FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 2016, 2015 and 2014
(Dollars in thousands)
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|
|
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2016
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|
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2015
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|
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2014
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|
|
|
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CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
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Net earnings
|
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$
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104,774
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|
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$
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100,381
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|
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$
|
89,559
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Adjustments to reconcile net earnings to net cash provided by operating activities:
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|
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|
|
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Depreciation and amortization
|
|
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11,573
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|
|
|
11,145
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|
|
|
9,262
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Provision for loan losses
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|
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10,212
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|
|
|
9,685
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|
|
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4,465
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Securities premium amortization (discount accretion), net
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29,005
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|
|
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27,705
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|
|
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20,221
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Gain on sale of assets, net
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|
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(1,894
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)
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|
|
(150
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)
|
|
|
(910
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)
|
Deferred federal income tax expense (benefit)
|
|
|
673
|
|
|
|
320
|
|
|
|
(893
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)
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Change in loans held for sale
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|
|
6,645
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|
|
|
(24,739
|
)
|
|
|
(3,640
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)
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Change in other assets
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|
|
2,397
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|
|
|
(16,919
|
)
|
|
|
9,852
|
|
Change in other liabilities
|
|
|
(2,643
|
)
|
|
|
1,664
|
|
|
|
3,486
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Total adjustments
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|
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55,968
|
|
|
|
8,711
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|
|
|
41,843
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net cash provided by operating activities
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|
|
160,742
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|
|
|
109,092
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|
|
|
131,402
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|
|
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|
|
|
|
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CASH FLOWS FROM INVESTING ACTIVITIES:
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|
|
|
|
|
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|
|
|
|
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Cash paid for asset acquisition of 4Trust Mortgage, Inc., net
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|
|
|
|
|
|
(1,931
|
)
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|
|
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Cash received in acquisition of FBC Bancshares, Inc., net
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|
|
|
|
|
|
65,197
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|
|
|
|
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Net decrease in interest-bearing time deposits in banks
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|
|
1,788
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|
|
|
13,507
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|
|
|
14,915
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Activity in
available-for-sale
securities:
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Sales
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40,510
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|
|
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35,580
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|
|
|
1,619
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|
Maturities
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|
|
3,509,113
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|
|
|
2,717,724
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|
|
|
2,917,407
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Purchases
|
|
|
(3,737,865
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)
|
|
|
(3,055,117
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)
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|
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(3,248,804
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)
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Activity in
held-to-maturity
securities maturities
|
|
|
157
|
|
|
|
163
|
|
|
|
243
|
|
Net increase in loans
|
|
|
(48,836
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)
|
|
|
(144,320
|
)
|
|
|
(247,829
|
)
|
Purchases of bank premises and equipment and other assets
|
|
|
(20,399
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)
|
|
|
(17,433
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)
|
|
|
(17,412
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)
|
Proceeds from sale of bank premises and equipment and other assets
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|
|
3,572
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|
|
|
2,405
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|
|
|
4,656
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|
|
|
|
|
|
|
|
|
|
|
|
|
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Net cash used in investing activities
|
|
|
(251,960
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)
|
|
|
(384,225
|
)
|
|
|
(575,205
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)
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|
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|
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CASH FLOWS FROM FINANCING ACTIVITIES:
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|
|
|
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|
|
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Net increase (decrease) in noninterest-bearing deposits
|
|
|
(28,230
|
)
|
|
|
23,473
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|
|
|
208,146
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Net increase in interest-bearing deposits
|
|
|
316,600
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|
|
|
72,857
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|
|
|
407,035
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|
Net increase (decrease) in borrowings
|
|
|
(169,905
|
)
|
|
|
235,440
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|
|
|
(96,778
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)
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Common stock transactions:
|
|
|
|
|
|
|
|
|
|
|
|
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Proceeds from stock issuances
|
|
|
1,260
|
|
|
|
1,545
|
|
|
|
1,437
|
|
Dividends paid
|
|
|
(44,907
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)
|
|
|
(38,767
|
)
|
|
|
(34,578
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net cash provided by financing activities
|
|
|
74,818
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|
|
|
294,548
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|
|
|
485,262
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|
|
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|
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|
|
|
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(16,400
|
)
|
|
|
19,415
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|
|
|
41,459
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|
|
|
|
|
CASH AND CASH EQUIVALENTS, beginning of year
|
|
|
272,886
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|
|
|
253,471
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|
|
|
212,012
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|
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|
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|
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|
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CASH AND CASH EQUIVALENTS, end of year
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|
$
|
256,486
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|
|
$
|
272,886
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|
|
$
|
253,471
|
|
|
|
|
|
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The accompanying notes are an integral part of these consolidated financial statements.
F-6
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
1.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
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Nature of Operations
First Financial Bankshares, Inc. (a Texas corporation) (Bankshares, Company, we or us) is a financial holding
company which owns all of the capital stock of one bank with 69 locations located in Texas as of December 31, 2016. The subsidiary bank is First Financial Bank, National Association, Abilene. The banks primary source of revenue is
providing loans and banking services to consumers and commercial customers in the market area in which the subsidiary is located. In addition, the Company also owns First Financial Trust & Asset Management Company, National Association,
First Financial Insurance Agency, Inc., and First Technology Services, Inc.
A summary of significant accounting policies of Bankshares and its
subsidiaries applied in the preparation of the accompanying consolidated financial statements follows. The accounting principles followed by the Company and the methods of applying them are in conformity with both U.S. GAAP and prevailing practices
of the banking industry.
The Company evaluated subsequent events for potential recognition through the date the consolidated financial statements were
issued.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The
Companys significant estimates include its allowance for loan losses and its valuation of financial instruments.
Consolidation
The accompanying consolidated financial statements include the accounts of Bankshares and its subsidiaries, all of which are wholly-owned. All significant
intercompany accounts and transactions have been eliminated.
Stock Repurchase
On October 28, 2014, the Companys Board of Directors authorized the repurchase of up to 1,500,000 common shares through September 30, 2017. The
stock buyback plan authorizes management to repurchase the stock at such time as repurchases are considered beneficial to stockholders. Any repurchase of stock will be made through the open market, block trades or in privately negotiated
transactions in accordance with applicable laws and regulations. Under the repurchase plan, there is no minimum number of shares that the Company is required to repurchase. For the years ended December 31, 2016, 2015 and 2014, no shares were
repurchased under this or the prior authorization that expired September 30, 2014.
Stock Split
On April 22, 2014, the Companys Board of Directors declared a
two-for-one
stock split in the form of a 100% stock dividend effective for shareholders of record on May 15, 2014 that was distributed on June 2, 2014. All
share and per share amounts in this report have been restated to reflect this stock split. An amount equal to the par value of the additional common shares issued pursuant to the stock split was reflected as a transfer from retained earnings to
common stock on the consolidated financial statements as of and for the year ended December 31, 2014.
Acquisitions and Asset Purchase
On July 31, 2015, the Company acquired 100% of the outstanding capital stock of FBC Bancshares, Inc. through the merger of a wholly-owned subsidiary with
and into FBC Bancshares, Inc. Following such merger, FBC Bancshares, Inc. and its wholly-owned subsidiary, First Bank, N.A. were merged into the Company and First Financial Bank, National Association, respectively. The results of operations of FBC
Bancshares, Inc. subsequent to the acquisition date, are included in the consolidated earnings of the Company. See Note 18 for additional information.
F-7
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
On June 1, 2015, the Company completed the asset purchase of 4Trust Mortgage, Inc. The results of
operation of 4Trust Mortgage Inc. subsequent to the asset purchase date, are included in the consolidated earnings of the Company. See Note 18 for additional information.
Increase in Authorized Shares
On April 28, 2015,
the Companys shareholders approved an amendment to the Companys Amended and Restated Certificate of Formation to increase the number of authorized common shares to 120,000,000.
Investment Securities
Management classifies debt and
equity securities as
held-to-maturity,
available-for-sale,
or trading based on its
intent. Debt securities that management has the positive intent and ability to hold to maturity are classified as
held-to-maturity
and recorded at cost, adjusted for
amortization of premiums and accretion of discounts, which are recognized as adjustments to interest income using the interest method. Securities not classified as
held-to-maturity
or trading are classified as
available-for-sale
and recorded at fair
value, with all unrealized gains and unrealized losses judged to be temporary, net of deferred income taxes, excluded from earnings and reported in the consolidated statements of comprehensive earnings.
Available-for-sale
securities that have unrealized losses that are judged other-than-temporary are included in gain (loss) on sale of securities and a new cost basis is established. Securities classified as
trading are recorded at fair value with unrealized gains and losses included in earnings.
The Company records its
available-for-sale
and trading securities portfolio at fair value. Fair values of these securities are determined based on methodologies in accordance with current authoritative accounting guidance. Fair
values are volatile and may be influenced by a number of factors, including market interest rates, prepayment speeds, discount rates, credit ratings and yield curves. Fair values for investment securities are based on quoted market prices, where
available. If quoted market prices are not available, fair values are based on the quoted prices of similar instruments or an estimate of fair value by using a range of fair value estimates in the market place as a result of the illiquid market
specific to the type of security.
When the fair value of a security is below its amortized cost, and depending on the length of time the condition exists
and the extent the fair value is below amortized cost, additional analysis is performed to determine whether an other-than-temporary impairment condition exists.
Available-for-sale
and
held-to-maturity
securities are analyzed quarterly for possible
other-than-temporary impairment. The analysis considers (i) whether we have the intent to sell our securities prior to recovery and/or maturity, (ii) whether it is more likely than not that we will have to sell our securities prior to
recovery and/or maturity, (iii) the length of time and extent to which the fair value has been less than amortized cost, and (iv) the financial condition of the issuer. Often, the information available to conduct these assessments is
limited and rapidly changing, making estimates of fair value subject to judgment. If actual information or conditions are different than estimated, the extent of the impairment of the security may be different than previously estimated, which could
have a material effect on the Companys results of operations and financial condition.
