments 34,845 0.35
James M. Parker 70 29 President, Parker Properties, 356,876 3.62
Inc.
Jack D. Ramsey, M.D. 70 4 Physician 78,997 0.80
Craig Smith 59 11 Chairman, President and Chief 54,212(2) 0.55
Executive Officer, Hereford
State Bank*
F. L. Stephens 63 3 Retired Chairman and Chief 16,000 0.16
Executive Officer, Town &
Country Food Stores, Inc.
3
Walter F. Worthington 74 5 Investments 185,426 1.88
Shares beneficially owned by all executive officers and directors** 1,226,228 12.44
<FN>
*A bank subsidiary.
**See "Security Ownership of Certain Beneficial Owners and Management."
(1) The years indicated are the approximate number of years each person has
continuously served as a director, or, prior thereto, of First National
Bank of Abilene, which became our wholly-owned subsidiary in April
1973, when all the then directors of First National Bank of Abilene
became our directors.
(2) Includes 344 shares of our common stock issuable upon exercise of
options presently exercisable or exercisable within 60 days of
March 8, 2001.
</FN>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE ELECTION OF EACH OF THESE NOMINEES.
Executive Officers
Set forth below are our executive officers, and the shares of our common
stock beneficially owned by each of them as of March 8, 2001:
Years Shares of
Served Bankshares Percent of
in Such Principal Occupation Beneficially Shares
Name Age Office Office During Past 5 Years Owned Outstanding
- ---- --- ------ ------ ------------------- ----- -----------
Kenneth T. Murphy 63 Chairman 14 years Chairman, President and 123,626 1.25
Chief Executive Officer
of Bankshares; Chairman,
First National Bank of
Abilene*
F. Scott Dueser 48 President and - President and Chief 85,019 0.86
Chief Executive Executive Officer, First
Officer National Bank of
Abilene*; Executive Vice
President of Bankshares
Curtis R. Harvey 55 Executive Vice 10 years Executive Vice President 9,190 0.09
President and and Chief Financial
Chief Financial Officer of Bankshares
Officer
Ronald E. Schneider 55 Executive Vice 2 years Chairman and Chief 3,754(1) 0.04
President Executive Officer;
Chairman, President and
Chief Executive Officer;
First Financial Bank,
National Association*;
Executive Vice President
of Bankshares
<FN>
*A bank subsidiary.
(1) Includes 2,408 shares of our common stock issuable upon exercise of options
presently exercisable or exercisable within 60 days of March 8, 2001.
</FN>
4
MANAGEMENT
Amounts and prices related to shares of our common stock have been adjusted
to give effect to all stock splits and stock dividends.
Executive Compensation
The following table provides individual compensation information on the
chief executive officer and our four most highly compensated officers.
Summary Compensation Table
Long Term
Compensation
Annual Awards
Compensation ------------------------ All Other
------------ Securities Compensation
Name and Principal Position Year Salary ($) Underlying Options(#)(1) ($)(2)
--------------------------- ---- -------- ------------------------ ---------
Kenneth T. Murphy, Chairman, President and 2000 422,318 3,750 26,542(3)
Chief Executive Officer 1999 386,500 - 30,815
First Financial Bankshares, Inc. 1998 363,750 3,630 22,497
F. Scott Dueser, President and Chief 2000 252,642 2,500 21,981
Executive Officer 1999 233,333 - 20,801
First National Bank of Abilene 1998 221,667 2,420 22,689
Ronald E. Schneider, Chairman 2000 173,761 1,500 13,651
and Chief Executive Officer 1999 158,333 - 19,129
First Financial Bank, National Association 1998 140,000 1,100 16,835
Curtis R. Harvey, Executive Vice President 2000 158,500 1,500 19,412
and Chief Financial Officer 1999 151,000 - 18,386
First Financial Bankshares, Inc. 1998 143,500 1,100 20,166
Craig Smith, Chairman, President 2000 155,000 800 4,100
and Chief Executive Officer 1999 155,000 - 18,497
Hereford State Bank 1998 150,000 825 20,386
<FN>
(1) Adjusted for stock splits and stock dividends.
(2) Represents the contributions to our profit sharing plan for the executive
officer.
(3) Includes $5,645 bonus.
</FN>
5
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning the options
granted to the named executive officers during 2000. Since December 31, 2000, we
have not granted any options to any of the named executive officers. For
additional information on options, see " - Stock Option Plan."
