UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
Commission file number 0-7674
FIRST FINANCIAL BANKSHARES, INC.
--------------------------------
(Exact name of registrant as Specified in its charter)
Texas 75-0944023
- --------------------------------------------- -------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
400 Pine Street, Abilene, Texas 79601
-------------------------------------
(Address of principal executive offices)
(Zip Code)
(325) 627-7155
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
Indicate by checkmark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X No .
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of April 30, 2004:
Class Number of Shares Outstanding
----- ----------------------------
Common Stock, $10.00 par value 15,488,778
per share
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item Page
---- ----
Forward-Looking Statement Disclaimer 3
1. Financial Statements 4
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
3. Quantitative and Qualitative Disclosures About Market Risk 15
4. Controls and Procedures 15
PART II
OTHER INFORMATION
4. Submission of Matters to a Vote of Security Holders 16
6. Exhibits and Reports on Form 8-K 17
Signatures 18
2
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. When used in this Form 10-Q, words such as "anticipate",
"believe", "estimate", "expect", "intend", "predict", "project", and similar
expressions, as they relate to us or management, identify forward-looking
statements. These forward-looking statements are based on information currently
available to our 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:
o general economic conditions;
o legislative and regulatory actions and reforms;
o competition from other financial institutions and financial holding
companies;
o the effects of and changes in trade, monetary and fiscal policies and
laws, including interest rate policies of the Federal Reserve Board;
o changes in the demand for loans;
o fluctuations in the value of collateral and loan reserves;
o inflation, interest rate, market and monetary fluctuations;
o changes in consumer spending, borrowing and savings habits;
o our ability to attract deposits;
o consequences of continued bank mergers and acquisitions in our market
area, resulting in fewer but much larger and stronger competitors;
o acquisitions and integration of acquired businesses; and
o other factors described in "Part I, Item 2 - Management's Discussion
and Analysis of Financial Condition and Results of Operations."
Such statements reflect the current views of our management with respect to
future events and are subject to these and other risks, uncertainties and
assumptions relating to our operations, results of operations, growth strategy
and liquidity. All subsequent written and oral forward-looking statements
attributable to us or persons acting on our behalf are expressly qualified in
their entirety by this paragraph. We undertake no obligation to publicly update
or otherwise revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
PART I
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
The consolidated balance sheets of First Financial Bankshares, Inc. at March 31,
2004 and 2003 and December 31, 2003, and the consolidated statements of earnings
and comprehensive earnings for the three months ended March 31, 2004 and 2003,
changes in shareholders' equity for the three months ended March 31, 2004 and
the year ended December 31, 2003, and cash flows for the three months ended
March 31, 2004 and 2003, follow on pages 4 through 8.
3
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
-------------------------------------
2004 2003 2003
----------------- ---------------- ----------------
ASSETS (Unaudited)
Cash and due from banks $ 88,504,777 $ 91,461,122 $ 111,940,573
Federal funds sold 15,175,000 17,875,000 1,900,000
----------------- ---------------- ----------------
Cash and cash equivalents 103,679,777 109,336,122 113,840,573
Interest-bearing deposits in banks 282,328 4,830,932 876,839
Investment securities:
Securities held-to-maturity (market value of $131,748,477,
$188,678,415 and $138,594,081 at March 31, 2004 and
2003 and December 31, 2003, respectively) 124,326,152 178,714,336 131,326,111
Securities available-for-sale, at fair value 806,103,397 671,593,468 778,976,003
----------------- ---------------- ----------------
Total investment securities 930,429,549 850,307,804 910,302,114
Loans 965,731,085 955,650,393 987,523,103
Less: Allowance for loan losses (11,791,894) (11,363,556) (11,576,299)
----------------- ---------------- ----------------
Net loans 953,939,191 944,286,837 975,946,804
Bank premises and equipment, net 43,542,359 41,084,401 43,902,112
Goodwill and intangible assets 24,683,882 24,836,999 24,717,671
Other assets 21,136,926 21,721,426 22,985,321
----------------- ---------------- ----------------
TOTAL ASSETS $ 2,077,694,012 $ 1,996,404,521 $ 2,092,571,434
================= ================ ================
LIABILITIES
Noninterest-bearing deposits $ 455,106,813 $ 431,520,958 $ 472,574,590
Interest-bearing deposits 1,319,173,214 1,291,883,993 1,323,696,580
----------------- ---------------- ----------------
Total deposits 1,774,280,027 1,723,404,951 1,796,271,170
Dividends payable 4,800,760 4,328,601 4,798,948
Securities sold under agreements to repurchase 15,438,499 12,489,786 28,975,167
Other liabilities 19,799,989 15,983,244 11,039,392
----------------- ---------------- ----------------
Total liabilities 1,814,319,275 1,756,206,582 1,841,084,677
----------------- ---------------- ----------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock - $10 par value; authorized 20,000,000 shares; 15,486,322,
15,459,289 and 15,480,679 shares issued and outstanding
at March 31, 2004 and 2003 and December 31, 2003, respectively 154,863,220 154,592,890 154,806,790
Capital surplus 58,293,285 58,103,956 58,253,180
Retained earnings 36,568,622 18,849,930 31,276,464
Accumulated other comprehensive income 13,649,610 8,651,163 7,150,323
----------------- ---------------- ----------------
Total shareholders' equity 263,374,737 240,197,939 251,486,757
----------------- ---------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,077,694,012 $ 1,996,404,521 $ 2,092,571,434
================= ================ ================
See notes to consolidated financial statements.
