First Financial Bankshares Announces Third Quarter Earnings Results

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Oct 22, 2015, 04:05 ET

ABILENE, Texas, Oct. 22, 2015 /PRNewswire/ -- First Financial Bankshares, Inc. (NASDAQ: FFIN) today reported earnings for the third quarter of 2015 of $25.89 million, up 10.48 percent when compared with earnings of $23.43 million in the same quarter a year ago. Basic earnings per share were $0.40 for the third quarter of 2015 compared with $0.37 in the same quarter a year ago.

All amounts for the third quarter and nine months ended September 30, 2015, include the results of the asset purchase of 4Trust Mortgage, Inc. on May 31, 2015, and the acquisition of First Bank, N.A., Conroe, Texas, on July 31, 2015. As of the acquisition date, First Bank had total gross loans of $252.46 million and total deposits of $356.75 million.

Net interest income for the third quarter of 2015 increased 14.75 percent to $56.10 million compared with $48.89 million in the same quarter of 2014. The net interest margin, on a taxable equivalent basis, was 4.13 percent for the third quarter of 2015 compared to 4.07 percent in the second quarter of 2015 and 4.18 percent in the third quarter of 2014. Included in interest income for the third quarter of 2015 was $657 thousand, or four basis points in net interest margin, related to discount accretion from fair value accounting related to the Conroe and Orange acquisitions.

The provision for loan losses was $2.66 million in the third quarter of 2015 compared with $1.55 million in the second quarter of 2015 and $896 thousand in the third quarter of 2014. The continued provision for loan losses in 2015 and 2014 reflects the overall growth in loans and continued levels of nonperforming and classified assets, including those related to the oil and gas industry. Nonperforming assets as a percentage of loans and foreclosed assets totaled 0.69 percent at September 30, 2015, compared with 0.61 percent at June 30, 2015, and 0.83 percent at September 30, 2014. Classified loans totaled $112.12 million at September 30, 2015, compared to $95.77 million at June 30, 2015, and $81.39 million at September 30, 2014. The increase in classifieds at September 30, 2015, was primarily due to the Conroe acquisition, which included $11.30 million in classified loans.

Noninterest income increased 18.02 percent in the third quarter of 2015 to $20.45 million compared with $17.32 million in the same quarter a year ago. Trust fees increased to $4.82 million in the third quarter of 2015 compared with $4.77 million in the same quarter last year, due to continued growth in the fair value of Trust assets managed to $3.83 billion from $3.66 billion a year ago. This growth offset a $248 thousand decline in Trust oil and gas fee income in the third quarter of 2015 compared to the same quarter a year ago. ATM, interchange and credit card fees increased 13.76 percent to $5.79 million compared with $5.09 million in the same quarter last year due to continued growth in net new accounts and debit cards. Real estate mortgage fees increased 79.99 percent in the third quarter of 2015 to $3.74 million compared with $2.08 million in the same quarter a year ago, primarily resulting from a stronger mortgage market and the asset purchase of 4Trust Mortgage, Inc.

Noninterest expense for the third quarter of 2015 totaled $39.97 million compared to $34.04 million in the third quarter of 2014. The Company's efficiency ratio in the third quarter of 2015 was 48.44 percent compared with 47.93 percent in the same quarter last year. The increase in noninterest expense in the third quarter of 2015 was primarily a result of an increase in salary and employee benefit costs to $21.65 million compared to $17.95 million in the same quarter a year ago, primarily driven by the addition of employees in compliance-related areas, the addition of 4Trust Mortgage Inc. and First Bank employees and annual pay increases. Also included in noninterest expense in the third quarter of 2015 were technology contract termination and conversion related costs totaling $1.14 million related to the First Bank acquisition.

For the nine months ended September 30, 2015, net income increased 12.27 percent to $75.19 million from $66.97 million a year ago. Basic earnings per share rose to $1.16 from $1.05 in the same period last year. Net interest income increased 10.58 percent to $159.53 million for the nine months ended September 30, 2015 from $144.28 million in the same period a year ago. The provision for loan losses totaled $5.51 million compared with $3.71 million in the same period a year ago. Noninterest income was $54.15 million for the first nine months 2015 compared with $49.60 million in the same period a year ago. Noninterest expense rose to $109.12 million compared with $101.49 million during the same period a year ago.

