First Financial Bankshares Announces Fourth Quarter 2020 Earnings And 34th Year Of Consecutive Annual Earnings Growth

ABILENE, Texas, Jan. 28, 2021 /PRNewswire/ -- First Financial Bankshares, Inc. (NASDAQ: FFIN) today reported earnings for the fourth quarter of 2020 of $58.48 million, or $0.41 per diluted share, compared with earnings of $41.39 million, or $0.30 per diluted share, for the fourth quarter of 2019, representing a $17.09 million, or 41.28 percent, increase.  

Earnings for the year ended December 31, 2020 totaled $202.03 million, or $1.42 per diluted share, compared to $164.81 million, or $1.21 per diluted share, for the year ended December 31, 2019, representing a $37.22 million, or 22.58 percent increase.

All amounts for the fourth quarter and year ended December 31, 2020, include the results of the Company's acquisition of TB&T Bancshares, Inc. and its wholly-owned subsidiary, The Bank & Trust of Bryan/College Station, Texas, which was effective January 1, 2020.

"We are extremely pleased with both our quarterly and annual results representing our 34^th consecutive year of annual earnings growth.  During 2020, in the face of the pandemic, two hurricanes and one tornado, we stayed Texas Strong, kept our doors open and served our customers and communities while keeping our associates safe. Because of this, the Company had organic asset growth of $1.9 billion, excluding the $775 million acquisition of The Bank & Trust of Bryan/College Station. We originated $704 million in PPP loans, $1.21 billion in secondary market mortgage loans for over 4,000 families across Texas and grew trust assets managed to $7.51 billion. In 2020, we recorded annual earnings of $202.03 million and ended the year with strong momentum and are very optimistic about our outlook for 2021," said F. Scott Dueser, Chairman, President and CEO of First Financial Bankshares, Inc.

Net interest income for the fourth quarter of 2020 was $90.54 million, up $15.22 million, from $75.32 million for the fourth quarter of 2019. The net interest margin, on a tax equivalent basis, was 3.75 percent for the quarter compared to 3.99 percent a year ago and 3.75 percent from last quarter.  Net interest income was positively impacted by a $2.29 billion increase in average-earning assets to $9.96 billion for the fourth quarter of 2020 when compared to the same period a year ago.  For the fourth quarter of 2020, interest income included Payroll Protection Program ("PPP") loan fees of $5.67 million compared to $2.83 million for the third quarter of 2020, and accretion from acquired loans of $571 thousand compared to $384 thousand in the same quarter last year and $1.85 million for the third quarter of 2020.  

During the fourth quarter of 2020, $220.34 million of PPP loans were forgiven and the remaining PPP loans totaled $483.66 million at December 31, 2020 ($624.15 million and $479.43 million in average balances for the fourth quarter and year-to-date, respectively). The remainder of the PPP loan deferred fees totaled $11.27 million at December 31, 2020 and continue to be amortized over the shorter of the repayment period or the contractual life of 24 months.

The Company initially elected to delay implementation of CECL, and calculated and recorded the provision for credit losses through the nine-months ended September 30, 2020 under the incurred loss model. The Company elected to adopt CECL, effective as of January 1, 2020, through a transition charge to retained earnings of $589 thousand ($466 thousand net of applicable income taxes).

At December 31, 2020, the Company calculated the allowance for credit losses utilizing the CECL methodology which resulted in a net reversal of provision for credit losses during the fourth quarter of 2020 of $8.03 million, comprised of a reversal of provision for loan losses of $10.00 million and a provision for unfunded commitments of $1.97 million. The Company's provision for credit losses in the fourth quarter of 2020 reflected the improved economic outlook for our markets across Texas and general improvement in overall asset quality.  During the fourth quarter of 2020, net charge-offs totaled $561 thousand compared to $340 thousand in the fourth quarter of 2019. At December 31, 2020, the allowance for credit losses totaled $66.53 million, or 1.29 percent of loans held-for-investment ("loans" hereafter), or 1.42 percent of loans excluding PPP loans, compared to $52.50 million at December 31, 2019, or 1.25 percent of loans. Additionally, the reserve for unfunded commitments totaled $5.49 million at December 31, 2020 compared to $809 thousand at December 31, 2019.  Nonperforming assets as a percentage of loans and foreclosed assets totaled 0.83 percent at December 31, 2020, compared with 0.61 percent at December 31, 2019. Classified loans totaled $197.45 million at December 31, 2020, compared to $140.66 million at December 31, 2019.  

During 2020, the Company offered deferral and extensions of principal and/or interest payments to selected borrowers on a case-by-case basis, considering the current and projected profile of the borrower.  At December 31, 2020, the Company had approximately 59 loans totaling $2.69 million subject to deferral and extension agreements compared to 122 loans totaling $18.65 million at September 30, 2020.

At December 31, 2020, loans with oil and gas industry exposure totaled $106.24 million, or 2.27 percent of outstanding loans, excluding PPP loans. These loans comprised $13.30 million of classified loans including $4.77 million in nonaccrual loans. Net charge-offs related to this portfolio totaled $825 thousand for the year ended December 31, 2020.

In addition, at December 31, 2020, loans in the retail/restaurant/hospitality industries totaled $359.33 million, or 7.67 percent, of the Company's outstanding loans, excluding PPP loans. These loans comprised $31.19 million of classified loans, including $5.98 million in nonaccrual loans.  Net charge-offs related to this portfolio totaled $895 thousand for the year ended December 31, 2020.