4
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS - (UNAUDITED)
Three Months Ended March 31,
----------------------------------
2004 2003
-------------- ---------------
INTEREST INCOME
Interest and fees on loans $ 14,018,537 $ 14,786,550
Interest on investment securities:
Taxable 7,519,478 7,678,820
Exempt from federal income tax 2,403,116 1,745,746
Interest on federal funds sold and
interest-bearing deposits in banks 69,677 141,695
-------------- ---------------
Total interest income 24,010,808 24,352,811
INTEREST EXPENSE
Interest-bearing deposits 3,574,648 4,650,611
Other 52,335 67,728
-------------- ---------------
Total interest expense 3,626,983 4,718,339
-------------- ---------------
NET INTEREST INCOME 20,383,825 19,634,472
Provision for loan losses 178,000 510,501
-------------- ---------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 20,205,825 19,123,971
NONINTEREST INCOME
Trust department income 1,575,522 1,433,806
Service fees on deposit accounts 4,270,655 3,807,820
ATM fees 674,034 665,656
Real estate mortgage fees 423,627 684,363
Net gain (loss) on sale of securities 18,426 -
Net gain on sale of student loans 1,791,858 236,515
Net gain on sale of real estate and other assets 114,374 3,963
Other 1,034,217 1,239,849
-------------- ---------------
Total noninterest income 9,902,713 8,071,972
NONINTEREST EXPENSE
Salaries and employee benefits 8,790,528 8,221,387
Net occupancy expense 998,538 942,580
Equipment expense 1,415,112 1,187,966
Printing, stationery & supplies 346,074 346,025
Correspondent bank service charges 383,656 395,055
Amortization of intangible assets 33,789 33,789
Other expenses 3,921,855 3,985,749
-------------- ---------------
Total noninterest expense 15,889,552 15,112,551
-------------- ---------------
EARNINGS BEFORE INCOME TAXES 14,218,986 12,083,392
Income tax expense 4,126,068 3,633,803
-------------- ---------------
NET EARNINGS $ 10,092,918 $ 8,449,589
============== ===============
EARNINGS PER SHARE, BASIC $ 0.65 $ 0.55
============== ===============
EARNINGS PER SHARE, ASSUMING DILUTION $ 0.65 $ 0.54
============== ===============
DIVIDENDS PER SHARE $ 0.31 $ 0.28
============== ===============
See notes to consolidated financial statements.
5
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS - (UNAUDITED)
Three Months Ended March 31,
--------------------------------
2004 2003
-------------- --------------
NET EARNINGS $ 10,092,918 $ 8,449,589
OTHER ITEMS OF COMPREHENSIVE EARNINGS:
Change in unrealized gain on
investment securities available-for-sale 10,017,329 (4,214,251)
Reclassification adjustment for realized
gains on investment securities
included in net earnings, before income tax (18,426) -
-------------- --------------
9,998,903 (4,214,251)
Total other items of comprehensive earnings
Income tax expense related to other
items of comprehensive earnings (3,499,616) 1,474,988
-------------- --------------
COMPREHENSIVE EARNINGS $ 16,592,205 $ 5,710,326
============== ==============
See notes to consolidated financial statements.
6
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Accumulated
Other Comprehensive Income
-------------------------
Unrealized Gain
Common Stock on Securities Minimum Total
------------------------- Capital Retained Available- Pension Shareholders'
Shares Amount Surplus Earnings for-sale Liability Equity
---------- ------------- ------------ ------------ ------------ ------------ -------------
Balances at December 31, 2002 12,364,201 $ 123,642,010 $ 58,087,687 $ 45,647,522 $ 12,830,709 $ (1,440,283)$ 238,767,645
Net earnings - - - 35,304,800 - - 35,304,800
Five for four stock split,
effected in the
form of a 25% stock dividend 3,092,995 30,929,950 - (30,929,950) - - -
Stock issuances 23,483 234,830 165,493 - - - 400,323
Cash dividends declared,
$1.21 per share - - - (18,745,908) - - (18,745,908)
Minimum liability pension
adjustment, net of
related taxes - - - - - 438,507 438,507
Change in unrealized gain in
investment securities
available-for-sale,
net of related income taxes - - - - (4,678,610) - (4,678,610)
---------- ------------- ------------ ------------ ------------ ------------ -------------
Balances at December 31, 2003 15,480,679 154,806,790 58,253,180 31,276,464 8,152,099 (1,001,776) 251,486,757
Net earnings (unaudited) - - - 10,092,918 - - 10,092,918
Stock issuances (unaudited) 5,643 56,430 40,105 - - - 96,535
Cash dividends declared,
$0.31 per share (unaudited) - - - (4,800,760) - - (4,800,760)
Change in unrealized gain in
investment securities available-
for-sale, net of related income
taxes (unaudited) - - - - 6,499,287 - 6,499,287
---------- ------------- ------------ ------------ ------------ ------------ -------------
Balances at March 31, 2004 (unaudited) 15,486,322 $ 154,863,220 $ 58,293,285 $ 36,568,622 $ 14,651,386 $ (1,001,776)$ 263,374,737
========== ============= ============ ============ ============ ============ =============
See notes to consolidated financial statements.