As of September 30, 2015, consolidated assets for the Company totaled $6.47 billion compared with $5.58 billion a year ago. Loans grew to $3.29 billion at quarter-end compared with loans of $2.84 billion a year ago. Deposits totaled $5.10 billion at September 30, 2015, compared to $4.46 billion a year ago. Shareholders' equity rose to $792.03 million as of September 30, 2015, compared with $658.77 million in the prior year.

"We are pleased with the earnings performance this quarter, especially in light of the additional expenses incurred to complete our acquisition of First Bank," said F. Scott Dueser, Chairman, President and CEO. "We continue to see growth in loans and earnings, and the recent acquisition of First Bank and asset purchase of 4Trust Mortgage, Inc. have contributed nicely to the bottom line. In light of the current depressed oil and gas prices, we continue to closely monitor our oil and gas industry exposure, which has declined slightly to 2.8% of gross loans and remains consistent with the 2014 year-end balances."

About First Financial Bankshares
Headquartered in Abilene, Texas, First Financial Bankshares is a financial holding company that through its subsidiary, First Financial Bank, N.A., operates 13 banking regions with 70 locations in Texas including Abilene, Acton, Albany, Aledo, Alvarado, Beaumont, Boyd, Bridgeport, Brock, Burleson, Cisco, Cleburne, Clyde, Conroe, Cut and Shoot, Decatur, Eastland, Fort Worth, Glen Rose, Granbury, Grapevine, Hereford, Huntsville, Keller, Magnolia, Mauriceville, Merkel, Midlothian, Mineral Wells, Montgomery, Moran, New Waverly, Newton, Odessa, Orange, 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 nine 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
			2015									2014
ASSETS			Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
Cash and due from banks		$	133,340		$	149,524		$	142,233		$	190,387		$	149,957
Interest-bearing deposits in banks			4,268			18,179			18,275			54,324			83,994
Interest-bearing time deposits in banks			4,491			5,456			9,170			17,002			19,234
Fed funds sold			2,790			5,720			5,460			8,760			4,785
Investment securities			2,737,639			2,729,408			2,689,640			2,416,297			2,254,316
Loans			3,288,422			2,967,768			2,938,707			2,937,991			2,839,696
	Allowance for loan losses		(40,420)			(38,999)			(37,828)			(36,824)			(36,388)
Net loans			3,248,002			2,928,769			2,900,879			2,901,167			2,803,308
Premises and equipment			116,803			104,495			104,358			103,000			101,437
Goodwill			139,655			96,632			94,882			94,882			94,882
Other intangible assets			4,641			2,407			2,310			2,477			2,547
Other assets			76,016			74,646			58,165			59,906			61,351
	Total assets	$	6,467,645		$	6,115,236		$	6,025,372		$	5,848,202		$	5,575,811

LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits		$	1,720,383		$	1,574,745		$	1,600,807		$	1,570,330		$	1,505,847
Interest-bearing deposits			3,376,900			3,152,674			3,236,200			3,179,925			2,958,517
	Total deposits		5,097,283			4,727,419			4,837,007			4,750,255			4,464,364
Short-term borrowings			500,903			621,155			401,898			367,110			341,909
Other liabilities			77,425			65,469			80,219			49,300			110,773
Shareholders' equity			792,034			701,193			706,248			681,537			658,765
	Total liabilities and shareholders' equity	$	6,467,645		$	6,115,236		$	6,025,372		$	5,848,202		$	5,575,811

		Quarter Ended
			2015									2014
INCOME STATEMENTS			Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
Interest income		$	57,163		$	53,344		$	52,069		$	51,121		$	49,955
Interest expense			1,065			1,008			970			1,039			1,069
Net interest income			56,098			52,336			51,099			50,082			48,886
Provision for loan losses			2,664			1,554			1,290			755			896
Net interest income after provision for loan losses			53,434			50,782			49,809			49,327			47,990
Noninterest income			20,446			17,809			15,897			17,023			17,324
Noninterest expense			39,973			35,204			33,943			36,435			34,040
	Net income before income taxes		33,907			33,387			31,763			29,915			31,274
Income tax expense			8,021			8,080			7,766			7,328			7,843
	Net income	$	25,886		$	25,307		$	23,997		$	22,587		$	23,431

