SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission
File Number
December 31, 1994
0-7674
FIRST FINANCIAL BANKSHARES, INC.
(Exact Name of Registrant as Specified in its Charter)
Texas
75-0944023
(State of Incorporation) (I.R.S.
Employer
Identification No.)
400 Pine Street, Abilene, Texas
79601
(Address of Executive Offices) (Zip
Code)
Registrant's Telephone Number (915) 675-7155
Securities Registered Pursuant to Section 12(b) of the
Act:
None
Securities Registered Pursuant to Section 12(g) of the
Act:
Common Stock, Par Value $10.00 Per Share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements
for the past 90 days. Yes X . No .
The aggregate market value of voting stock held by
nonaffiliates of the registrant was $ 110,480,950 as of March 17,
1995.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable
date.
5,006,077
Documents Incorporated by Reference
List hereunder the following documents if incorporated by
reference and the Part of the Form 10-K into which the document
is
incorporated.
None
TABLE OF CONTENTS
Item Page
PART I
1. Business . . . . . . . . . . . . . . . . . . . . . . . 1
2. Properties . . . . . . . . . . . . . . . . . . . . . .13
3. Legal Proceedings. . . . . . . . . . . . . . . . . . .15
4. Submission of Matters to a Vote of Security Holders. .15
PART II
5. Market for Registrant's Common Stock and Related
Security Holder Matters. . . . . . . . . . . . . . . .15
6. Selected Financial Data. . . . . . . . . . . . . . . .16
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . .17
8. Financial Statements and Supplementary Data. . . . . .27
9. Changes in and Disagreements with Accountants
and Financial Disclosure . . . . . . . . . . . . . . .46
PART III
10. Directors and Executive Officers of the Registrant . .46
11. Director and Officer Compensation. . . . . . . . . . .48
12. Security Ownership of Certain Beneficial
Owners and Management. . . . . . . . . . . . . . . . .52
13. Certain Relationships and Related Transactions . . . .53
PART IV
14. Exhibits, Financial Statement Schedules and
Reports on Form 8K . . . . . . . . . . . . . . . . . .53
Signatures
PART I
Item 1. Business
A. Organization and General Development of Business
First Financial Bankshares, Inc. (the "Registrant" or
"Bankshares"), is a Texas corporation duly registered as a multi-
bank holding company under the Bank Holding Company Act of 1956,
as
amended. On December 31, 1994 Bankshares owned (through its
wholly-owned Delaware subsidiary) all of the capital stock of
seven
banks located in Texas: First National Bank of Abilene, Abilene,
Texas ("First Abilene"); Hereford State Bank, Hereford, Texas
("Hereford"); First National Bank Sweetwater, Texas ("First
Sweetwater"); Eastland National Bank, Eastland, Texas
("Eastland");
First National Bank in Cleburne, Cleburne, Texas ("First
Cleburne"); Stephenville Bank & Trust, Stephenville, Texas
("Stephenville"); and Southwest Bank of San Angelo, San Angelo,
Texas ("San Angelo").
Bankshares was formed in 1956 at the direction of the Board
of Directors of the Farmers and Merchants National Bank of
Abilene
(a national bank organized in Abilene, Texas, in 1889, changing
its
name to First National Bank of Abilene in 1957). The
corporation's
initial name was F & M Operating Company (F & M), and it was
originally authorized to and did issue ten shares of stock
having
a par value of $100.00 each. The ten shares were issued to three
officers of the Bank under a trust agreement by which the three
trustees would hold the F & M stock for the ratable benefit of
the
shareholders of First National Bank of Abilene. The original
purposes in organizing the corporation were to provide a separate
entity to own, operate and maintain parking lots, parking
garages,
buildings and real estate, and to buy, sell and lease personal
property such as bank notes and automobiles.
In 1968, F & M purchased 200,000 shares of newly authorized
and issued stock of Bank of Commerce, Abilene, Texas ("BOC").
The
purchase was made after the State Banking Commission of Texas
required that new capital funds be injected into BOC. In the
resulting increased capitalization of BOC, the authorized and
outstanding shares of BOC common stock were increased from
300,000
to 700,000, with the 400,000 new shares being offered at $2.00
per
share. In addition, F & M acquired by proxy assignments the
power
to vote an additional 66,000 shares of BOC stock. These proxies
expired January 1, 1975. The First National Bank Employees'
Profit
Sharing Trust originally purchased 28,177 shares of BOC stock.
In November 1971, the Board of Directors of First Abilene
authorized the reorganization of F & M into a multi-bank holding
company and the commencement of proceedings to effect a merger
which would permit First Abilene to be wholly owned by the
holding
company. The merger was submitted for review and approval by
federal regulatory authorities in April 1972.
B. Reorganization, Mergers, and Acquisitions
F & M's reorganization was accomplished in September 1972.
Its name was changed to First Abilene Bankshares, Inc., and it
was
recapitalized by reducing the par value of its stock to $10.00
per
share and increasing the authorized shares to 500,000. The
merger
was approved in January 1973 and became effective in April of
that
same year. As a result, the shareholders of First Abilene became
shareholders in Bankshares, and Bankshares became the owner of
all
of the outstanding shares of First Abilene (except for the
qualifying shares owned by directors).
In 1974, Bankshares acquired the remaining outstanding
common stock of BOC (except for six shares amounting to
approximately .01%) by an offer (registered under the Securities
Act of 1933) to exchange one share of Bankshares' common stock
for
each 13-1/3 outstanding shares of BOC common stock. The exchange
was effected on May 1, 1974. In late 1987 Bankshares purchased
the
remaining six shares of BOC stock, paying $82.00 in cash for each
share.
Effective April 1, 1974, Bankshares acquired all the
outstanding capital stock of Hereford through an offer (also
registered under the Securities Act of 1933) to exchange one
share
of Bankshares' common stock and $175 cash for each outstanding
share of Hereford.
Effective September 4, 1981, Bankshares acquired all the
outstanding capital stock of First Sweetwater through an offer
(registered under the 1933 Act) to exchange one share of
Bankshares' common stock for each outstanding share of First
Sweetwater stock.
Effective June 8, 1982, Bankshares acquired all of the
outstanding capital stock of Eastland through an offer
(registered
under the 1933 Act) to exchange 3-1/2 shares of Bankshares'
common
stock for each outstanding share of Eastland stock.
Effective July 31, 1987, American National Bank of Abilene
("American National") was merged with and into First Abilene.
Following approval of the merger by the Board of Directors and
Shareholders of each bank, all of the issued and outstanding
common
stock of American National were tendered for exchange and First
Abilene paid $11.50 for each of American National's 200,000
shares
of common stock. The merger was approved by the Office of the
Comptroller of the Currency, the Federal Reserve Board, the
Federal
Deposit Insurance Corporation and the United States Department of
Justice. The premises formerly occupied by American National,
both
its main banking offices and drive-in banking facility, are now
being operated by First Abilene as a branch bank.
On July 21, 1988, Hereford acquired 11,576 shares of First
Tule Bancorp, Inc. in Tulia, Texas ("First Tule"), a registered
bank holding company, the principal asset of which is all, or
substantially all, of the capital stock of The First National
Bank,
Tulia, Texas ("FNB Tulia"). Although the Bank Holding Company
Act
of 1956, as amended, generally requires approval of the Federal
Reserve Board prior to acquiring more than 5% of the outstanding
capital stock of any bank or bank holding company, the
acquisition
by Hereford of the First Tule stock was effected under an
exemption
for acquisitions of voting securities in satisfaction of debt
previously contracted. The shares of First Tule were transferred
to Hereford in partial satisfaction of indebtedness owed to
Hereford by three individuals and secured, in part, by such
shares
of stock in First Tule. Since the date it acquired the stock,
Hereford has been attempting to sell or otherwise dispose of the
stock, but has been unable to do so because of pending litigation
against FNB Tulia. Full disclosure of the acquisition by
Hereford
of the First Tule stock was made to federal and state banking
authorities and continued holding of the stock was approved by
bank
regulatory authorities while Hereford attempted to sell such
stock.
However, under the Bank Holding Company Act (and Regulation Y
adopted by the Federal Reserve Board pursuant to the Act),
Hereford
was required to dispose of the First Tule stock within five (5)
years after having acquired the same, but has not been able to do
so. While Hereford is in technical violation of the Act and
Regulation Y, such circumstance exists with the knowledge and
apparent acquiescence of federal and state banking authorities
and
neither Registrant nor Hereford has any reason to believe that
any
adverse action will be taken against Hereford or Registrant by
reason of Hereford's continued ownership of the shares of First
Tule so long as Hereford, in good faith, continues its efforts to
liquidate or dispose of such shares. Neither First Tule nor FNB
Tulia is deemed or considered to be a subsidiary of the
Registrant.
By reason of the recent settlement or other disposition of the
remaining lawsuits against FNB Tulia, as well as the efforts of
the
remaining shareholders of First Tule to find a purchaser for
their
shares or those of FNB Tulia, First Tule has entered into a
Merger
and Plan Reorganization Agreement with Norwest Corporation which,
if consummated, will result in the shares of First Tule now held
by
Hereford being exchanged for $1,661,734 cash. Subject to certain
conditions precedent contained in the Agreement, it is
anticipated
that the transaction will be finalized and the shares of First
Tule
stock transferred by Hereford during the second quarter of 1995.
Effective January 1, 1989, BOC was merged with and into
First Abilene and its state charter surrendered to the State of
Texas for cancellation. First Abilene received all of the assets
of BOC and assumed all of its liabilities. The banking offices
and
drive-in facility of BOC are now being operated as a branch
banking
facility of First Abilene. The merger and branch banking action
was undertaken to achieve greater efficiency from the combined
operation of First Abilene and BOC and to provide improved
convenience for each bank's customers.
In January of 1990, Bankshares' Board of Directors
authorized a state franchise tax savings program designed to
substantially reduce the amount of corporate franchise taxes paid
by Bankshares. Pursuant to that program, a second bank holding
company was formed in the State of Delaware, First Abilene
Bankshares of Delaware, Inc. (the "Delaware BHC"). With the
approval of the Federal Reserve Board, and effective March 28,
1990, the Delaware BHC became the owner and holder of all of the
outstanding shares of Bankshares' subsidiary banks and, in turn,
the Delaware BHC became the sole subsidiary of Bankshares and is
wholly-owned and controlled by Bankshares. The corporate offices
of the Delaware BHC are located in the State of Delaware and, as
defined by Texas franchise tax statutes, the new subsidiary is
not
considered to be doing business in the State of Texas.
Effective December 21, 1990, the Delaware BHC, using funds
provided by Bankshares, purchased all of the outstanding stock of
The First National Bank of Cleburne, in Cleburne, Texas, for
$4,700,000 in cash.
Effective February 25, 1993, the Delaware BHC, using funds
provided by Bankshares, acquired all the outstanding capital
stock
of Stephenville Bank & Trust Co., Stephenville, Texas, through an
offer (registered under the 1933 Act) to pay $7,750,000 to the
Stephenville shareholders for all the Stephenville Bank & Trust's
outstanding stock.
Effective September 23, 1993, First Cleburne acquired by
purchase the Cleburne, Texas Branch office facility of Bank One,
Texas, N.A., and assumed deposit liabilities of approximately $19
million. The aggregate value of the land, buildings, loans and
other assets purchased by First Cleburne was approximately $2
million. The former Bank One facility is now being operated as a
branch office of First Cleburne.
On October 26, 1993, at a Special Shareholders Meeting
called for such purpose, the name of the Registrant was changed
to
First Financial Bankshares, Inc. Similarly, the corporate name
of
the Delaware BHC was changed to First Financial Bankshares of
Delaware, Inc. effective December 7, 1993.
Effective March 10, 1994, pursuant to that certain Stock
Exchange Agreement and Plan of Reorganization dated December 7,
1993, Bankshares acquired 190,622 shares (98.22%) of the issued
and
outstanding shares of Concho Bancshares, Inc. ("Concho"), a Texas
corporation and bank holding company, which owns all of the
capital
stock of Southwest Bank, a Texas state bank located in the City
of
San Angelo, Tom Green County, Texas. Southwest Bank owns all of
the issued and outstanding capital stock of SWB Investment
Centre,
Inc. ("SWB"), a Texas corporation providing securities brokerage
services. The shares of Concho common stock acquired by
Bankshares
were contributed by Bankshares to the capital of the Delaware BHC
and effective May 1, 1994, pursuant to the corporation laws of
the
States of Delaware and Texas, Concho was merged with and into the
Delaware BHC so that Southwest Bank became a subsidiary of the
Delaware BHC. As part of the merger of the Delaware BHC and
Concho, minority shareholders of Concho tendered an additional
2,649 shares of Concho common stock in exchange for shares of
Bankshares' common stock and cash. In connection with the
acquisition of Concho by Bankshares and the subsequent merger of
Concho with and into the Delaware BHC, Bankshares issued 232,080
shares of its common stock and paid $44,531 in cash in lieu of
issuing fractional shares of Bankshares' common stock.
On December 3, 1992, the Texas Secretary of State issued a
Certificate of Incorporation for First Financial Investments,
Inc.,
which is, or shall become, a wholly owned subsidiary of
Bankshares
and the initial capital of which shall consist of $100,000
represented by 100,000 shares of common stock to be issued to
Bankshares. First Financial Investments, Inc. ("FFI") was
intended
to be a securities brokerage subsidiary and on or about December
8,
1992, Bankshares submitted to the Federal Reserve Board its
Application to Engage in Non-Banking Activity (Form FR Y-4) to
engage, de novo, in providing securities brokerage services
pursuant to Section 225.25(b)(15) of FRB Regulation Y and Section
4(c)(a) of the Bank Holding Company Act of 1956, as amended. At
the end of 1992 Bankshares and FFI were engaged in the process of
securing all approvals, and meeting all other requirements, for
FFI
to become a broker-dealer registered with the National
Association
of Securities Dealers, the Securities and Exchange Commission and
the Texas State Securities Board. At that time it was
anticipated
that the activities of FFI would be limited to buying and selling
stocks, bonds and other securities as agent for the account of
the
customers of Bankshares' subsidiaries, which securities would
include equities, mutual funds and municipal, corporate and
government bonds, but without providing investment advice or
research services. Securities brokerage services would be
provided
on, or adjacent to, the premises and banking offices of
Bankshares'
subsidiary banks. It was anticipated at that time that
Bankshares,
through FFI, would begin providing securities brokerage services
during the second quarter of 1993. On February 3, 1993
Bankshares
received Federal Reserve approval to engage, de novo, in
providing
securities brokerage services through FFI. While it is still the
intent of Bankshares to provide securities brokerage services
through FFI, Bankshares has notified the Federal Reserve that its
plans to offer brokerage services through a separate subsidiary
have been delayed. In the meantime, four of Bankshares'
subsidiary
banks (First Abilene, First Sweetwater, First Cleburne, and
Stephenville) are providing brokerage services through a shared-
employee arrangement with The Stephens Company, a national
brokerage firm headquartered in Little Rock, Arkansas, and its
affiliated company, Link Investment Services, Inc. Southwest
Bank
continues to provide brokerage services for its customers through
SWB, its wholly owned subsidiary.
C. Mode of Conducting Business
Bankshares operates principally in order to give the
affiliated banks access to additional management and technical
resources which help them to improve or expand their banking
services while continuing their local activity and autonomy.
Each
of the affiliated banks operates under the day-to-day management
of
its Board of Directors and officers, with substantial authority
in
making decisions concerning their own investments, loan policies,
interest rates and service charges. Bankshares provides
assistance
to the affiliated banks, especially with respect to decisions
concerning major capital expenditures, employee fringe benefits,
including pension plans, group insurance, dividend policies,
appointment of officers and directors of affiliated banks and
their
compensation. The internal audit and loan review functions are
centralized at Bankshares. Each of these corporate staff groups
perform on-site operational audits and loan reviews of the
subsidiary banks. Bankshares, through First Abilene, provides
advice to and specialized services for the affiliated banks in
such
areas as lending, investments, purchasing, advertising, public
relations, and computer services. In addition, through First
Abilene, Bankshares coordinates various transactions among the
affiliated banks, including loan participation. Bankshares makes
the services of the Trust Department of First Abilene available
to
customers of the other affiliated banks, as well as investment
and
computer services. Such specialized services are not ordinarily
offered by smaller banks.
Each Bankshares' subsidiary is engaged in the general
commercial banking business consisting of the acceptance of
checking, savings and time deposits, the making of loans,
transmitting funds and performing such other banking services as
are usual and customary for commercial banks. While all
subsidiary
banks, with the exception of Eastland, have trust powers only
First
Abilene, First Sweetwater, and Stephenville have active trust
departments. First Abilene, First Sweetwater, First Cleburne and
Stephenville provide securities brokerage services through a
shared
employee arrangement with Link Investment Services, Inc. and
Southwest Bank provides similar services through its subsidiary,
SWB Investment Centre, Inc.
The trust departments offer a complete range of services to
individuals, associations and corporations. They include the
administration of estates, testamentary trusts and various types
of
living trusts and agency accounts. Other sources of revenue are
services for businesses, including administering pension, profit
sharing and other employee benefit plans, acting as stock
transfer
agents or stock registrar, and providing paying agent services.
D. Competition
Commercial banking in Texas is very competitive and
Bankshares, holding less than 1% of deposits, represents only a
minor segment of the industry. Success is dependent upon being
able to compete in the areas of interest rates paid or charged
and
scope of services offered and prices charged therefore.
Subsidiary
banks of Bankshares compete in their respective service areas
with
highly competitive banks, savings and loan associations, small
loan
companies, credit unions and brokerage firms, all of which are
engaged in providing financial products and services.