7
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
Three Months Ended March 31,
---------------------------------------
2004 2003
----------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 10,092,918 $ 8,449,589
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 1,231,057 1,053,539
Provision for loan losses 178,000 510,501
Premium amortization, net of discount accretion 778,647 1,101,460
Gain on sale of assets (1,924,658) (4,488)
Deferred federal income tax benefit (79,691) (128,602)
Decrease (increase) in other assets 1,367,840 2,452,801
Increase in other liabilities 5,340,674 4,295,139
----------------- -------------------
Total adjustments 6,891,869 9,280,350
----------------- -------------------
Net cash provided by operating activities 16,984,787 17,729,939
----------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in interest-bearing deposits in banks 594,511 (2,506,507)
Activity in available-for-sale securities:
Sales 6,462,322 -
Maturities 21,459,429 44,314,517
Purchases (46,943,370) (149,554,799)
Activity in held-to-maturity securities:
Maturities 8,132,865 23,373,180
Purchases - (1,500,000)
Net decrease (increase) in loans (35,244,064) 7,177,902
Capital expenditures (883,298) (1,544,904)
Proceeds from sale of assets 59,506,246 65,427
----------------- -------------------
Net cash used in investing activities 13,084,641 (80,175,184)
----------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in noninterest-bearing deposits (17,467,777) 6,047,605
Net increase (decrease) in interest-bearing deposits (4,523,366) 5,795,130
Net decrease in securities sold under agreements to repurchase (13,536,668) (14,219,208)
Proceeds from stock issuances 96,535 48,569
Dividends paid (4,798,948) (4,327,374)
----------------- -------------------
Net cash provided by (used in) financing activities (40,230,224) (6,655,278)
----------------- -------------------
Net decrease in cash and cash equivalents (10,160,796) (69,100,523)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 113,840,573 178,436,645
----------------- -------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 103,679,777 $ 109,336,122
================= ===================
SUPPLEMENTAL INFORMATION AND NONCASH TRANSACTIONS
Interest paid $ 4,052,268 $ 4,860,537
Federal income tax paid 140,000 -
Assets acquired through foreclosure 94,808 845,804
Loans to finance the sale of other real estate 507,800 -
See notes to consolidated financial statements.
8
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - Basis of Presentation
In the opinion of Management, the unaudited consolidated financial statements
reflect all adjustments necessary for a fair presentation of the Company's
financial position and unaudited results of operations. All adjustments were of
a normal recurring nature. However, the results of operations for the three
months ended March 31, 2004, are not necessarily indicative of the results to be
expected for the year ending December 31, 2004, due to seasonality and other
factors. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States have been condensed or omitted under SEC rules and
regulations.
Note 2 - Earnings Per Share
Basic earnings per common share is computed by dividing net income available to
common shareholders by the weighted average number of shares outstanding during
the periods. In computing diluted earnings per common share for the three months
ended March 31, 2004 and 2003, the Company assumes that all outstanding options
to purchase common stock have been exercised at the beginning of the year (or
the time of issuance, if later). The dilutive effect of the outstanding options
is reflected by application of the treasury stock method, whereby the proceeds
from the exercised options are assumed to be used to purchase common stock at
the average market price during the respective periods. The weighted average
common shares outstanding used in computing basic earnings per common share for
the three months ended March 31, 2004 and 2003, were 15,483,756 and 15,456,529
shares, respectively. The weighted average common shares outstanding used in
computing fully diluted earnings per common share for the three months ended
March 31, 2004 and 2003, were 15,558,525 and 15,512,345, respectively.
Note 3 - Stock Based Compensation
The Company grants stock options for a fixed number of shares to employees with
an exercise price equal to the fair value of the shares at the date of grant.
The Company accounts for stock option grants using the intrinsic value method
prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees ("APB
25"). Under APB 25, because the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized. Had compensation cost for the plan been
determined consistent with Statement of Financial Accounting Standard No. 123,
Accounting for Stock-Based Compensation, the Company's net earnings and earnings
per share would have been reduced by insignificant amounts on a pro forma basis
for the three months ended March 31, 2004 and 2003.
Note 4 - Pension Plan
The Company has a defined benefit pension plan covering substantially all of its
employees. The benefits are based on years of service and a percentage of the
employee's qualifying compensation during the final years of employment. The
Company's funding policy is to contribute annually the amount necessary to
satisfy the Internal Revenue Service's funding standards. Contributions to the
pension plan through December 31, 2003 were intended to provide not only for
benefits attributed to service to date but also for those expected to be earned
in the future. Effective January 1, 2004, the pension plan was frozen whereby no
additional years of service accrue to participants, unless the pension plan is
subsequently reinstated. Under current accounting principles generally accepted
in the United States and utilizing current assumptions, we do not expect any
significant pension costs in 2004 and beyond as a result of this action.
Accordingly, no amount of net periodic benefit cost was recorded in the three
months ended March 31, 2004 as the interest cost component is generally offset
with the expected return on plan assets.
9
The Company does not expect to make a contribution to the pension plan during
the year ending December 31, 2004 as required by IRS funding standards.
Note 5 - Acquisition Announcement
On March 4, 2004, we entered into a stock purchase agreement with the principal
shareholders of Liberty National Bank, Granbury, Texas. Pursuant to the purchase
agreement and provided all of the shares of Liberty National Bank are tendered
for purchase by the Company, the Company will pay approximately $12.8 million
for all of the outstanding shares of Liberty National Bank. Acquisition of
Liberty National Bank by the Company is subject to the approval of the Board of
Governors of the Federal Reserve System and other federal and state regulatory
authorities, as well as, subject to satisfaction of the conditions contained in
the purchase agreement. If the transaction is approved by federal and state
regulatory authorities, it is anticipated that the acquisition of Liberty
National Bank by the Company will close in mid 2004. Conditioned upon completion
of the above described transactions, Liberty National Bank will become a direct
subsidiary of First Financial Bankshares of Delaware, Inc., our wholly owned
Delaware bank holding company.
Liberty National Bank is located in the City of Granbury, Hood County, Texas,
approximately 40 miles southwest of Fort Worth, Texas. Liberty National Bank was
chartered in 1997 and as of March 31, 2004, had assets totaling approximately
$60 million and shareholders' equity of $6.2 million.