PER COMMON SHARE DATA
Net income - basic		$	0.40		$	0.39		$	0.37		$	0.35		$	0.37
Net income - diluted			0.40			0.39			0.37			0.35			0.36
Cash dividends declared			0.16			0.16			0.14			0.14			0.14
Book Value			12.01			10.93			11.01			10.63			10.28
Market Value		$	31.78		$	34.64		$	27.64		$	29.88		$	27.79
Shares outstanding - end of period			65,942,155			64,156,302			64,142,812			64,089,921			64,065,828
Average outstanding shares - basic			65,335,457			64,148,356			64,122,965			64,075,334			64,059,675
Average outstanding shares - diluted			65,501,697			64,354,720			64,298,896			64,316,815			64,304,985

PERFORMANCE RATIOS
Return on average assets			1.61	%		1.67	%		1.64	%		1.57	%		1.71	%
Return on average equity			13.63			14.38			14.00			13.34			14.27
Net interest margin (tax equivalent)			4.13			4.07			4.11			4.08			4.18
Efficiency ratio			48.44			46.46			47.01			50.58			47.93


		Nine Months Ended
		Sept. 30,
INCOME STATEMENTS			2015			2014
Interest income		$	162,576		$	147,418
Interest expense			3,042			3,143
Net interest income			159,534			144,275
Provision for loan losses			5,508			3,710
Net interest income after provision for loan losses			154,026			140,565
Noninterest income			54,152			49,601
Noninterest expense			109,122			101,489
	Net income before income taxes		99,056			88,677
Income tax expense			23,867			21,705
	Net income	$	75,189		$	66,972

PER COMMON SHARE DATA
Net income - basic		$	1.16		$	1.05
Net income - diluted			1.16			1.04
Cash dividends declared			0.46			0.41
Book Value			12.01			10.28
Market Value		$	31.78		$	27.79
Shares outstanding - end of period			65,942,155			64,065,828
Average outstanding shares - basic			64,540,034			64,038,526
Average outstanding shares - diluted			64,736,155			64,302,615

PERFORMANCE RATIOS
Return on average assets			1.64	%		1.68	%
Return on average equity			13.99			14.24
Net interest margin (tax equivalent)			4.10			4.25
Efficiency ratio			47.34			48.78

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

	Quarter Ended
		2015									2014
ALLOWANCE FOR LOAN LOSSES		Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
Balance at beginning of period	$	38,999		$	37,828		$	36,824		$	36,388		$	35,892
Loans charged off		(1,477)			(943)			(509)			(670)			(614)
Loan recoveries		234			560			223			351			214
Net recoveries (charge-offs)		(1,243)			(383)			(286)			(319)			(400)
Provision for loan losses		2,664			1,554			1,290			755			896
Balance at end of period	$	40,420		$	38,999		$	37,828		$	36,824		$	36,388

Allowance for loan losses / period-end loans		1.23	%		1.31	%		1.29	%		1.25	%		1.28	%
Allowance for loan losses / nonperforming loans		183.39			228.20			196.04			178.06			162.77
Net charge-offs / average loans (annualized)		0.16			0.05			0.04			0.04			0.06

SUMMARY OF LOAN CLASSIFICATION
Special Mention	$	43,284		$	47,409		$	30,874		$	19,453		$	23,084
Substandard		68,772			48,317			46,775			53,388			58,219
Doubtful		62			43			99			141			87
Total classified loans	$	112,118		$	95,769		$	77,748		$	72,982		$	81,390

NONPERFORMING ASSETS
Nonaccrual loans	$	21,788		$	16,854		$	18,935		$	20,195		$	22,093
Accruing troubled debt restructured loans		204			172			177			226			-
Accruing loans 90 days past due		49			64			184			260			263
Total nonperforming loans		22,041			17,090			19,296			20,681			22,356
Foreclosed assets		701			1,045			1,081			1,035			1,273
Total nonperforming assets	$	22,742		$	18,135		$	20,377		$	21,716		$	23,629

As a % of loans and foreclosed assets		0.69	%		0.61	%		0.69	%		0.74	%		0.83	%
As a % of end of period total assets		0.35			0.30			0.34			0.37			0.42

CAPITAL RATIOS
Tier 1 risk-based		15.73	%		16.25	%		16.23	%		16.05	%		16.07	%
Total risk-based		16.78			17.36			17.35			17.16			17.20
Tier 1 leverage		9.96			9.84			9.85			9.89			10.10
Equity to assets		12.25			11.47			11.72			11.65			11.81