Noninterest income in the fourth quarter of 2020 rose to $35.71 million from $27.35 million for the fourth quarter of 2019, as a result of the following:

• Trust fees increased to $7.67 million in the fourth quarter of 2020 from $7.34 million in the fourth quarter of 2019. The fair value of trust assets managed increased to $7.51 billion, up 11.33 percent at December 31, 2020 from $6.75 billion at December 31, 2019.
• Service charges on deposits were $5.33 million in the fourth quarter of 2020 compared with $5.86 million in the fourth quarter of 2019.
• ATM, interchange and credit card fees increased to $8.38 million in the fourth quarter of 2020 from $7.94 million in the fourth quarter of 2019, driven by continued growth in the number of debit cards issued and customer utilization.
• Mortgage income increased to $11.12 million compared with $4.22 million in the fourth quarter of 2019 due to a significant increase in the volume of loans originated. The Company's mortgage pipeline increased to $198.46 million at December 31, 2020, when compared to $45.46 million at December 31, 2019.
• The Company originated seven loans totaling $141.95 million ($7.10 million retained on the balance sheet, net of the 95% participations sold to the Federal Reserve), in Main Street Lending loans and recognized fees of $1.07 million during the fourth quarter ($1.40 million for the year), which are included in other noninterest income.

Noninterest expense for the fourth quarter of 2020 totaled $63.71 million compared to $51.94 million in the fourth quarter of 2019, as a result of the following:

• Salary, commissions and employee benefit costs totaled $41.02 million for the fourth quarter of 2020, compared to $31.64 million in the fourth quarter of 2019. The increase over the prior year was primarily driven by the acquisition, annual merit-based pay increases, higher mortgage related commissions, and increases in the fourth quarter of 2020 to incentive compensation based on the overall 2020 operating results. Additionally, the fourth quarter of 2019 included $1.70 million charge related to the termination of an acquired pension plan.
• Noninterest expense in the fourth quarter of 2020 included merger related costs totaling $475 thousand, and $4.88 million for the year ended December 31, 2020, as a result of The Bank & Trust acquisition, while no significant conversion related costs were incurred in the fourth quarter or year ended December 31, 2019.

The Company's efficiency ratio was 45.49 percent for 2020 compared to 48.61 percent for 2019.

As of December 31, 2020, consolidated assets for the Company totaled $10.90 billion compared to $8.26 billion at December 31, 2019. Loans totaled $5.17 billion at December 31, 2020, compared with loans of $4.19 billion at December 31, 2019.  During the fourth quarter of 2020, loans, excluding PPP loans, grew $97.42 million, or 8.44 percent annualized, from September 30, 2020 balances. Deposits totaled $8.68 billion at December 31, 2020, compared to $6.60 billion at December 31, 2019, driven by organic growth and the acquisition.

Shareholders' equity rose to $1.68 billion as of December 31, 2020, compared to $1.23 billion at December 31, 2019, primarily from The Bank & Trust acquisition, undistributed earnings and the net increase in the net unrealized gain on investment securities while tangible book value per common share increased to $9.57 at December 31, 2020 compared to $7.75 at December 31, 2019, representing a 23.48 percent increase. At December 31, 2020, the Company's capital ratios significantly exceeded all well-capitalized requirements.

About First Financial Bankshares, Inc.

Headquartered in Abilene, Texas, First Financial Bankshares, Inc. is a financial holding company that through its subsidiary, First Financial Bank, N.A., operates multiple banking regions with 78 locations in Texas, including Abilene, Acton, Albany, Aledo, Alvarado, Beaumont, Boyd, Bridgeport, Brock, Bryan, Burleson, College Station, Cisco, Cleburne, Clyde, Conroe, Cut and Shoot, Decatur, Eastland, El Campo, Fort Worth, Fulshear, Glen Rose, Granbury, Grapevine, Hereford, Huntsville, Keller, Kingwood, Magnolia, Mauriceville, Merkel, Midlothian, Mineral Wells, Montgomery, Moran, New Waverly, Newton, Odessa, Orange, Palacios, Port Arthur, Ranger, Rising Star, Roby,  San  Angelo,  Southlake,  Stephenville,  Sweetwater, Tomball, Trent, Trophy Club, Vidor, Waxahachie, Weatherford, Willis, and Willow Park. The Company also operates First Financial Trust & Asset Management Company, N.A., with ten locations and First Technology Services, Inc., a technology operating company.

The Company is listed on The NASDAQ Global Select Market under the trading symbol FFIN.  For more information about First Financial, please visit our website at http://www.ffin.com.

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Certain statements contained herein may be considered "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These statements are based upon the belief of the Company's management, as well as assumptions made beyond information currently available to the Company's management, and may be, but not necessarily are, identified by such words as "expect", "plan", "anticipate", "target", "forecast" and "goal".  Because such "forward-looking statements" are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements.  Factors that could cause actual results to differ materially from the Company's expectations include competition from other financial institutions and financial holding companies; the effects of and changes in trade, monetary and fiscal policies and laws, including interest rate policies of the  Federal Reserve Board; economic impact of oil and gas prices and the pandemic, changes in the demand for loans; fluctuations in value of collateral and loan reserves; inflation, interest rate, market and monetary fluctuations; changes in consumer spending, borrowing and savings habits; and acquisitions and integration of acquired businesses, and similar variables.   Other key risks are described in the Company's reports filed with the Securities and Exchange Commission, which may be obtained under "Investor Relations-Documents and Filings" on the Company's Website or by writing or calling the Company at 325.627.7155. Except as otherwise stated in this news announcement, the Company does not undertake any obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise.