SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
First Financial Bankshares, Inc.
(Name of Registrant As Specified in its Charter)
----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
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Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid: $___________
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(4) Date Filed: ______________________
FIRST FINANCIAL BANKSHARES, INC.
400 Pine Street
Abilene, Texas 79601
(915) 627-7155
NOTICE OF THE 1999 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 1999
To Our Shareholders:
The annual meeting of shareholders of First Financial Bankshares, Inc.
("Bankshares" or the "Company") will be held in the Abilene Civic Center, 1100
North 6th Street, Abilene, Texas, at 10:30 a.m., Abilene time, on Tuesday, April
27, 1999, for the following purposes:
(1) To elect 15 directors of Bankshares;
(2) To approve the appointment of Arthur Andersen LLP as the independent
accountants of Bankshares for the year 1999; and
(3) To act on such other business as may properly come before the annual
meeting, or any adjournment thereof. The Board of Directors is not
aware of any other business to come before the meeting.
Only shareholders of record at the close of business on March 17, 1999 are
entitled to notice of and to vote at the annual meeting or any adjournments
thereof.
We have included, along with this notice and Proxy Statement, the 1998
Annual Report, which describes certain of Bankshares' activities during 1998 and
contains Bankshares' financial statements for the year ended December 31, 1998.
The Annual Report does not form any part of the material for solicitation of
proxies.
We hope that you are present at the annual meeting and the luncheon to
be held immediately afterward. We respectfully urge you, whether or not you plan
to attend the annual meeting, to sign, date and mail the enclosed proxy card in
the envelope provided in order to eliminate any question of your vote being
counted. You can revoke your proxy in writing at any time before the annual
meeting, so long as your written request is received by the Secretary of
Bankshares before your proxy is voted. Alternatively, if you submitted a proxy
and attend the annual meeting in person, you may revoke the proxy and vote in
person on all matters submitted at the annual meeting.
By order of the Board of Directors,
KENNETH T. MURPHY, Chairman
March 31, 1999
FIRST FINANCIAL BANKSHARES, INC.
400 Pine Street
Abilene, Texas 79601
(915) 627-7155
PROXY STATEMENT
1999 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 1999
INTRODUCTION
The board of directors (the "Board of Directors") of First Financial
Bankshares, Inc., a Texas corporation ("Bankshares" or the "Company"), hereby
solicits your proxy on behalf of Bankshares for use at the 1999 annual meeting
of Bankshares' shareholders and any continuation of this meeting pursuant to any
adjournment thereof (the "Annual Meeting"). The Annual Meeting will be held in
the Abilene Civic Center, 1100 North 6th Street, Abilene, Texas, at 10:30 a.m.,
Abilene time, on Tuesday, April 27, 1999.
Bankshares' principal executive office is located at 400 Pine Street,
Abilene, Texas 79601. Bankshares' telephone number is (915) 627-7155.
Bankshares mailed this proxy statement (this "Proxy Statement") and the
accompanying proxy card on March 31, 1999. The date of this Proxy Statement is
March 31, 1999.
VOTING OF SECURITIES
Record Date
The Board of Directors has established the close of business on March
17, 1999 as the record date for determining the shareholders (the
"Shareholders") entitled to notice of, and to vote at, the Annual Meeting. On
the Record Date, Bankshares had 9,956,183 shares of its common stock
outstanding.
Quorum
In order for any business to be conducted at the Annual Meeting, a
quorum consisting of Shareholders having voting rights with respect to a
majority of Bankshares' outstanding common stock on the Record Date must be
present in person or by proxy. Shares that are represented at the Annual Meeting
but abstain from voting on any or all matters and shares that are "broker
non-votes" (shares held by brokers or nominees as to which they have no
discretionary power to vote on a particular matter and have received no
instructions from the beneficial owners thereof or persons entitled to vote
thereon) will be counted in determining whether a quorum is present at the
Annual Meeting.
Required Vote
To elect a nominee for director, the affirmative vote of a majority of
shares entitled to vote at the Annual Meeting is required. Therefore, if you
abstain from voting or withhold authority to vote in the election of a director,
your abstention or withholding will have the effect of a negative vote with
respect to such election because such election requires the affirmative vote of
a majority of shares entitled to vote. To approve the appointment by the Board
of Directors of Arthur Andersen LLP as the independent accountants of Bankshares
for the year 1999, the affirmative vote of a majority of votes cast with respect
to such appointment is required. Abstentions will be included in determining the
number of votes cast. Therefore, if you return your proxy card and expressly
abstain from voting on this proposal, your abstention will have the effect of a
negative vote with respect to this proposal because this proposal requires the
affirmative vote of a majority of votes cast with respect to this proposal.
Broker non-votes will be treated as present with respect to each applicable
proposal. But, because broker non-votes are not votes cast for, against, or as
expressly abstained, they will have no effect on the outcome of any such
proposal.
