First Financial Bankshares Announces Third Quarter Earnings Results

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Oct 16, 2014, 04:05 ET

ABILENE, Texas, Oct. 16, 2014 /PRNewswire/ -- First Financial Bankshares, Inc. (NASDAQ: FFIN) today reported earnings for the third quarter of 2014 of $23.43 million, up 19.78 percent compared with earnings of $19.56 million in the same quarter last year. Basic earnings per share were $0.37 for the third quarter of 2014 compared with $0.31 in the same quarter a year ago.

Net interest income for the third quarter of 2014 increased 7.46 percent to $48.89 million compared with $45.49 million in the same quarter of 2013. The net interest margin, on a taxable equivalent basis, was 4.18 percent compared to 4.24 percent in the second quarter of 2014 and 4.25 percent in the same quarter last year. Included in interest income for the third quarter of 2014 was $536 thousand, or four basis points in net interest margin, related to discount accretion from fair value accounting related to the Orange and Huntsville acquisitions.

The provision for loan losses was $896 thousand in the third quarter of 2014 compared with $1.35 million in the same quarter last year and $1.12 million in the second quarter of 2014. Nonperforming assets as a percentage of loans and foreclosed assets totaled 0.83 percent at September 30, 2014, compared with 0.93 percent at June 30, 2014, and 1.09 percent at September 30, 2013. Classified loans totaled $81.39 million at September 30, 2014, compared to $79.93 million at June 30, 2014, and $81.67 million at September 30, 2013.

Noninterest income increased 1.46 percent in the third quarter of 2014 to $17.32 million compared with $17.08 million in the same quarter a year ago. Trust fees increased to $4.77 million in the third quarter of 2014 compared with $4.14 million in the same quarter last year, primarily due to continued growth in the fair value of Trust assets managed to $3.66 billion from $3.20 billion a year ago. ATM, interchange and credit card fees increased 15.64 percent to $5.09 million compared with $4.40 million in the same quarter last year due to a large growth in net new accounts and debit cards. Real estate mortgage fees decreased to $1.81 million in the third quarter of 2014 compared to $2.01 million in the same quarter last year due to the decline in the overall mortgage refinance market.

Noninterest expense for the third quarter of 2014 totaled $34.04 million compared to $35.53 million in the third quarter of 2013. Included in noninterest expense in the third quarter of 2013 were technology contract termination and conversion costs totaling $3.40 million related to the Company's acquisition of Orange Savings Bank, SSB. There were no such expenses for the quarter ended September 30, 2014. The Company's efficiency ratio in the third quarter of 2014 was 47.93 percent compared with 53.10 percent in the same quarter last year.

For the nine months ended September 30, 2014, net income increased 16.21 percent to $66.97 million from $57.63 million in the same period a year ago. Basic earnings per share rose to $1.05 from $0.91 for the same period last year. Net interest income increased 14.88 percent to $144.28 million for the nine months ended September 30, 2014 from $125.59 million in the same period a year ago. The provision for loan losses totaled $3.71 million compared with $2.58 million in the same period last year. Noninterest income was $49.60 million for the first nine months of 2014 compared with $46.26 million in the same period a year ago. Noninterest expense rose to $101.49 million compared with $92.92 million in the same period a year ago.

As of September 30, 2014, consolidated assets for the Company totaled $5.58 billion compared with $5.08 billion a year ago. Loans totaled $2.84 billion at quarter end compared with loans of $2.61 billion a year ago. Total deposits grew 11.59 percent to $4.46 billion at September 30, 2014, compared to $4.00 billion a year ago. Shareholders' equity rose to $658.77 million as of September 30, 2014, compared with $568.24 million at September 30, 2013.

"We are pleased to report another quarter of good growth in loans and deposits as well as solid earnings," said F. Scott Dueser, Chairman, President and CEO. "We continue to pursue opportunities for acquisitions and focus on growing loans, cutting costs and increasing income."

On April 22, 2014, the Company's Board of Directors declared a two-for-one stock split in the form of a 100 percent stock dividend, which was effective June 2, 2014. All share and per share amounts in this earnings release have been restated to reflect this stock split.

All amounts for the quarters and nine months ended on September 30, 2014 and 2013 include the results of the Company's acquisition of Orange Savings Bank, SSB, Orange, Texas, which was effective on May 31, 2013. As of the acquisition date, Orange had total loans of $293.29 million and total deposits of $385.95 million.