Individual Grants Potential Realizable
----------------------------------------------- Value at Assumed
Number of % of Total Annual Rates of
Securities Options Stock Price
Underlying Granted to Exercise Appreciation for
Options Employees or Base Option Term(3)
Granted in Fiscal Price Expiration -----------------
Name (#)(1)(2) Year ($/Sh)(2) Date (4) 5% ($) 10% ($)
- ---- ----- ---- ------ ---------- ------- --------
Kenneth T. Murphy 3,750 7.69% $26.00 12/31/2003 (5) $15,368 $ 32,273
F. Scott Dueser 2,500 5.13% $26.00 03/29/2010 $40,878 $103,593
Ronald E. Schneider 1,500 3.08% $26.00 03/29/2010 $24,527 $ 62,156
Curtis R. Harvey 1,500 3.08% $26.00 03/29/2010 $24,527 $ 62,156
Craig Smith 800 1.64% $26.00 03/29/2010 $13,081 $ 33,150
<FN>
(1) Granted under our 1992 Incentive Stock Option Plan.
(2) Options to purchase a total of 48,750 shares of our common stock were
granted to employees in 2000.
(3) The amounts under the columns labeled "5%" and "10%" are included pursuant
to certain rules promulgated by the Securities and Exchange Commission (the
"Commission") and are not intended to forecast future appreciation, if any,
in the price of our common stock. Such amounts are based on the assumption
that the named persons hold the options for the full term of the options.
The actual value of the options will vary in accordance with the market
price of our common stock.
(4) Options are subject to a six-year vesting schedule, with one-fifth becoming
exercisable on the second anniversary of the date of grant and an
additional one-fifth becoming exercisable on each of the following
anniversaries of the date of grant until fully vested.
(5) Expiration date for Mr. Murphy's options is one year following his
currently projected retirement date.
</FN>
The following table sets forth certain information concerning options
exercised during the last fiscal year by the named executive officers.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at Fiscal Year End (#) at Fiscal Year End ($)(1)
Acquired on Value --------------------------- ----------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
Kenneth T. Murphy 1,031 $13,341 - 8,411 - $33,617
F. Scott Dueser 2,749 $34,720 - 5,608 - $22,420
Ronald E. Schneider 400 $ 3,752 2,408 2,944 $30,871 $12,570
Curtis R. Harvey 700 $ 9,282 1,875 2,944 $24,038 $12,570
Craig Smith - - 344 1,969 $ 4,410 $ 8,762
<FN>
(1) Based upon the closing price per share of our common stock of $31.44 on
December 31, 2000.
</FN>
6
Compensation pursuant to Plans
General
We have both a defined benefit pension plan and a profit sharing plan. An
employee is eligible to become a participant in the pension plan and profit
sharing plan on the January 1 coincident with or immediately following the date
his employment begins. With our subsidiary banks we adopted a flexible spending
account benefit plan for all employees that became effective in 1988. First
Financial Bank, National Association (formerly The First National Bank in
Cleburne) adopted these plans effective in 1991. Stephenville Bank & Trust Co.
adopted these plans effective in 1993. San Angelo National Bank adopted the
pension and flexible spending account benefit plan effective in 1994 and profit
sharing plan effective in 1995. Weatherford National Bank adopted these plans
effective in 1996. Texas National Bank adopted all benefit plans effective in
1998.
Profit Sharing Plan
We, and each of our subsidiary banks that participates in the profit
sharing plan, determine on an annual basis the contribution that it will make to
the profit sharing plan from such employer's operating profits. Contributions
under the profit sharing plan are administered by the administrative committee
for the profit sharing, pension and flexible spending account benefit plans for
the exclusive benefit of plan participants under the provisions of a trust
agreement. Under the profit sharing plan, eligible employees may contribute
between 1% and 5% of their eligible earnings, although contributions by
employees are not required as a condition of participation. Each participating
employer's annual contribution is allocated among the accounts of the active
plan participants employed by such employer, in the ratio that each
participant's compensation bears to the total compensation of all participants
of such employer. Compensation is defined as the total amount paid to an
employee during the year, including bonuses, commissions, overtime pay, and
salary reductions under the flexible spending account benefit plan, but
excluding reimbursed expenses, director fees, group insurance benefits and
pension and profit sharing contributions. However, the Internal Revenue Service
limits the compensation amount used to calculate a participant's benefit to a
maximum of $170,000. Additionally, the annual addition amount (which is the
aggregate of employer and employee contributions) that may be allocated to a
participant is limited to $30,000.
The profit sharing plan provides for benefits to vest (become
nonforfeitable) in graduated percentages for the first six years of
participation, with benefits being fully vested after seven years of credited
service. Generally, an employee's benefit at normal retirement will be the
contributions allocated to his account while a participant, increased by gains
and decreased by losses from investments of the trust, and increased by any
forfeitures allocated to his account. An employee is always fully vested with
respect to any voluntary contributions he makes, and death or disability of a
participant while employed by us or one of our participating subsidiary banks
results in immediate full vesting with respect to employer contributions. If a
participant terminates employment for any other reason, the total amount of his
employee contribution account and the vested portion of his employer
contribution account are distributed to him.