1
Shareholder List
A list of Shareholders entitled to vote at the Annual Meeting, which
will be arranged in alphabetical order and which will show each Shareholder's
address and the number of shares registered in his or her name, will be open to
any Shareholder to examine for any purpose related to the Annual Meeting. Any
Shareholder may examine this list during ordinary business hours commencing
March 31, 1999, and continuing through the date of the Annual Meeting at the
principal office of Bankshares, 400 Pine Street, Abilene, Texas 79601.
SOLICITATION AND REVOCABILITY OF PROXIES
Solicitation
Bankshares will bear the expense to solicit proxies, which will include
reimbursement of expenses incurred by brokerage firms and other custodians,
nominees and fiduciaries to forward solicitation materials regarding the Annual
Meeting to beneficial owners. Bankshares' officers may further solicit proxies
from Shareholders and other persons by telephone or oral communication.
Bankshares will not pay these officers any extra compensation for participating
in this solicitation.
Proxies and Revocation
Each executed and returned proxy card will be voted according to the
directions indicated on that proxy card. If no direction is indicated, the proxy
will be voted according to the Board of Directors' recommendations, which are
contained in this Proxy Statement. The Board of Directors does not intend to
present, and has no information that others will present, any business at the
Annual Meeting that requires a vote on any other matter. If any other matter
requiring a vote properly comes before the Annual Meeting, the proxies will be
voted in the discretion of the proxyholders named on the proxy.
Each Shareholder giving a proxy has the power to revoke it at any time
before the shares of Bankshares common stock it represents are voted. This
revocation is effective upon receipt, at any time before the Annual Meeting is
called to order, by the Secretary of Bankshares of either (i) an instrument
revoking the proxy or (ii) a duly executed proxy bearing a later date than the
preceding proxy. Additionally, a Shareholder may change or revoke a previously
executed proxy by voting in person at the Annual Meeting.
2
PROPOSAL 1
ELECTION OF DIRECTORS
General
The Board of Directors currently consists of 15 directors. At the
Annual Meeting, 15 directors are to be elected, each for a term of one year.
Under the Bylaws of Bankshares, an individual may not stand for election or
reelection as a director upon attaining 72 years of age, unless such individual
owns at least 1% of the outstanding shares of Bankshares common stock and is
less than 75 years of age. While the Bylaws of Bankshares fix the number of
directors at a number not less than three nor more than 30, the Board of
Directors has fixed the number of directors at 15. Although Bankshares does not
contemplate that any of the nominees will be unable to serve, if such a
situation arises before the Annual Meeting, the proxies will be voted to elect
any substitute nominee or nominees designated by the Board of Directors.
Nominees
The names and principal occupations of the nominees, together with the
length of service as a director and the number of shares of Bankshares common
stock beneficially owned by each of them on February 9, 1999, are as follows:
Shares of
Years as Bankshares Percent
Director Principal Occupation Beneficially of Shares
Name Age (1) During Last Five Years Owned Outstanding
- ---- --- --- ---------------------- ----- -----------
Joseph E. Canon 57 3 Executive Director, 7,213 0.07
Dodge Jones Foundation
Mac A. Coalson 59 3 Real Estate and Ranching 105,186 1.06
David Copeland 43 1 President, Shelton Family 3,121 0.03
Foundation
F. Scott Dueser 46 8 President and Chief Executive 76,411(2) 0.77
Officer, First National
Bank of Abilene*
Kade L. Matthews 41 1 Ranching and Investments 73,852 0.74
Raymond A. McDaniel, Jr. 65 7 Investments 40,726 0.41
Bynum Miers 62 7 Ranching 23,122 0.23
Kenneth T. Murphy 61 27 See "Executive Officers" on 117,212(3) 1.18
page 4
Dian Graves Owen 59 6 Consultant, Owen Healthcare, 29,345 0.29
Inc.
James M. Parker 68 26 President, Parker Properties, 351,764 3.53
Inc.
Jack D. Ramsey, M.D. 68 2 Physician, Radiology 77,397 0.78
Associates
Craig Smith 57 9 Chairman, President and Chief 51,107 0.51
Executive Officer, Hereford
State Bank*
F. L. Stephens 61 1 Chairman and Chief Executive 11,000 0.11
Officer, Town & Country
Food Stores, Inc.
3
H. T. Wilson 71 16 Investments 75,057 0.75
Walter F. Worthington 72 3 Investments 183,426 1.84
Shares beneficially owned by all Executive Officers and Directors of Bankshares** 1,234,420(4) 12.40
*Bank subsidiary of Bankshares.
**See "Security Ownership of Certain Beneficial Owners and Management."
(1) The years indicated are the approximate number of years each person has
continuously served as a director of Bankshares, or, prior thereto, of
First National Bank of Abilene, which became a wholly-owned subsidiary of
Bankshares in April 1973, when all the then directors of First National
Bank of Abilene became directors of Bankshares.
(2) Includes 858 shares of Bankshares common stock issuable upon exercise of
options presently exercisable or exercisable within 60 days of February 9,
1999.
(3) Includes 3,903 shares of Bankshares common stock issuable upon exercise of
options presently exercisable or exercisable within 60 days of February 9,
1999.
(4) Includes 6,179 shares of Bankshares common stock issuable upon exercise of
options presently exercisable or exercisable within 60 days of February 9,
1999.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE ELECTION OF EACH OF THESE NOMINEES.