Note 6 - Reclassifications
Certain prior period balances have been reclassified to conform with the current
period presentation.
Note 7 - Increase in Authorized Shares
On April 27, 2004, the shareholders of the Company voted at the annual
shareholder meeting to increase the number of authorized shares of common stock
from 20,000,000 to 40,000,000.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
As a multi-bank financial holding company, we generate most of our revenue from
interest on loans and investments, trust fees, and service charges. Our primary
source of funding for our loans are deposits we hold in our subsidiary banks.
Our largest expenses are interest on these deposits and salaries and related
employee benefits. We usually measure our performance by calculating our return
on average assets, return on average equity, our regulatory leverage and risk
based capital ratios, and our efficiency ratio, which is calculated by dividing
noninterest expense by the sum of net interest income on a tax equivalent basis
and noninterset income.
The following discussion of operations and financial condition should be read in
conjunction with the financial statements and accompanying footnotes included in
Item 1 of this Form 10-Q as well as those included in the Company's 2003 Annual
Report on Form 10-K.
Critical Accounting Policies
- ----------------------------
We prepare consolidated financial statements based on the selection of certain
accounting policies, accounting principles generally accepted in the United
States and customary practices in the banking industry. These policies, in
certain areas, require us to make significant estimates and assumptions.
10
We deem a policy critical if (1) the accounting estimate required us to make
assumptions about matters that are highly uncertain at the time we make the
accounting estimate; and (2) different estimates that reasonably could have been
used in the current period, or changes in the accounting estimate that are
reasonably likely to occur from period to period, would have a material impact
on the financial statements.
The following discussion addresses our allowance for loan loss and its provision
for loan losses, which we deem to be our most critical accounting policy. We
have other significant accounting policies and continue to evaluate the
materiality of their impact on our consolidated financial statements, but we
believe that these other policies either do not generally require us to make
estimates and judgments that are difficult or subjective, or it is less likely
that they would have a material impact on our reported results for a given
period.
The allowance for loan losses is an amount that we believe will be adequate to
absorb inherent estimated losses on existing loans in which full collectibility
is unlikely based upon our review and evaluation of the loan portfolio,
including letters of credit, lines of credit and unused commitments to provide
financing.
The allowance for loan losses is increased by charges to income and decreased by
charge-offs (net of recoveries).
Our periodic evaluation of the adequacy of the allowance is based on general
economic conditions, the financial condition of the borrower, the value and
liquidity of collateral, delinquency, prior loan loss experience, and the
results of periodic reviews of the portfolio by our independent loan review
department and regulatory examiners. We have developed a consistent,
well-documented loan review methodology that includes allowances assigned to
specific loans and nonspecific allowances, which are based on the factors noted
in the prior sentence. While each subsidiary bank is responsible for the
adequacy of its allowance, our independent loan review department is responsible
for reviewing this evaluation for all of our subsidiary banks to ensure
consistent methodology and overall adequacy.
Although we believe that we use the best information available to make loan loss
allowance determinations, future adjustments could be necessary if circumstances
or economic conditions differ substantially from the assumptions used in making
our initial determinations. A downturn in the economy and employment could
result in increased levels of nonperforming assets and charge-offs, increased
loan loss provisions and reductions in income. Additionally, as an integral part
of their examination process, bank regulatory agencies periodically review our
allowance for loan losses. The bank regulatory agencies could require the
recognition of additions to the loan loss allowance based on their judgment of
information available to them at the time of their examination.
Accrual of interest is discontinued on a loan when management believes, after
considering economic and business conditions and collection efforts, that the
borrower's financial condition is such that collection of interest is doubtful.
Our policy requires measurement of the allowance for an impaired collateral
dependent loan based on the fair value of the collateral. Other loan impairments
are measured based on the present value of expected future cash flows or the
loan's observable market price.
Operating Results
- -----------------
Three-months ended March 31, 2004 and 2003
- ------------------------------------------
Net income for the third quarter of 2004 totaled $10.1 million, an increase of
$1.6 million or 19.4% for the same period last year. The earnings improvement
over the same period for the prior year resulted primarily
11
from an increase in the gain from sale of student loans of $1.6 million and an
increase in net interest income of $749 thousand. We accelerated the sale of
approximately $60 million in student loans in the 2004 first quarter recognizing
a premium of $1.8 million, compared to a sale of approximately $16 million in
student loans recognizing a premium of $237 thousand in the first quarter of
2003. We similarly accelerated the sale of approximately $53 million in loans in
the 2003 second quarter recognizing a premium of $1.6 million. On a basic
earnings per share basis, earnings amounted to $0.65 per share for the first
quarter of 2004 as compared to $0.55 per share for the first quarter of 2003.
Return on average assets and return on average equity for the first quarter of
2004 amounted to 1.96% and 15.85%, respectively. For the same periods in 2003,
return on average assets and return on average equity amounted to 1.72% and
14.49%, respectively.
Tax equivalent net interest income for the first quarter of 2004 amounted to
$21.6 million as compared to $20.6 million for the same period last year. Our
rates on interest earning assets declined approximately 29 basis points while
our rates paid on deposits declined 38 basis points. The increase in volume of
average interest earning assets of $83.1 million offset the declines caused by
the decline in interest rates. Average interest bearing liabilities increased
$30.8 million, which only partially offset the decreased cost of funds from
declines in interest rates. Average earning assets were $1.9 billion for the
first quarter of 2004 which is 4.6% greater than the first quarter of 2003.