Pension Plan
The pension plan requires annual contributions sufficient to provide the
pension benefits accruing to employees under the pension plan. The annual
benefit for a participant in the pension plan who retires on his normal
retirement date is the accrued benefit (as defined in the pension plan) at
December 31, 1988, plus 1.25% of average compensation multiplied by years of
service from January 1, 1989. "Average compensation" is the average compensation
during the ten years immediately preceding the date of determination.
Compensation means the total amount paid to an employee during the year
including bonuses, commissions, and overtime pay, but excluding reimbursed
expenses, director fees, group insurance benefits and pension and profit sharing
contributions. There are provisions in the pension plan for early retirement
with reduced benefits. There is no vesting of benefits until a participant has
five or more years of credited service with participating employers. Full
vesting (100%) occurs upon the completion of five years of credited service or
upon reaching age 65 without regard to credited service.
The pension plan is subject to the minimum funding requirements of the
Employee Retirement Income Security Act of 1974, or ERISA. As of December 31,
2000, we believe there was no present funding deficiency. Our contributions to
the pension plan, including those of our participating subsidiary banks, have
been $491,681 in 1996; $557,915 in 1997; $589,238 in 1998; $621,030 in 1999; and
$754,416 in 2000.
7
The following table illustrates estimated retirement benefits under the
pension plan for persons in specified remuneration and years of service
categories, which benefits are payable annually for life (but in no event less
than ten years). The benefits listed in the table below are not subject to any
deduction for social security or other offset amounts. This table does not
reflect any benefit that a participant may have accrued at December 31, 1988.
PENSION PLAN TABLE
Years of Service
---------------------------------------------------------
Remuneration 15 20 25 30 35
- ------------ --------- --------- --------- --------- ---------
$ 25,000 $ 4,688 $ 6,250 $ 7,813 $ 9,375 $ 10,938
50,000 9,375 12,500 15,625 18,750 21,875
75,000 14,063 18,750 23,438 28,125 32,813
100,000 18,750 25,000 31,250 37,500 43,750
125,000 23,438 31,250 39,063 46,875 54,688
150,000 28,125 37,500 46,875 56,250 65,625
175,000 32,813 43,750 54,688 65,625 76,563
200,000 37,500 50,000 62,500 75,000 87,500
As of December 31, 2000, under the pension plan, Mr. Murphy was credited
with 30 years of service, Mr. Dueser was credited with 24 years of service, Mr.
Smith was credited with 31 years of service, Mr. Harvey was credited with 10
years of service, and Mr. Schneider was credited with 8 years of service. The
covered compensation of each of these persons during 2000 was $170,000;
$170,000; $155,000; $158,500; and $170,000, respectively.
Flexible Spending Account Benefit Plan
Effective January 1, 1988, with our subsidiary banks we adopted a flexible
spending account benefit plan. An employee is eligible to become a participant
in this plan on the first day of the month following completion of two months of
service. The flexible spending account benefit plan allows each participant to
redirect a portion of his/her salary, before taxes, to pay certain medical
and/or dependent care expenses.
Deferred Compensation Agreement
In 1992, your board of directors approved a deferred compensation
agreement, which was amended in 1995, between us and Mr. Murphy. We entered into
this agreement in recognition of Mr. Murphy's contribution to our success and as
an inducement to him to remain, subject to the discretion of your board of
directors, in our employ. This agreement provides that, following his retirement
in December 2002, or such later date as may be mutually agreed upon, we would
pay him, or his beneficiary, the sum of $8,750 per month for a period of 84
months. The monthly amount is considered to be an appropriate level of
supplemental income to partially offset Mr. Murphy's reduction in personal
income following retirement and is based on an analysis of the difference in
projected final year compensation and retirement compensation. The agreement
also provides for 70% vesting at age 62, 80% vesting at age 63, and 90% vesting
at age 64.
Executive Recognition Plan
In April 1996, our outside directors, who constituted a majority of your
board of directors, unanimously approved an executive recognition plan. This
plan enables the outside directors of the executive committee of the board of
directors, which functions as the compensation committee, to offer our key
executive officers and those of our subsidiary banks an executive recognition
agreement. Each of our named executive officers and the principal executive
officers of certain of our subsidiary banks have entered into executive
recognition agreements with us. Each executive recognition agreement provides
severance benefits for each executive officer if, within two years following a
change in control (as defined in the executive recognition agreements), his
employment with us or our subsidiary bank is terminated by us or the subsidiary
bank for any reason other than for cause (as defined in the executive
recognition agreements) (except for terminations as a result of the officer's
death, disability or retirement (as such terms are defined in the executive
recognition agreements) or by the executive officer for good reason (as defined
in the executive recognition agreements).