About First Financial Bankshares

Headquartered in Abilene, Texas, First Financial Bankshares is a financial holding company that operates 12 banking regions with 62 locations in Texas including Abilene, Acton, Albany, Aledo, Alvarado, Beaumont, Boyd, Bridgeport, Brock, Burleson, Cisco, Cleburne, Clyde, Decatur, Eastland, Fort Worth, Glen Rose, Granbury, Grapevine, Hereford, Huntsville, Keller, Mauriceville, Merkel, Midlothian, Mineral Wells, Moran, New Waverly, Newton, Odessa, Orange, Port Arthur, Ranger, Rising Star, Roby, San Angelo, Southlake, Stephenville, Sweetwater, Trent, Trophy Club, Vidor, Waxahachie, Weatherford and Willow Park. The Company also operates First Financial Trust & Asset Management Company, N.A., with eight 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 Bankshares, please visit our website at http://www.ffin.com.

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; 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/Filings" on the Company's Web site 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.

FIRST FINANCIAL BANKSHARES, INC.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except share and per share data)

		As of
			2014									2013
ASSETS			Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
Cash and due from banks		$	149,957		$	166,237		$	160,469		$	183,084		$	164,666
Interest-bearing deposits in banks			83,994			68,331			3,772			25,498			48,634
Interest-bearing time deposits in banks			19,234			24,188			30,026			31,917			34,352
Fed funds sold			4,785			3,110			3,620			3,430			14,300
Investment securities			2,254,316			2,174,396			2,163,599			2,058,407			1,976,101
Loans			2,839,696			2,786,644			2,698,717			2,689,448			2,614,809
	Allowance for loan losses		(36,388)			(35,892)			(34,693)			(33,900)			(34,800)
Net loans			2,803,308			2,750,752			2,664,024			2,655,548			2,580,009
Premises and equipment			101,437			96,619			95,406			95,505			94,676
Goodwill			94,882			94,882			94,882			94,882			94,882
Other intangible assets			2,547			2,547			2,600			2,603			2,547
Other assets			61,351			65,294			62,629			71,334			65,468
	Total assets	$	5,575,811		$	5,446,356		$	5,281,027		$	5,222,208		$	5,075,635

LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits		$	1,505,847		$	1,445,947		$	1,389,331		$	1,362,184		$	1,371,835
Interest-bearing deposits			2,958,517			2,872,511			2,844,950			2,772,891			2,628,722
	Total deposits		4,464,364			4,318,458			4,234,281			4,135,075			4,000,557
Short-term borrowings			341,909			434,583			383,220			463,888			466,500
Other liabilities			110,773			53,279			46,960			35,598			40,337
Shareholders' equity			658,765			640,036			616,566			587,647			568,241
	Total liabilities and shareholders' equity	$	5,575,811		$	5,446,356		$	5,281,027		$	5,222,208		$	5,075,635

		Quarter Ended
			2014									2013
INCOME STATEMENTS			Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
Interest income		$	49,955		$	49,254		$	48,209		$	47,756		$	46,655
Interest expense			1,069			1,037			1,036			1,066			1,164
Net interest income			48,886			48,217			47,173			46,690			45,491
Provision for loan losses			896			1,124			1,690			1,171			1,349
Net interest income after provision for loan losses			47,990			47,093			45,483			45,519			44,142
Noninterest income			17,324			15,872			16,405			15,792			17,075
Noninterest expense			34,040			35,002			32,448			33,096			35,534
	Net income before income taxes		31,274			27,963			29,440			28,215			25,683
Income tax expense			7,843			6,758			7,104			6,977			6,121
	Net income	$	23,431		$	21,205		$	22,336		$	21,238		$	19,562

PER COMMON SHARE DATA
Net income - basic		$	0.37		$	0.33		$	0.35		$	0.33		$	0.31
Net income - diluted			0.36			0.33			0.35			0.33			0.30
Cash dividends declared			0.14			0.14			0.13			0.13			0.13
Book Value			10.28			9.99			9.63			9.18			8.88
Market Value		$	27.79		$	31.37		$	30.90		$	33.06		$	29.43
Shares outstanding - end of period			64,065,828			64,053,010			64,039,234			63,984,994			63,955,340
Average outstanding shares - basic			64,059,675			64,045,282			64,010,076			63,965,876			63,940,810
Average outstanding shares - diluted			64,304,985			64,301,306			64,212,018			64,192,458			64,243,542

PERFORMANCE RATIOS
Return on average assets			1.71	%		1.59	%		1.74	%		1.65	%		1.56	%
Return on average equity			14.27			13.46			15.02			14.47			13.64
Net interest margin (tax equivalent)			4.18			4.24			4.32			4.27			4.25
Efficiency ratio			47.93			50.84			47.57			49.42			53.10

		Nine Months Ended
		Sept. 30,
INCOME STATEMENTS			2014			2013
Interest income		$	147,418		$	128,605
Interest expense			3,143			3,014
Net interest income			144,275			125,591
Provision for loan losses			3,710			2,582
Net interest income after provision for loan losses			140,565			123,009
Noninterest income			49,601			46,260
Noninterest expense			101,489			92,917
	Net income before income taxes		88,677			76,352
Income tax expense			21,705			18,723
	Net income	$	66,972		$	57,629

PER COMMON SHARE DATA
Net income - basic		$	1.05		$	0.91
Net income - diluted			1.04			0.90
Cash dividends declared			0.41			0.39
Book Value			10.28			8.88
Market Value		$	27.79		$	29.43
Shares outstanding - end of period			64,065,828			63,955,340
Average outstanding shares - basic			64,038,526			63,444,544
Average outstanding shares - diluted			64,302,615			63,706,588

PERFORMANCE RATIOS
Return on average assets			1.68	%		1.64	%
Return on average equity			14.24			13.53
Net interest margin (tax equivalent)			4.25			4.21
Efficiency ratio			48.78			50.47

FIRST FINANCIAL BANKSHARES, INC.
SELECTED FINANCIAL DATA (UNAUDITED)
(In thousands)

		Quarter Ended
			2014									2013
ALLOWANCE FOR LOAN LOSSES			Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
Balance at beginning of period		$	35,892		$	34,693		$	33,900		$	34,800		$	34,099
Loans charged off			(614)			(302)			(1,297)			(1,294)			(944)
Loan recoveries			214			377			400			311			297
Net recoveries (charge-offs)			(400)			75			(897)			(983)			(647)
Provision for loan losses			896			1,124			1,690			1,171			1,348
Transfer of off balance sheet exposure to other liabilities			-			-			-			(1,088)			-
Balance at end of period		$	36,388		$	35,892		$	34,693		$	33,900		$	34,800

Allowance for loan losses / period-end loans			1.28	%		1.29	%		1.29	%		1.26	%		1.33	%
Allowance for loan losses / nonperforming loans			162.77			151.52			140.23			120.82			152.21
Net charge-offs / average loans (annualized)			0.06			(0.01)			0.14			0.15			0.10


NONPERFORMING ASSETS
Nonaccrual loans		$	22,093		$	23,565		$	24,710		$	27,926		$	22,809
Accruing loans 90 days past due			263			123			30			133			54
	Total nonperforming loans		22,356			23,688			24,740			28,059			22,863
Foreclosed assets			1,273			2,342			2,813			3,069			5,672
	Total nonperforming assets	$	23,629		$	26,030		$	27,553		$	31,128		$	28,535

As a % of loans and foreclosed assets			0.83	%		0.93	%		1.02	%		1.16	%		1.09	%
As a % of end of period total assets			0.42			0.48			0.52			0.60			0.56

CAPITAL RATIOS
Tier 1 risk-based			16.07	%		16.15	%		16.24	%		15.82	%		15.37	%
Total risk-based			17.20			17.30			17.39			16.92			16.49
Tier 1 leverage			10.10			9.99			9.95			9.84			9.77
Equity to assets			11.81			11.75			11.68			11.25			11.20


		Quarter Ended
			2014									2013
NONINTEREST INCOME			Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
Trust fees		$	4,772		$	4,549		$	4,576		$	4,433		$	4,138
Service charges on deposits			4,402			4,174			4,047			4,537			4,798
ATM, interchange and credit card fees			5,093			4,754			4,443			4,436			4,404
Real estate mortgage fees			1,813			1,337			1,024			1,200			2,008
Net gain (loss) on sale of available-for-sale securities			1			(1)			(4)			-			(108)
Net gain (loss) on sale of foreclosed assets			305			47			452			111			36
Net gain (loss) on sale of assets			(31)			44			3			6			9
Other noninterest income			969			968			1,864			1,069			1,790
	Total noninterest income	$	17,324		$	15,872		$	16,405		$	15,792		$	17,075