Average interest bearing liabilities were $1.4 billion for the first quarter of
2004 which is 2.3% greater than the first quarter of 2003. The Company's
interest spread increased to 4.26% for 2004 compared to 4.19% for 2003. The
Company's net interest margin was 4.57% for the first quarter of 2004 compared
to 4.58% for the same period of 2003.
The provision for loan losses for the first quarter of 2004 totaled $178
thousand compared to $511 thousand for the same period in 2003. Gross chargeoffs
for the quarter ended March 31, 2004 totaled $241 thousand compared to $902
thousand for the same period of 2003. Recoveries of previously charged-off loans
totaling $279 thousand in the quarter ended March 31, 2004 (as compared to $535
thousand in 2003) offset the chargeoffs experienced. On an annualized basis, net
chargeoffs (recoveries) as a percentage of average loans was (0.02%) for the
first quarter of 2004 as compared to 0.15% for the same period in 2003. The
Company's allowance for loan losses totaled $11.8 million at March 31, 2004,
virtually unchanged from the balance of $11.4 million at March 31, 2003. As a
percentage of nonperforming loans, the Company's allowance amounted to 767.0% at
March 31, 2004. As of March 31, 2004, management of the Company believes that
the Company's balance in allowance for loan losses is adequate to provide for
losses existing in its portfolio that are deemed uncollectible.
Total noninterest income for the first quarter of 2004 was $9.9 million, as
compared to $8.1 million for the same period last year. Trust fees totaled $1.6
million for 2004, up $142 thousand over the same period in 2003 due to increased
volume of trust assets managed and improvement in overall equity markets.
Service fees on deposits totaled $4.3 million for the first quarter of 2004
compared to $3.8 million for the same period of 2003, an improvement of $463
thousand, due to increased fees from enhancements to the Company's overdraft
privilege products. During the first quarter, the Company sold approximately $60
million in student loans recognizing a premium of $1.8 million. The Company
capitalized on the opportunity to accelerate the sale of its student loans and
receive a higher premium than normally received. We similarly accelerated the
sale of approximately $53 million in loans in the 2003 second quarter
recognizing a premium of $1.6 million. The Company's real estate mortgage fees
declined from $684 thousand to $424 thousand as the Company experienced a slow
down in the volume of refinancing.
Noninterest expense for the first quarter of 2004 amounted to $15.9 million as
compared to $15.1 million for the same period in 2003. Salaries and benefits
expense, the Company's largest noninterest expense item, increased 6.9% to $8.8
million in 2004, up $569 thousand over the same period in 2003. The primary
cause of this increase was $270 thousand in additional profit sharing expense
due to the overall increased net income. Net occupancy expense was relatively
flat in the first quarter of 2004 compared to the first quarter of 2003.
Equipment expense increased $227 thousand in 2004 over 2003 due to the
depreciation of new technology expenditures in the latter part of 2003 and first
quarter of 2004 as the Company improved its technology infrastructure.
12
The Company's other expense decreased $64 thousand in the first quarter of 2004
compared to the first quarter of 2003. This is a result of Company wide efforts
to curtail such expenses. We believe a key indicator of our operating efficiency
is expressed by the ratio that is calculated by dividing noninterest expense by
the sum of net interest income (on a tax equivalent basis) and noninterest
income. This ratio in effect measures the amount of funds expended to generate
revenue. We decreased this ratio from 52.77% for the first quarter of 2003 to
50.40% for the first quarter of 2004.
Balance Sheet Review
- --------------------
Total assets at March 31, 2004 amounted to $2.078 billion as compared to $2.093
billion at December 31, 2003, and $1.996 billion at March 31, 2003. Since
December 31, 2003, loans decreased $21.8 million primarily as a result of the
student loan sales referenced above. Deposits totaled $1.774 billion at March
31, 2004 compared to $1.796 billion at December 31, 2003, down 1.2%.
Loans at March 31, 2004, totaled $965.7 million as compared to $987.5 million at
year-end 2003 and $955.7 million at March 31, 2003. As compared to March 31,
2003 amounts, loans at March 31, 2004 reflects (i) a $21.4 million increase in
commercial, financial and agricultural loans; (ii) a $66.6 million increase in
real estate loans; and (iii) a $78.8 million decrease in consumer and student
loans. Investment securities at March 31, 2004, totaled $930.4 million as
compared to $910.3 million at year-end 2003 and $850.3 million at March 31,
2003. The net unrealized gain, net of income tax in the investment portfolio at
March 31, 2004, amounted to $14.7 million and had an overall tax equivalent
yield of 4.87%. Since March 31, 2004, the bond market has experienced an
increase in interest rates which as a result, although not yet quantified, could
decrease our unrealized gain on our investment portfolio. At March 31, 2004, the
Company did not hold any structured notes and management does not believe that
their collateralized mortgage obligations have an interest, credit or other risk
greater than their other investments. Total deposits at March 31, 2004, amounted
to $1.774 billion as compared to $1.723 billion at March 31, 2003.
Nonperforming assets at March 31, 2004, totaled $2.5 million as compared to $3.2
million at December 31, 2003. The decrease resulted primarily from the
collection of certain loans previously included in nonperforming loans. At 0.26%
of loans plus foreclosed assets, management considers nonperforming assets to be
at a manageable level and is unaware of any material classified credit not
properly disclosed as nonperforming.