8
Such severance benefits provide that the executive officer will receive a
payment equal to a certain percentage (as set forth in his executive recognition
agreement) of his annual base salary immediately preceding the date of
termination and, for two years following the date of termination, the
continuation of all medical, life and disability benefit plans covering the
officer at no cost to the officer. With respect to each of the named executive
officers, the percentage of annual base salary to be received upon a change in
control pursuant to his executive recognition agreement is as follows: 200% for
Mr. Murphy, 200% for Mr. Dueser, 100% for Mr. Smith, 200% for Mr. Harvey, and
200% for Mr. Schneider. The total severance payment for the executive officer
cannot, however, exceed the amount that would cause such payment to be deemed a
"parachute payment" under Section 280G of the Internal Revenue Code.
Each executive recognition agreement has a term of two years, beginning
June 1, 2000. However, if a change in control occurs during the original term of
the executive recognition agreements, then the executive recognition agreements
will continue in effect for an additional period of two years following the
change in control. Similarly, if a second change in control occurs within two
years from the date of the first change in control, then the executive
recognition agreements will continue in effect for a period of two years from
the date of the second change in control.
Stock Option Plan
At the 1992 annual meeting of shareholders, our 1992 incentive stock option
plan was approved and adopted. The purposes of the stock option plan are to
attract and retain key employees and to encourage employee performance by
providing them with a proprietary interest in us through the granting of stock
options. The maximum aggregate number of shares of our common stock that may be
issued under the stock option plan is 316,550, subject to adjustment for stock
dividends and similar events. The stock option plan is administered by our stock
option committee. Only incentive stock options (as defined in the Internal
Revenue Code) may be granted under the stock option plan. Incentive stock
options granted under the stock option plan may be exercised solely by the
grantee, or in the case of the grantee's death or incapacity, by the grantee's
executors, administrators, guardians or other legal representatives and are not
assignable or transferable by a grantee. There were 48,750 options granted
during 2000.
Meetings of the Board of Directors
Your board of directors has four regularly scheduled meetings each year.
Each of the directors attended at least 75% of the meetings of the board of
directors and the committees of the board of directors on which such director
served.
Committees of the Board of Directors
Your board of directors has four committees. The functions and current
members of each committee are as follows:
Executive Committee. The executive committee acts for your board of
directors between board meetings, except to the extent limited by our bylaws or
Texas law. The current members are Messrs. Coalson, Dueser, McDaniel, Murphy,
Parker, and Ramsey. The executive committee also functions as a nominating
committee with appropriate recommendations to the entire board of directors.
Outside directors who serve on the executive committee also function as our
compensation committee. The executive committee met six times during 2000 and,
among other things, considered and took action on matters relating to its
capacity as the compensation and nominating committee. In its capacity as
nominating committee, the executive committee will consider director nominations
from shareholders. There are no prescribed procedures that the shareholder must
follow to nominate a director.
Directors' Audit Committee. The directors' audit committee reviews the
scope and results of the annual audit by Arthur Andersen LLP, our independent
accountants, and receives and reviews internal and external audit reports. Its
members include Messrs. Coalson, Copeland, McDaniel, Miers, and Worthington.
During 2000, the audit committee met four times.
9
Administrative Committee for the Profit Sharing, Pension and Flexible
Spending Account Benefit Plans. This committee administers our profit sharing,
pension and flexible spending account benefit plans. Current members include
Messrs. Canon, Matthews, Parker, and Stephens. During 2000, the committee did
not meet.
Stock Option Committee. The stock option committee was created under our
1992 incentive stock option plan for key employees. Its current members include
Mrs. Stai and Messrs. Johnson, Miers, and Ramsey. The stock option committee met
one time in 2000.
Director Compensation
Directors who are our executive officers or employees receive no
compensation as such for service as members of either the board of directors or
committees thereof. Directors who are not our officers receive $1,250 for each
board meeting attended. The directors who serve on committees and who are not
our officers receive $750 for each committee meeting attended.
Compensation Committee Interlocks and Insider Participation
No person who served as a member of the executive committee in its capacity
as the compensation committee was, during 2000, an officer or employee of us or
any of our subsidiary banks, or had any relationship requiring disclosure in
this proxy statement. However, committee member Mac A. Coalson obtained loans
from a subsidiary bank during 2000. The loans were made in the ordinary course
of business, on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions on an
arms-length basis and did not involve more than the normal risk of
collectibility or present other unfavorable features to the subsidiary bank.
None of our executive officers served as a member of the compensation committee
(or other board committee performing equivalent functions or, in the absence of
any such committee, the entire board of directors) of another entity, one of
whose executive officers served as a member of the board of directors.
10
REPORT OF THE EXECUTIVE COMMITTEE
IN ITS CAPACITY AS THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
During 2000, the executive compensation program was administered by Messrs.
Coalson, McDaniel, Parker, and Ramsey, the outside director members of the
executive committee acting in the capacity of compensation committee. The
executive compensation program consists of a base salary, profit sharing
contributions, and incentive stock options. Mr. Murphy's compensation program
includes a bonus plan which calls for Mr. Murphy to receive a cash bonus payable
on or before each February 1 that equals 10% of the amount by which our net
earnings for the year exceed a 10% increase over the prior year. In 2000, Mr.
Murphy earned a bonus of $5,645. Mr. Dueser's annual base salary was reviewed in
February 2000 and adjusted effective March 1, 2000. The annual base salaries for
Messrs. Smith, Harvey, and Schneider were adjusted effective January 1, 2000.
Among other things, the committee considers the following factors when approving
annual base salaries: attainment of planned goals and objectives, scope of
responsibility (asset size of subsidiary bank and/or degree of influence on our
profitability and operations), tenure with First Financial Bankshares,
evaluation input from subsidiary bank directors, and relationship of base salary
to the base salaries of other members of the executive officer group.
The annual base salary for Mr. Murphy was reviewed in March 2000 with an
adjustment made effective April 1, 2000. The increase was based on the following
factors:
o our financial performance for 1999,
o performance of the chief executive officer's duties that relate primarily
to leading and managing us within the broad guidelines set by the board of
directors,
o base salary compared to the SNL Securities, Inc. compensation survey data
for chief executive officers of similar size organizations within the
industry, and
o subjective evaluations of Mr. Murphy's contribution to the overall success
of First Financial Bankshares.
Acting on a recommendation of the Compensation Committee, the Board of
Directors approved on October 24, 2000, effective January 1, 2001, a management
succession program, which provided for Mr. Murphy to retain his title of
Chairman until his normal retirement date but relinquish the President and Chief
Executive Officer responsibilities, which were assumed by Mr. Dueser.
Section 162(m) of the Internal Revenue Code generally limits the annual
corporate tax deduction for compensation paid to the chief executive officer and
the four other most highly compensated executive officers unless the
compensation is performance-based. One condition to qualify compensation as
performance-based is to establish the amount of the award on an objective
formula that precludes any discretion. The compensation committee continues to
review the impact of this tax provision on our incentive plans and has
determined that Section 162(m) is currently inapplicable because no named
executive officer receives compensation in excess of $1 million.
EXECUTIVE COMMITTEE IN ITS CAPACITY AS THE COMPENSATION COMMITTEE
Mac A. Coalson
Raymond A. McDaniel, Jr.
James M. Parker
Jack D. Ramsey, M.D.
11
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees our financial reporting process on behalf of
your board of directors. Management has the primary responsibility for the
financial statements and the reporting process including the system of internal
controls. In fulfilling its oversight responsibilities, the Committee, which is
composed of independent directors in compliance with Rule 4200 of the National
Association of Securities Dealers' listing standards, reviewed the audited
financial statements in the Annual Report with management. The Committee also
discussed with management the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Committee reviewed with Arthur Andersen LLP, our independent auditors,
who are responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of our accounting
principles and such other matters as are required to be discussed with the
Committee under generally accepted auditing standards. In addition, the
Committee has discussed with the independent auditors the auditors' independence
from management and the Company, including the matters required by the Statement
on Auditing Standards No. 61, Communication with Audit Committees, as amended,
and the matters in the written disclosures required by the Independence
Standards Board, and considered the compatibility of nonaudit services with the
auditors' independence.
The Committee discussed with our independent auditors the overall scope and
plans for their audit. The Committee meets with the independent auditors, with
and without management present, to discuss the results of their examinations,
their evaluations of our internal controls, and the overall quality of our
financial reporting. The Committee held four such meetings during the year ended
December 31, 2000.
In reliance on the reviews and discussions referred to above, the Committee
recommended to your board of directors (and the board of directors has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended December 31, 2000 for filing with the Securities and
Exchange Commission. The Committee and your board of directors have also
recommended, subject to shareholder approval, that Arthur Andersen LLP serve as
our independent auditors for the year ending December 31, 2001. Your board of
directors has adopted a charter for the Audit Committee, a copy of which is
attached as Appendix A.