F-8
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
The Companys investment portfolio consists of U.S. Treasury securities, obligations of U.S. government
sponsored enterprises and agencies, obligations of state and political subdivisions, mortgage pass-through securities, corporate bonds and general obligation or revenue based municipal bonds. Pricing for such securities is generally readily
available and transparent in the market. The Company utilizes independent third party pricing services to value its investment securities, which the Company reviews as well as the underlying pricing methodologies for reasonableness and to ensure
such prices are aligned with pricing matrices. The Company validates quarterly, on a sample basis, prices supplied by the independent pricing services by comparison to prices obtained from other third party sources.
Loans and Allowance for Loan Losses
Loans held for
investment are stated at the amount of unpaid principal, reduced by unearned income and an allowance for loan losses. Interest on loans is calculated by using the simple interest method on daily balances of the principal amounts outstanding. The
Company defers and amortizes net loan origination fees and costs as an adjustment to yield. The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged against the allowance for loan losses
when management believes the collectability of the principal is unlikely.
The allowance for loan losses is an amount which represents managements
best estimate of probable losses that are inherent in the Companys loan portfolio as of the balance sheet date. The allowance for loan losses is comprised of three elements: (i) specific reserves determined based on probable losses on
specific classified loans; (ii) a historical valuation reserve component that considers historical loss rates and estimated loss emergence periods; and (iii) qualitative reserves based upon general economic conditions and other qualitative
risk factors both internal and external to the Company. The allowance for loan losses is increased by charges to income and decreased by
charge-offs
(net of recoveries). Managements periodic evaluation
of the appropriateness of the allowance is based on general economic conditions, the financial condition of borrowers, the value and liquidity of collateral, delinquency, prior loan loss experience, and the results of periodic reviews of the
portfolio. For purposes of determining our historical valuation reserve, the loan portfolio, less cash secured loans, government guaranteed loans and classified loans, is multiplied by the Companys historical loss rate. Specific allocations
are increased or decreased in accordance with deterioration or improvement in credit quality and a corresponding increase or decrease in risk of loss on a particular loan. In addition, we adjust our allowance for qualitative factors such as current
local economic conditions and trends, including, without limitations, unemployment, oil and gas prices, drought conditions, changes in lending staff, policies and procedures, changes in credit concentrations, changes in the trends and severity of
problem loans and changes in trends in volume and terms of loans. This qualitative reserve serves to estimate for additional areas of losses inherent in our portfolio that are not reflected in our historic loss factors.
Although we believe 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 decline in the economy and employment could result in increased levels of
non-performing
assets and
charge-offs, increased loan provisions and reductions in income. Additionally, bank regulatory agencies periodically review our allowance for loan losses and methodology and could require, in accordance with U.S. GAAP, additional provisions to the
allowance for loan losses based on their judgment of information available to them at the time of their examination as well as changes to our methodology.
Accrual of interest is discontinued on a loan and payments are applied to principal when management believes, after considering economic and business
conditions and collection efforts, the borrowers financial condition is such that collection of interest is doubtful. Except consumer loans, generally all loans past due greater than 90 days, based on contractual terms, are placed on
non-accrual.
Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Consumer loans are generally
charged-off
when a loan becomes past due 90 days. For other loans in the portfolio, facts and circumstances are evaluated in making
charge-off
decisions.
Loans are considered impaired when, based on current information and events, management determines that it is probable we will be unable to collect all
amounts due in accordance with the loan agreement, including scheduled principal and interest payments. If a loan is impaired, a specific valuation allowance is allocated, if necessary.
F-9
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis.
Impaired loans, or portions thereof, are charged off when deemed uncollectable.
The Companys policy requires measurement of the allowance for an
impaired, collateral dependent loan based on the fair value of the collateral. Other loan impairments for
non-collateral
dependent loans are measured based on the present value of expected future cash flows or
the loans observable market price. At December 31, 2016 and 2015, all significant impaired loans have been determined to be collateral dependent and the allowance for loss has been measured utilizing the estimated fair value of the
collateral.
From time to time, the Company modifies its loan agreement with a borrower. A modified loan is considered a troubled debt restructuring when
two conditions are met: (i) the borrower is experiencing financial difficulty and (ii) concessions are made by the Company that would not otherwise be considered for a borrower with similar credit risk characteristics. Modifications to
loan terms may include a lower interest rate, a reduction of principal, or a longer term to maturity. For all impaired loans, including the Companys troubled debt restructurings, the Company performs a periodic, well-documented credit
evaluation of the borrowers financial condition and prospects for repayment to assess the likelihood that all principal and interest payments required under the terms of the agreement will be collected in full. When doubt exists about the
ultimate collectability of principal and interest, the troubled debt restructuring remains on
non-accrual
status and payments received are applied to reduce principal to the extent necessary to eliminate such
doubt. This determination of accrual status is judgmental and is based on facts and circumstances related to each troubled debt restructuring. Each of these loans is individually evaluated for impairment and a specific reserve is recorded based on
probable losses, taking into consideration the related collateral, modified loan terms and cash flow. As of December 31, 2016 and 2015, substantially all of the Companys troubled debt restructured loans are included in the
non-accrual
totals.
The Company originates certain mortgage loans for sale in the secondary market. Accordingly, these
loans are classified as
held-for-sale
and are carried at the lower of cost or fair value on an aggregate basis. The mortgage loan sales contracts contain indemnification
clauses should the loans default, generally in the first three to six months, or if documentation is determined not to be in compliance with regulations. The Companys historic losses as a result of these indemnities have been insignificant.
Loans acquired, including loans acquired in a business combination, are initially recorded at fair value with no valuation allowance. Acquired loans are
segregated between those considered to be credit impaired and those deemed performing. To make this determination, management considers such factors as past due status,
non-accrual
status and credit risk
ratings. The fair value of acquired performing loans is determined by discounting expected cash flows, both principal and interest, at prevailing market interest rates. The difference between the fair value and principal balances at acquisition
date, the fair value discount, is accreted into interest income over the estimated life of the acquired portfolio.
Purchased credit impaired loans are
those loans that showed evidence of deterioration of credit quality since origination and for which it is probable, at acquisition, that the Company will be unable to collect all amounts contractually owed. Their acquisition fair value, which
includes a credit component at the acquisition date, was based on the estimate of cash flows, both principal and interest, expected to be collected or estimated collateral values if cash flows are not estimable, discounted at prevailing market rates
of interest. The difference between the discounted cash flows expected at acquisition and the investment in the loan is recognized as interest income on a level-yield method over the life of the loan, unless management was unable to reasonably
forecast cash flows in which case the loans were placed on nonaccrual. Contractually required payments for interest and principal that exceed the cash flows expected at acquisition are not recognized as a yield adjustment. Increases in expected cash
flows subsequent to the initial investment are recognized prospectively through adjustment of the yield on the loan over its remaining life. Decreases in expected cash flows subsequent to acquisition are recognized as impairment. Valuation
allowances on these impaired loans reflect only losses incurred after the acquisition. The carrying amount of purchased credit impaired loans at December 31, 2016 and 2015 were $1,256,000 and $2,178,000, respectively, compared to a contractual
balance of $1,865,000 and $2,936,000, respectively. Other purchased credit impaired loan disclosures were omitted due to immateriality.
F-10
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Other Real Estate
Other real estate owned is foreclosed property held pending disposition and is initially recorded at fair value, less estimated costs to sell. At foreclosure,
if the fair value of the real estate, less estimated costs to sell, is less than the Companys recorded investment in the related loan, a write-down is recognized through a charge to the allowance for loan losses. Any subsequent reduction in
value is recognized by a charge to income. Operating and holding expenses of such properties, net of related income, and gains and losses on their disposition are included in net gain (loss) on sale of foreclosed assets as incurred.
Bank Premises and Equipment
Bank premises and equipment
are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed principally on a straight-line basis over the estimated useful lives of the related assets. Leasehold improvements are amortized over the
life of the respective lease or the estimated useful lives of the improvements, whichever is shorter.
Business Combinations, Goodwill and Other
Intangible Assets
The Company accounts for all business combinations under the purchase method of accounting. Tangible and intangible assets and
liabilities of the acquired entity are recorded at fair value. Intangible assets with finite useful lives represent the future benefit associated with the acquisition of the core deposits and are amortized over seven years, utilizing a method that
approximates the expected attrition of the deposits. Goodwill with an indefinite life is not amortized, but rather tested annually for impairment as of June 30 each year and totaled $139,971,000 at both December 31, 2016 and 2015. There
was no impairment recorded for the years ended December 31, 2016, 2015 and 2014.
The carrying amount of goodwill arising from acquisitions that
qualify as an asset purchase for federal income tax purposes was $74,376,000 both at December 31, 2016 and 2015, and is deductible for federal income tax purposes.
Also included in other intangible assets are mortgage servicing rights totaling $1,795,000 and $1,902,000 at December 31, 2016 and 2015, respectively.
Securities Sold Under Agreements To Repurchase
Securities sold under agreements to repurchase, which are classified as borrowings, generally mature within one to four days from the transaction date.
Securities sold under agreements to repurchase are reflected at the amount of the cash received in connection with the transaction. The Company may be required to provide additional collateral based on the estimated fair value of the underlying
securities.
Segment Reporting
The Company has
determined that its banking regions meet the aggregation criteria of the current authoritative accounting guidance since each of its banking regions offer similar products and services, operate in a similar manner, have similar customers and report
to the same regulatory authority, and therefore operate one line of business (community banking) located in a single geographic area (Texas).
Statements of Cash Flows
For purposes of reporting cash
flows, cash and cash equivalents includes cash on hand, amounts due from banks, including interest-bearing deposits in banks with original maturity of 90 days or less, and federal funds sold.
Accumulated Other Comprehensive Income (Loss)
Unrealized
net gains on the Companys
available-for-sale
securities (after applicable income tax expense) totaling $21,492,000 and $51,359,000 at December 31, 2016 and
2015, respectively, and the minimum pension liability (after applicable income tax benefit) totaling $3,047,000 and $3,964,000 at December 31, 2016 and 2015, respectively, are included in accumulated other comprehensive income.
F-11
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Income Taxes
The Companys provision for income taxes is based on income before income taxes adjusted for permanent differences between financial reporting and taxable
income. Deferred tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book
and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.
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 grant date. The Company recorded stock option expense totaling $882,000, $644,000 and $709,000 for the years ended December 31, 2016, 2015 and 2014, respectively.
The Company also grants restricted stock for a fixed number of shares. The Company recorded expenses associated with its director and officer restricted stock
grants totaling $278,000 and $381,000, respectively, for the year ended December 31, 2016 and $139,000 and $62,000, respectively, for the year ended December 31, 2015. As the restricted stock plan was approved by shareholders in April
2015, there were no such expenses in 2014.
See Note 15 for further information.
Advertising Costs
Advertising costs are expensed as
incurred.
Per Share Data
Net earnings per share
(EPS) are computed by dividing net earnings by the weighted average number of common stock shares outstanding during the period. The Company calculates dilutive EPS assuming all outstanding stock 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 and restricted stock is reflected by application of the treasury stock method, whereby the proceeds from the exercised
options and restricted stock are assumed to be used to purchase common stock at the average market price during the respective year. The following table reconciles the computation of basic EPS to dilutive EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Earnings
(in thousands)
|
|
|
Weighted
Average
Shares
|
|
|
Per Share
Amount
|
|
For the year ended December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share, basic
|
|
$
|
104,774
|
|
|
|
66,013,004
|
|
|
$
|
1.59
|
|
Effect of stock options and stock grants
|
|
|
|
|
|
|
89,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share, assuming dilution
|
|
$
|
104,774
|
|
|
|
66,102,886
|
|
|
$
|
1.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share, basic
|
|
$
|
100,381
|
|
|
|
64,892,934
|
|
|
$
|
1.55
|
|
Effect of stock options and stock grants
|
|
|
|
|
|
|
175,096
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share, assuming dilution
|
|
$
|
100,381
|
|
|
|
65,068,030
|
|
|
$
|
1.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share, basic
|
|
$
|
89,559
|
|
|
|
64,047,803
|
|
|
$
|
1.40
|
|
Effect of stock options
|
|
|
|
|
|
|
260,732
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share, assuming dilution
|
|
$
|
89,559
|
|
|
|
64,308,535
|
|
|
$
|
1.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-12
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Recently Issued Authoritative Accounting Guidance
Accounting
Standards
Update
(
ASU
)
2014-09,
Revenue
from
Contracts
with
Customers.
ASU
2014-09
implements a comprehensive new revenue recognition standard that will supersede substantially all
existing revenue recognition guidance. The new standards core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company
expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the
contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. ASU
2015-4
Revenue from Contracts with Customers Deferral of the Effective Date deferred the effective date of ASU
2014-09
by one year and as a result, the new
standard will be effective the first quarter of 2018. The Companys revenue is comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU
2014-09,
and
non-interest
income. The Company expects that ASU
2014-09
will require a change in how the Company recognizes
certain recurring revenue streams within trust management fees; however, these changes are not expected to have a significant impact on the Companys financial statements. The Company continues to evaluate the impact of ASU
2014-09
on other components of
non-interest
income and expects to adopt the standard in the first quarter of 2018 with a cumulative effective adjustment to opening retained
earnings, if such adjustment is deemed to be significant.
ASU
2014-11,
Transfers
and
Servicing.
ASU
2014-11
amended guidance related to
repurchase-to-maturity
transactions to require that
repurchase-to-maturity
transactions be accounted for as secured borrowings consistent with the accounting for other repurchase agreements. In addition, the amendment requires
separate accounting for repurchase financings, which entails the transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty. The amendment requires entities to disclose certain information about
transfers accounted for as sales in transactions that are economically similar to repurchase agreements. In addition, the amendment requires disclosures related to collateral, remaining contractual term and of the potential risks associated with
repurchase agreements, securities lending transactions and
repurchase-to-maturity
transactions. The amendment was effective for the Company on January 1, 2015 and
did not have a significant impact on the Companys financial statements.
ASU
2014-14,
Receivables
Troubled
Debt
Restructuring
by
Creditors.
ASU
2014-14
clarified that an in substance repossession or foreclosure occurs, and a
creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion
of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the
amendment requires interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real
estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The new guidance was effective for the Company on January 1, 2015 and did not have a significant impact to the Companys
financial statements.
ASU
2014-15,
Presentation
of
Financial
Statements
Going
Concern.
ASU
2014-15
requires management to evaluate an entitys ability to continue as a going concern within one year after the date that the
financial statements are issued. Management must evaluate whether conditions and events raise substantial doubt about an entitys ability to continue as a going concern and then whether its plans alleviate that doubt. ASU
2014-15
was effective in 2016 and management performed such required evaluation and concluded there were no such conditions or events that raised substantial doubt about the Companys ability to continue as a
going concern.
ASU
2015-01,
Income
Statement
Extraordinary
and
Unusual
Items.
ASU
2015-01
eliminated from U.S. GAAP the concept of extraordinary items, which, among other things, required an entity to show the item separately in the income
statement, net of tax, after income from continuing operations. The new guidance became effective for the Company beginning January 1, 2016, and did not have a significant impact on the Companys financial statements.
F-13
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
ASU
2015-05,
Intangibles
Goodwill
and
Other
Internal-Use
Software
Customer
s
Accounting
for
Fees
Paid
in
a
Cloud
Computing
Arrangement.
ASU
2015-05
addresses accounting for fees paid by a customer in cloud computing arrangements such as (i) software as a
service, (ii) platform as a service, (iii) infrastructure as a service and (iv) other similar hosting arrangements. ASU
2015-05
provides guidance to customers about whether a cloud computing
arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses.
If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU
2015-05
became effective on January 1, 2016 and did not
have a significant impact on the Companys financial statements.
ASU
2015-16,
Business
Combinations
Simplifying
the
Accounting
Measurement
Period
Adjustments.
ASU
2015-16
amended business combination
guidance to require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The acquirer must record, in the same
periods financial statements, the effect of earnings on changes in depreciation, amortization, or other income effects, if any, as a result of the changes to the provisional amounts, calculated as if the accounting had been completed at the
acquisition date. Additionally, the entity is required to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in
previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The amended guidance became effective for the Company on January 1, 2016, and did not have a significant impact on the
Companys financial statements.
ASU
2016-1,
Financial
Instruments
Overall:
Recognition
and
Measurement
of
Financial
Assets
and
Financial
Liabilities.
ASU
2016-1,
among other things,
(i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair
values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be
disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes,
(v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure
the liability at fair value in accordance with the fair value option for financial instruments, (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance
sheet or the accompanying notes to the financial statements and (vii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to
available-for-sale
securities. ASU
2016-1
will be effective for us on January 1, 2018 and is not expected to have a
significant impact on the Companys financial statements.
ASU
2016-02,
Leases.
ASU
2016-02
will amend current lease accounting to require lessees to recognize (i) a lease liability, which is a lessees obligation to make lease payments arising from a lease, measured on a discounted
basis, and (ii) a
right-of-use
asset, which is an asset that represents the lessees right to use, or control the use of, a specified asset for the lease term.
ASU
2016-02
does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model.
The amended guidance will be effective in the first quarter of 2019 and will require transition using a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the
financial statements. The Company continues to evaluate the provision of the new lease standard but, due to the small number of lease agreements presently in effect for the Company, has concluded the new guidance will not have a significant impact
on the Companys financial statements.
ASU
2016-09,
Compensation
Stock
Compensation:
Improvements
to
Employee
Share-Based
Payment
Accounting.
ASU
2016-09
will amend current guidance such that all excess tax
benefits and tax deficiencies related to share-based payment awards will be recognized as income tax expense or benefit in the income statement during the period in which they occur. Additionally, excess tax benefits will be classified along with
other income tax cash flows as an operating activity rather than a financing activity. ASU
2016-09
also provides that any entity can make an entity-wide accounting policy election to either estimate the number
of awards that are expected to vest, which is the current requirement, or account for forfeitures when they occur. ASU
2016-09
will be effective January 1, 2017 and is not expected to have a significant
impact on the Companys financial statements.
F-14
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
ASU
2016-13,
Financial
Instruments
Credit
Losses.
ASU
2016-13
implements a comprehensive change in estimating the allowances for loan losses from the current model of losses inherent
in the loan portfolio to a current expected credit loss model that generally is expected to result in earlier recognition of allowances for losses. Additionally, purchase accounting rules have been modified as well as credit losses on
held-to-maturity
debt securities. ASU
2016-13
will be effective in the first quarter of 2020. While the Company generally expects that
the implementation of ASU
2016-13
will increase their allowance for loan losses balance, the Company is continuing to evaluate the potential impact on the Companys financial statements.
ASU
2017-04,
Intangibles
Goodwill
and
Other.
ASU
2017-04
will amend and simplify current goodwill impairment testing to eliminate Step 2 from the current provisions. Under the new guidance, an entity should perform the goodwill impairment test by comparing the
fair value of a reporting unit with its carrying value and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting units fair value. An entity still has the option to perform the quantitative assessment
for a reporting unit to determine if a quantitative impairment test is necessary. ASU
2017-04
will be effective for the Company on January 1, 2020 and is not expected to have a significant impact on the
Companys financial statements.
F-15
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
2.
|
INTEREST-BEARING TIME DEPOSITS IN BANKS AND SECURITIES:
|
Interest-bearing time deposits in banks totaled
$1,707,000 and $3,495,000 at December 31, 2016 and 2015, respectively, and have original maturities generally ranging from one to three years.
A
summary of the Companys
available-for-sale
securities as of December 31, 2016 and 2015 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Amortized
Cost Basis
|
|
|
Gross
Unrealized
Holding Gains
|
|
|
Gross
Unrealized
Holding Losses
|
|
|
Estimated
Fair Value
|
|
Securities
available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
10,649
|
|
|
$
|
19
|
|
|
$
|
|
|
|
$
|
10,668
|
|
Obligations of U.S. government sponsored enterprises and agencies
|
|
|
113,450
|
|
|
|
253
|
|
|
|
|
|
|
|
113,703
|
|
Obligations of state and political subdivisions
|
|
|
1,534,095
|
|
|
|
40,194
|
|
|
|
(10,013
|
)
|
|
|
1,564,276
|
|
Corporate bonds and other
|
|
|
51,920
|
|
|
|
476
|
|
|
|
(3
|
)
|
|
|
52,393
|
|
Residential mortgage-backed securities
|
|
|
848,614
|
|
|
|
8,260
|
|
|
|
(5,513
|
)
|
|
|
851,361
|
|
Commercial mortgage-backed securities
|
|
|
269,044
|
|
|
|
622
|
|
|
|
(1,230
|
)
|
|
|
268,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
available-for-sale
|
|
$
|
2,827,772
|
|
|
$
|
49,824
|
|
|
$
|
(16,759
|
)
|
|
$
|
2,860,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
Amortized
Cost Basis
|
|
|
Gross
Unrealized
Holding Gains
|
|
|
Gross
Unrealized
Holding Losses
|
|
|
Estimated
Fair Value
|
|
Securities
available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
10,792
|
|
|
$
|
5
|
|
|
$
|
(2
|
)
|
|
$
|
10,795
|
|
Obligations of U.S. government sponsored enterprises and agencies
|
|
|
148,393
|
|
|
|
268
|
|
|
|
(107
|
)
|
|
|
148,554
|
|
Obligations of state and political subdivisions
|
|
|
1,379,879
|
|
|
|
71,382
|
|
|
|
(134
|
)
|
|
|
1,451,127
|
|
Corporate bonds and other
|
|
|
86,182
|
|
|
|
1,778
|
|
|
|
(5
|
)
|
|
|
87,955
|
|
Residential mortgage-backed securities
|
|
|
781,648
|
|
|
|
10,993
|
|
|
|
(3,759
|
)
|
|
|
788,882
|
|
Commercial mortgage-backed securities
|
|
|
247,991
|
|
|
|
429
|
|
|
|
(1,834
|
)
|
|
|
246,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
available-for-sale
|
|
$
|
2,654,885
|
|
|
$
|
84,855
|
|
|
$
|
(5,841
|
)
|
|
$
|
2,733,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-16
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Disclosures related to the Companys
held-to-maturity
securities, which totaled $121,000 and $278,000 at December 31, 2016 and 2015, respectively, have not been presented due to insignificance.
The Company invests in mortgage-backed securities that have expected maturities that differ from their contractual maturities. These differences arise because
borrowers may have the right to call or prepay obligations with or without a prepayment penalty. These securities include collateralized mortgage obligations (CMOs) and other asset backed securities. The expected maturities of these securities at
December 31, 2016, were computed by using scheduled amortization of balances and historical prepayment rates. At December 31, 2016 and 2015, the Company did not hold any CMOs that entail higher risks than standard mortgage-backed
securities.
The amortized cost and estimated fair value of
available-for-sale
securities at December 31, 2016, by contractual and expected maturity, are shown below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost Basis
|
|
|
Estimated
Fair Value
|
|
|
|
|
Due within one year
|
|
$
|
206,182
|
|
|
$
|
207,276
|
|
Due after one year through five years
|
|
|
664,151
|
|
|
|
684,849
|
|
Due after five years through ten years
|
|
|
836,421
|
|
|
|
845,257
|
|
Due after ten years
|
|
|
3,360
|
|
|
|
3,658
|
|
Mortgage-backed securities
|
|
|
1,117,658
|
|
|
|
1,119,797
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,827,772
|
|
|
$
|
2,860,837
|
|
|
|
|
|
|
|
|
|
|
The following tables disclose, as of December 31, 2016 and 2015, the Companys investment securities that have been
in a continuous
unrealized-loss
position for less than 12 months and for 12 or more months (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months
|
|
|
12 Months or Longer
|
|
|
Total
|
|
December 31, 2016
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
|
|
|
|
|
|
Obligations of state and political subdivisions
|
|
$
|
446,052
|
|
|
$
|
9,997
|
|
|
$
|
1,209
|
|
|
$
|
16
|
|
|
$
|
447,261
|
|
|
$
|
10,013
|
|
Corporate bonds and other
|
|
|
244
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
244
|
|
|
|
3
|
|
Residential mortgage-backed securities
|
|
|
372,331
|
|
|
|
4,532
|
|
|
|
33,227
|
|
|
|
981
|
|
|
|
405,558
|
|
|
|
5,513
|
|
Commercial mortgage-backed securities
|
|
|
193,495
|
|
|
|
1,180
|
|
|
|
13,263
|
|
|
|
50
|
|
|
|
206,758
|
|
|
|
1,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,012,122
|
|
|
$
|
15,712
|
|
|
$
|
47,699
|
|
|
$
|
1,047
|
|
|
$
|
1,059,821
|
|
|
$
|
16,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months
|
|
|
12 Months or Longer
|
|
|
Total
|
|
December 31, 2015
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
5,110
|
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
5,110
|
|
|
$
|
2
|
|
Obligations of U.S. government sponsored enterprises and agencies
|
|
|
50,388
|
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
50,388
|
|
|
|
107
|
|
Obligations of state and political subdivisions
|
|
|
32,929
|
|
|
|
127
|
|
|
|
1,513
|
|
|
|
7
|
|
|
|
34,442
|
|
|
|
134
|
|
Corporate bonds and other
|
|
|
7,004
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
7,004
|
|
|
|
5
|
|
Residential mortgage-backed securities
|
|
|
231,481
|
|
|
|
1,765
|
|
|
|
63,919
|
|
|
|
1,994
|
|
|
|
295,400
|
|
|
|
3,759
|
|
Commercial mortgage-backed securities
|
|
|
196,163
|
|
|
|
1,752
|
|
|
|
9,345
|
|
|
|
82
|
|
|
|
205,508
|
|
|
|
1,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
523,075
|
|
|
$
|
3,758
|
|
|
$
|
74,777
|
|
|
$
|
2,083
|
|
|
$
|
597,852
|
|
|
$
|
5,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-17
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
The number of investments in an unrealized loss position totaled 466 at December 31, 2016. We do not
believe these unrealized losses are other-than-temporary as (i) we do not have the intent to sell our securities prior to recovery and/or maturity and, (ii) it is more likely than not that we will not have to sell our
securities prior to recovery and/or maturity. In making this determination, we also consider the length of time and extent to which fair value has been less than cost and the financial condition of the issuer. The unrealized losses noted are
interest rate related due to the level of interest rates at December 31, 2016 compared to the time of purchase. We have reviewed the ratings of the issuers and have not identified any issues related to the ultimate repayment of principal as a
result of credit concerns on these securities. Our mortgage related securities are backed by GNMA, FNMA and FHLMC or are collateralized by securities backed by these agencies. At December 31, 2016, 82.13% of our
available-for-sale
securities that are obligations of states and political subdivisions were issued within the State of Texas, of which 33.91% are guaranteed by the
Texas Permanent School Fund.
Securities, carried at approximately $1,940,460,000 and $1,759,570,000 at December 31, 2016 and 2015, respectively,
were pledged as collateral for public or trust fund deposits, repurchase agreements and for other purposes required or permitted by law.
During 2016,
2015, and 2014, sales of investment securities that were classified as
available-for-sale
totaled $40,510,000, $35,580,000 and $1,619,000. Gross realized gains from
2016, 2015, and 2014, securities sales were $1,579,000, $443,000 and $2,000, respectively. Gross realized losses from 2016, 2015 and 2014 securities sales were $309,000, $11,000 and $6,000, respectively. The specific identification method was used
to determine cost in order to compute the realized gains and losses.
3.
|
LOANS AND ALLOWANCE FOR LOAN LOSSES:
|
Loans
held-for-investment
by class of financing receivables are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
Commercial
|
|
$
|
674,410
|
|
|
$
|
696,163
|
|
|
|
|
Agricultural
|
|
|
84,021
|
|
|
|
102,351
|
|
|
|
|
Real estate
|
|
|
2,189,844
|
|
|
|
2,136,233
|
|
|
|
|
Consumer
|
|
|
409,032
|
|
|
|
382,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
held-for-investment
|
|
$
|
3,357,307
|
|
|
$
|
3,317,050
|
|
|
|
|
|
|
|
|
|
|
Loans
held-for-sale
totaled $26,898,000 and
$33,543,000 at December 31, 2016 and 2015, respectively, which are valued using the lower of cost or fair value.
The Companys
non-accrual
loans, loan still accruing and past due 90 days or more and restructured loans are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
Non-accrual
loans*
|
|
$
|
27,371
|
|
|
$
|
28,601
|
|
Loans still accruing and past due 90 days or more
|
|
|
284
|
|
|
|
341
|
|
Troubled debt restructured loans**
|
|
|
701
|
|
|
|
199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
28,356
|
|
|
$
|
29,141
|
|
|
|
|
|
|
|
|
|
|
F-18
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
*
|
Includes $1,256,000 and $2,178,000, respectively, of purchased credit impaired loans as of December 31, 2016 and 2015.
|
**
|
Our troubled debt restructured loans of $6,863,000 and $6,113,000, whose interest collection, after considering economic and business conditions and collection efforts, is doubtful are included in
non-accrual
loans as of December 31, 2016 and 2015, respectively.
|
The Companys recorded
investment in impaired loans and the related valuation allowance are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Recorded
Investment
|
|
|
Valuation
Allowance
|
|
|
Recorded
Investment
|
|
|
Valuation
Allowance
|
|
|
|
|
|
$
|
27,371
|
|
|
$
|
5,012
|
|
|
$
|
28,601
|
|
|
$
|
5,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company had $29,000,000 and $29,768,000 in
non-accrual,
past due 90 days or more
and still accruing, restructured loans and foreclosed assets at December 31, 2016 and 2015, respectively.
Non-accrual
loans totaled $27,371,000 and $28,601,000 at December 31, 2016 and 2015,
respectively, and consisted of the following amounts by type (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
Commercial
|
|
$
|
7,284
|
|
|
$
|
8,761
|
|
Agricultural
|
|
|
99
|
|
|
|
97
|
|
Real Estate
|
|
|
18,754
|
|
|
|
18,766
|
|
Consumer
|
|
|
1,234
|
|
|
|
977
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
27,371
|
|
|
$
|
28,601
|
|
|
|
|
|
|
|
|
|
|
No significant additional funds are committed to be advanced in connection with impaired loans as of December 31, 2016.
F-19
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
The Companys impaired loans and related allowance as of December 31, 2016 and 2015 are summarized
in the following tables by class of financing receivables (in thousands). No interest income was recognized on impaired loans subsequent to their classification as impaired.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Unpaid
Contractual
Principal
Balance
|
|
|
Recorded
Investment
With No
Allowance*
|
|
|
Recorded
Investment
With
Allowance
|
|
|
Total
Recorded
Investment
|
|
|
Related
Allowance
|
|
|
12 Month
Average
Recorded
Investment
|
|
Commercial
|
|
$
|
13,389
|
|
|
$
|
1,148
|
|
|
$
|
6,136
|
|
|
$
|
7,284
|
|
|
$
|
2,128
|
|
|
$
|
4,921
|
|
Agricultural
|
|
|
103
|
|
|
|
|
|
|
|
99
|
|
|
|
99
|
|
|
|
25
|
|
|
|
50
|
|
Real Estate
|
|
|
23,466
|
|
|
|
6,229
|
|
|
|
12,525
|
|
|
|
18,754
|
|
|
|
2,428
|
|
|
|
16,170
|
|
Consumer
|
|
|
1,421
|
|
|
|
280
|
|
|
|
954
|
|
|
|
1,234
|
|
|
|
431
|
|
|
|
914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
38,379
|
|
|
$
|
7,657
|
|
|
$
|
19,714
|
|
|
$
|
27,371
|
|
|
$
|
5,012
|
|
|
$
|
22,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Includes $1,256,000 of purchased credit impaired loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Unpaid
Contractual
Principal
Balance
|
|
|
Recorded
Investment
With No
Allowance*
|
|
|
Recorded
Investment
With
Allowance
|
|
|
Total
Recorded
Investment
|
|
|
Related
Allowance
|
|
|
12 Month
Average
Recorded
Investment
|
|
Commercial
|
|
$
|
10,056
|
|
|
$
|
608
|
|
|
$
|
8,153
|
|
|
$
|
8,761
|
|
|
$
|
2,030
|
|
|
$
|
5,812
|
|
Agricultural
|
|
|
97
|
|
|
|
|
|
|
|
97
|
|
|
|
97
|
|
|
|
70
|
|
|
|
48
|
|
Real Estate
|
|
|
23,710
|
|
|
|
5,314
|
|
|
|
13,452
|
|
|
|
18,766
|
|
|
|
2,827
|
|
|
|
15,211
|
|
Consumer
|
|
|
1,167
|
|
|
|
624
|
|
|
|
353
|
|
|
|
977
|
|
|
|
144
|
|
|
|
664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
35,030
|
|
|
$
|
6,546
|
|
|
$
|
22,055
|
|
|
$
|
28,601
|
|
|
$
|
5,071
|
|
|
$
|
21,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Includes $2,178,000 of purchased credit impaired loans.
|
The Company recognized interest income on impaired
loans prior to being recognized as impaired of approximately $829,000, $922,000 and $162,000 during the years ended December 31, 2016, 2015, and 2014, respectively.
From a credit risk standpoint, the Company rates its loans in one of four categories: (i) pass, (ii) special mention, (iii) substandard or
(iv) doubtful. Loans rated as loss are
charged-off.
The ratings of loans reflect a judgment about the risks
of default and loss associated with the loan. The Company reviews the ratings on our credits as part of our
on-going
monitoring of the credit quality of our loan portfolio. Ratings are adjusted to reflect the
degree of risk and loss that are felt to be inherent in each credit as of each reporting period. Our methodology is structured so that specific allocations are increased in accordance with deterioration in credit quality (and a corresponding
increase in risk and loss) or decreased in accordance with improvement in credit quality (and a corresponding decrease in risk and loss).
Credits rated
special mention show clear signs of financial weaknesses or deterioration in credit worthiness, however, such concerns are not so pronounced that the Company generally expects to experience significant loss within the short-term. Such credits
typically maintain the ability to perform within standard credit terms and credit exposure is not as prominent as credits rated more harshly.
Credits
rated substandard are those in which the normal repayment of principal and interest may be, or has been, jeopardized by reason of adverse trends or developments of a financial, managerial, economic or political nature, or important weaknesses exist
in collateral. A protracted workout on these credits is a distinct possibility. Prompt corrective action is therefore required to strengthen the Companys position, and/or to reduce exposure and to assure that adequate remedial measures are
taken by the borrower. Credit exposure becomes more likely in such credits and a serious evaluation of the secondary support to the credit is performed.
Credits rated doubtful are those in which full collection of principal appears highly questionable, and which some degree of loss is anticipated, even though
the ultimate amount of loss may not yet be certain and/or other factors exist which could affect collection of debt. Based upon available information, positive action by the Company is required to avert or minimize loss. Credits rated doubtful are
generally also placed on
non-accrual.
F-20
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
The following summarizes the Companys internal ratings of its loans
held-for-investment
by class of financing receivables and portfolio segments, which classes are the same, at December 31, 2016 and 2015 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
629,756
|
|
|
$
|
5,769
|
|
|
$
|
38,885
|
|
|
$
|
|
|
|
$
|
674,410
|
|
Agricultural
|
|
|
81,620
|
|
|
|
715
|
|
|
|
1,686
|
|
|
|
|
|
|
|
84,021
|
|
Real Estate
|
|
|
2,111,947
|
|
|
|
18,091
|
|
|
|
59,806
|
|
|
|
|
|
|
|
2,189,844
|
|
Consumer
|
|
|
406,182
|
|
|
|
212
|
|
|
|
2,638
|
|
|
|
|
|
|
|
409,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,229,505
|
|
|
$
|
24,787
|
|
|
$
|
103,015
|
|
|
$
|
|
|
|
$
|
3,357,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
633,083
|
|
|
$
|
9,762
|
|
|
$
|
53,318
|
|
|
$
|
|
|
|
$
|
696,163
|
|
Agricultural
|
|
|
99,862
|
|
|
|
1,398
|
|
|
|
1,091
|
|
|
|
|
|
|
|
102,351
|
|
Real Estate
|
|
|
2,054,738
|
|
|
|
29,000
|
|
|
|
52,458
|
|
|
|
37
|
|
|
|
2,136,233
|
|
Consumer
|
|
|
379,941
|
|
|
|
416
|
|
|
|
1,946
|
|
|
|
|
|
|
|
382,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,167,624
|
|
|
$
|
40,576
|
|
|
$
|
108,813
|
|
|
$
|
37
|
|
|
$
|
3,317,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016 and 2015, the Companys past due loans are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
15-59
Days
Past
Due*
|
|
|
60-89
Days
Past
Due
|
|
|
Greater
Than
90
Days
|
|
|
Total
Past
Due
|
|
|
Total
Current
|
|
|
Total
Loans
|
|
|
Total 90
Days Past
Due Still
Accruing
|
|
Commercial
|
|
$
|
3,908
|
|
|
$
|
1,122
|
|
|
$
|
2,220
|
|
|
$
|
7,250
|
|
|
$
|
667,160
|
|
|
$
|
674,410
|
|
|
$
|
10
|
|
Agricultural
|
|
|
185
|
|
|
|
|
|
|
|
|
|
|
|
185
|
|
|
|
83,836
|
|
|
|
84,021
|
|
|
|
|
|
Real Estate
|
|
|
13,172
|
|
|
|
1,301
|
|
|
|
5,268
|
|
|
|
19,741
|
|
|
|
2,170,103
|
|
|
|
2,189,844
|
|
|
|
272
|
|
Consumer
|
|
|
1,845
|
|
|
|
368
|
|
|
|
122
|
|
|
|
2,335
|
|
|
|
406,697
|
|
|
|
409,032
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,110
|
|
|
$
|
2,791
|
|
|
$
|
7,610
|
|
|
$
|
29,511
|
|
|
$
|
3,327,796
|
|
|
$
|
3,357,307
|
|
|
$
|
284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
15-59
Days
Past
Due*
|
|
|
60-89
Days
Past
Due
|
|
|
Greater
Than
90
Days
|
|
|
Total
Past
Due
|
|
|
Total
Current
|
|
|
Total
Loans
|
|
|
Total 90
Days Past
Due Still
Accruing
|
|
Commercial
|
|
$
|
3,099
|
|
|
$
|
3,652
|
|
|
$
|
1,024
|
|
|
$
|
7,775
|
|
|
$
|
688,388
|
|
|
$
|
696,163
|
|
|
$
|
54
|
|
Agricultural
|
|
|
348
|
|
|
|
83
|
|
|
|
|
|
|
|
431
|
|
|
|
101,920
|
|
|
|
102,351
|
|
|
|
|
|
Real Estate
|
|
|
12,247
|
|
|
|
2,226
|
|
|
|
2,874
|
|
|
|
17,347
|
|
|
|
2,118,886
|
|
|
|
2,136,233
|
|
|
|
217
|
|
Consumer
|
|
|
1,645
|
|
|
|
183
|
|
|
|
266
|
|
|
|
2,094
|
|
|
|
380,209
|
|
|
|
382,303
|
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
17,339
|
|
|
$
|
6,144
|
|
|
$
|
4,164
|
|
|
$
|
27,647
|
|
|
$
|
3,289,403
|
|
|
$
|
3,317,050
|
|
|
$
|
341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
The Company monitors commercial, agricultural and real estate loans after such loans are 15 days past due. Consumer loans are monitored after such loans are 30 days past due.
|
F-21
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
The following table details the allowance for loan losses at December 31, 2016 and 2015 by portfolio
segment (in thousands). There were no allowances for purchased credit impaired loans at December 31, 2016 or 2015. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other
categories.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Commercial
|
|
|
Agricultural
|
|
|
Real Estate
|
|
|
Consumer
|
|
|
Total
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
2,128
|
|
|
$
|
25
|
|
|
$
|
2,428
|
|
|
$
|
431
|
|
|
$
|
5,012
|
|
Loan collectively evaluated for impairment
|
|
|
9,579
|
|
|
|
1,076
|
|
|
|
24,436
|
|
|
|
5,676
|
|
|
|
40,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,707
|
|
|
$
|
1,101
|
|
|
$
|
26,864
|
|
|
$
|
6,107
|
|
|
$
|
45,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Commercial
|
|
|
Agricultural
|
|
|
Real Estate
|
|
|
Consumer
|
|
|
Total
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
2,030
|
|
|
$
|
70
|
|
|
$
|
2,827
|
|
|
$
|
144
|
|
|
$
|
5,071
|
|
Loan collectively evaluated for impairment
|
|
|
10,614
|
|
|
|
1,121
|
|
|
|
21,548
|
|
|
|
3,523
|
|
|
|
36,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
12,644
|
|
|
$
|
1,191
|
|
|
$
|
24,375
|
|
|
$
|
3,667
|
|
|
$
|
41,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in the allowance for loan losses for the years ended December 31, 2016 and 2015 are summarized as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Commercial
|
|
|
Agricultural
|
|
|
Real Estate
|
|
|
Consumer
|
|
|
Total
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
12,644
|
|
|
$
|
1,191
|
|
|
$
|
24,375
|
|
|
$
|
3,667
|
|
|
$
|
41,877
|
|
Provision for loan losses
|
|
|
5,101
|
|
|
|
104
|
|
|
|
1,150
|
|
|
|
3,857
|
|
|
|
10,212
|
|
Recoveries
|
|
|
952
|
|
|
|
25
|
|
|
|
2,021
|
|
|
|
508
|
|
|
|
3,506
|
|
Charge-offs
|
|
|
(6,990
|
)
|
|
|
(219
|
)
|
|
|
(682
|
)
|
|
|
(1,925
|
)
|
|
|
(9,816
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
11,707
|
|
|
$
|
1,101
|
|
|
$
|
26,864
|
|
|
$
|
6,107
|
|
|
$
|
45,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Commercial
|
|
|
Agricultural
|
|
|
Real Estate
|
|
|
Consumer
|
|
|
Total
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
7,990
|
|
|
$
|
527
|
|
|
$
|
26,657
|
|
|
$
|
1,650
|
|
|
$
|
36,824
|
|
Provision for loan losses
|
|
|
8,044
|
|
|
|
773
|
|
|
|
(2,399
|
)
|
|
|
3,267
|
|
|
|
9,685
|
|
Recoveries
|
|
|
344
|
|
|
|
55
|
|
|
|
558
|
|
|
|
450
|
|
|
|
1,407
|
|
Charge-offs
|
|
|
(3,734
|
)
|
|
|
(164
|
)
|
|
|
(441
|
)
|
|
|
(1,700
|
)
|
|
|
(6,039
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
12,644
|
|
|
$
|
1,191
|
|
|
$
|
24,375
|
|
|
$
|
3,667
|
|
|
$
|
41,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys recorded investment in loans as of December 31, 2016 and 2015 related to the balance in the allowance
for loan losses on the basis of the Companys impairment methodology was as follows (in thousands). Purchased credit impaired loans of $1,256,000 and $2,178,000, respectively, at December 31, 2016 and 2015 are included in loans
individually evaluated for impairment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Commercial
|
|
|
Agricultural
|
|
|
Real Estate
|
|
|
Consumer
|
|
|
Total
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
7,284
|
|
|
$
|
99
|
|
|
$
|
18,754
|
|
|
$
|
1,234
|
|
|
$
|
27,371
|
|
Loan collectively evaluated for impairment
|
|
|
667,126
|
|
|
|
83,922
|
|
|
|
2,171,090
|
|
|
|
407,798
|
|
|
|
3,329,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
674,410
|
|
|
$
|
84,021
|
|
|
$
|
2,189,844
|
|
|
$
|
409,032
|
|
|
$
|
3,357,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-22
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Commercial
|
|
|
Agricultural
|
|
|
Real Estate
|
|
|
Consumer
|
|
|
Total
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
8,761
|
|
|
$
|
97
|
|
|
$
|
18,766
|
|
|
$
|
977
|
|
|
$
|
28,601
|
|
Loan collectively evaluated for impairment
|
|
|
687,402
|
|
|
|
102,254
|
|
|
|
2,117,467
|
|
|
|
381,326
|
|
|
|
3,288,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
696,163
|
|
|
$
|
102,351
|
|
|
$
|
2,136,233
|
|
|
$
|
382,303
|
|
|
$
|
3,317,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys loans that were modified in the years ended December 31, 2016 and 2015, and considered troubled debt
restructurings are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
Year Ended December 31, 2015
|
|
|
|
Number
|
|
|
Pre-Modification
Recorded
Investment
|
|
|
Post-
Modification
Recorded
Investment
|
|
|
Number
|
|
|
Pre-Modification
Recorded
Investment
|
|
|
Post-
Modification
Recorded
Investment
|
|
Commercial
|
|
|
15
|
|
|
$
|
3,208
|
|
|
$
|
3,208
|
|
|
|
8
|
|
|
$
|
447
|
|
|
$
|
447
|
|
Agricultural
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
128
|
|
|
|
128
|
|
Real Estate
|
|
|
6
|
|
|
|
1,460
|
|
|
|
1,460
|
|
|
|
5
|
|
|
|
598
|
|
|
|
598
|
|
Consumer
|
|
|
7
|
|
|
|
189
|
|
|
|
189
|
|
|
|
7
|
|
|
|
255
|
|
|
|
255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
28
|
|
|
$
|
4,857
|
|
|
$
|
4,857
|
|
|
|
23
|
|
|
$
|
1,428
|
|
|
$
|
1,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The balances below provide information as to how the loans were modified as troubled debt restructured loans during the years
ended December 31, 2016 and 2015 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
Year Ended December 31, 2015
|
|
|
|
Adjusted
Interest
Rate
|
|
|
Extended
Maturity
|
|
|
Combined
Rate and
Maturity
|
|
|
Adjusted
Interest
Rate
|
|
|
Extended
Maturity
|
|
|
Combined
Rate and
Maturity
|
|
Commercial
|
|
$
|
|
|
|
$
|
2,560
|
|
|
$
|
648
|
|
|
$
|
|
|
|
$
|
182
|
|
|
$
|
265
|
|
Agricultural
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128
|
|
|
|
|
|
Real Estate
|
|
|
|
|
|
|
298
|
|
|
|
1,162
|
|
|
|
15
|
|
|
|
150
|
|
|
|
433
|
|
Consumer
|
|
|
|
|
|
|
70
|
|
|
|
119
|
|
|
|
|
|
|
|
56
|
|
|
|
199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
2,928
|
|
|
$
|
1,929
|
|
|
$
|
15
|
|
|
$
|
516
|
|
|
$
|
897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the years ended December 31, 2016 and 2015, certain loans were modified as a troubled debt restructured loans
within the previous 12 months and for which there was a payment default. A default for purposes of this disclosure is a troubled debt restructured loan in which the borrower is 90 days past or more due or results in the foreclosure and repossession
of the applicable collateral. The loans with payment default are as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
Year Ended December 31, 2015
|
|
|
|
Number
|
|
|
Balance
|
|
|
Number
|
|
|
Balance
|
|
Commercial
|
|
|
4
|
|
|
$
|
1,690
|
|
|
|
1
|
|
|
$
|
66
|
|
Agriculture
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate
|
|
|
3
|
|
|
|
921
|
|
|
|
1
|
|
|
|
15
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7
|
|
|
$
|
2,611
|
|
|
|
4
|
|
|
$
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016, the Company has no commitments to lend additional funds to loan customers whose terms have been
modified in troubled debt restructurings.
An analysis of the changes in loans to officers, directors, principal shareholders, or associates of such
persons for the year ended December 31, 2016 (determined as of each respective
year-end)
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
Balance
|
|
|
Additional
Loans
|
|
|
Payments
|
|
|
Ending
Balance
|
|
|
|
|
|
|
Year ended December 31, 2016
|
|
$
|
65,729
|
|
|
$
|
49,674
|
|
|
$
|
70,974
|
|
|
$
|
44,429
|
|
F-23
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
In the opinion of management, those loans are on substantially the same terms, including interest rates and
collateral requirements, as those prevailing at the time for comparable transactions with unaffiliated persons.
Our subsidiary bank has established a
line of credit with the Federal Home Loan Bank of Dallas (FHLB) to provide liquidity and meet pledging requirements for those customers eligible to have securities pledged to secure certain uninsured deposits. At December 31, 2016,
$2,081,615,000 in loans held by our bank subsidiary were subject to blanket liens as security for this line of credit. At December 31, 2016, $75,000,000 in advances were outstanding under this line of credit.
4.
|
BANK PREMISES AND EQUIPMENT
:
|
The following is a summary of bank premises and equipment (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful Life
|
|
|
December 31,
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
Land
|
|
|
|
|
|
$
|
28,266
|
|
|
$
|
29,050
|
|
|
|
|
|
Buildings
|
|
|
20 to 40 years
|
|
|
|
115,566
|
|
|
|
106,515
|
|
|
|
|
|
Furniture and equipment
|
|
|
3 to 10 years
|
|
|
|
58,145
|
|
|
|
54,353
|
|
|
|
|
|
Leasehold improvements
|
|
|
Lesser of lease term or 5 to 15 years
|
|
|
|
4,783
|
|
|
|
4,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
206,760
|
|
|
|
194,246
|
|
Less- accumulated depreciation and amortization
|
|
|
|
(84,075
|
)
|
|
|
(78,534
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Bank Premises and Equipment
|
|
|
$
|
122,685
|
|
|
$
|
115,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for the years ended December 31, 2016, 2015 and 2014 amounted to $9,390,000, $9,125,000 and
$7,833,000, respectively, and is included in the captions net occupancy expense and equipment expense in the accompanying consolidated statements of earnings.
The Company is lessor for portions of its banking premises. Total rental income for all leases included in net occupancy expense is approximately $2,139,000,
$1,949,000 and $1,923,000, for the years ended December 31, 2016, 2015, and 2014, respectively.
During the years ended December 31, 2016, 2015
and 2014, the Company recorded gains (losses) on sale the of bank premises and equipment totaling $168,000, ($820,000) and $10,000. In 2016, the Company sold its Weatherford and Orange main region branch building for $1,385,000 and $2,000,000 and
recorded a gain of $560,000 and a loss of $31,000, respectively. The Company recorded a write down of $1,000,000 in 2015 in anticipation of the Orange branch building sale.
5.
|
DEPOSITS AND BORROWINGS:
|
Time deposits of $250,000 or more totaled approximately $130,385,000 and
$190,386,000 at December 31, 2016 and 2015, respectively.
F-24
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
At December 31, 2016, the scheduled maturities of time deposits (in thousands) were, as follows:
|
|
|
|
|
Year ending December 31,
|
|
|
|
2017
|
|
$
|
419,326
|
|
2018
|
|
|
54,713
|
|
2019
|
|
|
17,893
|
|
2020
|
|
|
9,939
|
|
2021
|
|
|
7,093
|
|
Thereafter
|
|
|
32
|
|
|
|
|
|
|
|
|
$
|
508,996
|
|
|
|
|
|
|
Deposits received from related parties at December 31, 2016 and 2015 totaled $114,513,000 and $89,006,000, respectively.
Borrowings at December 31, 2016 and 2015 consisted of the following (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Securities sold under agreements with customers to repurchase
|
|
$
|
360,820
|
|
|
$
|
310,330
|
|
Federal funds purchased
|
|
|
9,950
|
|
|
|
6,325
|
|
Advances from Federal Home Loan Bank of Dallas
|
|
|
75,000
|
|
|
|
299,020
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
445,770
|
|
|
$
|
615,675
|
|
|
|
|
|
|
|
|
|
|
Securities sold under repurchase agreements are generally with significant customers of the Company that require short-term
liquidity for their funds for which the Company pledges certain securities that have a fair value equal to at least the amount of the borrowings. The agreements mature daily and therefore the risk arising from a decline in the fair value of the
collateral pledged is minimal. The securities pledged are mortgage-backed securities. These agreements do not include right of
set-off
provisions and therefore the Company does not offset such
agreements for financial reporting purposes.
At December 31, 2016 and 2015, the Company had advances from the Federal Home Loan Bank of Dallas of
$75,000,000 and $299,020,000, respectively, that are scheduled to mature in 2017 and 2018. The interest rate on these advances were 0.46% and 0.31%, respectively, at December 31, 2016 and 2015.
The Company renewed its loan agreement, effective June 30, 2015, with Frost Bank.
Under the loan agreement, as renewed and amended, we are permitted to draw up to $25,000,000 on a revolving line of credit. Prior to June 30, 2017, interest is paid quarterly at
The
Wall
Street
Journal
Prime Rate and
the line of credit matures June 30, 2017. If a balance exists at June 30, 2017, the principal balance converts to a term facility payable quarterly over five years and interest is paid quarterly at our election at
The
Wall
Street
Journal
Prime Rate plus 50 basis points or LIBOR plus 250 basis points. The line of credit is unsecured. Among other provisions in the credit agreement, we must satisfy certain financial covenants during the term of the loan
agreement, including, without limitation, covenants that require us to maintain certain capital, tangible net worth, loan loss reserve, non-performing asset and cash flow coverage ratios. In addition, the credit agreement contains certain
operational covenants, which among others, restricts the payment of dividends above 55% of consolidated net income, limits the incurrence of debt (excluding any amounts acquired in an acquisition) and prohibits the disposal of assets except in the
ordinary course of business. Since 1995, we have historically declared dividends as a percentage of our consolidated net income in a range of 37% (low) in 1995 to 53% (high) in 2003 and 2006. The Company was in compliance with the financial and
operational covenants at December 31, 2016. There was no outstanding balance under the line of credit as of December 31, 2016 or 2015.
F-25
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
The Company files a consolidated federal income tax return. Income tax expense is
comprised of the following (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Current federal income tax
|
|
$
|
30,381
|
|
|
$
|
31,014
|
|
|
$
|
29,832
|
|
Current state income tax
|
|
|
99
|
|
|
|
103
|
|
|
|
94
|
|
Deferred federal income tax expense (benefit)
|
|
|
673
|
|
|
|
320
|
|
|
|
(893
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
31,153
|
|
|
$
|
31,437
|
|
|
$
|
29,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense, as a percentage of pretax earnings, differs from the statutory federal income tax rate as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percent of Pretax Earnings
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Statutory federal income tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Reductions in tax rate resulting from interest income exempt from federal income tax
|
|
|
(12.1
|
)
|
|
|
(11.4
|
)
|
|
|
(10.6
|
)
|
Effect of state income tax
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.1
|
|
ESOP tax deduction
|
|
|
(0.2
|
)
|
|
|
(0.2
|
)
|
|
|
(0.2
|
)
|
Other
|
|
|
0.1
|
|
|
|
0.3
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
22.9
|
%
|
|
|
23.8
|
%
|
|
|
24.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The approximate effects of each type of difference that gave rise to the Companys deferred tax assets and liabilities at
December 31, 2016 and 2015 are as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Tax basis of loans in excess of financial statement basis
|
|
$
|
17,006
|
|
|
$
|
16,326
|
|
Minimum liability in defined benefit plan
|
|
|
1,641
|
|
|
|
2,135
|
|
Recognized for financial reporting purposes but not yet for tax purposes:
|
|
|
|
|
|
|
|
|
Deferred compensation
|
|
|
2,807
|
|
|
|
2,602
|
|
Write-downs and adjustments to other real estate owned and repossessed assets
|
|
|
9
|
|
|
|
7
|
|
Other deferred tax assets
|
|
|
226
|
|
|
|
224
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
21,689
|
|
|
|
21,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Financial statement basis of fixed assets in excess of tax basis
|
|
|
5,870
|
|
|
|
5,644
|
|
Intangible asset amortization deductible for tax purposes, but not for financial reporting
purposes
|
|
|
15,191
|
|
|
|
13,881
|
|
Recognized for financial reporting purposes but not yet for tax purposes:
|
|
|
|
|
|
|
|
|
Accretion on investment securities
|
|
|
1,788
|
|
|
|
1,813
|
|
Pension plan contributions
|
|
|
1,799
|
|
|
|
1,761
|
|
Net unrealized gain on investment securities
available-for-sale
|
|
|
11,573
|
|
|
|
27,655
|
|
Other deferred tax liabilities
|
|
|
83
|
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
36,304
|
|
|
|
50,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset (liability)
|
|
$
|
(14,615
|
)
|
|
$
|
(29,531
|
)
|
|
|
|
|
|
|
|
|
|
F-26
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
At December 31, 2016 and 2015, management believes that it is more likely than not that all of the
deferred tax amounts shown above will be realized and therefore no valuation allowance was recorded.
Current authoritative accounting guidance prescribes
a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements
only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the
more-likely-than-not
recognition threshold is measured at the largest amount of cumulative benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously
failed to meet the
more-likely-than-not
recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no
longer meet the
more-likely-than-not
recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. Current authoritative accounting
guidance also provides guidance on the accounting for and disclosure of unrecognized tax benefits, interest and penalties. The Company concluded the tax benefits of positions taken and expected to be taken on its tax returns should be recognized in
the financial statements under this guidance. The Company files income tax returns in the U.S. federal jurisdiction and several U.S. state jurisdictions. We are no longer subject to U.S. federal income tax examinations by tax authorities for years
before 2013 or Texas state tax examinations by tax authorities for years before 2012. As of December 31, 2016 and 2015, the Company believes that there are no uncertain tax positions.
8.
|
FAIR VALUE DISCLOSURES:
|
The authoritative accounting guidance for fair value measurements defines fair
value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability
occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of
the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary
for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and
(iv) willing to transact.
The authoritative accounting guidance requires the use of valuation techniques that are consistent with the market
approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation
techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset
(replacement costs). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that
reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entitys own assumptions about
the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, the authoritative guidance establishes a fair value hierarchy for valuation
inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
|
|
|
Level 1 Inputs Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
|
|
|
|
Level 2 Inputs Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or
liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (for example, interest rates, volatilities,
prepayment speeds, loss severities, credit risks and default rates) or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
|
|
Level 3 Inputs Significant unobservable inputs that reflect an entitys own assumptions that market participants would use in pricing the assets or liabilities.
|
F-27
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
A description of the valuation methodologies used for assets and liabilities measured at fair value, as well
as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.