Acquisition Announcement
- ------------------------
On March 4, 2004, we entered into a stock purchase agreement with the principal
shareholders of Liberty National Bank, Granbury, Texas. Pursuant to the purchase
agreement and provided all of the shares of Liberty National Bank are tendered
for purchase by the Company, the Company will pay approximately $12.8 million
for all of the outstanding shares of Liberty National Bank. Acquisition of
Liberty National Bank by the Company is subject to the approval of the Board of
Governors of the Federal Reserve System and other federal and state regulatory
authorities, as well as, subject to satisfaction of the conditions contained in
the purchase agreement. If the transaction is approved by federal and state
regulatory authorities, it is anticipated that the acquisition of Liberty
National Bank by the Company will close in mid 2004. Conditioned upon completion
of the above described transactions, Liberty National Bank will become a direct
subsidiary of First Financial Bankshares of Delaware, Inc., our wholly owned
Delaware bank holding company.
Liberty National Bank is located in the City of Granbury, Hood County, Texas,
approximately 40 miles southwest of Fort Worth, Texas. Liberty National Bank was
chartered in 1997 and as of March 31, 2004, had assets totaling approximately
$60 million and shareholders' equity of $6.2 million.
13
Liquidity and Capital
- ---------------------
Liquidity is our ability to meet cash demands as they arise. Such needs can
develop from loan demand, deposit withdrawals or acquisition opportunities.
Potential obligations resulting from the issuance of standby letters of credit
and commitments to fund future borrowings to our loan customers are other
factors affecting our liquidity needs. Many of these obligations and commitments
are expected to expire without being drawn upon; therefore the total commitment
amounts do not necessarily represent future cash requirements affecting our
liquidity position. The potential need for liquidity arising from these types of
financial instruments is represented by the contractual notional amount of the
instrument. Asset liquidity is provided by cash and assets, which are readily
marketable or which will mature in the near future. Liquid assets include cash,
federal funds sold, and short-term investments in time deposits in banks.
Liquidity is also provided by access to funding sources, which includes core
depositors and correspondent banks that maintain accounts with and sell federal
funds to our subsidiary banks. Other sources of funds include our ability to
sell securities under agreement to repurchase, and an unfunded $20.0 million
line of credit established with a nonaffiliated bank which matures on June 30,
2004. We expect to renew this line of credit at maturity under similar terms for
another year.
Given the strong core deposit base and relatively low loan to deposit ratios
maintained at the subsidiary banks, management considers the current liquidity
position to be adequate to meet short- and long-term liquidity needs.
We plan to fund the acquisition of Liberty National Bank with internal cash
funds. In addition, we anticipate that any future additional acquisitions of
financial institutions and expansion of branch locations could place a demand on
our cash resources. Available cash at our parent company, available dividends
from subsidiary banks, utilization of available lines of credit, and future debt
or equity offerings are expected to be the source of funding for these potential
acquisitions or expansions.
The Company's consolidated statements of cash flows are presented on page 8 of
this report. Total equity capital amounted to $263.4 million at March 31, 2004,
which was up from $251.5 million at year-end 2003 and $240.2 million at March
31, 2003. The Company's risk-based capital and leverage ratios at March 31, 2004
were 19.31% and 10.79%, respectively. The first quarter 2004 cash dividend of
$0.31 per share totaled $4.8 million and represented 47.6% of first quarter
earnings.
Interest Rate Risk
- ------------------
Interest rate risk results when the maturity or repricing intervals of
interest-earning assets and interest bearing liabilities are different. The
Company's exposure to interest rate risk is managed primarily through the
Company's strategy of selecting the types and terms of interest-earning assets
and interest-bearing liabilities which generate favorable earnings, while
limiting the potential negative effects of changes in market interest rates. The
Company uses no off-balance-sheet financial instruments to manage interest rate
risk. The Company and each subsidiary bank have an asset/liability committee
which monitors interest rate risk and compliance with investment policies.
Interest-sensitivity gap and simulation analysis are among the ways that the
subsidiary banks track interest rate risk. As of March 31, 2004, management
estimates that, over the next twelve months, an upward shift of interest rates
by 150 basis points would result in an increase in projected net interest income
of 3.63% and a downward shift of interest rates by 100 basis points would result
in a reduction in projected net interest income of 7.06%. These are good faith
estimates and assume that the composition of our interest sensitive assets and
liabilities existing at March 31, 2004, will remain constant over the relevant
twelve month measurement period and that changes in market interest rates are
instantaneous and sustained across the yield curve regardless of duration of
pricing characteristics of specific assets or liabilities. Also, this analysis
does not contemplate any actions that we might undertake in response to changes
in market interest rates. In management's belief, these estimates are not
necessarily indicative of what actually could occur in the
14
event of immediate interest rate increases or decreases of this magnitude. As
interest-bearing assets and liabilities reprice at different time frames and
proportions to market interest rate movements, various assumptions must be made
based on historical relationships of these variables in reaching any conclusion.
Since these correlations are based on competitive and market conditions, our
future results could in management's belief, be different from the foregoing
estimates, and such results could be material.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Management considers interest rate risk to be a significant market risk for the
Company. See "Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations" for disclosure regarding this market risk.
Item 4. Controls and Procedures
As of March 31, 2004, we carried out an evaluation, under the supervision and
with the participation of our management, including our principal executive
officer and principal financial officer, of the effectiveness of the design and
operation of our disclosure controls and procedures pursuant to Securities
Exchange Act Rule 15d-15. Our management, including the principal executive
officer and principal financial officer, does not expect that our disclosure
controls and procedures will prevent all errors and all fraud.
A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the Company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the control. The design of any system of controls also is based in
part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions; over time, controls may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected. Our principal executive officer and principal financial officer
have concluded, based on our evaluation of our disclosure controls and
procedures, that our disclosure controls and procedures under Rule 13a-14 (c)
and Rule 15d - 14 (c) of the Securities Exchange Act of 1934 are effective.
Subsequent to our evaluation, there were no significant changes in internal
controls or other factors that could significantly affect these internal
controls.
15
PART II
OTHER INFORMATION
Item 4. Submission of Matter to a Vote of Security Holders
On April 27, 2004, the annual meeting of shareholders was held in Abilene,
Texas. The following directors were elected at this meeting and the respective
number of votes cast for and withheld:
Votes Votes
Director For Withheld
-------- --- --------
Joseph E. Canon 12,938,099 151,113
Mac A. Coalson 12,981,256 107,956
David Copeland 12,978,689 110,523
F. Scott Dueser 12,714,700 374,512
Derrell E. Johnson 12,982,107 107,105
Kade L. Matthews 12,982,147 107,065
Raymond A. McDaniel, Jr. 12,981,495 107,717
Bynum Miers 12,981,433 107,779
Kenneth T. Murphy 12,715,637 373,575
James M. Parker 12,715,537 373,675
Jack D. Ramsey, M.D. 12,982,047 107,165
Dian Graves Stai 12,981,527 107,685
F. L. Stephens 12,982,147 107,065
Johnny E. Trotter 12,978,427 110,785
There were no votes against, abstentions or broker non-votes.
In addition, the shareholders voted to ratify the selection of Ernst & Young LLP
to serve as the Company's independent public accountants for the year ending
December 31, 2004 by a vote of 13,018,069 for, 7,176 against and 63,967
abstained. Also, the shareholders approved an amendment to the Company's
articles of incorporation to increase the number of authorized shares of the
Company's stock to 40,000,000 by a vote of 12,560,044 for, 492,728 against and
36,440 abstained.
There were no other matters voted upon at the meeting.
16
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
3.1 Articles of Incorporation, and all amendments thereto, of the Registrant
(incorporated by reference from Exhibit 1 of the Registrant's Amendment No.
2 to Form 8-A filed on Form 8-A/A No. 2 on November 21, 1995).
3.2 Amended and Restated Bylaws, and all amendments thereto, of the Registrant
(incorporated by reference from Exhibit 2 of the Registrant's Amendment No.
1 to Form 8-A filed on Form 8-A/A No. 1 on January 7, 1994).
*3.3 Amendment to the Articles of Incorporation of the Registrant, dated April
27, 2004.
*3.4 Amendment to Amended and Restated Bylaws of the Registrant, dated April 27,
1994.
*3.5 Amendment to Amended and Restated Bylaws of the Registrant, dated October
23, 2001.
4.1 Specimen certificate of First Financial Common Stock (incorporated by
reference from Exhibit 3 of the Registrant's Amendment No. 1 to Form 8-A
filed on Form 8-A/A No. 1 on January 7, 1994).
10.1 Deferred Compensation Agreement, dated October 28, 1992, between the
Registrant and Kenneth T. Murphy (incorporated by reference from Exhibit
10.1 of the Registrant's Form 10-K Annual Report for the year ended
December 31, 2002).
10.2 Revised Deferred Compensation Agreement, dated December 28, 1995, between
the Registrant and Kenneth T. Murphy (incorporated by reference from
Exhibit 10.2 of the Registrant's Form 10-K Annual Report for the year ended
December 31, 2002).
10.3 Executive Recognition Plan (incorporated by reference from Exhibit 10.3 of
the Registrant's Form 10-K Annual Report for the year ended December 31,
2002).
10.4 Form of Executive Recognition Agreement (incorporated by reference from
Exhibit 10.4 of the Registrant's Form 10-K Annual Report for the year ended
December 31, 2002).
10.5 1992 Incentive Stock Option Plan (incorporated by reference from Exhibit
10.5 of the Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1998).
10.6 2002 Incentive Stock Option Plan (incorporated by reference from Appendix A
of the Registrant's Schedule 14a Definitive Proxy Statement for the 2002
Annual Meeting of Shareholders).
10.7 Revised Consulting Agreement dated January 1, 2004 between the Registrant
and Kenneth T. Murphy (incorporated by reference from Exhibit 10.7 of the
Registrant's Form 10-K Annual Report for the year ended December 31, 2003).
*31.1 Rule 13a-14(a)/15(d)-14(a) Certification of Chief Executive Officer of
First Financial Bankshares, Inc.
*31.2 Rule 13a-14(a)/15(d)-14(a) Certification of Chief Financial Officer of
First Financial Bankshares, Inc.
*32.1 Section 1350 Certification of Chief Executive Officer of First Financial
Bankshares, Inc.
*32.2 Section 1350 Certification of Chief Financial Officer of First Financial
Bankshares, Inc.
- ----------------
* Filed herewith
(b) On April 20, 2004, we furnished a report on Form 8-K relating to our
earnings release for the quarter ended March 31, 2004. On March 4, 2004, we
furnished a report on Form 8-K relating to our signing of a definitive
agreement to acquire 100% of outstanding shares of Liberty National Bank,
Granbury, Texas.
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST FINANCIAL BANKSHARES, INC.
Date: May 3, 2004 By:/S/ F. Scott Dueser
-------------------------------------
F. Scott Dueser
President and Chief Executive Officer
Date: May 3, 2004 By:/S/ J. Bruce Hildebrand
-------------------------------------
J. Bruce Hildebrand
Executive Vice President and
Chief Financial Officer
18
Exhibit 3.3
-----------
AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
FIRST FINANCIAL BANKSHARES, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned Corporation hereby adopts the following
Articles of Amendment to its Articles of Incorporation:
ARTICLE I
---------
The name of the Corporation is FIRST FINANCIAL BANKSHARES, INC.