AUDIT COMMITTEE
Mac A. Coalson
David Copeland
Raymond A. McDaniel, Jr.
Bynum Miers
Walter F. Worthington
12
PERFORMANCE GRAPH
The following performance graph compares cumulative total shareholder
return for our common stock, the S&P 500 Index, and the SNL Banks Index, which
is a banking index prepared by SNL Securities, Inc. and is comprised of banks
with $1 billion to $5 billion in total assets, for a five-year period (December
31, 1995 to December 31, 2000). The performance graph assumes $100 invested in
our common stock at its closing price on December 31, 1995, and in each of the
S&P 500 Index and the SNL Banks Index on the same date. The performance graph
also assumes the reinvestment of all dividends. The dates on the performance
graph represent the last trading day of each year indicated. The amounts noted
on the performance graph have been adjusted to give effect to all stock splits
and stock dividends.
Corporate Performance Chart
[LINE GRAPH OMITTED AND REPLACED WITH TABLE]
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
FIRST FINANCIAL BANKSHARES $100 $154 $212 $196 $178 $191
S&P 500 $100 $129 $216 $216 $198 $225
SNL Banks $100 $123 $164 $211 $255 $232
13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 15, 2001, we were not aware of any person (including any
"group" as that term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934) who is the beneficial owner of more than 5% of our common stock.
However, as of February 15, 2001, First National Bank of Abilene, First National
Bank, Sweetwater, and Stephenville Bank & Trust Co. held of record in various
fiduciary capacities an aggregate of 1,666,716 shares of our common stock. Of
the total shares held, First National Bank of Abilene had sole power to vote
632,790 shares (6.42%), and First National Bank, Sweetwater, had sole power to
vote 113,041 shares (1.15%). In addition, First National Bank of Abilene shared,
with other persons, the power to vote 542,663 shares (5.51%), and had no
authority to vote 325,704 shares (3.31%), while Stephenville Bank & Trust Co.
had no authority for its 3,252 shares (0.03%). All the shares held by each
subsidiary bank, which are registered in its name as fiduciary or in the name of
its nominee, are owned by many different accounts, each of which is governed by
a separate instrument that sets forth the powers of the fiduciary with regard to
the securities held in such accounts. The board of directors historically has
not attempted to, and does not intend to attempt to in the future, exercise any
power to vote such shares. See "Proposal 1--Election of Directors--Nominees" and
"--Executive Officers" for information with respect to the beneficial ownership
of our common stock by each director nominee and named executive officer as of
March 8, 2001. In the aggregate, all director nominees and executive officers as
a group (17 individuals) beneficially owned 1,226,228 shares of our common
stock, or 12.44%, as of March 8, 2001.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors and officers, and
persons who own more than 10% of our common stock, to file with the Securities
and Exchange Commission initial reports of our common stock ownership and
reports of changes in such ownership. A reporting person must file a Form 3 --
Initial Statement of Beneficial Ownership of Securities within 10 days after
such person becomes a reporting person. A reporting person must file a Form 4 --
Statement of Changes of Beneficial Ownership of Securities within 10 days after
any month in which such person's beneficial ownership of securities changes,
except for certain changes exempt from the reporting requirements of Form 4.
Such exempt changes include stock options granted under a plan qualifying
pursuant to Rule 16b-3 under the Exchange Act. A reporting person must file a
Form 5 -- Annual Statement of Beneficial Ownership of Securities within 45 days
after the end of the issuer's fiscal year to report any changes in ownership
during such year not reported on a Form 4, including changes exempt from the
reporting requirements of Form 4.
The Securities and Exchange Commission's rules require our reporting
persons to furnish us with copies of all Section 16(a) reports that they file.
Based solely upon a review of the copies of such reports furnished to us, we
believe that the reporting persons have complied with all applicable Section
16(a) filing requirements for 2000 on a timely basis.
PROPOSAL 2
APPROVAL OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
General. Your board of directors has selected Arthur Andersen LLP to serve
as independent accountants for us and our subsidiary banks for the year ending
December 31, 2001. Arthur Andersen LLP has served as our independent accountants
since 1990.
Audit Fees. During 2000, Arthur Andersen billed us $221,000 for audit fees,
which included $22,500 for quarterly reviews and $9,000 for FDIC Improvement Act
Procedures and Reports.
All Other Fees. Arthur Andersen did not provide any non-audit services
during 2000 and therefore no fees for such services were billed to us.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL
OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT ACCOUNTANTS.
14
If you do not approve the appointment of Arthur Andersen LLP, then your
board of directors will reconsider the appointment of independent accountants.
Representatives of Arthur Andersen LLP are expected to be present at the annual
meeting. These representatives will be given the opportunity to make a
statement, if they desire to do so, and to respond to appropriate questions.
INTEREST IN CERTAIN TRANSACTIONS
As has been true in the past, some of our officers and directors, members
of their families, and other businesses with which they are affiliated, are or
have been customers of one or more of our subsidiary banks. As customers, they
have entered into transactions in the ordinary course of business with such
banks, including borrowings, all of which were on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions on an arms-length basis and did not involve more than a
normal risk of collectibility or present any other unfavorable features to the
subsidiary banks involved. None of the transactions involving our subsidiary
banks and our officers and directors, or other businesses with which they may be
affiliated, have been classified or disclosed as nonaccrual, past due,
restructured or potential problems.
INCORPORATION BY REFERENCE
With respect to any future filings with the Securities and Exchange
Commission into which this proxy statement is incorporated by reference, the
material under the headings "Executive Committee Report on Executive
Compensation," "Report of the Audit Committee" and "Performance Graph" shall not
be incorporated into such future filings.
FORWARD-LOOKING STATEMENTS
This proxy statement contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. When used in this proxy statement, words such
as "anticipate," "believe," "estimate," "expect," "intend," "predict,"
"project," and similar expressions, as they relate to us or our management,
identify forward-looking statements. These forward-looking statements are based
on information currently available to our management. Actual results could
differ materially from those contemplated by the forward-looking statements as a
result of certain factors, including but not limited to general economic
conditions, actions taken by the Federal Reserve Board, legislative and
regulatory actions and reforms, competition from other financial institutions
and financial holding companies, fluctuation in interest rates, changes in the
demand for loans, fluctuations in value of collateral and loan reserves and
other factors described in "PART II, Item 7 -- Management's Discussion and
Analysis of Financial Condition and Results of Operations" in our Form 10-K for
the year ended December 31, 2000. Such statements reflect the current views of
our management with respect to future events and are subject to these and other
risks, uncertainties and assumptions relating to our operations, results of
operations, growth strategy and liquidity. All subsequent written and oral
forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by this paragraph.
FORM 10-K
We will furnish a copy of our Form 10-K for the year ended December 31,
2000, without charge to any person whose proxy is solicited herewith upon such
person's written request therefor. This written request must contain a good
faith representation that, as of the record date for the annual meeting, the
person making the request was a beneficial owner of our common stock. This
request should be addressed to Curtis R. Harvey, Executive Vice President and
Chief Financial Officer, First Financial Bankshares, Inc., P. O. Box 701,
Abilene, Texas 79604. Exhibits to our Form 10-K will also be furnished upon the
payment of a fee, which fee shall be limited to our reasonable expenses in
furnishing these exhibits.
15
SHAREHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
To be considered for inclusion in our proxy statement for the 2002 annual
meeting, shareholder proposals must be received at our principal executive
offices no later than December 1, 2001. Under Rule 14a-4(c)(1) of the Securities
Exchange Act of 1934, if any shareholder proposal intended to be presented at
the 2002 annual meeting without inclusion in our proxy statement for this
meeting is received at our principal executive offices after February 14, 2002,
then a proxy will have the ability to confer discretionary authority to vote on
this proposal.
By Order of the Board of Directors,
KENNETH T. MURPHY, Chairman
March 30, 2001
16
APPENDIX A
AUDIT COMMITTEE CHARTER
FIRST FINANCIAL BANKSHARES, INC.
The Audit Committee is appointed by the Board to assist the Board in
overseeing (1) the quality and integrity of the financial statements of the
Company, (2) the compliance by the Company with legal, accounting and regulatory
requirements and (3) the independence and performance of the Company's internal
and external auditors.
The members of the Audit Committee shall meet the independence and
experience requirements of The Nasdaq Stock Market. The Audit Committee shall
consist of at least three outside directors and shall be appointed by the Board
on the recommendation of the Executive Committee.
The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Committee. The Audit Committee may
request any officer or employee of the Company or the Company's outside counsel
or independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
The Audit Committee shall make quarterly reports to the Board.