NONINTEREST EXPENSE
Salaries and employee benefits, excluding profit sharing		$	16,354		$	16,279		$	16,197		$	15,690		$	16,024
Profit sharing expense			1,596			995			1,217			1,942			1,477
Net occupancy expense			2,297			2,273			2,234			2,101			2,164
Equipment expense			2,758			2,665			2,622			2,527			2,490
FDIC insurance premiums			693			684			659			636			640
ATM, interchange and credit card expenses			1,819			1,696			1,480			1,499			1,474
Legal, tax and professional fees			1,463			1,208			1,273			1,248			1,576
Audit fees			403			367			369			506			368
Printing, stationery and supplies			632			554			775			562			534
Amortization of intangible assets			62			74			75			77			77
Advertising and public relations			1,591			1,465			1,375			1,495			1,245
Correspondent bank service charges			222			215			228			241			250
Other noninterest expense			4,150			6,527			3,944			4,572			7,215
	Total noninterest expense	$	34,040		$	35,002		$	32,448		$	33,096		$	35,534

TAX EQUIVALENT YIELD ADJUSTMENT		$	4,814		$	4,753		$	4,629		$	4,490		$	4,358

		Nine Months Ended
		Sept. 30,
NONINTEREST INCOME			2014		2013
Trust fees		$	13,897	$	11,884
Service charges on deposits			12,623		13,009
ATM, interchange and credit card fees			14,291		12,315
Real estate mortgage fees			4,174		5,149
Net gain (loss) on sale of available-for-sale securities			(4)		147
Net gain (loss) on sale of foreclosed assets			804		(263)
Net gain (loss) on sale of assets			15		177
Other noninterest income			3,801		3,842
	Total noninterest income	$	49,601	$	46,260

NONINTEREST EXPENSE
Salaries and employee benefits, excluding profit sharing		$	48,830	$	45,093
Profit sharing expense			3,808		3,738
Net occupancy expense			6,804		5,995
Equipment expense			8,045		7,146
FDIC insurance premiums			2,035		1,781
ATM, interchange and credit card expenses			4,995		4,161
Legal, tax and professional fees			3,945		3,846
Audit fees			1,138		1,052
Printing, stationery and supplies			1,960		1,504
Amortization of intangible assets			210		120
Advertising and public relations			4,431		3,339
Correspondent bank service charges			666		674
Other noninterest expense			14,622		14,468
	Total noninterest expense	$	101,489	$	92,917

TAX EQUIVALENT YIELD ADJUSTMENT		$	14,197	$	12,235

FIRST FINANCIAL BANKSHARES, INC.
SELECTED FINANCIAL DATA (UNAUDITED)
(In thousands)

		Three Months Ended						Three Months Ended
		Sept. 30, 2014						June 30, 2014
			Average		Tax Equivalent	Yield /			Average		Tax Equivalent	Yield /
			Balance		Interest	Rate			Balance		Interest	Rate
Interest-earning assets:
Fed funds sold		$	10,619	$	11	0.40	%	$	11,310	$	12	0.41	%
Interest-bearing deposits in nonaffiliated banks			50,213		69	0.55			48,974		78	0.64
Taxable securities			1,166,248		6,856	2.35			1,159,430		7,091	2.45
Tax exempt securities			1,057,715		12,763	4.83			1,037,608		12,599	4.86
Loans			2,814,083		35,070	4.94			2,748,023		34,227	5.00
Total interest-earning assets			5,098,878	$	54,769	4.26	%		5,005,345	$	54,007	4.33	%
Noninterest-earning assets			348,369						335,651
	Total assets	$	5,447,247					$	5,340,996

Interest-bearing liabilities:
Deposits		$	2,892,065	$	999	0.14	%	$	2,867,740	$	955	0.13	%
Fed funds purchased and other short term borrowings			384,768		70	0.07			406,913		82	0.08
Total interest-bearing liabilities			3,276,833	$	1,069	0.13	%		3,274,653	$	1,037	0.13	%
Noninterest-bearing liabilities			1,518,907						1,434,674
Shareholders' equity			651,507						631,669
	Total liabilities and shareholders' equity	$	5,447,247					$	5,340,996