ARTICLE II
----------
The following amendment to the Articles of Incorporation was adopted by the
Shareholders of the Corporation on the 27th of April, 2004:
Article Four of the Articles of Incorporation is hereby amended to read as
follows:
"The aggregate number of shares which the Corporation shall have
authority to issue is FORTY MILLION (40,000,000) of the par value of
TEN DOLLARS ($10.00) each."
ARTICLE III
-----------
The date of the adoption of the amendment by the shareholders of the
Corporation is April 27, 2004.
ARTICLE IV
----------
The amendment to the Articles of Incorporation has been approved in the
manner required by the Texas Business Corporation Act and by the constituent
documents of the Corporation.
DATED this 27th day of April, 2004.
FIRST FINANCIAL BANKSHARES, INC.
By: /s/ J. Bruce Hildebrand
---------------------------
J. Bruce Hildebrand
Executive Vice President
and Chief Financial Officer
Exhibit 3.4
-----------
AMENDMENT TO BYLAWS
-------------------
Upon motion being duly made, seconded and unanimously carried, the following
Amendment to the Amended and Restated Bylaws of First Financial Bankshares, Inc.
was approved and adopted at the regular meeting of the Board of Directors, at
which a quorum was present, held on April 26, 1994:
"Section A
----------
The name of this corporation shall be First Financial Bankshares, Inc."
SIGNED AND CERTIFIED this 27th day of April, 1994.
/s/ Curtis R. Harvey
----------------------------
CURTIS R. HARVEY
Executive Vice President and
Chief Financial Officer
ATTEST:
/s/ Sandy Lester
- ----------------
SANDY LESTER
Secretary
Exhibit 3.5
-----------
AMENDMENTS TO BY-LAWS
---------------------
Upon motion being duly made, seconded and unanimously carried, the
following Amendments to the Amended and Restated By-Laws of First Financial
Bankshares, Inc. were approved and adopted at the regular meeting of the Board
of Directors, at which a quorum was present, held on October 23, 2001:
Article II, Section B shall be amended to read as follows:
"Section B
----------
All certificates of stock shall be signed by the Chairman of the Board, the
President or the Executive Vice President/Chief Financial Officer, and the
Secretary, and shall be sealed with the corporate seal. A facsimile
signature may be used for either or both of such required signatures."
The following Section G shall be added to Article II:
"Section G
----------
A facsimile signature may be used by the corporation's duly appointed
Transfer Agent and Registrar in connection with the countersigning and
registering of certificates of stock representing the shares of the
corporation."
SIGNED AND CERTIFIED this 23rd day of October, 2001.
ATTEST:
/s/ Sandy Lester /s/ F. Scott Dueser
- ------------------------ ------------------------------
Sandy Lester, Secretary F. Scott Dueser, President and
Chief Executive Officer
Exhibit 31.1
------------
Certification of
Chief Executive Officer
of First Financial Bankshares, Inc.
I, F. Scott Dueser, President and Chief Executive Officer of First
Financial Bankshares, Inc., certify that:
1. I have reviewed this Form 10-Q of First Financial Bankshares, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15 (e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the
registrant and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b. [Intentionally omitted];
c. Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectives of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: May 3, 2004
By: /s/ F. SCOTT DUESER
-------------------------------------
F. Scott Dueser
President and Chief Executive Officer
Exhibit 31.2
------------
Certification of
Chief Financial Officer
of First Financial Bankshares, Inc.
I, J. Bruce Hildebrand, Executive Vice President and Chief Financial
Officer of First Financial Bankshares, Inc., certify that:
1. I have reviewed this Form 10-Q of First Financial Bankshares, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15 (e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the
registrant and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b. [Intentionally omitted];
c. Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectives of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: May 3, 2004 By: /s/ J. Bruce Hildebrand
----------------------------------
J. Bruce Hildebrand
Executive Vice President and Chief
Financial Officer
Exhibit 32.1
------------
Certification of
Chief Executive Officer
of First Financial Bankshares, Inc.
This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United
States code) and accompanies the quarterly report on Form 10-Q (the "Form 10-Q")
for the quarter ended March 31, 2004 of First Financial Bankshares, Inc.
I, F. Scott Dueser, the President and Chief Executive Officer of the Issuer
certify that:
1. the Form 10-Q fully complies with the requirements of section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or
78o(d)); and
2. the information contained in the Form 10-Q fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Dated: May 3, 2004
By: /s/ F. SCOTT DUESER
-----------------------
F. Scott Dueser
Chief Executive Officer
Subscribed and sworn to before me this 3rd of May 2004.
/s/ Gaila N. Kilpatrick
- -----------------------
Gaila N. Kilpatrick
Notary Public
My commission expires: April 15, 2005
Exhibit 32.2
------------
Certification of
Chief Financial Officer
of First Financial Bankshares, Inc.
This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United
States code) and accompanies the annual report on Form 10-Q (the "Form 10-Q")
for the quarter ended March 31, 2004 of First Financial Bankshares, Inc.
I, J. Bruce Hildebrand, the Executive Vice President and Chief Financial Officer
of the Issuer certify that:
1. the Form 10-Q fully complies with the requirements of section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or
78o(d)); and
2. the information contained in the Form 10-Q fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Dated: May 3, 2004
By: /s/ J. Bruce Hildebrand
-----------------------
J. Bruce Hildebrand
Chief Financial Officer
Subscribed and sworn to before me this 3rd of May, 2004.
/s/ Gaila N. Kilpatrick
- -----------------------
Gaila N. Kilpatrick
Notary Public
My commission expires: April 15, 2005