Executive Officers
Set forth below are the executive officers of Bankshares, and the
shares of Bankshares common stock beneficially owned by each of them as of
February 9, 1999:
Years Shares of
Served Bankshares Percent of
in Such Principal Occupation Beneficially Shares
Name Age Office Office During Past 5 Years Owned Outstanding
- ---- --- ------ ------ ------------------- ----- -----------
Kenneth T. Murphy 61 Chairman, 12 years Chairman, President and 117,212(1) 1.18
President and Chief Executive Officer
Chief Executive of Bankshares; Chairman,
Officer First National Bank of
Abilene*
Curtis R. Harvey 53 Executive Vice 8 years Executive Vice President 7,347(2) 0.07
President and and Chief Financial
Chief Financial Officer of Bankshares
Officer
Tommy J. Barrow 51 Executive Vice 4 years Executive Vice President 1,134(3) 0.01
President of Bankshares since
October 1995; President,
First National Bank of
Andrews
*Bank subsidiary of Bankshares.
(1) Includes 3,903 shares of Bankshares common stock issuable upon exercise of
options presently exercisable or exercisable within 60 days of February 9,
1999.
(2) Includes 732 shares of Bankshares common stock issuable upon exercise of
options presently exercisable or exercisable within 60 days of February 9,
1999.
(3) Includes 686 shares of Bankshares common stock issuable upon exercise of
options presently exercisable or exercisable within 60 days of February 9,
1999.
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MANAGEMENT
Amounts and prices related to shares of Bankshares common stock have
been adjusted to give effect to all stock splits and stock dividends.
Executive Compensation
The following table provides individual compensation information on the
Chief Executive Officer and the four most highly compensated officers of
Bankshares and officers of its subsidiaries who are directors (the "named
executive officers").
Summary Compensation Table
Long Term
Compensation
Annual Awards All Other
Compensation Securities Compensation
Name and Principal Position Year Salary ($) Underlying Options (#) ($)(1)
- --------------------------- ---- ---------- ---------------------- ----------
Kenneth T. Murphy, Chairman, President and 1998 363,750 3,630 22,497
Chief Executive Officer 1997 339,000 -- 20,551
First Financial Bankshares, Inc. 1996 315,750 -- 18,421
F. Scott Dueser, President and Chief 1998 221,667 2,420 22,689
Executive Officer 1997 202,000 -- 23,931
First National Bank of Abilene 1996 185,000 -- 21,210
Craig Smith, Chairman, President and 1998 150,000 825 20,386
Chief Executive Officer 1997 144,000 -- 20,199
Hereford State Bank 1996 140,000 -- 10,043
Curtis R. Harvey, Executive Vice President 1998 143,500 1,100 20,166
and Chief Financial Officer 1997 136,500 -- 17,240
First Financial Bankshares, Inc. 1996 130,000 -- 15,686
Tommy J. Barrow, Executive Vice President 1998 109,200 825 15,345
First Financial Bankshares, Inc. 1997 105,000 -- 13,262
1996 100,000 -- 12,038
(1) Represents Bankshares' contribution to its Profit Sharing Plan for such
executive officer.
5
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning the
options granted to the named executive officers during 1998. Since December 31,
1998, Bankshares has not granted any options to any of the named executive
officers. For additional information on options, see "--Stock Option Plan."
Individual Grants Potential Realizable
---------------------------------------------------------------- Value at
% of Assumed Annual
Number of Total Rates of
Securities Options Market Stock Price
Underlying Granted to Price on Appreciation
Options Employees Exercise Date of for Option Term
Granted in Fiscal Price Grant Expiration ($)(3)
Name (#)(1)(4) Year(2) ($/Sh) ($/Sh) Date -------------------
- ---- --------- ---------- -------- -------- ---------- 5% 10%
-- ---
Kenneth T. Murphy 3,630 7.99 36.59 36.59 12/31/2003(5) 36,697 81,091
F. Scott Dueser 2,420 5.33 36.59 36.59 03/24/2008 55,689 141,126
Craig Smith 825 1.82 36.59 36.59 03/24/2008 18,985 48,111
Curtis R. Harvey 1,100 2.42 36.59 36.59 03/24/2008 25,313 64,148
Tommy J. Barrow 825 1.82 36.59 36.59 03/24/2008 18,985 48,111
(1) Granted under Bankshares' 1992 Incentive Stock Option Plan.
(2) Options to purchase a total of 45,430 shares of Bankshares common stock
were granted to employees in 1998.
(3) The amounts under the columns labeled "5%" and "10%" are included by
Bankshares pursuant to certain rules promulgated by the Securities and
Exchange Commission (the "Commission") and are not intended to forecast
future appreciation, if any, in the price of Bankshares common stock. Such
amounts are based on the assumption that the named persons hold the options
for the full term of the options. The actual value of the options will vary
in accordance with the market price of Bankshares common stock.
(4) Options are subject to a six-year vesting schedule, with one-fifth becoming
exercisable on the second anniversary of the date of grant and an
additional one-fifth becoming exercisable on each of the following
anniversaries of the date of grant until fully vested.