Net interest income and margin (tax equivalent)				$	53,700	4.18	%			$	52,970	4.24	%

		Three Months Ended						Three Months Ended
		Mar. 31, 2014						Dec. 31, 2013
			Average		Tax Equivalent	Yield /			Average		Tax Equivalent	Yield /
			Balance		Interest	Rate			Balance		Interest	Rate
Interest-earning assets:
Fed funds sold		$	5,718	$	5	0.35	%	$	7,177	$	7	0.40	%
Interest-bearing deposits in nonaffiliated banks			48,708		82	0.68			44,421		89	0.79
Taxable securities			1,121,296		7,084	2.53			1,094,256		6,687	2.44
Tax exempt securities			992,947		12,218	4.92			958,278		11,817	4.93
Loans			2,689,474		33,450	5.04			2,650,834		33,645	5.04
Total interest-earning assets			4,858,143	$	52,839	4.41	%		4,754,966	$	52,245	4.36	%
Noninterest-earning assets			351,309						344,927
	Total assets	$	5,209,452					$	5,099,893

Interest-bearing liabilities:
Deposits		$	2,817,181	$	941	0.14	%	$	2,696,123	$	950	0.14	%
Fed funds purchased and other short term borrowings			426,204		96	0.09			454,573		115	0.10
Total interest-bearing liabilities			3,243,385	$	1,037	0.13	%		3,150,696	$	1,065	0.13	%
Noninterest-bearing liabilities			1,362,852						1,366,726
Shareholders' equity			603,215						582,471
	Total liabilities and shareholders' equity	$	5,209,452					$	5,099,893

Net interest income and margin (tax equivalent)				$	51,802	4.32	%			$	51,180	4.27	%

		Three Months Ended
		Sept. 30, 2013
			Average		Tax Equivalent	Yield /
			Balance		Interest	Rate
Interest-earning assets:
Fed funds sold		$	13,611	$	14	0.42	%
Interest-bearing deposits in nonaffiliated banks			49,434		95	0.76
Taxable securities			1,011,050		6,130	2.43
Tax exempt securities			943,623		11,441	4.85
Loans			2,636,253		33,333	5.02
Total interest-earning assets			4,653,971	$	51,013	4.35	%
Noninterest-earning assets			334,521
	Total assets	$	4,988,492

Interest-bearing liabilities:
Deposits		$	2,631,862	$	1,038	0.16	%
Fed funds purchased and other short term borrowings			457,914		126	0.11
Total interest-bearing liabilities			3,089,776	$	1,164	0.15	%
Noninterest-bearing liabilities			1,329,582
Shareholders' equity			569,134
	Total liabilities and shareholders' equity	$	4,988,492

Net interest income and margin (tax equivalent)				$	49,849	4.25	%

		Nine Months Ended						Nine Months Ended
		Sept. 30, 2014						Sept. 30, 2013
			Average		Tax Equivalent	Yield /			Average		Tax Equivalent	Yield /
			Balance		Interest	Rate			Balance		Interest	Rate
Interest-earning assets:
Fed funds sold		$	9,234	$	27	0.39	%	$	10,932	$	28	0.35	%
Interest-bearing deposits in nonaffiliated banks			49,304		229	0.62			77,543		376	0.65
Taxable securities			1,149,156		21,032	2.44			1,038,679		18,818	2.42
Tax exempt securities			1,029,661		37,580	4.87			895,778		32,327	4.81
Loans			2,750,983		102,747	4.99			2,359,216		89,291	5.06
Total interest-earning assets			4,988,338	$	161,615	4.33	%		4,382,148	$	140,840	4.30	%
Noninterest-earning assets			345,098						312,933
	Total assets	$	5,333,436					$	4,695,081

Interest-bearing liabilities:
Deposits		$	2,859,269	$	2,894	0.14	%	$	2,453,370	$	2,758	0.15	%
Fed funds purchased and other short term borrowings			405,811		249	0.08			378,775		256	0.09
Total interest-bearing liabilities			3,265,080	$	3,143	0.13	%		2,832,145	$	3,014	0.14	%
Noninterest-bearing liabilities			1,439,382						1,293,373
Shareholders' equity			628,974						569,563
	Total liabilities and shareholders' equity	$	5,333,436					$	4,695,081

Net interest income and margin (tax equivalent)				$	158,472	4.25	%			$	137,826	4.21	%