First Abilene, the largest of Bankshares' subsidiary banks,
competes in the City of Abilene with three locally owned banks
and
the branches of two major regional banks. At December 31, 1994,
First Abilene was the largest of this group on the basis of local
market share. First Abilene also competes with savings and loan
institutions, finance companies, brokerage firms and credit
unions
located in the City of Abilene. Hereford is the smaller of two
banks serving Hereford, Texas and must also compete with larger
banks located in larger cities in its general area. First
Sweetwater is the only bank located in Sweetwater, Texas,
although
a smaller bank in another town operates a branch office in
Sweetwater. In 1989 First Sweetwater acquired certain assets and
assumed the deposit liabilities of Texas Bank and Trust Company,
a
failed bank which, at the time, was the only other bank located
in
Sweetwater. Although located within the 16-county area
surrounding
Abilene, First Sweetwater does not directly compete with banks
located in Abilene. Eastland is the largest of five banks in
Eastland County, Texas. Although it, too, lies within the
geographic area served by First Abilene, Eastland is not in
direct
competition with First Abilene. First Cleburne is located in
Johnson County and competes with local branches of three area
banks, as well as branches of three major regional banks.
Stephenville is located in Erath County and competes with local
branches of major regional holding companies, a savings and loan
association, and a locally owned bank. Southwest Bank is located
in Tom Green County and competes with four local banks, branches
of
four out-of-town banks, and several credit unions and savings and
loan institutions.
The Registrant's business is not dependent upon any single
customer or upon any few customers, the loss of any one of which
would have a materially adverse effect upon the business of
Bankshares. Customers of Bankshares and its subsidiaries include
its officers and directors, as well as other entities with which
they are affiliated. It is the policy of Bankshares and its
subsidiaries to make loans to officers and directors, and
entities
with which they are affiliated in the ordinary course of
business.
When such loans are made, they are made on substantially the same
terms, including interest rates and collateral, as those
prevailing
at the time for comparable transactions with other persons.
E. Employees
The Registrant and its subsidiaries employed approximately
515 full-time employees at February 15, 1995. Management
believes
that its employee relations have been and will continue to be
good.
F. Supervision and Regulation
Bankshares is a bank holding company within the meaning of
the Bank Holding Company Act of 1956, as amended, and is
registered
as such with the Federal Reserve Board. Bankshares is subject to
the reporting requirements of, and supervision and examination
by,
the Federal Reserve Board under the provisions of the Act.
Bankshares is required to file with the Federal Reserve Board an
annual report and such additional information as the Federal
Reserve Board may require. The Federal Reserve Board may also
make
examination of Bankshares and its subsidiaries or "affiliates."
The Act requires every bank holding company to obtain the
prior approval of the Federal Reserve Board before the holding
company may acquire direct or indirect ownership or control of
more
than 5% of the voting shares of any bank which is not majority-
owned. (As noted in Section B of this Item 1, however, Hereford
State Bank, a subsidiary of the Registrant, has acquired more
than
5% of the voting shares of First Tule Bancorp, Inc. under an
exemption from the prior approval requirements of the Act and
Regulation Y, but is required to divest itself of such shares as
soon as reasonably possible.) The Act provides that the Federal
Reserve Board shall not approve any acquisition, merger or
consolidation which would result in a monopoly, or which would be
in furtherance of any combination or conspiracy to monopolize or
attempt to monopolize the business of banking in any part of the
United States, or any other proposed acquisition, merger or
consolidation, the effect of which may be substantially to lessen
competition or to tend to create a monopoly in any section of the
country, or which in any other manner would be a restraint of
trade, unless the anticompetitive effects of the proposed
combination are clearly the convenience and needs of the
community
to be served. In approving acquisitions by bank holding
companies
of banks and companies engaged in banking-related activities, the
Federal Reserve Board considers a number of factors, including
the
expected benefits to the public such as greater convenience,
increased competition or gains in efficiency as weighed against
the
risks of possible adverse effects such as undue concentration of
resources, decreased or unfair competition, conflicts of
interest,
or unsound banking practices. The Federal Reserve Board is also
empowered to differentiate between new activities and activities
commenced through acquisition of a going concern.
Prior to September 29, 1994, the Act prohibited the
acquisition by a bank holding company of shares of a bank located
outside the home state of such bank holding company unless such
acquisition was specifically authorized by statute of the state
in
which the bank is located. Under the Act [12 U.S.C. 1842(d)], an
interstate banking corporation was previously required to
establish
a separate bank holding company in each state where it intended
to
acquire a national or state bank unless the laws of a particular
state permitted acquisition by out-of-state bank holding
companies.
However, under the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994, Public Law 103-328 (the "Interstate
Banking
Act"), the Federal Reserve Board may now approve applications by
a
bank holding company to acquire control of, or all (or
substantially all) of the assets of, a bank located in a state
other than the home state of such bank holding company. The
Interstate Banking Act also permits merger transactions between
banks with different home states including, under limited
circumstances, an interstate merger transaction involving the
acquisition of a branch of an insured bank without the
acquisition
of the bank itself. The Interstate Banking Act also permits
national banks to engage in consolidations or mergers with
out-of-
state banks and permits the Comptroller of the Currency to
approve
applications by a national bank to establish and operate a de
novo
branch in a state other than the national bank's home state, if
the
law of the state where the branch will be located permits all
out-
of-state banks to establish de novo branches in such state. The
Interstate Banking Act will also permit foreign banks, under
certain conditions, to establish and operate a federal (or state)
branch or agency in any state outside the home state of such
foreign bank. Subject to the terms of the Interstate Banking
Act,
and to regulations to be adopted by the Federal Reserve Board,
Comptroller of the Currency and Federal Deposit Insurance
Corporation under the Act, it will now be substantially easier
for
interstate banking corporations and bank holding companies to
acquire banks and establish branch facilities throughout the
United
States, thereby increasing competition between and among banks
and
bank holding companies, as well as between commercial banks and
other financial institutions. Notwithstanding the foregoing
description of the Interstate Banking Act, the provisions
regarding
out-of-state mergers, acquisitions and branch banking will not
generally apply to the Company or its subsidiary banks until June
1, 1997, unless the State of Texas enacts a law accelerating the
effective date of the provisions permitting interstate merger
transactions. Conversely, the Act also permits the State of
Texas,
prior to the June 1, 1997 effective date of the Act, to enact a
law
expressly prohibiting merger transactions involving out-of-state
banks and bank holding companies.
With certain limited exceptions, the Act provides that a
bank holding company may not engage in any business other than
that
of banking, managing or controlling banks and other authorized
subsidiaries of which it owns or controls 25% or more of the
voting
shares, and may not own or control more than 5% of the voting
shares of any company which is not a bank. Among the exceptions,
one provides services to the bank holding company or its
subsidiary
banks. Another exception permits a bank holding company to
acquire
shares which are eligible for investment by a national banking
association. In addition, the Act permits a bank holding company
to acquire shares of any company, the activities of which the
Federal Reserve Board, after due notice and opportunity for
hearing, has determined to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto.
The Federal Reserve Board has issued regulations setting
forth certain activities regarded as closely related to banking
or
managing or controlling banks and thus permissible for bank
holding
companies. Such activities include, among others: (1) the
making
or acquiring of loans or other extensions of credit; (2) the
servicing of loans for any person; (3) the performing of
certain
trust functions; (4) the making of equity and debt investments
in
projects or corporations designated primarily to promote
community
welfare; (5) providing bookkeeping and data processing services
for the internal operations of a bank holding company and its
subsidiaries, and the storing and processing of other banking,
financial or related economic data, such as performing payroll,
accounts receivable or payable, or billing services; (6) acting
as an insurance agent or broker under certain circumstances and
with respect to certain types of insurance; (7) providing
certain
securities brokerage services; (8) certain leasing of real and
personal property; (9) insurance underwriting and insurance
activities; (10) underwriting and dealing in government
obligations and money market instruments; (11) acting or
servicing as an investment or financial advisor; (12) real
estate
and personal property appraising; (13) consumer financial
counseling; and (14) tax planning and preparation.
Regulations
have also been issued with respect to ownership by bank holding
companies of so-called "non-bank banks," i.e., banks which do not
accept demand deposits or do not make commercial loans. The
Federal Reserve Board has cease-and-desist powers over parent
holding companies and nonbanking subsidiaries where their actions
would constitute a serious threat to the safety, soundness or
stability of a subsidiary bank. Registered bank holding
companies
are required to divest themselves of all activities not permitted
by these regulations.
A subsidiary bank of a bank holding company is subject to
certain restrictions imposed by the Federal Reserve Act with
regard
to (i) loans or extensions of credit to the bank holding company
or
any of its subsidiaries, (ii) the purchase of or investment in
securities issued by the bank holding company or any of its
subsidiaries, (iii) the purchase of other assets from the bank
holding company or any of its subsidiaries, and (iv) the
acceptance
of securities issued by the bank holding company or any of its
subsidiaries as collateral for a loan or extension of credit.
Further, the Act and the Federal Reserve Board's regulations
thereunder prohibit a bank holding company and its subsidiaries
from certain tie-in arrangements in connection with any extension
of credit or lease or sale of any property or the furnishing of
services.
The Texas Banking Code of 1943, as amended, grants to the
Banking Commissioner of Texas the authority to disapprove any
acquisition (or activity regulated by Section 4 of the Bank
Holding
Company Act of 1956, as amended, which does not include the
acquisition of banks or certain banking activities), by a bank
holding company doing business in the State, unless he finds that
is can reasonably be expected to produce benefits to the public,
such as greater convenience or increased competition, that
outweigh
possible adverse effects, such as undue concentration of
resources,
decreased or unfair competition, conflicts of interest or unsound
banking practices. Prior to 1987 the banking laws of the State
of
Texas did not permit acquisition by an out-of-state bank holding
company of a Texas state bank, a national bank located in Texas
or
a bank holding company owning or controlling a state or national
bank located in Texas. However, by amendments to the Texas
Banking
Code which became effective January 1, 1987, a bank located in
the
State of Texas, or a bank holding company owning or controlling a
bank located in Texas, may be acquired by an out-of-state bank
holding company upon compliance with the provisions of the
Banking
Code and the Commissioner's regulations.
First Abilene, First Sweetwater, First Cleburne and
Eastland
are chartered under the National Bank Act and are subject to the
supervision and regulation of, and are regularly examined by, the
Comptroller of the Currency of the United States. Hereford,
Stephenville and San Angelo are chartered under the Texas Banking
Code and are similarly supervised, regulated and examined by the
Banking Commissioner of the State of Texas. The supervision and
regulation of the banks by all of these authorities is primarily
intended to protect the interest of depositors, though
shareholders
are likewise benefited. Various requirements and restrictions
under the laws of the United States and the State of Texas affect
the operations of each of the banks, including the requirement to
maintain reserves against deposits, restrictions on the nature
and
amount of loans which may be made and the interest that may be
charged thereon, and restrictions relating to investments and
other
activities.
First Abilene, Hereford, First Sweetwater, First Cleburne,
Eastland, Stephenville and San Angelo are members of the Federal
Deposit Insurance Corporation. The Federal Deposit Insurance Act
requires that the Federal Deposit Insurance Corporation approve
any
merger or consolidation by or with an insured bank or any
establishment of branches by an insured bank, and it is also
empowered to regulate interest rates paid by insured banks. The
approval of the Federal Deposit Insurance Corporation must also
be
obtained by an insured bank before it retires any part of its
common or preferred stocks or retires any part of its capital
notes or debentures. However, an insured bank which is a member
of
the Federal Reserve System is regulated with respect to the
foregoing matters by the Federal Reserve System.
In addition, the Federal Deposit Insurance Act makes
applicable to insured banks provisions of the federal banking
laws
which establish limitations with respect to loans to, extensions
of
credit to, or purchases of securities from affiliates.
Affiliates
include any bank holding company of which a bank is a subsidiary
and any other subsidiary of a bank holding company of which the
bank is a subsidiary. Bankshares and each of its subsidiary
banks
are affiliates of each other.
First Abilene, First Sweetwater, First Cleburne and
Eastland
are member banks of the Federal Reserve System. By being a
member
bank in good standing, each of such banks has available the bank
credit facilities of the Federal Reserve Bank of Dallas, and thus
may obtain discounts, advancements and accommodations from that
Reserve Bank.
As a condition of membership in the Federal Reserve System,
First Abilene, First Sweetwater, First Cleburne and Eastland must
hold shares of stock in the Federal Reserve Bank of Dallas.
First
Abilene had paid $990,000, First Sweetwater $150,000, First
Cleburne $171,000 and Eastland $105,000, for such stock.
Pursuant
to law, each bank has paid only one-half of the par value of such
shares and is subject in the future to a call for the remaining
50%
should it be determined that such a call is in the best interest
of
the Federal Reserve Bank.
As member banks, First Abilene, First Sweetwater, First
Cleburne, and Eastland are subject to the regulations of the
Board
of Governors of the Federal Reserve System and to the limitations
and restrictions imposed upon the Bank by such regulations and by
the Federal Reserve Act. Bankshares, Hereford, and Stephenville
may be deemed to be "affiliates" within the meaning of such Act,
which imposes restrictions on loans by subsidiary banks to
Bankshares on investments by those banks in the stock or
securities
of Bankshares and on the use of such stock or securities as
collateral security for loans by those banks to any borrower.
Bankshares is also subject to certain restrictions with respect
to
engaging in the business of issuing, underwriting, public sale
and
distribution of securities.
The ability of Bankshares to pay dividends is largely
dependent upon the amount of dividends declared by the Delaware
BHC
and its subsidiary banks and any subsequently-acquired affiliated
banks. Under the Texas Banking Code of 1943, as amended, before
any dividend may be paid to Bankshares by an affiliated state
bank,
the state bank must transfer to "certified surplus" an amount
which
is not less than 10% of the net profits of such bank earned since
the last dividend was declared; provided, however, that a
transfer
is not required to certified surplus of a sum which would
increase
the certified surplus to more than the capital of the bank.
Under
the Federal Reserve Act, the approval of the Federal Reserve
Board
is required if dividends declared by any subsidiary state bank
which is a member of the Federal Reserve System in any year
should
exceed the total of net profits for that year combined with the
retained net profits for the preceding two years. Approval of
the
Comptroller of the Currency, or his designate, is required for
any
dividend to Bankshares from an affiliated national bank if the
total of all dividends, including any proposed dividend, declared
by such bank in any calendar year exceeds the total of its net
profits for that year combined with its retained net profits for
the preceding two years, less any required transfers to surplus
or
a fund for the retirement of any preferred stock of such bank.
At
December 31, 1994, approximately $14,256,000 was available for
the
declaration of dividends by Bankshares' subsidiary banks without
approval of regulatory agencies. All dividends declared by
subsidiary banks are paid to the Delaware BHC and dividends must
then be declared and paid by the Delaware BHC to Bankshares.
Stockholders of banks (including bank holding companies
which own stock in banks) may be compelled by bank regulatory
authorities to invest additional capital, in the event their
bank's
experience either significant operating losses or rapid growth of
loans or deposits. In addition, Bankshares may also be required
to
provide additional capital to the banks which it acquires, as a
condition to obtaining the approvals and consents of regulatory
authorities in connection with such acquisitions.
The State of Texas has various usury laws that place
ceilings on interest rates that can be charged by banks on
particular kinds of loans or on loans to particular classes of
borrowers. Moreover, the federal government, by statute and
regulation, preempted, for certain categories of loans and for
designated periods of time, the usury laws of the several states
and imposed or, in some cases, removed ceilings on interest rates
for particular kinds of loans or on loans to particular classes
of
borrowers.
Commercial banking is affected not only by general economic
conditions but also by the fiscal and monetary policies of the
Federal Reserve Board. Changes in the discount rate on member
bank
borrowings, availability of borrowings at the "discount window,"
open market operations, the imposition of and changes in reserve
requirements against member banks' deposits and assets of foreign
branches, the imposition of and changes in reserve requirements
against certain borrowings by banks and their affiliates and the
placing of limits on interest rates which member banks may pay on
time and savings deposits are some of the instruments of fiscal
and
monetary policy available to the Federal Reserve Board. These
fiscal and monetary policies influence to a significant extent
the
overall growth of bank loans, investments and deposits and the
interest rates charged on loans or paid on time and savings
deposits.
Bankshares is unable to predict the nature or the extent of
the effects on its business and earnings which fiscal or monetary
policies or economic controls may have in the future.
In 1986 the Texas Constitution was amended to permit
limited
branch banking in Texas. Although the Constitutional amendment
and
legislation authorized only limited branch banking, a federal
court
decision in June of 1988 and a later opinion of the Texas
Attorney
General held that national banks and state-chartered banks in
Texas
have State-wide branch banking authority. Moreover, as
previously
indicated, the Interstate Banking Act has substantially changed
regulation of interstate banking activities and expressly permits
bank holding companies to acquire banks and other financial
institutions located in other states and for national banks (and
foreign banks) to establish de novo branch banks in other states.
G. Statistical Disclosure
Information related to industry segments and foreign
operations required by Regulation S-K is not applicable. The
following tables provide information required by Guide 3,
"Statistical Disclosure by Bank Holding Companies", that has not
been included in Part II, item 7.
Table 1 - Composition of Loans (000's omitted):
December 31,
1994 1993 1992 1991
1990
Commercial,
financial,
and
agricultural $173,410,963 $198,561,759 $190,785,608
$178,698,515 $195,348,944
Real estate -
construction 11,244,692 6,777,796 5,159,484
3,446,053 4,535,183
Real estate -
mortgage 115,172,072 113,697,844 95,903,542
100,014,995 102,006,332
Consumer 125,732,896 101,205,604 82,637,708
67,973,955 52,362,655
$425,560,623 $420,243,003 $374,486,342
$350,133,518 $354,253,114
Loan Concentrations
At December 31, 1994, the Company had $62,154,752 million in
loans outstanding to
agricultural which represented 14.61% of total loans.