(5) Expiration date for Mr. Murphy's options is one year following his currently
projected retirement date.
The following tables contain information concerning options granted and
options exercised during the last fiscal year by the named executive officers.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at Fiscal Year End (#) at Fiscal Year End ($)(1)
Acquired on Value ------------------------------ ---------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
Kenneth T. Murphy 1,250 21,725 3,903 10,075 63,931 105,569
F. Scott Dueser -- -- 858 6,717 14,054 70,385
Craig Smith 2,682 55,191 -- 2,974 -- 35,201
Curtis R. Harvey 896 14,526 732 3,287 11,990 35,823
Tommy J. Barrow -- -- 686 1,857 11,237 16,904
(1) Based upon the closing price per share of Bankshares common stock of $35.00
on December 31, 1998.
Compensation pursuant to Plans
General
Bankshares has both a defined benefit pension plan (the "Pension Plan")
and a profit sharing plan (the "Profit Sharing Plan"). An employee is eligible
to become a participant in the Pension Plan and Profit Sharing Plan on the
January 1 coincident with or immediately following the date such person's
employment begins. Bankshares and its subsidiary banks adopted a Flexible
Spending Account Benefit Plan for all employees that became effective in 1988.
The First National Bank in Cleburne adopted these plans effective in 1991.
6
Stephenville Bank & Trust Co. adopted these plans effective in 1993. San Angelo
National Bank adopted the Pension and Flexible Spending Account Benefit Plan
effective in 1994 and Profit Sharing Plan effective in 1995. Weatherford
National Bank adopted these plans effective in 1996. Texas National Bank adopted
all benefit plans effective in 1998. Cleburne State Bank adopted all benefit
plans effective in 1999.
Profit Sharing Plan
Bankshares and each subsidiary bank that participates in the Profit
Sharing Plan determines on an annual basis the contribution that it will make to
the Profit Sharing Plan from such employer's operating profits. Contributions
under the Profit Sharing Plan are administered by the Administrative Committee
for the Profit Sharing, Pension and Flexible Spending Account Benefit Plans for
the exclusive benefit of plan participants under the provisions of a Trust
Agreement. Under the Profit Sharing Plan, eligible employees may contribute
between 1% and 5% of their eligible earnings, although contributions by
employees are not required as a condition of participation. Each participating
employer's annual contribution is allocated among the accounts of the active
plan participants employed by such employer, in the ratio that each
participant's compensation bears to the total compensation of all participants
of such employer. Compensation is defined as the total amount paid to an
employee during the year, including bonuses, commissions, overtime pay, and
salary reductions under the Flexible Spending Account Benefit Plan, but
excluding reimbursed expenses, director fees, group insurance benefits and
pension and profit sharing contributions. However, the Internal Revenue Service
limits the compensation amount used to calculate a participant's benefit to a
maximum of $160,000. Additionally, the annual addition amount (which is the
aggregate of employer and employee contributions) that may be allocated to a
participant is limited to $30,000.
The Profit Sharing Plan provides for benefits to vest (become
nonforfeitable) in graduated percentages for the first six years of
participation, with benefits being fully vested after seven years of credited
service. Generally, an employee's benefit at normal retirement will be the
contributions allocated to his account while a participant, increased by gains
and decreased by losses from investments of the trust, and increased by any
forfeitures allocated to his account. An employee is always fully vested with
respect to any voluntary contributions he makes, and death or disability of a
participant while employed by Bankshares or one of its participating subsidiary
banks results in immediate full vesting with respect to employer contributions.
If a participant terminates employment for any other reason, the total amount of
his employee contribution account and the vested portion of his employer
contribution account are distributed to him.
Pension Plan
The Pension Plan requires annual contributions sufficient to provide
the pension benefits accruing to employees under the Pension Plan. The annual
benefit for a participant in the Pension Plan who retires on his normal
retirement date is the Accrued Benefit (as defined in the Pension Plan) at
December 31, 1988, plus 1.25% of average compensation multiplied by years of
service from January 1, 1989. "Average Compensation" is the average compensation
during the ten years immediately preceding the date of determination.
Compensation means the total amount paid to an employee during the year
including bonuses, commissions, and overtime pay, but excluding reimbursed
expenses, director fees, group insurance benefits and pension and profit sharing
contributions. There are provisions in the Pension Plan for early retirement
with reduced benefits. There is no vesting of benefits until a participant has
five or more years of credited service with participating employers. Full
vesting (100%) occurs upon the completion of five years of credited service or
upon reaching age 65 without regard to credited service.
The Pension Plan is subject to the minimum funding requirements of the
Employee Retirement Income Security Act of 1974 ("ERISA"). As of December 31,
1998, there was no present funding deficiency. Bankshares and participating
subsidiary banks' contributions to the Pension Plan have been $272,346 in 1994;
$533,411 in 1995; $491,681 in 1996; $557,915 in 1997; and $589,238 in 1998.