The Audit Committee shall:
o Review and reassess the adequacy of this Charter annually and recommend any
proposed changes to the Board for approval.
o Periodically and timely review presentations by Management of the
following:
1. The financial statements and related disclosures prior to their
filing with the SEC or other regulatory bodies,
2. Any changes in accounting principles or financial reporting
policies from a prior year,
3. The accounting treatment accorded significant transactions,
4. Significant variations between budgeted and actual amounts in a
particular account, and
5. Information regarding the adequacy of internal controls that
could significantly affect the Company's financial statements.
o Discuss candidly with Management, the internal auditor and the independent
auditor regarding significant accounting and financial reporting issues
implicating judgments and impacting quality of the Company's financial
statements.
o Meet periodically with Management to review the Company's business risk
management process that identifies, sources, measures, and prioritizes
business and financial reporting risks, and monitors the effectiveness of
the control and risk management processes established to manage those
risks.
o Review major changes to the Company's accounting principles and financial
reporting policies from the prior year as suggested by the independent
auditor, internal auditors or Management.
o Recommend to the Board the appointment of the independent auditor, which
firm is ultimately accountable to the Audit Committee and the Board.
o Ensure that the independent auditor submits a formal written statement
regarding relationships and services which may affect the auditor's
objectivity and independence (consistent with Independent Standards Board
No. 1, Independence Discussions with Audit Committees), discuss any
relevant matters with the independent auditor, and if so determined by the
Audit Committee, recommend that the Board take appropriate action to
address the independence of the auditor.
o Evaluate together with the Board the performance of the independent auditor
and, if so determined by the Audit Committee, recommend that the Board
replace the independent auditor.
1
o Review the significant reports to Management prepared by the internal and
external auditors and Management's responses.
o Ensure that the independent auditor has complied with the Private
Securities Litigation Reform Act of 1995 (codified in Section 10A(b) of the
Securities Exchange Act of 1934), which requires the independent auditor to
communicate illegal acts noted during the course of its audit to Management
and the audit committee (unless clearly inconsequential).
o Discuss with the independent auditor the matters required to be
communicated to the audit committee by Statement on Auditing Standards No.
61, Communication with Audit Committees, relating to the conduct of the
audit.
o Review with the internal auditor:
(a) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or
access to required information.
(b) Any changes required in the planned scope of the internal
audit procedures.
(c) The internal audit department responsibilities, budget and
staffing.
o Prepare the report required by Item 306 of Regulations S-K and S-B and Item
7(e)(3) of Schedule 14A of the Securities and Exchange Commission to be
included in the Company's annual proxy statement, to help inform
shareholders of the audit committee's oversight with respect to the
Company's financial reporting.
o Review with the Company's legal counsel matters that may have a material
impact on the financial statements, the Company's compliance policies and
any material reports or inquiries received from regulators or governmental
agencies.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan and conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
These are the responsibilities of the independent auditor and Management,
respectively. Nor is it the duty of the Audit Committee to conduct
investigations, to resolve disagreements, if any, between Management and the
independent auditor or to assure compliance with laws and regulations and the
Company's Code of Conduct.
2
FIRST FINANCIAL BANKSHARES, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
FIRST FINANCIAL BANKSHARES, INC.
FOR THE ANNUAL MEETING OF SHAREHOLDERS
APRIL 24, 2001
I hereby appoint Bynum Miers and David Copeland, or either one of them
acting in the absence of the other, as proxyholders, each with the power to
appoint his substitute, and hereby authorize them to represent me and to vote
for me as designated below at the annual meeting of First Financial Bankshares,
Inc., a Texas corporation, to be held on April 24, 2001, at 10:30 a.m., Abilene
time, in the Abilene Civic Center, 1100 North 6th Street, Abilene, Texas, and at
any postponement or any adjournment thereof.
This proxy when properly executed will be voted in the manner directed
below, or if no direction is indicated below, in accordance with the
recommendation of the board of directors on each proposal. This proxy will be
voted, in the discretion of the proxyholders, upon such other business as may
properly come before the annual meeting or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING:
(1) The election of directors:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as written to the contrary below) to vote for all nominees listed below
Joseph E. Canon, Mac A. Coalson, David Copeland, F. Scott Dueser, Derrell E.
Johnson, Kade L. Matthews, Raymond A. McDaniel, Jr., Bynum Miers, Kenneth T.
Murphy, Dian Graves Stai, James M. Parker, Jack D. Ramsey, M.D., Craig Smith,
F.L. Stephens and Walter F. Worthington.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided .)
________________________________________________________________________________
(2) The proposal to approve the appointment by the board of directors of Arthur
Andersen LLP as independent accountants for the year ended December 31,2001:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned hereby acknowledges receipt of the proxy statement dated
March 30, 2001, and hereby revokes any proxy or proxies heretofore given to vote
at the annual meeting or any adjournment thereof. Please date your proxy and
sign, exactly as your name or names appear below; when signing as attorney,
executor, administrator, trustee or guardian, please give title. Each joint
owner is required to sign.
(PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED SELF-ADDRESSED
AND POSTMARKED ENVELOPE.)
Signature(s): ___________________________ Date:_____________________, 2001.
___________________________