	Quarter Ended
		2015									2014
NONINTEREST INCOME		Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
Trust fees	$	4,818		$	4,740		$	4,731		$	4,869		$	4,772
Service charges on deposits		4,653			4,021			3,768			4,287			4,402
ATM, interchange and credit card fees		5,794			5,445			4,969			5,137			5,093
Real estate mortgage fees		3,742			2,098			1,482			1,601			2,079
Net gain (loss) on sale of available-for-sale securities		136			239			5			-			1
Net gain (loss) on sale of foreclosed assets		28			(49)			30			100			305
Net gain (loss) on sale of assets		(11)			(4)			5			(6)			(31)
Other noninterest income		1,286			1,319			907			1,035			703
Total noninterest income	$	20,446		$	17,809		$	15,897		$	17,023		$	17,324

NONINTEREST EXPENSE
Salaries and employee benefits, excluding profit sharing	$	20,007		$	17,865		$	17,023		$	16,302		$	16,354
Profit sharing expense		1,641			1,308			1,242			1,516			1,596
Loss from partial settlement of pension plan		-			-			-			2,909			-
Net occupancy expense		3,050			2,394			2,197			2,296			2,297
Equipment expense		3,114			2,992			2,899			2,695			2,758
FDIC insurance premiums		819			749			748			689			693
ATM, interchange and credit card expenses		1,509			1,609			1,725			1,875			1,819
Legal, tax and professional fees		1,497			1,701			1,697			1,363			1,463
Audit fees		444			372			381			279			403
Printing, stationery and supplies		594			471			596			676			632
Amortization of intangible assets		200			72			90			64			62
Advertising and public relations		1,564			1,484			1,353			1,515			1,591
Correspondent bank service charges		238			225			222			222			222
Other noninterest expense		5,296			3,962			3,770			4,034			4,150
Total noninterest expense	$	39,973		$	35,204		$	33,943		$	36,435		$	34,040

TAX EQUIVALENT YIELD ADJUSTMENT	$	5,984		$	5,635		$	5,213		$	4,934		$	4,814


	Nine Months Ended
	Sept. 30,
NONINTEREST INCOME		2015			2014
Trust fees	$	14,289		$	13,897
Service charges on deposits		12,442			12,623
ATM, interchange and credit card fees		16,209			14,291
Real estate mortgage fees		7,321			4,835
Net gain (loss) on sale of available-for-sale securities		380			(4)
Net gain (loss) on sale of foreclosed assets		10			804
Net gain (loss) on sale of assets		(11)			15
Other noninterest income		3,512			3,140
Total noninterest income	$	54,152		$	49,601

NONINTEREST EXPENSE
Salaries and employee benefits, excluding profit sharing	$	54,896		$	48,830
Profit sharing expense		4,190			3,808
Net occupancy expense		7,640			6,804
Equipment expense		9,005			8,045
FDIC insurance premiums		2,316			2,035
ATM, interchange and credit card expenses		4,844			4,995
Legal, tax and professional fees		4,895			3,945
Audit fees		1,196			1,138
Printing, stationery and supplies		1,662			1,960
Amortization of intangible assets		362			210
Advertising and public relations		4,402			4,431
Correspondent bank service charges		686			666
Other noninterest expense		13,028			14,622
Total noninterest expense	$	109,122		$	101,489

TAX EQUIVALENT YIELD ADJUSTMENT	$	16,831		$	14,197

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

	Three Months Ended						Three Months Ended
	Sept. 30, 2015						June 30, 2015
		Average		Tax Equivalent	Yield /			Average		Tax Equivalent	Yield /
		Balance		Interest	Rate			Balance		Interest	Rate
Interest-earning assets:
Fed funds sold	$	8,334	$	8	0.40	%	$	10,391	$	10	0.37	%
Interest-bearing deposits in nonaffiliated banks		42,083		33	0.31			34,633		40	0.47
Taxable securities		1,372,834		7,296	2.13			1,425,744		7,398	2.08
Tax exempt securities		1,376,119		16,021	4.66			1,294,809		15,108	4.67
Loans		3,161,229		39,789	4.99			2,954,502		36,423	4.94
Total interest-earning assets		5,960,599	$	63,147	4.20	%		5,720,079	$	58,979	4.14	%
Noninterest-earning assets		402,174						351,223
Total assets	$	6,362,773					$	6,071,302

Interest-bearing liabilities:
Deposits	$	3,295,411	$	932	0.11	%	$	3,177,999	$	902	0.11	%
Fed funds purchased and other short term borrowings		572,431		133	0.09			558,367		106	0.08
Total interest-bearing liabilities		3,867,842	$	1,065	0.11	%		3,736,366	$	1,008	0.11	%
Noninterest-bearing liabilities		1,741,319						1,628,847
Shareholders' equity		753,612						706,089
Total liabilities and shareholders' equity	$	6,362,773					$	6,071,302