The following table illustrates estimated retirement benefits under the
Pension Plan for persons in specified remuneration and years of service
categories, which benefits are payable annually for life (but in no event less
than ten years). The benefits listed in the table below are not subject to any
deduction for social security or other offset amounts. This table does not
reflect any benefit that a participant may have accrued at December 31, 1988.
7
PENSION PLAN TABLE
Years of Service
----------------------------------------------------------
Remuneration 15 20 25 30 35
- ------------ --------- ---------- ---------- ---------- ----------
$ 25,000 $ 4,688 $ 6,250 $ 7,813 $ 9,375 $ 10,938
50,000 9,375 12,500 15,625 18,750 21,875
75,000 14,063 18,750 23,438 28,125 32,813
100,000 18,750 25,000 31,250 37,500 43,750
125,000 23,438 31,250 39,063 46,875 54,688
150,000 28,125 37,500 46,875 56,250 65,625
175,000 32,813 43,750 54,688 65,625 76,563
200,000 37,500 50,000 62,500 75,000 87,500
As of December 31, 1998, under the Pension Plan, Mr. Murphy was
credited with 28 years of service, Mr. Dueser was credited with 22 years of
service, Mr. Smith was credited with 29 years of service, Mr. Harvey was
credited with 8 years of service, and Mr. Barrow was credited with 9 years of
service. The covered compensation of each of these persons during 1998 was
$160,000; $160,000; $150,000; $143,500; and $109,200, respectively.
Flexible Spending Account Benefit Plan
Effective January 1, 1988, Bankshares and its subsidiary banks adopted
a Flexible Spending Account Benefit Plan. An employee is eligible to become a
participant in this plan on the first day of the month following completion of
two months of service. The Flexible Spending Account Benefit Plan allows each
participant to redirect a portion of his/her salary, before taxes, to pay
certain medical and/or dependent care expenses.
Deferred Compensation Agreement
In 1992, the Board of Directors approved a deferred compensation
agreement, which was amended in 1995, between Bankshares and Mr. Murphy.
Bankshares entered into this agreement in recognition of Mr. Murphy's
contribution to Bankshares' success and as an inducement to him to remain,
subject to the discretion of the Board of Directors, in the employ of
Bankshares. This agreement provides that, following his retirement in December
2002, or such later date as may be mutually agreed upon, Bankshares would pay
him, or his beneficiary, the sum of $8,750 per month for a period of 84 months.
The monthly amount is considered to be an appropriate level of supplemental
income to partially offset Mr. Murphy's reduction in personal income following
retirement and is based on an analysis of the difference in projected final year
compensation and retirement compensation. The agreement also provides for 70%
vesting at age 62, 80% vesting at age 63, and 90% vesting at age 64.
Executive Recognition Plan
In April 1996, the outside directors of Bankshares, who constituted a
majority of the Board of Directors, unanimously approved an Executive
Recognition Plan (the "Plan"). The Plan enables the outside directors of the
Executive Committee of the Board of Directors, which function as the
compensation committee, to offer key executive officers of Bankshares and its
subsidiary banks an executive recognition agreement (the "ER Agreement"). Each
named executive officer of Bankshares and the principal executive officers of
certain subsidiary banks of Bankshares have entered into ER Agreements with
Bankshares. Each ER Agreement provides severance benefits for each executive
officer if, within two years following a Change in Control (as defined in the ER
Agreements), his employment with Bankshares or a subsidiary bank thereof is
terminated by Bankshares or such subsidiary bank for any reason other than for
Cause (as defined in the ER Agreements) (except for terminations as a result of
the officer's death, Disability or Retirement (as such terms are defined in the
ER Agreements)) or by the executive officer for Good Reason (as defined in the
ER Agreements). Such severance benefits provide that the executive officer will
receive a payment equal to a certain percentage (as set forth in his ER
Agreement) of his annual base salary immediately preceding the date of
termination and, for two years following the date of termination, the
continuation of all medical, life and disability benefit plans covering the
officer at no cost to the officer. With respect to each of the named executive
officers, the percentage of annual base salary to be received upon a Change in
Control pursuant to his ER Agreement is as follows: 200% for Mr. Murphy, 200%
for Mr. Dueser, 100% for Mr. Smith, 100% for Mr. Harvey, and 100% for Mr.
Barrow. The total severance payment for the executive officer cannot, however,
exceed the amount that would cause such payment to be deemed a "parachute
payment" under Section 280G of the Internal Revenue Code.
8
Each ER Agreement has a term of two years, beginning June 1, 1998.
However, if a Change in Control shall occur during the original term of the ER
Agreements, then the ER Agreements shall continue in effect for an additional
period of two years following such Change in Control. Similarly, if a second
Change in Control occurs within two years from the date of the first Change in
Control, then the ER Agreements shall continue in effect for a period of two
years from the date of the second Change in Control.
Stock Option Plan
At the 1992 annual meeting of shareholders, Bankshares 1992 Incentive
Stock Option Plan (the "Stock Option Plan") was approved and adopted. The
purposes of the Stock Option Plan are to attract and retain key employees and to
encourage employee performance by providing them with a proprietary interest in
Bankshares through the granting of stock options. The maximum aggregate number
of shares of Bankshares common stock that may be issued under the Stock Option
Plan is 354,492, subject to adjustment for stock dividends and similar events.