Table 2 - Maturity Distribution and Interest Sensitivity of Loans
at December 31, 1994:
Over one
Year
One Year orThrough Over Five
less Five years
Years Total
Commercial, financial,
and agriculture $ 130,171,064 $ 40,487,205
$ 2,752,694 $ 173,410,963
Real estate - construction 8,663,412 2,581,280
- 11,244,692
$ 138,834,476 $ 43,068,485
$ 2,752,694 $ 184,655,655
Maturities
After One Year
Loans with fixed interest rates $ 20,026,301
Loans with floating or
adjustable interest rates 25,794,878
$ 45,821,179
Table 3 - Nonperforming Assets (000's omitted):
At December 31,
1994 1993 1992
1991 1990
Nonaccrual loans $ 1,277,156 $ 3,416,338 $
2,589,539 $ 4,405,189 $ 6,284,352
Loans past due
90 days or more 83,999 165,141
721,267 528,317 483,873
Restructured loans - - -
- 1,117,784
Nonperforming
loans 1,361,155 3,581,479
3,310,806 4,933,506 7,886,009
Foreclosed assets 814,413 1,910,089
2,531,388 3,704,686 4,362,489
Total
nonperforming
assets $ 2,175,568 $ 5,491,568 $
5,842,194 $ 8,638,192 $ 12,248,498
As a % of loans
and foreclosed
properties 0.51% 1.30%
1.55% 2.44% 3.42%
Potential Problem Loans
Certain loans classified for regulatory purposes as doubtful,
substandard, or
special mention are included in the nonperforming loan table.
Also included in the
classified loans are certain other loans which are deemed to be
potential problems.
Potential problem loans are those loans which are currently
performing but where known
information about trends or uncertainties or possible credit
problems of the borrowers
causes management to have concerns 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 loans totaled $840,547 million at December 31,
1994.
Table 4 - Composition of Investment Securities
Held -to- Maturity
December 31,
1994 1993 1992
U.S. Treasury
obligations
and obligations of
U.S. government
corporations and
agencies $ 378,239,397 $ 391,622,606 $ 361,542,225
Obligations of
states and
political
subdivisions 16,492,371 17,484,965 12,461,597
Mortgage-backed
securities 24,163,330 44,716,714 27,871,134
Total debt
securities 418,895,098 453,824,285 401,874,956
Other securities - 2,355,251 2,565,263
$ 418,895,098 $ 456,179,536 $ 404,440,219
Available -for- Sale December 31,
1994
U.S. Treasury
obligations
and obligations
of U.S. government
corporations and
agencies $ 14,098,806
Obligations of states and
political subdivisions -
Mortgage-backed securities 11,691,860
Total debt securities 25,790,666
Other securities 2,241,266
$ 28,031,932
Table 5 - Maturities and Yields of Investment Securities Held
December 31, 1994 (000's omitted):
Maturing
After one but After five but
Held-to-Maturity: Within one year Within five years
Within ten years After ten years
Total
Amount Yield Amount Yield Amount Yield
Amount Yield
Amount Yield
U.S. Treasury obligations and
obligations of U.S. government
corporations and agencies$ 102,810 5.24%$ 279,834 5.56%
$ 1,7355.48% $
7,9806.20% $ 392,359 5.49%
Obligations of states and
political subdivisions 3,225 8.35 8,922 6.18
3,3486.97
1,9017.81 17,396 6.91
Mortgage-backed securities 668.17 11,266 6.85
7,2118.35
6,9146.45 25,457 7.17
Total $ 106,101 5.34% $ 300,022 5.63% $ 12,294
7.57% $
16,7956.48% $ 435,212 5.64%
Maturing
After one but After five but
Available-for-Sale: Within one year Within five years
Within ten years After ten years
Total
Amount Yield Amount Yield Amount Yield
Amount Yield
Amount Yield
U.S. Treasury obligations and
obligations of U.S. government
corporations and agencies $ 4,943 5.13%$ 8,198 5.48%
$ 9585.19% $
% $ 14,099 5.35%
Obligations of states and
political subdivisions
Mortgage-backed securities 3,308 6.21 5,142
7.03 3,242 6.99
11,692 6.79
Other securities
2,2416.45 2,241 6.45
Total $ 4,943 5.13% $ 11,506 5.69% $ 6,100
6.74% $
5,4836.77% $ 28,032 6.03%
Table 6 - Analysis of the Allowance for Loan Losses
1994 1993 1992
1991 1990
Balance at January 1, $ 9,013,387 $ 8,298,738
$ 7,708,488 $ 7,811,813 $ 4,859,900
Allowance established
from purchase
acquisition - 712,222
- - 1,564,227
9,013,387 9,010,960
7,708,273 7,811,813 6,424,127
Charge-offs:
Commercial, financial
and agricultural 740,047 1,232,129
1,170,284 1,820,860 2,087,001
Consumer 605,240 552,482
689,349 539,218 585,827
All other 27,790 340,537
167,487 365,645 25,524
Total loans charged off 1,373,077 2,125,148
2,027,120 2,725,723 2,698,352
Recoveries:
Commercial, financial
and agricultural 1,899,465 1,200,055
1,247,851 1,175,795 1,022,390
Consumer 288,084 318,885
170,636 179,605 166,148
All other 81,565 100,625
53,813 26,998 7,500
Total recoveries 2,269,114 1,619,565
1,472,300 1,382,398 1,196,038
Net (recoveries)/
charge-offs (896,037) 505,583
554,820 1,343,540 1,502,314
Provision/(credit) for
loan losses (885,000) 508,010
1,145,070 1,240,000 2,890,000
Balance at December 31,$ 9,024,424 $ 9,013,387
$ 8,298,738 $ 7,708,488 $ 7,811,813
Loans at year-end $ 425,560,623 $ 420,243,003
$ 374,486,342 $ 350,133,518 $ 354,253,114
Average loans 411,884,911 399,806,116
362,413,567 349,060,202 304,146,160
Net charge-offs/
(recoveries)/ (0.22)% 0.13%
0.15% 0.38% 0.49%
average loans
Allowance for loan
losses/year-end loans 2.12 2.14
2.22 2.20 2.21
Table 7 - Allocation of Allowance for Loan Losses
1994 1993
1992 1991 1990
Allocation Allocation
Allocation Allocation Allocation
Amount Amount
Amount Amount Amount
Real estate-
construction $ 238,245 $ 145,116
$ 114,523 $ 75,541 $ 99,991
Real estate - mortgage 2,442,009 2,439,023
2,125,307 2,201,483 2,249,021
Commercial, financial
and agricultural 3,677,453 4,258,824
4,227,377 3,935,289 4,308,215
Consumer 2,666,717 2,170,424
1,831,531 1,496,176 1,154,586
$ 9,024,424 $ 9,013,387
$ 8,298,738 $ 7,708,488 $ 7,811,813
Allocation as Percent of Total Loans
1994 1993
1992 1991 1990
Real estate-construction 2.6% 1.6%
1.4% 0.1% 1.3%
Real estate - mortgage 27.1 27.1
25.6 28.6 28.8
Commercial, financial and
agricultural 40.8 47.3
50.9 51.0 55.1
Consumer 29.6 24.1
22.1 19.4 14.8
Table 8 - Composition of Deposits (000's omitted):
1994
1993
1992
Average Average Average
Average Average Average
Balance Rate Balance
Rate Balance Rate
Noninterest-bearing
deposits $ 187,996 - $ 173,180
- $ 149,124 -
Interest-bearing deposits
Interest-bearing
checking 178,095 2.01% 166,960
2.19% 154,073 2.79%
Savings and money
market accounts 187,368 2.49 167,095
2.74 147,633 3.11
Time deposits:
under $100,000 244,327 3.71 261,642
3.51 251,810 4.39
Time deposits of
$100,000 or more 95,035 4.01 105,133
2.65 91,718 4.49
Total interest-
bearing deposits 704,825 3.00 700,830
2.88 645,234 3.73
Total deposits $ 892,821 $ 874,010
$ 794,358
Table 9 - Remaining Maturity of Time Deposits of $100,000 or More
(000's omitted):
December 31, 1994
(In thousands)
Under three months $ 44,161
Over three through six months 25,604
Over six through twelve months 22,808
Over twelve months 13,314
$105,887
Item 2. Properties
A. First Financial Bankshares/First National Bank of
Abilene
The principal offices of Bankshares and First Abilene are
located in the First National Bank Building at 400 Pine Street in
downtown Abilene, Texas. First Abilene occupies the first four
floors of the building and the remaining six floors of this
170,842
square foot facility are available for lease to tenants. The
First
National Bank Building is connected to the First National West
Building, a six-story modern facility owned by First Abilene
which
contains 52,800 square feet of lease space which is rented to
business and professional tenants. First Abilene began occupying
the First National Bank Building in June of 1984 and, at the same
time, a new four-level drive-in parking garage was completed
immediately south across the street from the new bank building,
which is connected to the bank building by an over-the-street,
enclosed pedestrian bridge. The total cost of the project was
$14,000,000. Until January 1, 1989, both the new First National
Bank Building and the connected parking garage were owned by a
joint venture between First Abilene and the Trammell Crow
Company.
Effective January 1, 1989, First Abilene purchased the interest
of
Trammell Crow Company and is now the sole owner of the First
National Bank building and the connecting parking garage. A note
payable to Aetna Life Insurance Company in the amount of $
7,000,000 which was previously secured by this property was paid
in
full during 1991.
First Abilene also owns a five-story office building known as
the First National/Ely Building, which is located directly south
across the street from the First National West Building and
connected to the First National West Building by an underground
pedestrian tunnel. The First National/Ely Building contains
approximately 34,000 square feet of space and is leased to
business
and professional tenants. The premises also includes a ground
level parking lot with spaces for 22 cars which are leased to
tenants and others. Both the First National/Ely Building and the
parking lot are situated on land leased by First Abilene. The
lease has 20 years remaining at this time and provides an option
to
purchase the underlying property for $360,000.
First Abilene owns and operates a 17-lane drive-in banking
facility which was completed in 1981 and which is also located on
Pine Street, two blocks north of First Abilene's main banking
facilities. In 1987 First Abilene completed construction of a
branch banking facility located at the northwest corner of North
Judge Ely Boulevard and East North Tenth Street in Abilene. The
cost of the site was $412,383 and the construction cost for the
building and improvements was $ 554,318. The new branch banking
facility includes a one-story office building containing 2,960
square feet and six lane drive-in facility.
As a result of the merger between First Abilene and American
National, First Abilene acquired title to the drive-in banking
facility owned by American National on Buffalo Gap Road in the
southwest part of Abilene, Texas. The drive-in facility is
located
on 2.23 acres of land adjoining a five-story office building in
which American National leased office space for its banking
operations. Following its merger with American National First
Abilene entered into a 10-year lease covering 11,009 square feet
of
office space on the ground floor of the building adjacent to the
drive-in facility, which office space includes all, or
substantially all, of the space formerly leased and occupied by
American National for its primary banking facility. In addition
to
the original 10-year term of the lease, the lease provides three
renewal options on the leased premises, each option being for a
renewal term of five years. The drive-in banking facility was
constructed to provide for seventeen (17) lanes, but only eight
drive-in teller windows and lanes are presently being utilized.
As a result of the merger between First Abilene and BOC,
First Abilene acquired title to the banking facility at the
corner
of South 14th and Willis Streets in Abilene, Texas, occupying the
first floor and renting 27,000 square feet of office space to
tenants. The building is of steel reinforced concrete and
masonry
construction with air conditioning throughout. The building was
constructed in 1966 and is of modern design. It was purchased
from
C M & M, a partnership, subject to a mortgage and promissory note
payable to Connecticut General Life Insurance Company. BOC did
not
assume the mortgage note, but the property was conveyed to the
Bank
by warranty deed dated March 30, 1967, subject to the mortgage.
The mortgage note was paid in full in 1992. BOC's facilities are
located on six (6) acres of land, all of which is subject to the
above-described mortgage. During 1978 BOC conveyed approximately
4-1/2 acres (not included in the above six acres) of its property
(considered to be surplus) for fair market value to an individual
from Fort Worth, Texas, who developed the property into offices
and
parking. In 1976 a 12-lane drive-in facility located adjacent to
the main banking facility was completed. In 1982 BOC completed
construction of an addition to the teller service area for the
drive-in facility at an estimated cost of $200,000. In December
1984, BOC purchased property (approximately 1.85 acres) located
on
Southwest Drive in Abilene, Texas, for future construction of a
full-service banking facility. The cost of such property was
$344,937.02. As a result of the mergers of American National and
BOC with First Abilene and the operation of the banking
facilities
of American National and BOC as branch banks of First Abilene, it
is unlikely that First Abilene, which acquired all of BOC's
assets
in the merger, will proceed with construction of banking
facilities
at the property on Southwest Drive and the property is presently
listed for sale.
B. Hereford State Bank
Hereford owns its main banking house located at 212 North
Sampson Street, Hereford, Texas. The building contains 16,000
square feet (not including drive-in facilities) and is of
concrete
block-brick face construction with air conditioning throughout.
This new facility was completed during 1977. The drive-in
complex
is 12 years old, is of brick construction, and is connected to
the
bank by a walk-through tunnel.
C. First National Bank, Sweetwater, Texas
First Sweetwater owns its main banking house located at 201
Elm Street in The City of Sweetwater, Texas. The building
contains
20,000 square feet and is constructed of steel-reinforced
concrete
and marble, with air conditioning throughout. The building was
constructed in 1974 and is of modern design. First Sweetwater
also
maintains a drive-in facility located on the same premises as its
main banking facility. In December 1987, First Sweetwater
completed construction of a basement to its banking facility at a
cost of $289,000.
D. Eastland National Bank
Eastland owns its banking facilities located at 201 East Main
Street in Eastland, Texas. The building contains 13,000 square
feet and is of steel and stucco construction with air
conditioning
throughout. It was constructed in 1980 and is of modern design.
Eastland also maintains a drive-in facility located on the same
premises as its main banking facility.
E. The First National Bank of Cleburne
First Cleburne owns its banking facilities located at 403
North Main Street in Cleburne, Texas. The building contains
18,000
square feet and is of steel and brick masonry construction with
air
conditioning throughout. It was constructed in 1978 and is of
modern design. Cleburne also maintains a drive-in facility
located
on the same premises as its main banking facility. On September
23, 1994, First Cleburne acquired the Cleburne branch of Bank One
Texas, N.A. The building is of brick masonry construction,
contains 4,400 square feet and includes a drive-in teller window.
Now operating as a branch of First Cleburne, the facility is
located approximately 3 miles west of the main office.
F. Stephenville Bank & Trust
Stephenville Bank & Trust owns its banking facility which is
located at 298 West Washington in Stephenville, Texas. The
building is a brick masonry structure with approximately 10,000
square feet. Stephenville owns and operates a drive-in facility
that is located across the street from their main banking
facility,
and a branch facility consisting of 1,000 square feet located on
the west side of the city.
G. Southwest Bank of San Angelo
Southwest Bank owns its banking facility which is located at
3471 Knickerbocker Road in San Angelo, Texas. The five-story
building, including the office tower, has approximately 29,250
thousand square feet and is of steel and stucco construction.
Approximately 11,800 square feet of the office tower is available
for lease. The bank also owns and operates a drive-in banking
facility on the same premises as its main banking offices.
Item 3. Legal Proceedings
Other than routine litigation in the normal course of
business, there are no material pending legal proceedings to
which
Bankshares, the Delaware BHC or its subsidiary banks or any of
their properties are subject, nor are there any known material
legal proceedings involving directors, officers or affiliates of
Bankshares. Other than regular, routine examinations by state
and
federal banking authorities, there are no proceedings pending or
known to be contemplated by any governmental authorities except
the
following:
As a result of a routine examination of Southwest Bank by the
Federal Deposit Insurance Corporation, Southwest Bank entered
into
a Memorandum of Understanding with the FDIC in December of 1994,
which required Southwest Bank to develop, adopt and implement
written policies, training programs, formal internal controls and
management review procedures with respect to consumer credit
transactions, consumer real estate loans and compliance with the
requirements of the Bank Secrecy Act. The Memorandum required
that
all corrective action prescribed in the Memorandum, including
implementation of the policies, programs, controls and procedures
described therein, be accomplished within 60 days. The Company
believes that Southwest Bank has complied in full with the
requirements of the Memorandum, that all corrective action has
been
taken, and that Southwest Bank has adopted and implemented all
necessary written policies, training programs, formal internal
controls and management review procedures. Moreover, the Company
does not believe that any of the deficiencies or problems cited
in
the FDIC examination had any adverse effect upon, nor that any of
the policies, programs, controls or procedures adopted in
response
to the Memorandum will place any restrictions upon, the financial
operations of the Company or Southwest Bank.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the security holders
of Bankshares during the fourth quarter of Bankshares' fiscal
year
ending December 31, 1994.
PART II
Item 5. Market for Registrant's Common Stock and Related
Security
Holder Matters
As of February 2, 1995, there were 1,412 holders of
Bankshares' stock reflected on its records. Except for shares
held
by First Abilene, First Sweetwater, and Stephenville in various
fiduciary capacities (see Item 12 following), no shareholder or
shareholder group known to Bankshares owns five percent (5%) or
more of Bankshares' issued and outstanding stock. Market, price
and dividend information about the stock for the past three years
is set forth on page 30 under Item 7. Restrictions on
Bankshares'
present or future ability to pay dividends have been discussed
under Item 1, above, under the topic "Supervision and
Regulation."
Item 6. Selected Financial Data
First Financial Bankshares, Inc.
Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
Year
ended December 31,
1994 1993 (1) 1992
(1) 1991 (1) 1990 (1)
Summary Income Statement
Information:
Interest income $ 61,416 $ 59,850 $
61,441 $ 68,127 $ 64,241
Interest expense 21,264 20,333
24,202 35,912 35,471
Net interest income 40,152 39,517
37,239 32,215 28,770
Provision (credit)
for loan losses (885) 508
1,145 1,240 2,890
Non-interest income 11,593 11,696
9,768 9,232 8,667
Non-interest expense 33,092 31,875
28,935 27,307 23,889
Income before
income taxes 19,538 18,830
16,927 12,900 10,658
Provision (benefit)
for income taxes 6,426 6,105
5,189 3,824 2,756
Net income before
cumulative effect
of accounting change 13,112 12,725
11,738 9,076 7,902
Cumulative effect of
accounting change (2) - 1,024
- - -
Net income $ 13,112 $ 13,749 $
11,738 $ 9,076 $ 7,902
Per Share Data (3):
Net income before
cumulative effect of
accounting change $ 2.62 $ 2.56 $
2.37 $ 1.85 $ 1.62
Net income per share 2.62 2.77
2.37 1.85 1.62
Cash dividends
declared 1.10 0.96
0.76 0.66 0.56
Book value at
period end 20.79 19.45
17.60 15.96 14.74
Earnings performance
ratios (4):
Return on average
assets 1.31% 1.30%
1.32% 1.06% 1.06%
Return on average
equity 13.07 13.56
13.96 11.55 11.38
(Summary Balance Sheet
Data Period-end):
Investment securities $ 463,244 $ 456,180 $
404,440 $ 384,919 $ 309,346
Loans, net of
allowance for loan
losses 416,536 411,230
366,188 342,619 346,687
Total assets 1,012,613 1,017,983
928,338 915,308 866,952
Deposits 900,930 913,350
831,542 824,837 774,542
Total liabilities 908,705 921,273
841,199 836,693 794,543
Total shareholders'
equity 103,908 96,710
87,139 78,615 72,409
Asset quality ratios:
Allowance for loan
losses/Period-
end loans 2.12% 2.14%
2.22% 2.20% 2.21%
Nonperforming assets/
Period-end loans
plus foreclosed
assets 0.51 1.30
1.55 2.44 3.42
Net charge-offs/
Average loans (0.22) 0.13
0.16 0.39 0.50
Capital ratios:
Average shareholders'
equity/average assets 10.01% 9.59%
9.45% 9.18% 9.33%
Leverage ratio (5) 10.26 9.51
9.28 8.48 -
Tier I risk-based
capital (6) 20.09 16.76
16.90 15.38 -
Total risk-based
capital (7) 21.34 18.02
18.38 16.86 -
Dividend payout ratio 41.66 34.04
32.03 34.81 33.95
(1) Restated to reflect pooling -of- interests.
(2) Adoption of Statement of Financial Accounting Standards No.
109, "Accounting for
Income Taxes".
(3) Historical amounts adjusted for stock dividends and stock
splits.
(4) Calculated on net income before cumulative accounting
adjustment.
(5) Shareholders' equity (before unrealized loss on securities
available for sale) less
intangibles/fourth quarter average assets less intangibles.
(6) Shareholders' equity (before unrealized loss on securities
available for sale) less
intangibles/risked-adjusted assets.
(7) Shareholders' equity (before unrealized loss on securities
available for sale) less
intangibles plus allowance for loan losses to the extent
allowed under regulatory
guidelines/risk-adjusted assets.
Item 7. Management's Discussion and Analysis of
Results of Operations and Financial Condition
Review of Operating Results
Net income from operations for 1994 was $13.1 million or
3.04%
above the $12.7 million in operating earnings for 1993, which was
8.5% above the $11.7 million earned in 1992. Earnings per share
were $2.62, $2.56, and $2.37 for 1994, 1993, and 1992,
respectively. Return on average assets was 1.31% for 1994,
compared to 1.30% in 1993 and 1.32% in 1992. The Company's 1994
return on shareholders' equity was 13.07% compared to 13.56% in
1993 and 13.96% in 1992. Not included in the 1993 amounts, for
comparative purposes, was nonrecurring income of $1.0 million, or
$ .21 per share, which represented the cumulative effect of the
adoption of Financial Accounting Standard No. 109, "Accounting
for
Income Taxes". During 1994 the Company acquired Concho
Bancshares,
Inc. and its wholly-owned subsidiary, Southwest Bank of San
Angelo,
through an exchange of shares. The transaction was treated as a
pooling-of-interests for accounting purposes; therefore, the
1994
financial statements reflect the results of the acquired entity
for
the entire year and prior periods have been restated to include
the
combined balance sheets and income statements.
The increased income for 1994 is attributed primarily to
increased net tax-equivalent interest income of $697 thousand and
$885 thousand in reductions to the allowance for loan losses.
These gains were offset to some extent by various expenses
related
to the installation of new data processing systems and losses
resulting from the sale of certain low-yielding securities.
Details are provided further in this discussion. The 1993
earnings
reflect higher net interest income and noninterest income, a
lower
loan loss provision, and when compared to 1992, benefit from the
addition of Stephenville Bank & Trust Co. which was acquired in
a
cash purchase in February 1993.
Net Interest Income
For 1994, net interest income on a tax-equivalent basis
amounted
to $40.6 million, a $697 thousand increase over the 1993 total of
$39.9 million. The increase was attributable to a higher average
volume of interest earning assets with a slightly higher yield,
funded partially by higher average volumes of interest free
deposits and equity capital. These factors served to offset a
decreased yield on investment securities and a higher rate paid
on
interest-bearing liabilities, which, on an average basis, were
virtually unchanged from the prior year.
On a tax-equivalent basis, net interest income of $39.9
million
in 1993 increased $2.1 million from 1992 and resulted from growth
in average earning assets, a substantial amount of which related
to
the acquisition of the Stephenville Bank in February 1993. Also
during 1993, the net yield on earning assets declined to 4.51%
from
4.72% the prior year primarily as the result of the maturity and
reinvestment of fixed rate investments during a period of
declining
interest rates.
Table 1 below summarizes the changes in net interest income
on
a fully tax-equivalent basis by major category of
interest-earning
assets and interest-bearing liabilities, identifying changes
related to volumes and rates. Nonaccrual loans are included in
the
loan volumes used to calculate the following analysis of net
interest income.
Table 1 - Changes in Interest Income and Interest Expense (000's
omitted):
1994 Compared to 1993
1993 Compared to 1992
Change Attributable to Total
Change Attributable to Total
Volume Rate Change
Volume Rate Change
Short-term investments $ (616) $ 373 $ (243)
$ 83 $ (227) $ (144)
Taxable investment
securities 1,339 (2,426) (1,087)
3,210 (5,046) (1,836)
Tax-exempt investment
securities (1) 331 (172) 159
48 (203) (155)
Loans (1) 987 1,812 2,799
3,329 (2,905) 424
Interest income 2,041 (413) 1,628
6,670 (8,381) (1,711)
Interest bearing deposits 115 812 927
2,073 (5,921) (3,848)
Short-term borrowings 9 8 17
(18) (1) (19)
Long-term debt (13) - (13)
(2) - (2)
Interest expense 111 820 931
2,053 (5,922) (3,869)
Net interest income $ 1,930 $ (1,233) $ 697
$ 4,617 $ (2,459) $ 2,158
(1) Computed on a tax-equivalent basis assuming a marginal tax
rate of 35% in 1994 and 1993 and 34% in 1992.
The following table 2 presents average balances, income and
expense, and yields and rates for 1994, 1993
and 1992.
Table 2 - Average Balances and Average Yields and Rates (000's
omitted)
1994
1993 1992
Average Income/ Yield/ Average Income/ Yield/
Average Income/ Yield/
Balance Expense Rate Balance Expense
Rate Balance Expense Rate
Assets
Short-term investments$ 30,570 $ 1,288 4.21%$ 51,192
$ 1,531 2.99% $ 48,717 $
1,6753.44%
Taxable investment
securities443,953 23,806 5.36 421,292 24,8935.91
376,121 26,7297.11
Tax-exempt
investment
securities (1) 18,207 1,2907.09 14,080 1,131
8.03 13,573 1,286 9.47
Loans (1) (2) 411,885 35,485 8.62 399,806
32,686 8.18 362,414
32,2628.90
Total earning assets904,615 61,8696.84 886,370 60,241
6.80 800,825 61,952 7.74
Cash and due from banks55,849 51,334
46,252
Bank premises and
equipment 30,340 28,537 28,317
Other assets19,162 19,812 21,680
Intangible assets 1,149 853 1,126
Allowance for loan
losses (9,209) (9,120) (8,214)
Total assets$ 1,001,906 $ 977,786 $
889,986
Liabilities and
Shareholders' Equity
Interest-bearing deposits$ 704,825 $ 21,139 3.00%$ 700,830
$ 20,212 2.88% $ 645,234 $
24,0603.73%
Short-term borrowings 458 214.59 138 4
2.90 675 233.41
Long-term debt 1,095 1049.50 1,232 117
9.50 1,252 119 9.50
Total interest-
bearing liabilities706,378 21,264 3.01 702,200
20,333 2.90 647,161
24,2023.74
Noninterest-bearing
deposits 187,996 173,180 149,124
Other liabilities 7,219 8,595
9,638
Total liabilities 901,593 883,975
805,923
Shareholders' equity 100,313 93,811
84,063
Total liabilities and
shareholders' equity$ 1,001,906 $ 977,786
$ 889,986
Net interest income $ 40,605 $ 39,908
$ 37,750
Rate Analysis:
Interest income/
earning assets 6.84% 6.80%
7.74%
Interest expense/
earning assets 2.35 2.29
3.02
Net yield on
earning assets 4.49% 4.51%
4.72%
(1) Computed on a tax-equivalent basis assuming a marginal tax
rate of 35% in 1994 and
1993 and 34% in 1992.
(2) Nonaccrual loans are included in loans.
Provision for Loan Losses
In 1994 the Company had net loan recoveries of $896 thousand
which, coupled with continued improvement in credit quality,
permitted a credit loan loss provision of $885 thousand. The
charges against earnings for loan loss provisions in 1993 and
1992
were $508 thousand and $1.1 million, respectively. Net loan
charge
offs amounted to $506 thousand in 1993 and $555 thousand in 1992.
Nonperforming assets amounted to $2.2 million at December 31,
1994,
compared to $5.5 million at December 31, 1993. Additional
comparative information is provided in the Allowance for Loan
Losses section of this discussion.
Noninterest Income
Table 3 - Noninterest Income (000's omitted):
Increase Increase
1994 (Decrease) 1993 (Decrease) 1992
Trust department
income $ 2,898 $ (48) $ 2,946 $ 176 $ 2,770
Service fees on
deposit accounts 5,505 (25) 5,530 594 4,936
Other:
Miscellaneous
income 1,364 (16) 1,380 421 959
Interest on loan
recoveries 565 526 39 39 -
Mastercard fees 601 99 502 102 400
Securities gains
(losses) (596) (644) 48 133 (85)
Real estate
mortgage fees 442 (24) 466 402 64
Brokerage
commissions 308 (5) 313 16 297
Safe deposit
rental fees 262 2 260 18 242
Exchange fees 244 32 212 27 185
3,190 (30) 3,220 1,158 2,062
$ 11,593 $ (103) $ 11,696 $ 1,928 $ 9,768
As shown above, total noninterest income in 1994 amounted to
$11.6 million compared to $11.7 million in 1993. Trust fees were
down modestly due primarily to lower stock and bond market values
on which fee income was calculated. The small decrease in
service
fees on deposit accounts is attributable to higher rates used to
calculate earnings credits on corporate accounts and higher
average
balances on accounts which are subject to service charges,
thereby
reducing fees for services. Interest collected in 1994 on loans
which had been charged off in prior years amounted to $565
thousand
as compared to $39 thousand the prior year. Mastercard fees in
1994 increased $99 thousand, or 19.7%, and resulted from higher
volumes of merchant activity. Net losses on sale of securities
totaled $596 thousand in 1994 and resulted from the sale of $11.6
million in low-yielding securities which have been reinvested at
higher rates and will improve the overall portfolio yield in
future
periods. In 1993 the Company had a net gain of $48 thousand
from
the sale of a relatively small volume of securities to reduce
investment in a particular issue in order to meet regulatory
guidelines.
Noninterest income totaled $11.7 million in 1993 which was $1.9
million above the 1992 amount. The addition of the Stephenville
Bank and a significant increase in real estate mortgage fees were
the primary factors contributing to the 1993 increase in total
noninterest income.
Noninterest Expense
Table 4 - Noninterest Expense (000's omitted):
Increase
Increase
1994 (Decrease) 1993
(Decrease) 1992
Salaries $ 13,045 $ 729 $ 12,316 $
1,352 $ 10,964
Payroll taxes 999 44 955 103 852
Profit sharing 1,164 (9) 1,173 103 1,070
Medical and other benefits 1,230 (34) 1,264
306 958
16,438 730 15,708 1,864 13,844
Net occupancy 2,718 297 2,421 (50) 2,471
Equipment expense 2,193 174 2,019 184 1,835
FDIC insurance expense 1,983 42 1,941 161 1,780
Correspondent bank service charges 876 (20) 896 67
829
Other:
Printing and supplies 898 5 893 105 788
Postage and courier 792 39 753 22 731
Legal and accounting fees 785 80 705 134 571
Outside data processing fees 554 (48) 602 21 581
Other professional and
service fees 271 (164) 435 131 304
Advertising 642 48 594 40 554
Computer software amortization234 202 32 32 -
Other miscellaneous 4,708 (168) 4,876
229 4,647
8,884 (6) 8,890
714 8,176
Total Noninterest Expense $ 33,092 $ 1,217 $ 31,875 $
2,940 $ 28,935
As a % of Net Revenue 63.49% 61.77% 60.89%
Noninterest expense for 1994 amounted to $33.1 million, an
increase of $1.2 million, or 3.8% over 1993. The effect of
having
a full year of operating expenses at the Stephenville Bank versus
10 months in 1993 accounted for approximately $415 thousand of
the
1994 increase.
Salaries and employee benefits, the largest component of
noninterest expense increased $730 thousand, or 4.6%, to $16.4
million in 1994, with essentially all of the increase being in
salaries. Adjusting for the effect of the Stephenville Bank
referenced above, 1994 salaries and employee benefits on an
annualized basis reflect a 3.3% increase.
Net occupancy expense of $2.7 million in 1994 was $297
thousand,
or 12.3%, above 1993. Approximately $120 thousand of the
increase
represents additional depreciation expense taken in 1994
resulting
from a change in estimate for the useful life of certain
leasehold
improvements. Depreciation expense for the remodeled data center
space, building repairs, and slightly higher utilities expense
were
other items which contributed to the 1994 increase.
Equipment expense for 1994 increased $174 thousand and amounted
to $2.2 million. The higher 1994 expense resulted primarily from
a $235 thousand increase in equipment depreciation offset by a
$75
thousand decrease in maintenance and repairs. During 1994, the
Company's lead bank, First National Bank of Abilene, installed
new
data processing equipment which accounted for the higher
depreciation expense.
The major components of other noninterest expense are presented
in table 4. The 1994 decrease in professional and service fees
resulted from the termination of certain employee benefit and
investment advisory services at Southwest Bank of San Angelo.
Increased software amortization in 1994 relates to the
company-wide
installation of updated banking system software. Other
miscellaneous consists of outside director fees, travel,
communication, insurance, and various other operating expenses.
Also, the 1994 total for other miscellaneous includes
nonrecurring
computer conversion and training expense of $193 thousand, while
the 1993 total included $356 thousand for the settlement of legal
claims against one of the subsidiary banks.
Noninterest expense for 1993 totaled $31.9 million which was
$2.9 million, or 10.2%, above 1992. Excluding the operating
expenses at the Stephenville Bank which was purchased in February
1993, total noninterest expenses in 1993 were up $866 thousand,
or
3.0%, from the prior year.
Income Taxes
Income tax expense for 1994 amounted to $6.4 million compared
to
$6.1 million in 1993 and $5.2 million in 1992. The higher tax
expense reflected in each succeeding year is attributable to a
higher level of income before taxes and an increased effective
tax
rate due to an increase in the statutory tax rate and declining
levels of tax exempt investments. The Company's effective rates
on pre-tax income were 32.9%, 32.4%, and 30.7% for the years
1994,
1993 and 1992. Note 6 to the consolidated financial statements
provides additional analysis of income tax expense for these
years.
Balance Sheet Review
Total assets amounted to $1.01 billion and $1.02 billion at
December 31, 1994 and 1993, respectively. During 1994 total
assets
averaged $1.0 billion compared to an average of $978 million in
1993. The following sections provide information for the major
balance sheet categories.
Investment Securities
In May 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 115 which
modified
the accounting for investment securities. The statement requires
management to classify debt and equity securities as held-to-
maturity, available-for-sale, or trading based on their intent.
Securities classified as held-to-maturity are recorded at cost,
adjusted for amortization of premiums and accretion of discounts.
Securities classified as available-for-sale are recorded at fair
value, with unrealized gains and losses, net of deferred taxes,
excluded from earnings and reported in a separate component of
shareholders' equity. Securities classified as trading are
recorded at fair value, with unrealized gains and losses included
in earnings. As permitted by the statement, the Company adopted
this statement effective January 1, 1994, and the resulting
cumulative adjustment increased investment securities $375.5
thousand, deferred income taxes payable $131.4 thousand and
shareholders' equity $244.1 thousand. Holding investment
securities until maturity continues to be the Company's primary
investment strategy. However, in accordance with the statement
guidelines, investment securities totaling $28.0 million are
classified as available-for-sale which provides the Company
flexibility in asset and liability management to liquidate prior
to
maturity certain investments. During 1994 securities amounting
to
$11.6 million were sold and resulted in a net securities loss of
$596 thousand. The Company has no investments classified as
trading securities.
Excluding the adjustment to fair value for the available-for-
sale portfolio, investment securities increased $8.5 million
during
1994. The investment portfolio is comprised primarily of U. S.
Government and government corporations and agencies securities
with
relatively short maturities. Note 2 to the consolidated
financial
statements provides detail disclosures relating to the maturities
and fair values of the investment portfolio at December 31, 1993
and 1994.
Loans
Total loans at December 31, 1994, amounted to $425.6 million
compared to $420.2 million at the prior year end. The following
table 5 presents the composition of the loan portfolio at these
two
dates.
Table 5 - Composition of Loans (000's omitted):
December 31, 1994
December 31, 1993
Amount % Of Total Amount%
Of Total
Commercial, financial,
and agricultural $ 173,411 40.75% $ 172,782 41.11%
Short-term commercial paper - - 25,780 6.14
Real estate - construction 11,245 2.64 6,778 1.61
Real estate - mortgage 115,172 27.06 113,698 27.06
Consumer 125,733 29.55 101,205 24.08
$ 425,561 100.00% $ 420,243 100.00%
Excluding the effect of the maturity in 1994 of commercial
paper
as shown in the above table, internally-generated loans were up
$31.1 million, or 7.9%, from the 1993 year-end amount. Real
estate
mortgage loans represent loans secured by 1-4 family residences
in
the Company's primary markets, and loans to local business and
farm
operations in those markets. These loans generally provide for
repricing at intervals that protects the Company from the rate
risk
inherent in long term fixed rate mortgage loans.
Allowance for Loan Losses
An evaluation of the overall quality of the portfolio is
performed to determine the necessary level of the allowance for
loan losses. The evaluation takes into consideration the
classification of loans and the application of loss estimates to
those classifications. The Company has an independent loan
review
function which periodically reviews the loan quality at each of
the
subsidiary banks. The subsidiary banks also are subject to
periodic examinations by state and federal banking system
examiners. As stated earlier in this discussion, continued
improvement in credit quality and net loan recoveries in 1994
resulted in a credit loan loss provision for 1994. Table 6 below
provides activity in the allowance for loan loss account for the
past five years and table 7 presents the year-end balance and
composition of nonperforming assets which serves as a key
indicator
of loan quality.
Table 6 - Loan Loss Experience and Allowance for Loan Losses
(000's omitted):
1994 1993 1992 1991 1990
Balance at
January 1, $ 9,013 $ 8,298 $ 7,708 $ 7,812 $ 4,860
Allowance
established
from
purchase
acquisition - 712 - - 1,564
9,013 9,011 7,708 7,812 6,424
Loans charged
off 1,373 2,125 2,027 2,726 2,698
Loans recovered 2,269 1,620 1,472 1,382 1,196
Net (recoveries)
/charge-offs (896) 505 555 1,344 1,502
Provision/
(credit) for
loan losses (885) 508 1,145 1,240 2,890
Balance at
December 31, $ 9,024 $ 9,013 $ 8,298 $ 7,708 $ 7,812
Loans at
year-end $ 425,561 $ 420,243 $ 374,486 $ 350,134 $ 354,253
Average loans 411,885 399,806 362,414 349,060 304,146
Net charge-
offs/
(recoveries)/
average loans (0.22)% 0.13% 0.15% 0.38% 0.49%
Allowance for
loan losses/
year-end loans 2.12 2.14 2.22 2.20 2.21
Table 7 - Nonperforming Assets (000's omitted):
At December 31,
1994 1993 1992 1991 1990
Nonaccrual loans $ 1,278 $ 3,417 $ 2,590 $ 4,405 $ 6,284
Loans past due 90
days or more 84 165 721 528 484
Restructured loans - - - - 1,118
Nonperforming
loans 1,362 3,582 3,311 4,933 7,886
Foreclosed assets 814 1,910 2,531 3,705 4,362
Total
nonperforming
assets $ 2,176 $ 5,492 $ 5,842 $ 8,638 $ 12,248
As a % of loans
and foreclosed
properties 0.51% 1.30% 1.55% 2.44% 3.42%
Deposits
For the year 1994, total deposits averaged $892.8 million as
compared to the 1993 average of $874.0 million, an increase of
$18.8 million. Table 8 provides a breakdown of average deposits
and rates paid over the past three years. The 1993 increase in
total average deposits is attributed primarily to the February
1993
cash purchase of the Stephenville Bank and the September 1993
branch purchase by the First National Bank in Cleburne.
Table 8 - Composition of Deposits
1994
1993 1992
Average Average Average
Average Average Average
Balance Rate Balance
Rate Balance Rate
Noninterest-bearing deposits $ 187,996 - $ 173,180 -
$ 149,124 -
Interest-bearing deposits
Interest-bearing checking 178,0952.01% 166,960 2.19%
154,0732.79%
Savings and money market accounts 187,368 2.49
167,0952.74 147,633 3.11
Time deposits under $100,000 244,3273.71 261,642 3.51
251,8104.39
Time deposits of $100,000 or more 95,035 4.01
105,1332.65 91,718 4.49
Total interest-bearing deposits 704,825 3.00
700,8302.88 645,234 3.73
Total deposits $ 892,821 $ 874,010
$ 794,358
Asset and Liability Management
Asset and liability management is the funding and investment
strategies necessary to maintain an appropriate balance between
interest-sensitive assets and liabilities. It is the policy of
the
Company that each subsidiary establish policies for balance sheet
management. Interest-sensitivity analysis is one of the tools
used
to monitor interest rate risk resulting from periodic mismatches
or
"gap" in the maturities of assets and liabilities. The following
table 9 presents the Company's interest-sensitivity gap as of
December 31, 1994. The Company has a negative cumulative
repricing
gap in the one-year horizon. Consequently, a sudden and large
increase in rates or a dramatic narrowing in the spread between
asset yields and liability costs would result in an adverse
impact
on the net interest margin; however, the adverse impact is more
moderate if interest rates follow historical trends and increase
gradually. The Company uses no off-balance sheet financial
instruments to manage interest rate risk.
Table 9 - Interest-Sensitivity Analysis (000's omitted):
Within 3 4-6 7-12 1-5
Over 5
Months Months Months Years
Years Total
Interest-earning assets:
Total loans $ 195,928 $ 28,426 $ 31,547 $ 160,623
$ 9,037 $ 425,561
Investment securities 51,414 21,275 38,354 311,528
40,673 463,244
Short-term investments 23,100 - -
198 - 23,298
Total interest-earning assets 270,442 49,701 69,901
472,349 49,710 912,103
Interest-bearing liabilities:
Transaction deposit accounts299,283 - - - -
299,283
Time deposits 204,363 79,210 73,202 43,932
27 400,734
Borrowed funds 90 - - - - 90
Mortgage notes payable 1,054 - -
- - 1,054
Total interest-bearing liabilities$ 504,790 $ 79,210 $
73,202 $ 43,932 $ 27 $ 701,161
Interest-sensitivity gap $ (234,348) $ (29,509) $ (3,301) $
428,417 $ 49,683 $ 210,942
Cumulative interest-sensitivity gap(234,348) (263,857) (267,158)
161,259 210,942 210,942
Ratio of interest-sensitive
assets to interest-sensitive liabilities 0.54 0.63 0.95
10.75 -
Cumulative ratio of interest-sensitive
assets to interest-sensitive liabilities 0.54 0.55 0.59
1.23 1.30
Cumulative interest-sensitivity gap
as a percent of total earning assets(25.69)% (28.93)%
(29.29)% 17.68% 23.13%
Capital and Liquidity
At December 31, 1994, total shareholders' equity was $103.9
million, an increase of $7.2 million, or 7.4%, from December 31,
1993. Banking system regulators measure capital adequacy by
means
of the risk-based capital ratio and leverage ratio. The
risk-based
capital rules provide for the weighting of assets and
off-balance-
sheet commitments and contingencies according to prescribed risk
categories ranging from 0% to 100%. Regulatory capital is then
divided by risk-weighted assets to determine the risk-adjusted
capital ratios. The leverage ratio is computed by dividing
shareholders' equity less intangibles by quarter-to-date average
assets less intangibles. Regulatory minimums for the risk-based
and leverage ratios are 8.00% and 3.00%, respectively. At
December
31, 1994, the Company's risk-based ratio and leverage ratio were
21.20% and 10.26%, respectively.
On April 26, 1994, the Board of Directors approved a 25% stock
dividend which was paid June 1, 1994. The Company does not
anticipate any changes in the cash dividend policy which has
yielded payout ratios of 41.66%, 34.04%, and 32.03%,
respectively,
in 1994, 1993, and 1992. On October 26, 1994, the Board of
Directors approved a Stock Purchase and Cancellation Plan which
authorized the Company, subject to market conditions and
availability, to purchase up to 200,000 shares of the Company's
common stock. There were no shares purchased during 1994.
The statements of cash flows which are included in the
consolidated financial statements present changes in cash and
cash
equivalents. The subsidiary banks continue to maintain
relatively
low loan to deposit ratios and highly liquid investment
portfolios
with short maturities. These factors, coupled with the parent
company's $5.0 million available line of credit, provide adequate
liquidity.
Market and Dividends
The following table 10 provides the high and low bid prices and
dividends per share for the Company's common stock for the
periods
indicated. All amounts have been adjusted for the 25% stock
dividend on June 1, 1994. The quarterly price range of the
Company's stock is the closing bid price and may not necessarily
represent actual transactions.
Table 10 - Common Stock Data
Dividends
Quarter High Low Declared
1994
Fourth $ 28.50 $ 24.00 $ 0.28
Third 30.00 28.00 0.28
Second 32.40 28.80 0.28
First 35.60 31.60 0.26
1993
Fourth $ 33.20 $ 32.00 $ 0.26
Third 32.00 31.20 0.26
Second 31.20 29.45 0.26
First 29.45 28.36 0.20
1992
Fourth $ 28.36 $ 24.73 $ 0.20
Third 24.73 18.55 0.20
Second 18.55 16.00 0.20
First 16.00 14.55 0.16
Quarterly Financial Data (Unaudited)
(Dollars in thousands, except per share data)
1994
4th 3rd 2nd
1st
Summary Income
Statement Information:
Interest income $ 16,046 $ 15,492 $ 15,121 $ 14,756
Interest expense 5,842 5,397 5,106 4,919
Net interest income 10,204 10,095 10,015 9,837
Provision for loan
losses (845) (185) 105 40
Net interest income
after provision for
loan losses 11,049 10,280 9,910 9,797
Non interest income 2,769 2,997 2,851 2,976
Non interest expense 8,545 8,228 8,091 8,227
Income before income
taxes 5,273 5,049 4,670 4,546
Provision (benefit)
for income taxes 1,767 1,697 1,519 1,443
Net income $ 3,506 $ 3,352 $ 3,151 $ 3,103
Per Share Data (1):
Net income
per share $ 0.70 $ 0.67 $ 0.63 $ 0.62
Cash dividends
declared 0.28 0.28 0.28 0.26
Book value at
period end 20.79 20.34 20.00 19.79
Market value
(period end) bid 25.00 28.50 31.00 31.60
Market value (bid):
High 28.50 30.00 32.40 35.60
Low 24.00 28.00 28.80 31.60
(Dollars in thousands,
except per share data)
1993 (2)
4th 3rd 2nd 1st
Summary Income
Statement Information:
Interest income $ 14,973 $ 15,029 $ 15,117 $ 14,731
Interest expense 5,080 5,055 5,154 5,044
Net interest income 9,893 9,974 9,963 9,687
Provision for
loan losses 51 232 146 79
Net interest income
after provision
for loan losses 9,842 9,742 9,817 9,608
Non interest income 3,176 2,946 2,896 2,678
Non interest expense 8,588 7,839 8,083 7,365
Income before
income taxes 4,430 4,849 4,630 4,921
Provision (benefit)
for income taxes 1,402 1,605 1,499 1,599
Net income before
cumulative effect
of accounting
change 3,028 3,244 3,131 3,322
Cumulative effect
of accounting
change (3) - - - 1,024
Net income $ 3,028 $ 3,244 $ 3,131 $ 4,346
Per Share Data (1):
Net income before
cumulative effect
of accounting
change $ 0.61 $ 0.65 $ 0.63 $ 0.67
Net income
per share 0.61 0.65 0.63 0.88
Cash dividends
declared 0.26 0.26 0.26 0.20
Book value at
period end 19.45 19.03 18.63 18.28
Market value
(period end) bid 33.20 32.00 31.20 29.45
Market value (bid):
High 33.20 32.00 31.20 29.45
Low 32.00 31.20 29.45 28.36
(1) Historical amounts adjusted for 25% stock dividend paid June
1, 1994.
(2) Restated for pooling-of-interests.
(3) Adoption of FASB 109, "Accounting for Income Taxes".
Item 8. Financial Statements and Supplementary Data
The independent auditor s report, and consolidated financial
statements of Bankshares at December 31, 1994 and 1993, and for
each of the three years in the period ended December 31, 1994,
are
provided on pages 27 through 45. Also included for the year
ended
December 31, 1994 is management s report on responsibility for
the
financial statements.
FIRST FINANCIAL BANKSHARES, INC.
MANAGEMENT'S REPORT
ON RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
The Management of First Financial Bankshares, Inc. is responsible
for the preparation, integrity and fair presentation of its
annual
financial statements as of December 31, 1994, and the year then
ended. The financial statements have been prepared in accordance
with generally accepted accounting principles and, as such,
include
amounts based on judgments and estimates made by Management.
Management has also prepared the other information included in
this
Annual Report and is responsible for its accuracy and consistency
with the financial statements.
The annual financial statements referred to above have been
audited
by Arthur Andersen LLP, who have been given unrestricted access
to
all financial records and related data, including minutes of all
meetings of shareholders and the Board of Directors. Management
believes that all representations made to Arthur Andersen LLP
during the audit were valid and appropriate.
Kenneth T. Murphy
Curtis R. Harvey
Chairman of the Board, President
Executive Vice President
and Chief Executive Officer and
Chief Financial Officer
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
First Financial Bankshares, Inc.:
We have audited the accompanying consolidated balance sheets of
First Financial Bankshares, Inc. (a Texas corporation), and
subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of earnings, shareholders' equity, and
cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
As explained in Note 1 to the consolidated financial statements,
effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes" and changed its method of accounting for income taxes.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of First Financial Bankshares, Inc. and subsidiaries as of
December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Dallas, Texas,
January 11, 1995
FIRST FINANCIAL BANKSHARES, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1994 AND 1993
ASSETS 1994
1993
CASH AND DUE FROM BANKS $ 60,536,136 $ 55,214,848
FEDERAL FUNDS SOLD 23,100,000 45,506,000
Total cash and
cash equivalents 83,636,136 100,720,848
INTEREST-BEARING DEPOSITS
IN BANKS 198,000 787,000
INVESTMENT IN SECURITIES
Securities held to maturity
(market value of
$418,895,098 in 1994 and
$461,205,853 in 1993) 435,212,460 456,179,536
Securities available for
sale, at market value 28,031,932 -
LOANS 425,560,623 420,243,003
Less- Allowance for
loan losses 9,024,424 9,013,387
Net loans 416,536,199 411,229,616
BANK PREMISES AND
EQUIPMENT, net 29,466,438 30,052,817
OTHER ASSETS 19,531,982 19,012,828
Total assets $ 1,012,613,147 $ 1,017,982,645
LIABILITIES AND
SHAREHOLDERS' EQUITY
NONINTEREST-BEARING
DEPOSITS $ 200,912,655 $ 193,934,140
INTEREST-BEARING DEPOSITS 700,016,977 719,415,421
Total deposits 900,929,632 913,349,561
DIVIDENDS PAYABLE 1,399,220 1,198,940
OTHER LIABILITIES 6,376,393 6,724,461
Total liabilities 908,705,245 921,272,962
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $l0 par value;
authorized 10,000,000 shares;
issued and outstanding
4,997,214 shares in 1994 and
3,978,767 shares in 1993 49,972,140 39,787,670
Capital surplus 36,863,701 15,948,384
Retained earnings 17,769,812 40,973,629
Unrealized loss on
investment in securities
available for sale (697,751) -
Total shareholders' equity 103,907,902 96,709,683
Total liabilities and
shareholders' equity $ 1,012,613,147 $ 1,017,982,645
The accompanying notes are an integral part of these consolidated
statements.
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
1994 1993 1992
INTEREST INCOME:
Interest and fees
on loans $ 35,482,131 $ 32,679,806 $ 32,174,846
Interest on
investment
securities-
Taxable 23,805,894 24,892,985 26,729,499
Exempt from
federal income
tax 840,225 746,195 862,011
Interest on federal
funds sold and
interest-bearing
deposits in banks 1,287,557 1,530,914 1,674,845
61,415,807 59,849,900 61,441,201
INTEREST EXPENSE:
Interest on time
deposits 21,138,660 20,211,447 24,059,501
Other 125,352 121,559 142,830
21,264,012 20,333,006 24,202,331
Net interest
income 40,151,795 39,516,894 37,238,870
PROVISION (CREDIT)
FOR LOAN LOSSES (885,000) 508,010 1,145,070
Net interest
income after
provision
(credit) for
loan losses 41,036,795 39,008,884 36,093,800
NONINTEREST INCOME:
Trust department
income 2,897,657 2,945,840 2,769,893
Service fees on
deposit accounts 5,504,997 5,529,706 4,936,204
Other 3,190,764 3,220,895 2,061,904
11,593,418 11,696,441 9,768,001
NONINTEREST EXPENSE:
Salaries and
employee benefits 16,437,665 15,707,789 13,844,438
Net occupancy
expense 2,717,634 2,421,020 2,470,924
Equipment expense 2,193,073 2,018,717 1,834,540
FDIC assessments 1,982,894 1,941,014 1,780,306
Correspondent bank
service charges 876,209 896,368 828,707
Other expenses 8,884,033 8,889,880 8,176,258
33,091,508 31,874,788 28,935,173
EARNINGS BEFORE
INCOME TAXES 19,538,705 18,830,537 16,926,628
INCOME TAX EXPENSE 6,426,475 6,105,087 5,189,018
NET EARNINGS BEFORE
CUMULATIVE ADJUSTMENT
FOR CHANGE IN
ACCOUNTING FOR
INCOME TAXES 13,112,230 12,725,450 11,737,610
CUMULATIVE ADJUSTMENT
FOR CHANGE IN
ACCOUNTING FOR
INCOME TAXES - 1,023,595 -
NET EARNINGS $ 13,112,230 $ 13,749,045 $ 11,737,610
EARNINGS PER SHARE
BEFORE CUMULATIVE
ADJUSTMENT FOR
CHANGE IN ACCOUNTING
FOR INCOME TAXES $ 2.62 $ 2.56 $ 2.37
NET EARNINGS
PER SHARE $ 2.62 $ 2.77 $ 2.37
The accompanying notes are an integral part of these
consolidated statements.
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
Unrealized
Gain
(Loss)
on
Investment
In
Securities
Common Stock
Capital Retained Available
Shares Amount Surplus
Earnings For Sale
BALANCE at December 31, 1991 2,467,121 $ 24,671,210
$ 17,637,007 $ 36,221,365 $ -
Net earnings - - - 11,737,610
-
Stock issuances 31,228 312,280 124,030 - -
Cash dividends declared, $.76
per share - - - (3,513,740)
-
Cash paid for fractional shares
resulting from stock dividend - - - (6,350)
-
Stock split, 3 for 2 effective
June 1, 1992 1,118,516 11,185,160 (11,185,160)
- -
BALANCE at December 31, 1992 3,616,865 36,168,650
6,575,877 44,438,885 -
Net earnings - - - 13,749,045
-
Stock issuances 23,386 233,860 48,388 - -
Cash dividends declared, $.96
per share - - - (4,490,093)
-
Cash paid for fractional shares
resulting from stock dividend - - -
(14,929) -
Stock dividend, 10% 338,516 3,385,160 9,324,119
(12,709,279) -
BALANCE at December 31, 1993 3,978,767 39,787,670
15,948,384 40,973,629 -
Initial unrealized gain recorded on
investment in securities available
for sale, net - - - -
244,069
Net earnings - - - 13,112,230
-
Stock issuances 23,695 236,950 25,525 - -
Cash dividends declared, $1.10
per share - - - (5,462,207)
-
Cash paid for fractional shares
resulting from stock dividend - - -
(16,528) -
Stock dividend, 25% 994,7529,947,520 20,889,792
(30,837,312) -
Change in unrealized gain (loss)
on invest- ment in securities
available for sale, net - -
- - (941,820)
BALANCE at December 31, 1994 4,997,214 $ 49,972,140
$ 36,863,701 $ 17,769,812 $ (697,751)
The accompanying notes are an integral part of these consolidated
statements.
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
1994 1993 1992
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net earnings $ 13,112,230 $ 13,749,045 $ 11,737,610
Adjustments to
reconcile net
earnings to net
cash provided by
operating activities-
Depreciation and
amortization 3,318,666 2,510,135 2,457,605
Provision (credit)
for loan losses (885,000) 508,010 1,145,070
Premium amortization,
net of discount
accretion 4,960,847 5,524,023 3,955,863
Loss (gain) on sale
of securities 299,173 (18,545) 95,344
Deferred federal
income tax benefit (109,434) (1,170,687) (375,613)
(Increase)/Decrease
in other assets (630,491) 2,769,141 2,138,213
Decrease in other
liabilities (251,211) (2,818,756) (969,354)
Total adjustments 6,702,550 7,303,321 8,447,128
Net cash provided
by operating
activities 19,814,780 21,052,366 20,184,738
CASH FLOWS FROM
INVESTING ACTIVITIES:
Net decrease in
interest-bearing
deposits in banks 589,000 194,000 394,000
Cash and cash
equivalents received
through acquisition,
net of payment for stock - 5,511,888 -
Cash and cash
equivalents received
through purchase
of assets and
liabilities, net of
cash paid - 16,876,513 -
Proceeds from sale of
securities available
for sale 11,649,196 - -
Proceeds from
maturities of
securities available
for sale 9,155,976 - -
Proceeds from sales
of investment securities - 8,897,440 1,060,075
Proceeds from maturities
of securities held
to maturity 133,394,203 194,451,829 161,160,962
Purchase of securities
available for sale (1,000,000) - -
Purchase of securities
held to maturity (166,593,978) (213,227,198) (185,735,321)
Net increase in loans (4,177,658) (21,105,463) (25,809,442)
Capital expenditures (2,394,923) (3,643,838) (890,404)
Proceeds from sale of
other assets 11,458 2,297,728 1,795,203
Net cash used in
investing activities (19,366,726) (9,747,101) (48,024,927)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Net increase in
noninterest-bearing
deposits 6,978,515 8,135,836 7,789,243
Net decrease in
interest-bearing
deposits (19,398,444) (24,538,060) (1,085,247)
Net decrease in other
short-term borrowings (96,857) (83,177) (947,650)
Proceeds of stock
issuances 262,475 282,248 436,310
Dividends paid (5,278,455) (4,219,974) (3,388,462)
Net cash provided
by (used in)
financing activities (17,532,766) (20,423,127) 2,804,194
NET DECREASE IN CASH
AND CASH EQUIVALENTS (17,084,712) (9,117,862) (25,035,995)
CASH AND CASH
EQUIVALENTS, beginning
of year 100,720,848 109,838,710 134,874,705
CASH AND CASH
EQUIVALENTS,
end of year $ 83,636,136 $ 100,720,848 $ 109,838,710
The accompanying notes are an integral part of these consolidated
statements.
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993, AND 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A summary of significant accounting policies of First Financial
Bankshares, Inc. and subsidiaries (the "Company") applied in the
preparation of the accompanying consolidated financial statements
follows. The accounting principles followed by the Company and
the
methods of applying them are in conformity with both generally
accepted accounting principles and prevailing practices of the
banking industry.
Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its subsidiaries, all of which are
wholly owned. All significant intercompany accounts and
transactions have been eliminated.
Basis of Presentation
Prior period financial statements have been restated to include
the
accounts of a subsidiary which was acquired during 1994 and
accounted for as a pooling-of-interest. Another subsidiary,
acquired during 1993 and accounted for as a purchase, is included
in the consolidated financial statements from the date of
acquisition.
Investment in Securities
In May 1993, Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities,"
was issued. This statement requires management to classify debt
and equity securities as held-to-maturity, available-for-sale, or
trading based on their intent. Securities classified as held-to-
maturity are recorded at cost, adjusted for amortization of
premiums and accretion of discounts, which are recognized as
adjustments to interest income using the interest method.
Securities classified as available-for-sale are recorded at fair
value, with unrealized gains and losses, net of deferred taxes,
excluded from earnings and reported in a separate component of
shareholders' equity. Securities classified as trading are
recorded at fair value, with unrealized gains and losses included
in earnings. The Company adopted this statement effective
January
1, 1994, resulting in an after-tax adjustment to equity of
$244,069
and increasing investments by $375,491. The Company had no
trading
securities at December 31, 1994 or 1993.
Prior to January 1, 1994, the Company accounted for its
investment
in securities at amortized cost.
Loans and Allowance for Loan Losses
Loans are stated at the amount of unpaid principal, reduced by
unearned income and an allowance for loan losses. Unearned
income
on installment loans is recognized in income over the terms of
the
loans in decreasing amounts using a method which approximates the
interest method. Interest on other loans is calculated by using
the simple interest method on daily balances of the principal
amounts outstanding. The allowance for loan losses is
established
through a provision for loan losses charged to expense. Loans
are
charged against the allowance for loan losses when management
believes the collectibility of the principal is unlikely.
The allowance is an amount that management believes will be
adequate to absorb possible losses on existing loans that may
become uncollectible based upon management's review and
evaluation
of the loan portfolio. The factors considered in the evaluation
of
the loans include general economic conditions, the financial
condition of the borrower, the value and liquidity of collateral,
delinquency, prior loan loss experience, and the results of
periodic reviews of the portfolio. Accrual of interest is
discontinued on a loan when management believes, after
considering
economic and business conditions and collection efforts, that the
borrower's financial condition is such that collection of
interest
is doubtful.
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization are
computed principally on a straight-line basis over the estimated
useful lives of the related assets. Leasehold improvements are
amortized over the life of the respective lease or the estimated
useful lives of the improvements, whichever is shorter.
Excess of Cost Over Fair Value of Tangible Assets Acquired
(Goodwill)
Goodwill, relating to acquisitions of certain subsidiary banks,
is
being amortized by the straight-line method over periods of 15
and
40 years.
Per Share Data
Earnings per share are based on the weighted average number of
common shares and common share equivalents outstanding in 1994,
1993, and 1992 of 4,997,214, 4,973,519, and 4,950,133,
respectively, adjusted retroactively for stock dividends and
splits. Common share equivalents represent the dilutive effect
of
stock options. Additionally, dividends per share have been
retroactively adjusted for the effect of stock dividends and
splits.
Reclassifications
Certain 1993 and 1992 amounts have been reclassified to conform
to
the 1994 presentation.
Statements of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, amounts due from banks, and federal funds
sold.
Accounting for Income Taxes
In February 1992, Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," was issued. This
statement
requires an asset and liability approach for financial accounting
and reporting for income taxes and supersedes "Accounting for
Income Taxes" required by Statement of Financial Accounting
Standards No. 96 and APB Opinion No. 11. The Company adopted
this
statement effective January 1, 1993, with the resulting
cumulative
adjustment to income increasing other assets by $1,023,595.
Accounting Standards Not Yet Adopted
In May 1993, Statement of Financial Accounting Standards No. 114
(SFAS 114), "Accounting by Creditors for Impairment of a Loan,"
was
issued. In October 1994, SFAS 114 was amended by Statement of
Financial Accounting Standards No. 118, "Accounting by Creditors
for Impairment of a Loan-Income Recognition and Disclosures."
These statements require that impaired loans, within the scope of
the statements, be measured based on the present value of
expected
future cash flows discounted at the loan's effective interest
rate
or market price or the fair value of the collateral if the loan
is
collateral dependent. These statements apply to fiscal years
beginning after December 15, 1994, and are not expected to have a
material effect on the accompanying financial statements.
2. CASH AND INVESTMENT SECURITIES:
Certain subsidiary banks are required to maintain reserve
balances
with the Federal Reserve Bank. During 1994 and 1993, such
average
balances totaled approximately $12,226,000 and $14,961,000,
respectively.
The amortized cost, estimated market values, and gross unrealized
gains and losses of the Company's investment in securities as of
December 31, 1994 and 1993, are as follows:
December 31,
1994
Gross Gross
Amortized UnrealizedUnrealized
Estimated
Cost Basis Holding Gains Holding
Losses Fair Value
Securities held to maturity-
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies $ 392,359,163 $ 5,689
$ (14,125,455) $ 378,239,397
Obligations of states and
political subdivisions17,396,179 10,103 (913,911) 16,492,371
Mortgage-backed securities 25,457,118 4,050
(1,297,838) 24,163,330
Total investment in debt
securities held to maturity $ 435,212,460$ 19,842
$ (16,337,204) $ 418,895,098
December
31, 1994
Gross Gross
Amortized UnrealizedUnrealized
Estimated
Cost Basis Holding Gains Holding
Losses Fair Value
Securities available for sale-
U.S. Treasury securities and
obligations of U.S.
government corporations
and agencies $ 14,531,306 $ 22,270$
(454,770)$ 14,098,806
Mortgage-backed securities 12,326,532 38,628
(673,300) 11,691,860
Total investment in debt
securities available
for sale 26,857,838 60,898 (1,128,070)
25,790,666
Other securities 2,243,820 -
(2,554) 2,241,266
Total investment in
securities available
for sale $ 29,101,658 $ 60,898
$ (1,130,624) $ 28,031,932
December
31, 1993
Gross Gross
Amortized UnrealizedUnrealizedEstimated
Cost Basis Holding Gains Holding
Losses Fair Value
U.S. Treasury securities and
obligations of U.S.
government corporations
and agencies $ 391,622,606 $ 4,838,910$
(684,425)$ 395,777,091
Obligations of states and
political subdivisions17,484,965 239,978 (62,245) 17,662,698
Mortgage-backed securities 44,716,714 875,950
(181,851) 45,410,813
Total debt securities 453,824,2855,954,838 (928,521)458,850,602
Other securities 2,355,251 -
- 2,355,251
Total investment in securities$ 456,179,536 $ 5,954,838
$ (928,521) $ 461,205,853
The Company invests in securities that have expected maturities
that differ from their contractual maturities. These differences
arise because borrowers may have the right to call or prepay
obligations with or without a prepayment penalty. These
securities
include collateralized mortgage obligations and asset-backed
securities. The expected maturities of these securities at
December 31, 1994, were computed by using scheduled amortization
of
balances and historical prepayment rates.
The amortized cost and estimated market value of debt securities
held to maturity at December 31, 1994, by contractual and
expected
maturity, are shown below.
Amortized Estimated
Cost Fair Value
Due within one year $ 106,100,615 $ 105,413,500
Due after one year
through five years 300,022,400 286,446,482
Due after five years
through ten years 12,294,414 11,143,446
Due after ten years 16,795,031 15,891,670
Total debt securities
held to maturity $ 435,212,460 $ 418,895,098
The amortized cost and estimated market value of debt securities
available for sale at December 31, 1994, by contractual and
expected maturity, are shown below.
Amortized Estimated
Cost
Fair Value
Due within one year $ 4,990,640 $ 4,942,655
Due after one year
through five years 11,998,529 11,505,663
Due after five years
through ten years 6,427,019 6,100,586
Due after ten years 3,441,650 3,241,762
Total debt securities
held to maturity $ 26,857,838 $ 25,790,666
Investment securities carried at approximately $97,859,000 and
$94,098,000 at December 31, 1994 and 1993, respectively, were
pledged as collateral for public or trust fund deposits and for
other purposes required or permitted by law.
During 1994, sales from investments in securities that were
classified as available-for-sale totaled $11,649,196. The gross
realized gains and losses from those sales were $100,706 and
$696,703, respectively. Specific identification was used to
determine cost in computing the realized gains and losses.
3. LOANS AND ALLOWANCES FOR LOAN LOSSES:
Major classifications of loans are as follows:
December 31,
1994 1993
Commercial, financial,
and agricultural $ 173,410,963 $ 198,561,759
Real estate -
construction 11,244,692 6,777,796
Real estate -
mortgage 115,172,072 113,697,844
Consumer 132,781,581 108,062,188
432,609,308 427,099,587
Unearned income (7,048,685) (6,856,584)
Total loans $ 425,560,623 $ 420,243,003
At December 31, 1994 and 1993, the Company was carrying
nonaccrual
loans of approximately $1,278,000 and $3,417,000, respectively.
Had these loans performed according to their original contract
terms, the Company would have accrued interest of approximately
$130,000 and $430,000 for the years ended December 31, 1994 and
1993, respectively, as compared to amounts actually recognized of
approximately $47,000 and $53,000, respectively. In management's
opinion, the allowance for loan losses is adequate to absorb any
losses which may arise from these and other loans in the
portfolio.
Changes in the allowance for loan losses are summarized as
follows:
December 31,
1994 1993 1992
Balance at beginning
of year $ 9,013,387 $ 8,298,738 $ 7,708,488
Add:
Allowance of
acquired bank - 712,222 -
Provision for
loan losses 390,000 508,010 1,145,070
Loan recoveries 2,269,114 1,619,565 1,472,300
Deduct:
Credit for loan
losses (1,275,000) - -
Loan charge-offs (1,373,077) (2,125,148) (2,027,120)
Balance at end
of year $ 9,024,424 $ 9,013,387 $ 8,298,738
4. BANK PREMISES AND EQUIPMENT:
The following is a summary of bank premises and equipment:
December 31,
1994 1993
Land $ 4,662,743 $ 4,662,743
Buildings 30,059,405 29,735,077
Furniture and equipment 15,270,683 11,915,759
Leasehold improvements 4,986,812 6,631,728
54,979,643 52,945,307
Accumulated depreciation
and amortization (25,513,205) (22,892,490)
$ 29,466,438 $ 30,052,817
5. TIME DEPOSITS:
Time deposits of $100,000 or more totaled approximately
$105,887,000 and $91,109,000 at December 31, 1994 and 1993,
respectively. Interest expense on these deposits was
approximately
$3,812,000, $2,789,000, and $4,119,000 during 1994, 1993, and
1992,
respectively.
6. INCOME TAXES:
The Company files a consolidated federal income tax return.
Income
tax expense (benefit) is comprised of the following:
Year Ended
December 31,
1994 1993 1992
Current federal
income tax $ 6,535,909 $ 6,252,179 $ 5,564,631
Deferred federal
income tax (109,434) (147,092) (375,613)
Income tax expense $ 6,426,475 $ 6,105,087 $ 5,189,018
During 1993, the federal income tax rate for the Company's
taxable income greater than
$10,000,000 changed from 34 percent to 35 percent. The
adjustment to the Company's
deferred tax assets and liabilities for this change was
insignificant.
The provision for income tax expense (benefit), as a percentage
of pretax earnings,
differs from the statutory federal income tax rate as follows:
As a Percent of
Pretax Earnings
1994 1993 1992
Expected tax expense 35.0% 35.0% 34.0%
Reductions in taxes
resulting from
interest income exempt from
federal income tax (1.5)% (1.5)% (2.2)%
Other (0.6)% (1.1)% (1.1)%
Income tax expense 32.9% 32.4% 30.7%
The approximate effects of each type of difference that gave rise
to the Company's deferred tax assets and liabilities at
December 31, 1994, are as follows:
Asset Liability Total
Tax basis of loans
in excess of
financial statement
basis $ 2,906,731 $ - $ 2,906,731
Financial statement
basis of fixed
assets in excess
of tax basis - 1,371,726 (1,371,726)
Nondeductible write-
downs and
adjustments to
other real estate
owned and
repossessed assets 246,654 - 246,654
Accretion on
investments
recognized for
financial reporting
purposes, but not
recognized for tax
purposes - 233,571 (233,571)
Benefits of a
subsidiary bank
net operating
loss carryforward 842,929 - 842,929
Other - 300,651 (300,651)
$ 3,996,314 $ 1,905,948 $ 2,090,366
Valuation allowance (374,441)
Net deferred
tax asset $ 1,715,925
At December 31, 1994, the First National Bank in Cleburne
("Cleburne"), a subsidiary bank, had a net operating loss
carryforward for federal income tax purposes of approximately
$2,409,000. In its consolidated return, subject to certain
yearly
limitations, the Company can utilize Cleburne's preacquisition
net
operating loss carryforward to offset future consolidated taxable
income only to the extent Cleburne has future taxable income. If
not used, the net operating loss carryforward expires as follows:
$1,484,000 in 2001, $560,000 in 2002, and $365,000 in 2005.