Net interest income and margin (tax equivalent)			$	62,082	4.13	%			$	57,971	4.07	%

	Three Months Ended						Three Months Ended
	Mar. 31, 2015						Dec. 31, 2014
		Average		Tax Equivalent	Yield /			Average		Tax Equivalent	Yield /
		Balance		Interest	Rate			Balance		Interest	Rate
Interest-earning assets:
Fed funds sold	$	6,767	$	5	0.27	%	$	5,975	$	4	0.30	%
Interest-bearing deposits in nonaffiliated banks		89,798		75	0.34			118,244		110	0.37
Taxable securities		1,333,073		7,808	2.34			1,246,632		7,370	2.36
Tax exempt securities		1,191,772		13,973	4.69			1,091,723		13,078	4.79
Loans		2,931,805		35,420	4.90			2,889,951		35,492	4.87
Total interest-earning assets		5,553,215	$	57,281	4.18	%		5,352,525	$	56,054	4.15	%
Noninterest-earning assets		363,211						358,395
Total assets	$	5,916,426					$	5,710,920

Interest-bearing liabilities:
Deposits	$	3,221,552	$	927	0.12	%	$	3,043,612	$	989	0.13	%
Fed funds purchased and other short term borrowings		388,213		42	0.04			373,785		49	0.05
Total interest-bearing liabilities		3,609,765	$	969	0.11	%		3,417,397	$	1,038	0.12	%
Noninterest-bearing liabilities		1,611,430						1,621,819
Shareholders' equity		695,231						671,704
Total liabilities and shareholders' equity	$	5,916,426					$	5,710,920

Net interest income and margin (tax equivalent)			$	56,312	4.11	%			$	55,016	4.08	%

	Three Months Ended
	Sept. 30, 2014
		Average		Tax Equivalent	Yield /
		Balance		Interest	Rate
Interest-earning assets:
Fed funds sold	$	10,619	$	11	0.40	%
Interest-bearing deposits in nonaffiliated banks		50,213		69	0.55
Taxable securities		1,166,248		6,856	2.35
Tax exempt securities		1,057,715		12,763	4.83
Loans		2,814,083		35,070	4.94
Total interest-earning assets		5,098,878	$	54,769	4.26	%
Noninterest-earning assets		348,369
Total assets	$	5,447,247

Interest-bearing liabilities:
Deposits	$	2,892,065	$	999	0.14	%
Fed funds purchased and other short term borrowings		384,768		70	0.07
Total interest-bearing liabilities		3,276,833	$	1,069	0.13	%
Noninterest-bearing liabilities		1,518,907
Shareholders' equity		651,507
Total liabilities and shareholders' equity	$	5,447,247

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

	Nine Months Ended						Nine Months Ended
	Sept. 30, 2015						Sept. 30, 2014
		Average		Tax Equivalent	Yield /			Average		Tax Equivalent	Yield /
		Balance		Interest	Rate			Balance		Interest	Rate
Interest-earning assets:
Fed funds sold	$	8,503	$	23	0.36	%	$	9,234	$	27	0.39	%
Interest-bearing deposits in nonaffiliated banks		55,330		148	0.36			49,304		229	0.62
Taxable securities		1,377,363		22,502	2.18			1,149,156		21,032	2.44
Tax exempt securities		1,288,242		45,102	4.67			1,029,661		37,580	4.87
Loans		3,016,686		111,632	4.95			2,750,983		102,747	4.99
Total interest-earning assets		5,746,124	$	179,407	4.17	%		4,988,338	$	161,615	4.33	%
Noninterest-earning assets		372,345						345,098
Total assets	$	6,118,469					$	5,333,436

Interest-bearing liabilities:
Deposits	$	3,231,925	$	2,761	0.11	%	$	2,859,269	$	2,894	0.14	%
Fed funds purchased and other short term borrowings		507,011		281	0.07			405,811		249	0.08
Total interest-bearing liabilities		3,738,936	$	3,042	0.11	%		3,265,080	$	3,143	0.13	%
Noninterest-bearing liabilities		1,661,008						1,439,382
Shareholders' equity		718,525						628,974
Total liabilities and shareholders' equity	$	6,118,469					$	5,333,436

Net interest income and margin (tax equivalent)			$	176,365	4.10	%			$	158,472	4.25	%