The Stock Option Plan is administered by the Stock Option Committee. Only
incentive stock options (as defined in the Internal Revenue Code) may be granted
under the Stock Option Plan. Incentive stock options granted under the Stock
Option Plan may be exercised solely by the grantee, or in the case of the
grantee's death or incapacity, by the grantee's executors, administrators,
guardians or other legal representatives and are not assignable or transferable
by such grantee.
Meetings of the Board of Directors
The Board of Directors has four regularly scheduled meetings each year.
Each of the directors except Mrs. Owen attended at least 75% of the meetings of
the Board of Directors and the committees of the Board of Directors on which
such director served.
Committees of the Board of Directors
The Board of Directors has four committees. The functions and current
members of each committee are as follows:
Executive Committee. The Executive Committee acts for the Board of
Directors between Board meetings, except to the extent limited by Bankshares'
Bylaws or Texas law. The current members are Messrs. Dueser, McDaniel, Murphy,
Parker, Ramsey, and Wilson. The Executive Committee also functions as a
nominating committee with appropriate recommendations to the entire Board of
Directors. Outside directors who serve on the Executive Committee also function
as the compensation committee. The Executive Committee met six times during 1998
and, among other things, considered and took action on matters relating to its
capacity as the 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 to nominate a director.
Directors' Audit Committee. The Directors' Audit Committee reviews the
scope and results of the annual audit by Arthur Andersen LLP, Bankshares'
independent accountants, and receives and reviews internal and external audit
reports. Its members include Messrs. Coalson, Copeland, McDaniel, Miers, and
Worthington. During 1998, the Audit Committee met two times.
Administrative Committee for the Profit Sharing, Pension and Flexible
Spending Account Benefit Plans. This Committee administers Bankshares' Profit
Sharing, Pension and Flexible Spending Account Benefit Plans. Current members
include Messrs. Canon, Matthews, Parker, and Stephens. The Committee did not
meet in 1998.
Stock Option Committee. The Stock Option Committee was created pursuant to
Bankshares' 1992 Incentive Stock Option Plan for Key Employees. Its current
members include Mrs. Owen and Messrs. Miers, Ramsey, and Wilson. In 1998, the
Stock Option Committee met one time.
9
Director Compensation
Directors who are executive officers or employees of Bankshares receive
no compensation as such for service as members of either the Board of Directors
or committees thereof. Directors who are not officers of Bankshares receive
$1,000 for each Board meeting attended. Beginning April 1999, this fee will
increase to $1,250 per meeting attended. The directors who serve on committees
and who are not officers of Bankshares receive $600 for each committee meeting
attended. Beginning April 1999, this fee will increase to $750 per meeting
attended.
Compensation Committee Interlocks and Insider Participation
No person who served as a member of the Executive Committee in its
capacity as the compensation committee was, during 1998, an officer or employee
of Bankshares or any of its subsidiary banks, or had any relationship requiring
disclosure in this Proxy Statement. However, committee members James M. Parker
and Jack D. Ramsey obtained loans from a subsidiary bank during 1998. In each
case, the loans were made in the ordinary course of business, on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions on an arms-length basis and did not involve
more than the normal risk of collectibility or present other unfavorable
features to the subsidiary bank. No executive officer of Bankshares served as a
member of the compensation committee (or other board committee performing
equivalent functions or, in the absence of any such committee, the entire board
of directors) of another entity, one of whose executive officers served as a
member of the Board of Directors.
10
REPORT OF THE EXECUTIVE COMMITTEE
IN ITS CAPACITY AS THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
During 1998, Bankshares' executive compensation program was
administered by Messrs. McDaniel, Parker, Ramsey and Wilson, who are the outside
director members of the Executive Committee acting in the capacity of
compensation committee. Bankshares' executive compensation program consists of a
base salary, profit sharing contributions, and incentive stock options. Mr.
Murphy's annual base salary is reviewed in March and adjusted effective April 1
of each year. Mr. Dueser's annual base salary is reviewed in February and
adjusted effective March 1 of each year. The annual base salaries for Messrs.
Smith, Harvey, and Barrow are reviewed in December of each year and adjusted
effective on the following January 1. Among other things, the committee
considers the following factors when approving annual base salaries: attainment
of planned goals and objectives, scope of responsibility (asset size of
subsidiary bank and/or degree of influence on Bankshares' profitability and
operations), tenure with Bankshares, evaluation input from subsidiary bank
directors, and relationship of base salary to the base salaries of other members
of the executive officer group.
The annual base salary for Mr. Murphy was reviewed March 1998 with an
adjustment made effective April 1, 1998. The increase was based on the following
factors:
o Bankshares' financial performance for 1997.
o Performance of the Chief Executive Officer's duties that relate
primarily to leading and managing Bankshares within the broad
guidelines set by the Board of Directors.
o Base salary compared to the SNL Securities, Inc. compensation
survey data for chief executive officers of similar size
organizations within the industry.
o Subjective evaluations of Mr. Murphy's contribution to the overall
success of Bankshares.