The valuation allowance was established to recognize the
uncertainty of realization of the benefit related to Cleburne's
net
operating loss carryforward. The following summarizes the
changes
in the allowance account:
1994 1993
Valuation allowance at
beginning of period $ 480,767 $ 524,638
Reduction in valuation
allowance based on current
period utilization of net
operating loss carryforward (106,326) (43,871)
Valuation allowance at end of period $ 374,441 $ 480,767
7. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments," requires the Company
to
disclose the estimated fair value of its financial instrument
assets and liabilities. For the Company, as for most financial
institutions, over 90% of its assets and liabilities are
considered
financial instruments as defined in Statement No. 107. Many of
the
Company's financial instruments, however, lack an available
trading
market as characterized by a willing buyer and willing seller
engaging in an exchange transaction.
Estimated fair values have been determined by the Company using
the
best available data, as generally provided in the Company's
Regulatory Reports, and an estimation methodology suitable for
each
category of financial instruments. For those loans and deposits
with floating interest rates, it is presumed that estimated fair
values generally approximate the recorded book balances. The
estimation methodologies used, the estimated fair values, and
recorded book balances at December 31, 1994 and 1993, were as
follows:
- Financial instruments actively traded in a secondary
market
have been valued using quoted available market prices.
Estimated Recorded
Fair Book
Value Balance
1994 1993 1994 1993
Cash and
due from
banks $ 60,536,136 $ 55,214,848 $ 60,536,136 $ 55,214,848
Federal
funds
sold 23,100,000 45,506,000 23,100,000 45,506,000
Interest-
bearing
deposits
in banks 198,000 787,000 198,000 787,000
Investment
in sec-
urities 446,927,030 461,205,853 463,244,392 456,179,536
- Financial instruments with stated maturities have been
valued using a present value discounted cash flow with a
discount rate approximating current market for similar
assets and liabilities. Financial instrument assets with
variable rates and financial instrument liabilities with
no
stated maturities have an estimated fair value equal to
both
the amount payable on demand and the recorded book
balance.
Estimated Recorded
Fair Book
Value Balance
1994 1993 1994 1993
Deposits
with
stated
matur-
ities $316,887,645 $343,157,877 $318,214,237 $341,279,460
Deposits
with no
stated
matur-
ities 582,715,395 572,270,101 582,715,395 572,270,101
Net
loans 415,973,405 416,044,556 416,536,199 411,229,616
Changes in assumptions or estimation methodologies may have a
material effect on these estimated fair values.
The Company's remaining assets and liabilities which are not
considered financial instruments have not been valued differently
than has been customary with historical cost accounting. No
disclosure of the relationship value of the Company's deposits is
required by Statement No. 107 nor has the Company estimated its
value. There is no material difference between the notional
amount
and the estimated fair value of off-balance-sheet unfunded loan
commitments which total $119,495,930 and $87,522,874 at
December 31, 1994 and 1993, respectively, and are generally
priced
at market at the time of funding. Letters of credit discussed in
Note 9 have an estimated fair value based on fees currently
charged
for similar agreements. At December 31, 1994 and 1993, fees
related to the unexpired term of the letters of credit are not
significant.
Management is concerned that reasonable comparability between
financial institutions may not be likely due to the wide range of
permitted valuation techniques and numerous estimates which must
be
made given the absence of active secondary markets for many of
the
financial instruments. This lack of uniform valuation
methodologies also introduces a greater degree of subjectivity to
these estimated fair values.
8. COMMITMENTS AND CONTINGENCIES:
The Company is engaged in legal actions arising from the normal
course of business. In management's opinion, the Company has
adequate legal defenses with respect to these actions, and the
resolution of these matters should have no material adverse
effects
upon the results of operations or financial condition of the
Company.
The Company has an unused line of credit with a bank under which
it
may borrow up to $5,000,000 at the London Interbank Offered Rate
plus 1%, adjusted for reserves and deposit insurance expense.
The
line of credit is unsecured and matures on August 1, 1995. The
Company paid no fee to secure the unused line of credit and
accordingly has not estimated a fair value of the unused line of
credit at December 31, 1994 or 1993.
The Company leases portions of its banking premises and equipment
under operating leases. Total rental expense for these leases
was
approximately $340,000, $358,000, and $363,000 for the years
ended
December 31, 1994, 1993, and 1992, respectively.
The Company is a lessor for portions of its banking premises.
Total rental income for all leases included in net occupancy
expense was approximately $1,306,000, $1,214,000, and $1,219,000
for the years ended December 31, 1994, 1993, and 1992,
respectively. At December 31, 1994, approximate future minimum
lease commitments and lease receivables are summarized as
follows:
Lease Lease
Commitments Receivables
1995 $ 205,417$ 721,478
1996 212,430 338,478
1997 123,917 174,662
1998 and thereafter - -
Total $ 541,764$ 1,234,618
9. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK:
The Company is a party to financial instruments with off-balance-
sheet risk in the normal course of business to meet the financing
needs of its customers. These financial instruments include
commitments to extend credit and standby letters of credit.
Those
instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the
balance sheet.
The Company's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for
commitments to extend credit and standby letters of credit is
represented by the contractual notional amount of these
instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for
on-balance-
sheet instruments.
Contract or
Notional Amount
Financial instruments whose
contract amounts
represent credit risk-
Commitments to extend credit $ 119,495,930
Standby letters of credit 5,112,248
Commitments to extend credit are agreements to lend to a customer
as long as there is no violation of any condition established in
the contract. Commitments generally have fixed expiration dates
or
other termination clauses and may require payment of a fee.
Since
many of the commitments are expected to expire without being
drawn
upon, the total commitment amounts do not necessarily represent
future cash requirements. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of
collateral
obtained, if deemed necessary by the Company upon extension of
credit, is based on management's credit evaluation of the
counterparty. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment and income-
producing commercial properties.
Standby letters of credit are conditional commitments issued by
the
Company to guarantee the performance of a customer to a third
party. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan
facilities
to customers. The average collateral value held on letters of
credit is 84%.
10. CONCENTRATION OF CREDIT RISK:
The Company grants commercial, retail, agriculture, and
residential
loans to customers primarily in North Central and West Texas.
Although the Company has a diversified loan portfolio, a
substantial portion of its debtors' ability to honor their
contracts is dependent upon the local economic sector.
11. PENSION AND PROFIT SHARING PLANS:
The Company has a defined benefit pension plan covering
substantially all of its employees. The benefits are based on
years of service and a percentage of the employee's qualifying
compensation during the final years of employment. The Company's
funding policy is to contribute annually the amount necessary to
satisfy the Internal Revenue Service's funding standards.
Contributions are intended to provide not only for benefits
attributed to service to date but also for those expected to be
earned in the future.
The following table sets forth the plan's funded status and
amounts
recognized in the Company's balance sheet at December 31, 1994
and
1993.
December 31,
1994 1993
Actuarial present value
of benefit obligations:
Accumulated benefit
obligation, including
vested benefits of
$4,580,213 and
$4,257,607 in 1994
and 1993, respectively $ 4,786,799 $ 4,369,543
Projected benefit
obligation for service
rendered to date $ (5,347,357) $ (4,776,193)
Plan assets at fair value,
primarily corporate bonds
and equity securities 6,401,823 6,422,398
Plan assets in excess of
projected benefit
obligation 1,054,466 1,646,205
Unrecognized net gain from
past experience
different than that
assumed and effects of
changes in assumptions 305,389 (271,131)
Unrecognized net asset at
January 1, 1987, being
recognized over 10.7 years (392,094) (534,298)
Prepaid pension cost
included in other assets $ 967,761 $ 840,776
Net pension cost (credit) for the years ended December 31, 1994,
1993, and 1992, included the following
components:
Year Ended
December 31,
1994 1993 1992
Service cost-benefits
earned during the
period $ 398,106 $ 358,084 $ 307,643
Interest cost on
projected benefit
obligation 427,889 369,861 322,416
Actual return on
plan assets 59,728 (282,192) (578,291)
Net amortization
and deferral (749,369) (398,544) (78,592)
Net periodic pension
cost (credit) $ 136,354 $ 47,209 $ (26,824)
The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present
value
of the projected benefit obligations was 8.5% and 8.5%,
respectively. The expected long-term rate of return on assets
was
8.5%.
The Company also provides a profit sharing plan which covers
substantially all full-time employees. The profit sharing plan
is
a defined contribution plan and allows employees to contribute up
to 5% of their base annual salary. Employees are fully vested to
the extent of their contributions and become fully vested in the
Company's contributions over a seven-year period.
The Southwest Bank of San Angelo, a subsidiary bank, has a
noncontributory profit sharing plan available to all regular
employees who have completed six months of service. The plan is
a
defined contribution plan and contributions are at the discretion
of the subsidiary's board of directors. The subsidiary also
sponsors a defined contribution pension plan, whereby it matches
100% of employee contributions up to 4% of their compensation and
50% of contributions on the next 2% of compensation.
Costs related to the Company's defined contribution plans totaled
$1,164,000, $1,173,000, and $1,070,000 in 1994, 1993, and 1992,
respectively.
12. DIVIDENDS FROM SUBSIDIARIES:
At December 31, 1994, approximately $14,256,000 was available for
the declaration of dividends by the Company's subsidiary banks
without the prior approval of regulatory agencies.
13. LOANS TO RELATED PARTIES:
The Company had loans to officers, directors, principal
shareholders, or associates of such persons totalling
approximately
$38,000,000 and $35,000,000 at December 31, 1994 and 1993,
respectively.
In the opinion of management, those loans are on substantially
the
same terms, including interest rates and collateral requirements,
as those prevailing at the time for comparable transactions with
unaffiliated persons.
14. STOCK OPTION PLAN:
The Company has adopted an incentive stock plan to provide for
the
granting of options to senior management of the Company at prices
not less than market at the date of grant. At December 31, 1994,
the Company had reserved 300,228 shares of stock for issuance
under
the plan. The plan provides that options granted are exercisable
after two years from date of grant, at a rate of 20% each year
cumulatively during the 10-year term of the option. At
December 31, 1994, 30,364 shares were exercisable. An analysis
of
stock option activity for the years ended December 31, 1994 and
1993, is as follows:
Number Option Price
of Shares Per Share
Options outstanding at
December 31, 1992 148,758 $8.62 - 14.54
Canceled (625) 32.00
Exercised (29,761) 8.62 - 14.54
Granted 32,063 32.00
Options outstanding at
December 31, 1993 150,435 $8.62 - 32.00
Canceled (625) 32.00
Exercised (25,019) 8.62 - 14.54
Granted - -
Options outstanding at
December 31, 1994 124,791 $8.62 - 32.00
Stock options have been adjusted retroactively for the effects of
stock dividends and
splits.
15. CONDENSED FINANCIAL INFORMATION - PARENT COMPANY:
Condensed Balance Sheets-December 31, 1994 and 1993
ASSETS 1994 1993
Cash in subsidiary bank $ 453,214 $ 460,649
Investment securities 13,021,959 8,185,204
Investment in subsidiaries,
at equity 91,322,199 88,646,997
Excess of cost over fair
value of tangible
assets acquired, net 863,458 909,593
Other assets 213,741 316,125
Total assets $ 105,874,571 $ 98,518,568
LIABILITIES AND
SHAREHOLDERS' EQUITY
Total liabilities $ 1,966,669 $ 1,808,885
Shareholders' equity-
Common stock 49,972,140 39,787,670
Capital surplus 36,863,701 15,948,384
Retained earnings 17,769,812 40,973,629
Unrealized loss on investment
in securities
available for sale, net (697,751) -
Total shareholders' equity 103,907,902 96,709,683
Total liabilities and
shareholders' equity $ 105,874,571 $ 98,518,568
Condensed Statements of Earnings-
For the Years Ended December 31, 1994, 1993, and 1992
1994 1993 1992
Income-
Cash dividends from
subsidiary banks $ 10,265,000 $ 8,935,000 $ 9,365,000
Excess of earnings
over dividends
of subsidiary banks 3,332,171 5,376,282 2,746,019
Other income 797,299 550,543 589,051
14,394,470 14,861,825 12,700,070
Expenses-
Salaries and
employee benefits 888,538 829,148 694,927
Franchise taxes 6,290 5,799 4,428
Other operating
expenses 608,758 505,323 430,390
1,503,586 1,340,270 1,129,745
Earnings before income
taxes 12,890,884 13,521,555 11,570,325
Income tax benefit 221,346 251,862 167,285
Net earnings before
cumulative adjustment
for change in
accounting for
income taxes 13,112,230 13,773,417 11,737,610
Cumulative adjustment
for change in
accounting for income
taxes - (24,372) -
Net earnings $ 13,112,230 $ 13,749,045 $ 11,737,610
Condensed Statements of Cash Flows-
For the Years Ended December 31, 1994, 1993, and 1992
1994 1993 1992
Cash Flows from
operating activities-
Net earnings $ 13,112,230 $ 13,749,045 $ 11,737,610
Adjustments to
reconcile net
earnings to net
cash provided by
operating
activities-
Excess of earnings
over dividends of
subsidiary banks (3,332,171) (5,376,282) (2,746,019)
Depreciation 26,269 21,177 19,811
Discount accretion,
net of premium
amortization 115,027 (30,616) (64,838)
Amortization of
excess of cost
over fair value
of assets acquired 46,135 46,135 46,135
Increase in other
assets (215,136) (117,587) (42,140)
Increase in
liabilities 209,490 461,298 34,390
Net cash provided
by operating
activities 9,961,844 8,753,170 8,984,949
Cash flows from
investing activities-
Acquisition of
Stephenville
Bank & Trust - (7,750,000) -
Capital expenditures (5,265) (71,693) (22,513)
Proceeds from
maturity of
securities 18,350,000 20,800,000 18,000,000
Purchases of
securities (23,298,035) (17,495,313)(26,402,477)
Net cash used
in investing
activities (4,953,300) (4,517,006) (8,424,990)
Cash flows from
financing activities-
Proceeds of stock
issuance 262,475 282,248 436,310
Cash dividends paid (5,278,454) (4,219,974) (3,388,462)
Net cash used
in financing
activities (5,015,979) (3,937,726) (2,952,152)
Net increase
(decrease) in cash
and cash equivalents (7,435) 298,438 (2,392,193)
Cash in subsidiary
bank at beginning
of the year 460,649 162,211 2,554,404
Cash in subsidiary
bank at end of year $ 453,214 $ 460,649 $ 162,211
16. BUSINESS COMBINATIONS:
In March 1994, the Company acquired, for approximately 230,000
shares of its common stock, substantially all of the outstanding
shares of Concho Bancshares, Inc. ("Concho") and its wholly owned
subsidiary, Southwest Bank of San Angelo. The shareholders of
Concho received 1.15 shares of the Company's common stock for
each
share of Concho common stock owned.
The accompanying consolidated financial statements of the Company
give effect to the merger which has been accounted for as a
pooling-of-interests. Accordingly, the accounts of Concho have
been combined with those of the Company to reflect the results of
these companies on a combined basis for all periods presented.
Certain reclassifications of the historical results of these
companies have been made to conform to the current presentation.
There were no intercompany transactions.
The Company consolidated financial data for the three months
ended
March 31, 1994, (unaudited), and the years ended December 31,
1993
and 1992, have been restated as follows:
First Financial Concho Combined
Three Months Ended
March 31, 1994
Net interest income $ 9,048,000 $ 885,000 $ 9,933,000
Net earnings 2,908,000 195,000 3,103,000
Year Ended
December 31, 1993
Net interest income $ 36,420,000 $ 3,097,000 $ 39,517,000
Net earnings 13,233,000 516,000 13,749,000
Year Ended
December 31, 1992
Net interest income $ 34,159,000 $ 3,080,000 $ 37,239,000
Net earnings 10,990,000 748,000 11,738,000
17. CASH FLOW INFORMATION:
Supplemental information on cash flows and noncash transactions
is as follows:
Year Ended
December 31,
1994 1993 1992
Supplemental cash flow
information-
Interest paid $ 21,076,643 $ 16,686,798 $ 25,546,112
Federal income taxes
paid 6,523,443 6,601,491 5,571,971
Schedule of noncash
investing and
financing activities-
Assets acquired through
foreclosure $ 271,602 $ 688,518 $ 972,930
Unrealized loss on
investment securities
available for sale (1,069,727) - -
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Arthur Andersen LLP was appointed independent accountants for
fiscal years 1990, 1991, 1992, 1993, and 1994. There have been
no
disagreements between management of Bankshares and its current
independent accountants relating to accounting practices and
procedures or financial disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant
a.) Election of Directors
A Board of Directors is to be elected at the annual meeting.
Each Director elected will hold office until the next annual
meeting of the shareholders and until his or her successor shall
be
elected and qualified. Under the Bylaws of the Company, an
individual may not stand for election or reelection as Director
upon attainment of 72 years of age unless such individual owns at
least 1% of the outstanding shares of the Company and is less
than
75 years of age. While Bylaws of the Company fix the number of
Directors at a number not less than three nor more than thirty,
thirteen nominees are named and proposed by management. The
reason
that the number of Directors authorized exceeds the number of
nominees is to avoid the necessity of amending the Bylaws of the
Company each time that it would appear to be to the advantage of
the Company to increase the number of its Directors. The proxies
accompanying the proxy statement mailed to shareholders cannot be
voted by the proxy committee for a greater number of persons than
the number of nominees named. Other Directors could be elected
after nominations from the floor at the annual meeting, if such
nominees each receive a majority vote of the shareholders.
Although the management of the Company does not contemplate that
any of the nominees will be unable to serve, if such a situation
arises prior to the annual meeting, the proxy committee will vote
in accordance with its best judgment.
During the last full year, four regular quarterly meetings
of the Board of Directors were called and held. All directors
were
able to attend at least 75% of the aggregate of the meetings of
the
Board of Directors and the meetings held by all committees of the
Board on which they served. Directors who are not officers of
the
Company receive $800 for each Board meeting attended.
First Financial Bankshares, Inc. does not have a standing
nominating or compensation committee of the Board of Directors.
The Company has a standing Executive Committee whose
responsibilities include functioning as a compensation committee
and a nominating committee with appropriate recommendations to
the
entire Board. The Executive Committee met eight times during
1994
and, among other items, considered and took action on matters
relating to its capacity as compensation and/or nominating
committee. In its capacity as nominating committee, the
Executive
Committee will consider director nominations from security
holders.