Section 162(m) of the Internal Revenue Code generally limits the annual
corporate tax deduction for compensation paid to the Chief Executive Officer and
the four other most highly compensated executive officers unless the
compensation is performance-based. One condition to qualify compensation as
performance-based is to establish the amount of the award on an objective
formula that precludes any discretion. The compensation committee continues to
review the impact of this tax provision on Bankshares' incentive plans and has
determined that Section 162(m) is currently inapplicable because no named
executive officer receives compensation in excess of $1 million.
EXECUTIVE COMMITTEE IN ITS CAPACITY AS THE COMPENSATION COMMITTEE
Raymond A. McDaniel, Jr.
James M. Parker
Jack D. Ramsey, M.D.
H. T. Wilson
11
PERFORMANCE GRAPH
The following performance graph compares cumulative total shareholder
return for Bankshares common stock, the S&P 500 Index, and the SNL Banks Index,
which is a banking index prepared by SNL Securities, Inc. and is comprised of
banks with $1 billion to $5 billion in total assets, for a five-year period
(December 31, 1993 to December 31, 1998). The performance graph assumes $100
invested in Bankshares common stock at its closing price on December 31, 1993,
and in each of the S&P 500 Index and the SNL Banks Index on the same date. The
performance graph also assumes the reinvestment of all dividends. The dates on
the performance graph represent the last trading day of each year indicated. The
amounts noted on the performance graph have been adjusted to give effect to all
stock splits and stock dividends
Corporate Performance Chart
[LINE GRAPH OMITTED AND REPLACED WITH TABLE]
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
FIRST FINANCIAL BANKSHARES $100 $78 $106 $160 $228 $219
S & P 500 $100 $101 $139 $171 $228 $294
SNL Banks $100 $105 $142 $184 $306 $305
12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 9, 1999, Bankshares 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, as amended (the "Exchange Act")) who is the
beneficial owner of more than five percent (5%) of Bankshares common stock.
However, as of February 9, 1999, First National Bank of Abilene, First National
Bank, Sweetwater, and Stephenville Bank & Trust Co. held of record in various
fiduciary capacities an aggregate of 1,668,826 shares of Bankshares common
stock. Of the total shares held, these subsidiary banks of Bankshares had sole
power to vote 848,719 shares (8.53%), 106,507 shares (1.07%), and 2,152 shares
(.02%), respectively. In addition, First National Bank of Abilene shared, with
other persons, the power to vote the remaining 651,448 shares (6.55%). All the
shares held by each subsidiary bank, which are registered in its name as
fiduciary or in the name of its nominee, are owned by many different accounts,
each of which is governed by a separate instrument that sets forth the powers of
the fiduciary with regard to the securities held in such accounts. The Board of
Directors historically has not attempted to, and does not intend to attempt to
in the future, exercise any power to vote such shares. See "Proposal 1--Election
of Directors--Nominees" and "--Executive Officers" for information with respect
to the beneficial ownership of Bankshares common stock by each director and
named executive officer of Bankshares as of February 9, 1999. In the aggregate,
all directors and executive officers of Bankshares as a group (17 individuals)
beneficially owned 1,234,420 shares of Bankshares common stock, or 12.40%, as of
February 9, 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires directors and officers of
Bankshares, and persons who own more than 10% of Bankshares common stock, to
file with the Commission initial reports of Bankshares common stock ownership
and reports of changes in such ownership. A reporting person must file a Form 3
- -- Initial Statement of Beneficial Ownership of Securities within 10 days after
such person becomes a reporting person. A reporting person must file a Form 4 --
Statement of Changes of Beneficial Ownership of Securities within 10 days after
any month in which such person's beneficial ownership of securities changes,
except for certain changes exempt from the reporting requirements of Form 4.
Such exempt changes include stock options granted under a plan qualifying
pursuant to Rule 16b-3 under the Exchange Act. A reporting person must file a
Form 5 -- Annual Statement of Beneficial Ownership of Securities within 45 days
after the end of the issuer's fiscal year to report any changes in ownership
during such year not reported on a Form 4, including changes exempt from the
reporting requirements of Form 4.
The Commission's rules require Bankshares' reporting persons to furnish
Bankshares with copies of all Section 16(a) reports that they file. Based solely
upon a review of the copies of such reports furnished to Bankshares, Bankshares
believes that the reporting persons have complied with all applicable Section
16(a) filing requirements for 1998 on a timely basis.
PROPOSAL 2
APPROVAL OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP to serve as
independent accountants to Bankshares and its subsidiary banks for the year 1999
and to serve until the next annual meeting in April 2000. Arthur Andersen LLP
has served as Bankshares' independent accountants since 1990.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT ACCOUNTANTS. If the
Shareholders do not approve the appointment of Arthur Andersen LLP, then the
appointment of independent accountants will be reconsidered by the Board of
Directors. Representatives of Arthur Andersen LLP are expected to be present at
the Annual Meeting. These representatives will be given the opportunity to make
a statement, if they desire to do so, and to respond to appropriate questions.
13
INTEREST IN CERTAIN TRANSACTIONS
As has been true in the past, some of Bankshares' officers and
directors, members of their families, and other businesses with which they are
affiliated, are or have been customers of one or more of the subsidiary banks of
Bankshares. As customers, they have entered into transactions in the ordinary
course of business with such banks, including borrowings, all of which were on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions on an arms-length basis and
did not involve more than a normal risk of collectibility or present any other
unfavorable features to the subsidiary banks involved. None of the transactions
involving subsidiary banks of Bankshares 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.
INCORPORATION BY REFERENCE
With respect to any future filings with the Commission into which this
Proxy Statement is incorporated by reference, the material under the headings
"Executive Committee Report on Executive Compensation" and "Performance Graph"
shall not be incorporated into such future filings.
FORWARD-LOOKING STATEMENTS
This Proxy Statement contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act. When used in this Proxy Statement, words such
as "anticipate," "believe," "estimate," "expect," "intend," "predict,"
"project," and similar expressions, as they relate to Bankshares or its
management, identify forward-looking statements. These forward-looking
statements are based on information currently available to Bankshares'
management. Actual results could differ materially from those contemplated by
the forward-looking statements as a result of certain factors, including but not
limited to general economic conditions, actions taken by the Board of Governors
of the Federal Reserve System, legislative and regulatory actions and reform,
competition and other factors. Such statements reflect the current views of
Bankshares' management with respect to future events and are subject to these
and other risks, uncertainties and assumptions relating to the operations,
results of operations, growth strategy and liquidity of Bankshares. All
subsequent written and oral forward-looking statements attributable to
Bankshares or persons acting on its behalf are expressly qualified in their
entirety by this paragraph.
FORM 10-K
Bankshares will furnish a copy of its Form 10-K for the year ended
December 31, 1998 without charge to any person whose proxy is solicited herewith
upon such person's written request therefor. This written request must contain a
good faith representation that, as of the record date for the Annual Meeting,
the person making the request was a beneficial owner of Bankshares common stock.
This such request shall be addressed to Curtis R. Harvey, Executive Vice
President and Chief Financial Officer, First Financial Bankshares, Inc., P. O.
Box 701, Abilene, Texas 79604. Exhibits to the Form 10-K shall also be furnished
upon the payment of a fee, which fee shall be limited to Bankshares' reasonable
expenses in furnishing such exhibits.
14
SHAREHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
To be considered for inclusion in Bankshares' proxy statement for the
2000 annual meeting, shareholder proposals must be received at Bankshares'
principal executive offices no later than December 1, 1999. Pursuant to Rule
14a-4(c)(1) under the Exchange Act, if any shareholder proposal intended to be
presented at the 2000 annual meeting without inclusion in Bankshares' proxy
statement for such meeting is received at Bankshares' principal executive
offices after February 14, 2000, then a proxy will have the ability to confer
discretionary authority to vote on such proposal.
By Order of the Board of Directors,
KENNETH T. MURPHY, Chairman
March 31, 1999
15
FIRST FINANCIAL BANKSHARES, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
FIRST FINANCIAL BANKSHARES, INC.
FOR THE ANNUAL MEETING OF SHAREHOLDERS
APRIL 27, 1999
I hereby appoint H. T. Wilson and Bynum Miers, or either one of them
acting in the absence of the other, as proxyholders, each with the power to
appoint his substitute, and hereby authorize them to represent me and to vote
for me as designated below, at the annual meeting (the "Annual Meeting") of
First Financial Bankshares, Inc., a Texas corporation ("Bankshares"), to be held
on April 27, 1999, at 10:30 a.m., Abilene, Texas, time, in the Abilene Civic
Center, 1100 North 6th Street, Abilene, Texas, and at any postponement or any
adjournment thereof.
This proxy when properly executed will be voted in the manner directed
below, or if no direction is indicated below, in accordance with the
recommendation of the Board of Directors on each proposal. This proxy will be
voted, in the discretion of the proxyholders, upon such other business as may
properly come before the Annual Meeting or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING:
(1) The election of directors of Bankshares:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as written to the to vote for all nominees
contrary below) listed below
Joseph E. Canon, Mac A. Coalson, David Copeland, F. Scott Dueser, Kade L.
Matthews, Raymond A. McDaniel, Jr., Bynum Miers, Kenneth T. Murphy, Dian Graves
Owen, James M. Parker, Jack D. Ramsey, M.D., Craig Smith, F.L. Stephens, H.T.
Wilson and Walter F. Worthington.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
- --------------------------------------------------------------------------------
(2) The proposal to approve the appointment by the Board of Directors of Arthur
Andersen LLP as independent accountants of Bankshares for the year 1999:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned hereby acknowledges receipt of the Proxy Statement
dated March 31, 1999 and hereby revokes any proxy or proxies heretofore given to
vote at the Annual Meeting or any adjournment thereof. Please date your proxy
and sign, exactly as your name or names appear below; when signing as attorney,
executor, administrator, trustee or guardian, please give title. Each joint
owner is required to sign.
(PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED SELF-ADDRESSED AND
POSTMARKED ENVELOPE.)
Signature(s): Date: , 1999.
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