There are no prescribed procedures that the security holder must
follow. The Company has a Directors' Audit Committee that has
the
responsibility of acting on behalf of the Board in receiving and
reviewing both internal and external audit reports. During 1994
the Audit Committee met two times. The Company has a Brokerage
Services Policy Committee that provides oversight of the
brokerage
program throughout the Company. The Committee met two times
during
1994. The Company also has an Administrative Committee for the
Profit Sharing, Pension and Flexible Spending Account Benefit
Plans. Pursuant to the 1992 Incentive Stock Option Plan for Key
Employees of First Financial Bankshares, Inc. and its
Subsidiaries,
the Board of Directors has also appointed a Stock Option
Committee
composed of five members. Directors who are not officers of the
Company receive $400 for each committee meeting attended.
The names and principal occupations of Registrant's
Directors/nominees, together with the length of service as a
Director are as follows:
Years as Principal Occupation
Name Age Office Director (1) During
Last Five Years
F. Scott Dueser (2) 41 Director 4
President and Chief Executive Officer,
First National Bank of Abilene,
Abilene,
Texas*, since May 18, 1993;
President,
First National Bank of Abilene,
Abilene,
Texas*, January 15, 1991, to May 18,
1993;
Executive Vice President, First
National
Bank of Abilene, Abilene, Texas*
Patrick N. Gerald 55 Director 14
Chairman and President, First National
Bank, Sweetwater, Sweetwater,Texas*
Robert E. Hitt 70 Director 22
Investments
(2) (3) (4) (5)
Joe B. Matthews (5) 50 Director 7
Geologist
Raymond A. McDaniel, 61 Director 3
McDaniel & Associates
Jr. (3)
Bynum Miers (5) 58 Director 3
Ranching and Investments
Kenneth T. Murphy (2) 57 Chairman, 23
See "Executive Officers" below
President and
Chief Executive
Officer, Director
Dian Graves Owen 55 Director 2
Chairman, Owen Healthcare, Inc.
James M. Parker 64 Director 22
President, Parker Properties, Inc.
(2) (3) (4)
W.V. Ramsey, Jr., M.D. 67 Director 24
Chairman, Abilene Aero, Inc. since
(2) (3) (4) (6) July
1, 1991; Radiology Associates
O.L. Schuch 69 Director Investments
Craig Smith 52 Director 5 Chairman and President,
Hereford
State Bank, Hereford, Texas*
H.T. Wilson (2) (5) 67 Director 12
Chairman, Eastland National Bank,
Eastland, Texas*
(1) The years indicated are the approximate number of years each
person has continuously
served as Director of the Company, or, prior thereto, of
First National Bank of
Abilene, which became a wholly-owned subsidiary of the
Company in April, 1973, when
all the then Directors of First National Bank of Abilene
became Directors of the
Company.
(2) This Director/Nominee is a member of the Executive Committee.
(3) This Director/Nominee is a member of the Stock Option
Committee.
(4) This Director/Nominee is a member of the Administrative
Committee of the Company
Profit Sharing and Pension Plan.
(5) This Director/Nominee is a member of the Directors' Audit
Committee.
(6) This Director/Nominee is a member of the Brokerage Services
Policy Committee.
b.) Executive Officers
Term of Years Served
Principal Occupation
Name Age Office Office In Such Office
During Past 5 Years
Kenneth T. Murphy 57 Chairman, 1 year 8 years Chairman,
President
and Chief
President and
Executive Officer; Chairman,
Chief Executive First National
Bank of
Officer Abilene,
Abilene, Texas*
Curtis R. Harvey 49 Executive Vice 1 year 4
years Executive Vice President and
President and Chief
Financial Officer since
Chief Financial December 1, 1990;
Officer Executive Vice
President,
Bank One, Texas,
N.A.
*The bank shown is a subsidiary of the Company.
c.) Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of the forms furnished to the
Company, the Company believes that during the 1994 fiscal year no
Form 5s were required and all filing requirements applicable to
its
officers and directors were complied with.
Item 11. Director and Officer Compensation
a.) Directors who are not officers of the Company
receive $800 for each Board meeting attended and
$400 for each committee meeting attended.
b.) Officer Compensation
The following table provides individual compensation
information on the Chief Executive Officer and the four most
highly
compensated officers of the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation
Compensation Awards
Number of
Securities All Other
Underlying Compensa-
Name and Principal Position Year Salary ($)Options(#)(1)
tion($)(2)
Kenneth T. Murphy, Chairman, President 1994 $ 277,000 -
$ 17,605
& CEO-First Financial Bankshares, Inc. 1993
257,0003,750 26,516
1992 237,000 - 27,650
F. Scott Dueser, President & CEO 1994 168,000
- 18,380
First National Bank of Abilene 1993
151,2502,500 18,382
1992 130,000 - 16,305
Patrick N. Gerald, Chairman and President 1994 137,500
- 8,186
& CEO-First National Bank, Sweetwater 1993
132,0001,250 14,031
1992 125,000 - 13,702
Craig Smith, Chairman and President 1994 130,000
- 15,986
& CEO-Hereford State Bank 1993 124,500 1,250 15,299
1992 117,500 - 15,905
Curtis R. Harvey, Executive Vice President 1994 121,800
- 14,157
& CFO-First Financial Bankshares, Inc. 1993
117,0001,250 13,050
1992 110,000 - 13,024
(1) Adjusted for stock splits and stock dividends.
(2) The Company's contribution to Profit Sharing Plan.
The following table contains information concerning each
exercise of stock options during the last fiscal year by each of
the persons named below and the fiscal year-end value of
unexercised options.
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values
Number of
Securities Value of
Underlying Unexercised
Number of Unexercised
In-the-Money
Securities Options at Options
at
Underlying FY-End (#)(1) FY-End
($)
Shares Acquired Value Exercisable/
Exercisable/
Name on Exercise (#) Realized ($)
UnexercisableUnexercisable
Kenneth T. Murphy 2,740 $ 58,581 3,500$
57,330
15,611 91,897
F. Scott Dueser 454 7,922 - -
7,532 44,338
Patrick N. Gerald 2,832 86,722 - -
4,674 27,514
Craig Smith 681 13,075 - -
5,706 33,589
Curtis R. Harvey 619 6,165 - -
3,106 5,373
(1) Adjusted for stock splits and stock dividends
Pension Plan
The Company's Pension Plan requires annual contributions
sufficient to provide the pension benefits accruing to employees
under the Plan. The annual benefit for a participant in the
Pension Plan who retires on his normal retirement date is the
Accrued Benefit 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 10
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 Plan for early retirement with reduced
benefits.
There is no vesting of Plan benefits until a participant has 5 or
more years of credited service with participating employers.
Full
(100%) vesting occurs upon the completion of 5 years of credited
service or upon reaching age 65 without regard to credited
service.
The following table illustrates estimated retirement benefits
under the Company Pension Plan for persons in specified
remuneration and years of service categories and which benefits
are
payable annually for life with 10 years certain. The benefits
listed in the table are not subject to any deduction for social
security or other offset amounts. This illustration does not
reflect any benefit which 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
200,000 37,500 50,000 62,500 75,000 87,500
250,000 46,875 62,500 78,125 93,750 109,375
The maximum annual pension benefit payable allowable under
current
law is $118,800.
As of December 31, 1994, Mr. Murphy was credited with 24
years of service under the Company Pension Plan, Mr. Gerald was
credited with 19 years of service, Mr. Smith was credited with 25
years of service, Mr. Dueser was credited with 18 years of
service,
and Mr. Harvey was credited with 4 years of service. The covered
compensation of each of these officers and directors during 1994
was $150,000, $138,215, $131,819, $150,000, and $121,810,
respectively.
In 1992 the Board of Directors approved a deferred
compensation agreement between First Financial Bankshares, Inc.
and
Kenneth T. Murphy, Chairman, President and Chief Executive
Officer.
The agreement was made in recognition of his contribution to the
success of the Company and as an inducement to remain, subject to
the discretion of the Board of Directors, in the employ of the
Company. The agreement provides that following retirement in
December 2002, or such later date as may be mutually agreed upon
by
the parties, the Company will pay Mr. Murphy, or his beneficiary,
the sum of $6,250 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
No person who served as a member of the Executive Committee
in its capacity as compensation committee was, during the past
fiscal year, an officer or employee of the Company or any of its
subsidiaries, or had any relationship requiring disclosure except
for Mr. Tom Wilson, who is a former subsidiary bank officer.
However, committee members Robert Hitt, James Parker, and Dr.
Wayne
Ramsey, Jr. did obtain loans from a subsidiary bank during the
past
year. In each case, such 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 with other persons and did not involve more than the
normal risk of collectibility or present other unfavorable
features. No executive officer of the Company 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 Director of the Company.
EXECUTIVE COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During the past fiscal year the Company's executive
compensation program was administered by the Executive Committee
acting in the capacity of compensation committee. The Company's
executive compensation program consists of base salary, profit
sharing, and incentive stock options. With the exception of the
Chief Executive Officer, the base salaries for the executive
officers named on page 48 are reviewed in December of each year
with adjustments made effective January 1. Included among the
factors which the Committee considers when approving annual base
salaries are: attainment of planned goals and objectives, scope
of
responsibility (asset size of subsidiary bank and/or degree of
influence on the Company's profitability and operations), tenure
with the Company, evaluation input from subsidiary bank
directors,
and relationship of base salary to the base salaries of other
members of the executive officer group.
The base salary for Mr. Murphy was reviewed in March 1994
with
an adjustment made effective April 1, 1994. The increase was
based
on the following factors:
- The Company's financial performance for 1993 which
reflected
a 9% increase in net income.
- Performance of Chief Executive Officer's duties which
relate
primarily to leading and managing the Company within the
broad guidelines set by the Board of Directors.
- Successful negotiation and completion of acquisition
transaction.
- Base salary compared to Wyatt Data Services compensation
survey data for chief executive officers of similar size
organizations within the industry.
- Subjective evaluations of Mr. Murphy's contribution to
the
overall success of the Company.
Stock options are granted under the Incentive Stock Option
Plan upon recommendation of the Stock Option Committee of the
Board
of Directors. The Executive Committee believes that the Stock
Option Plan is an integral part of the executive compensation
program which encourages key employees to align their long-range
interest with those of shareholders by accomplishing longer-term
corporate goals. There were no options granted during 1994.
The following line graph compares cumulative total
shareholder return with a performance indication of the overall
stock market, the S&P 500 Stock Index, and a
nationally-recognized
banking industry index, the Keefe, Bruyette and Woods, Inc. (KBW)
50 Total Return Index, which is comprised of fifty of the
nation's
top banking companies.
Robert E. Hitt W.V. Ramsey, Jr., M.D.
James Parker H.T. Wilson
Item 12. Security Ownership of Certain Beneficial Owners and
Management
(a) Security ownership of certain beneficial owners.
At December 31, 1994, management was 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 five percent (5%) of the Company's common stock.
However, First National Bank of Abilene, First National Bank,
Sweetwater, and Stephenville Bank & Trust Co. held of record in
various fiduciary capacities an aggregate of 1,004,908 shares of
such stock. Of the total shares held, these subsidiaries of
capacities an aggregate of 1,004,908 shares of such stock. Of
the
total shares held, these subsidiaries of the Company had sole
power
to vote 486,363 shares (9.7%), 77,777 shares (1.6%), and -0-
shares, respectively. In addition, First National Bank of
Abilene,
First National Bank, Sweetwater, and Stephenville Bank & Trust
Co.
shared, with other persons, the power to vote the remaining
437,591
shares, 3,052 shares, and 125 shares, respectively. 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.
b.) Security ownership of management
Set forth in the following table is certain information as
of December 31, 1994 as to the number of shares of Common Stock
beneficially owned by each Director of the Company, by each
nominee
for election as a director, by the Company's chief executive
officer and its four other most highly compensated executive
officers, and by the officers and directors of the Company as a
group.
Number of Shares
Beneficially Percent
Name Owned of Class
F. Scott Dueser 30,814 0.6
Patrick N. Gerald 19,041 0.4
Robert E. Hitt 51,798 1.0
Joe B. Matthews 1,413 -
Raymond McDaniel, Jr. 14,696 0.3
Bynum Miers 13,218 0.3
Kenneth T. Murphy 50,078 1.0
Dian Graves Owen 13,047 0.3
James M. Parker 195,187 4.0
W. V. Ramsey, Jr., M.D. 102,750 2.1
O. L. Schuch 15,878 0.3
Craig Smith 23,459 0.5
H. T. Wilson 50,286 1.0
Curtis R. Harvey 1,444 -
All Officers and
Directors as a group 583,109 11.7
c.) Changes in control
There have been no events to the Registrant's knowledge which
have or will result in a change of control of the Registrant.
PART IV
Item 13. Certain Relationships and Related Transactions
Certain of Registrant's officers and directors are customers
of one or more of Registrant's subsidiary banks, as are
corporations and other business entities with which directors of
Bankshares are affiliated as directors, officers or principals.
All loans to directors and officers of Bankshares, or to persons
and firms with which they are or may be affiliated, were and are
made in the ordinary course of business and on substantially the
same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other
persons and did not, and do not, involve more than the normal
risk
of collectibility or present other unfavorable features. None of
the transactions involving Bankshares' subsidiaries and
Bankshares'
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.
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
The consolidated financial statements of the Registrant filed
with this report are included on pages 27 through 45. There
were
no financial statement schedules filed as a part of this report.
Such information, to the extent applicable, has been made a part
of
the consolidated financial statements or included elsewhere in
this
report.
No 8-K Current Reports were filed during the fourth quarter
of 1994.
The Registrant's Articles of Incorporation and Bylaws and
material contracts have been filed with the Securities and
Exchange
Commission in "Exhibits to Form S-15" under Registration No. 2-
73141.
Copies of the following documents were filed with the
Form 10-K Annual Report for the fiscal year ended December 31,
1984.
1. Joint Venture Agreement between First National Bank of
Abilene and Crow-Griffin #1.
2. Lease Agreement between First National Bank of Abilene
and Crow/First Joint Venture.
3. Deferred Compensation Agreement between Bankshares and
Walter F. Johnson.
The following documents were filed with the Form 10-K
Annual Report for the fiscal year ended December 31, 1988.
1. Articles of Amendment to the Articles of Incorporation
adopted at the 1988 Annual Meeting of Shareholders.
2. Restated Bylaws adopted by the Board of Directors on
January 24, 1989.
The following documents were filed with the Form 10-K
Annual Report for the fiscal year ended December 31, 1992.
1. Amendment to Registrant's Bylaws effective January 28,
1992, relative to emeritus directors.
2. Deferred Compensation Agreement between Bankshares and
Kenneth T. Murphy, Chairman of the Board, Chief
Executive
Officer and President of the Registrant.
Listed below are the exhibits filed with this report:
1. Subsidiaries of Registrant
2. Amendment to Registrant's Bylaws effective April 26,
1994.
SUBSIDIARIES OF REGISTRANT
Place of Percentage of Voting
Name of Subsidiary Organization
Securities Owned
First Financial Bankshares of Delaware 100%
Delaware, Inc
First Financial Investments, Inc. Texas 100%
First National Bank of Abilene Texas 100%*
Abilene, Texas
Hereford State Bank Texas 100%*
Hereford, Texas
First National Bank Texas 100%*
Sweetwater, Texas
Eastland National Bank Texas 100%*
Eastland, Texas
The First National Bank in Cleburne Texas 100%*
Cleburne, Texas
Stephenville Bank & Trust Texas 100%*
Stephenville, Texas
Southwest Bank of San Angelo Texas 100%*
San Angelo, Texas
* By First Financial Bankshares of
Delaware, Inc.
All subsidiaries (other than First Financial Investments, Inc.
which, as of December 31, 1994 had not yet been formally
organized)
are included in the consolidated financial statements.
AMENDMENT TO BYLAWS
Upon motion being duly made, seconded and unanimously carried,
the
following Amendment to the Amended and Restated Bylaws of First
Financial Bankshares, Inc. was approved and adopted at the
regular
meeting of the Board of Directors, at which a quorum was present,
held on April 26, 1994:
"Section A
The name of this corporation shall be First Financial
Bankshares, Inc."
SIGNED AND CERTIFIED this 26 day of April, 1994.
/S/ CURTIS R. HARVEY
CURTIS R. HARVEY
Executive Vice President
and
Chief Financial Officer
ATTEST:
/S/ SANDY LESTER
SANDY LESTER
Secretary
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FIRST FINANCIAL BANKSHARES, INC.
(Registrant)
By:/S/ KENNETH T. MURPHY By:/S/ CURTIS R. HARVEY
KENNETH T. MURPHY, Chairman CURTIS R. HARVEY, Executive
of the Board, President, Vice President, Chief Financial
Chief Executive Officer and Officer, Controller and Chief
Director Accounting Officer
Date: March 13 , 1995
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below
by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
NAME TITLE DATE
Director March , 1995
J. Allen Baird
/S/ F. SCOTT DUESER Director March 13 , 1995
F. Scott Dueser
/S/ PATRICK N. GERALD Director March 24 , 1995
Patrick N. Gerald
/S/ ROBERT E. HITT Director March 13 , 1995
Robert E. Hitt
/S/ JOE B. MATTHEWS Director March 23 , 1995
Joe B. Matthews
/S/ RAYMOND A. MCDANIEL, JR.Director March 13 , 1995
Raymond A. McDaniel, Jr.
/S/ BYNUM MIERS Director March 21 , 1995
Bynum Miers
/S/ DIAN GRAVES OWEN Director March 22 , 1995
Dian Graves Owen
/S/ JAMES M. PARKER Director March 21 , 1995
James M. Parker
/S/ W. V. RAMSEY, JR.,
M. D. Director March 23 , 1995
W.V. Ramsey, Jr., M.D.
/S/ CRAIG SMITH Director March 16 , 1995
Craig Smith
/S/ H. T. WILSON Director March 22 , 1995
H.T. Wilson
/S/ STANLEY P. WILSON Director March 21 , 1995
Stanley P. Wilson