In general, fair value is based upon quoted
market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that
financial instruments are recorded at fair value. While management believes the Companys valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the
fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
Securities classified as
available-for-sale
and trading are reported at fair value utilizing Level 1 and Level 2 inputs. For these securities, the Company obtains fair value measurements
from an independent pricing service. The fair value measurements consider observable data that may include market spreads, cash flows, the United States Treasury yield curve, live trading levels, trade execution data, dealer quotes, market consensus
prepayments speeds, credit information and the securitys terms and conditions, among other items.
There were no transfers between Level 2 and
Level 3 during the year ended December 31, 2016, 2015 and 2014.
The following table summarizes financial assets and financial liabilities
measured at fair value on a recurring basis as of December 31, 2016, and 2015 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
|
Total Fair
Value
|
|
Available-for-sale
investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
10,668
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,668
|
|
Obligations of U. S. government sponsored enterprises and agencies
|
|
|
|
|
|
|
113,703
|
|
|
|
|
|
|
|
113,703
|
|
Obligations of state and political subdivisions
|
|
|
|
|
|
|
1,564,276
|
|
|
|
|
|
|
|
1,564,276
|
|
Corporate bonds
|
|
|
|
|
|
|
47,965
|
|
|
|
|
|
|
|
47,965
|
|
Residential mortgage-backed securities
|
|
|
|
|
|
|
851,361
|
|
|
|
|
|
|
|
851,361
|
|
Commercial mortgage-backed securities
|
|
|
|
|
|
|
268,436
|
|
|
|
|
|
|
|
268,436
|
|
Other securities
|
|
|
4,428
|
|
|
|
|
|
|
|
|
|
|
|
4,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
15,096
|
|
|
$
|
2,845,741
|
|
|
$
|
|
|
|
$
|
2,860,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
|
Total Fair
Value
|
|
Available-for-sale
investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
10,795
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,795
|
|
Obligations of U. S. government sponsored enterprises and agencies
|
|
|
|
|
|
|
148,554
|
|
|
|
|
|
|
|
148,554
|
|
Obligations of state and political subdivisions
|
|
|
|
|
|
|
1,451,127
|
|
|
|
|
|
|
|
1,451,127
|
|
Corporate bonds
|
|
|
|
|
|
|
83,254
|
|
|
|
|
|
|
|
83,254
|
|
Residential mortgage-backed securities
|
|
|
|
|
|
|
788,882
|
|
|
|
|
|
|
|
788,882
|
|
Commercial mortgage-backed securities
|
|
|
|
|
|
|
246,586
|
|
|
|
|
|
|
|
246,586
|
|
Other securities
|
|
|
4,701
|
|
|
|
|
|
|
|
|
|
|
|
4,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
15,496
|
|
|
$
|
2,718,403
|
|
|
$
|
|
|
|
$
|
2,733,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-28
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis, that
is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets and financial liabilities measured at
fair value on a
non-recurring
basis include the following at December 31, 2016:
Impaired
Loans Impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level 2 inputs based on observable market data. At
December 31, 2016, impaired loans with a carrying value of $27,371,000 were reduced by specific valuation reserves totaling $5,012,000 resulting in a net fair value of $22,359,000.
Loans
Held-for-Sale
Loans
held-for-sale
are reported at the lower of cost or fair value. The Company originates conforming loans that are sold in the secondary market in which loan pricing is
available. In determining whether the fair value of loans
held-for-sale
is less than cost and quoted prices are available for similar assets. These loans are considered
Level 2 of the fair value hierarchy. At December 31, 2016, the Companys mortgage loans
held-for-sale
fair value was $26,702,000, which approximated cost.
Certain
non-financial
assets and
non-financial
liabilities measured at
fair value on a
non-recurring
basis include other real estate owned, goodwill and other intangible assets and other
non-financial
long-lived assets.
Non-financial
assets measured at fair value on a
non-recurring
basis during the year ended December 31, 2016 and 2015 include other real estate owned which, subsequent to
their initial transfer to other real estate owned from loans, were
re-measured
at fair value through a write-down included in gain (loss) on sale of foreclosed assets. During the reported periods, all fair
value measurements for foreclosed assets utilized Level 2 inputs based on observable market data, generally third-party appraisals, or Level 3 inputs based on customized discounting criteria. These appraisals are evaluated individually and
discounted as necessary due to the age of the appraisal, lack of comparable sales, expected holding periods of property or special use type of the property. Such discounts vary by appraisal based on the above factors but generally range from 5% to
25% of the appraised value. Reevaluation of other real estate owned is performed at least annually as required by regulatory guidelines or more often if particular circumstances arise. The following table presents other real estate owned that were
re-measured
subsequent to their initial transfer to other real estate owned (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Carrying value of other real estate owned prior to
re-measurement
|
|
$
|
|
|
|
$
|
351
|
|
Write-downs included in gain (loss) on sale of other real estate owned
|
|
|
|
|
|
|
(95
|
)
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
$
|
|
|
|
$
|
256
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016 and 2015, other real estate owned totaled $413,000 and $153,000, respectively.
The Company is required under current authoritative accounting guidance to disclose the estimated fair value of their financial instrument assets and
liabilities including those subject to the requirements discussed above. For the Company, as for most financial institutions, substantially all of its assets and liabilities are considered financial instruments. Many of the Companys financial
instruments, however, lack an available trading market as characterized by a willing buyer and willing seller engaging in an exchange transaction.
The
estimated fair value amounts of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may
have a material effect on the estimated fair value amounts.
In addition, reasonable comparability between financial institutions may not be likely due to
the wide range of permitted valuation techniques and numerous estimates that must be made given the absence of active secondary markets for many of the financial instruments. This lack of uniform valuation methodologies also introduces a greater
degree of subjectivity to these estimated fair values.
F-29
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Cash and due from banks, federal funds sold, interest-bearing deposits and time deposits in banks and accrued
interest receivable and payable are liquid in nature and considered Levels 1 or 2 of the fair value hierarchy.
Financial instruments with stated
maturities have been valued using a present value discounted cash flow with a discount rate approximating current market for similar assets and liabilities and are considered Levels 2 and 3 of the fair value hierarchy. Financial instrument
liabilities with no stated maturities have an estimated fair value equal to both the amount payable on demand and the carrying value and are considered Level 1 of the fair value hierarchy.
The carrying value and the estimated fair value of the Companys contractual
off-balance-sheet
unfunded lines of
credit, loan commitments and letters of credit, which are generally priced at market at the time of funding, are not material.
The estimated fair values
and carrying values of all financial instruments under current authoritative guidance at December 31, 2016 and 2015, were as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
Carrying
Value
|
|
|
Estimated
Fair Value
|
|
|
Carrying
Value
|
|
|
Estimated
Fair Value
|
|
|
Fair Value
Hierarchy
|
Cash and due from banks
|
|
$
|
204,782
|
|
|
$
|
204,782
|
|
|
$
|
179,140
|
|
|
$
|
179,140
|
|
|
Level 1
|
|
|
|
|
|
|
Federal funds sold
|
|
|
3,130
|
|
|
|
3,130
|
|
|
|
3,810
|
|
|
|
3,810
|
|
|
Level 1
|
|
|
|
|
|
|
Interest-bearing deposits in banks
|
|
|
48,574
|
|
|
|
48,574
|
|
|
|
89,936
|
|
|
|
89,936
|
|
|
Level 1
|
|
|
|
|
|
|
Interest-bearing time deposits in banks
|
|
|
1,707
|
|
|
|
1,709
|
|
|
|
3,495
|
|
|
|
3,500
|
|
|
Level 2
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
2,860,837
|
|
|
|
2,860,837
|
|
|
|
2,733,899
|
|
|
|
2,733,899
|
|
|
Levels 1 and 2
|
|
|
|
|
|
|
Held-to-maturity
securities
|
|
|
121
|
|
|
|
124
|
|
|
|
278
|
|
|
|
283
|
|
|
Level 2
|
|
|
|
|
|
|
Loans
|
|
|
3,338,426
|
|
|
|
3,361,735
|
|
|
|
3,308,716
|
|
|
|
3,316,243
|
|
|
Level 3
|
|
|
|
|
|
|
Accrued interest receivable
|
|
|
36,469
|
|
|
|
36,469
|
|
|
|
34,697
|
|
|
|
34,697
|
|
|
Level 2
|
|
|
|
|
|
|
Deposits with stated maturities
|
|
|
508,996
|
|
|
|
510,304
|
|
|
|
620,852
|
|
|
|
622,572
|
|
|
Level 2
|
|
|
|
|
|
|
Deposits with no stated maturities
|
|
|
4,969,543
|
|
|
|
4,969,543
|
|
|
|
4,569,317
|
|
|
|
4,569,317
|
|
|
Level 1
|
|
|
|
|
|
|
Borrowings
|
|
|
445,770
|
|
|
|
445,770
|
|
|
|
615,675
|
|
|
|
615,675
|
|
|
Level 2
|
|
|
|
|
|
|
Accrued interest payable
|
|
|
225
|
|
|
|
225
|
|
|
|
240
|
|
|
|
240
|
|
|
Level 2
|
F-30
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
9.
|
COMMITMENTS AND CONTINGENCIES:
|
The Company is engaged in legal actions arising from the normal course
of business. In managements opinion, the Company has adequate legal defenses with respect to these actions, and as of December 31, 2016 the resolution of these matters is not expected to have material adverse effects upon the results of
operations or financial condition of the Company.
The Company leases a portion of its bank premises and equipment under operating leases. At
December 31, 2016, future minimum lease commitments were: 2017 - $774,000, 2018 - $369,000, 2019 - $268,000, 2020 - $140,000, and 2021 - $32,000.
10.
|
FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET
RISK:
|
We are a
party to financial instruments with
off-balance-sheet
risk in the normal course of business to meet the financing needs of our customers. These financial instruments include unfunded lines of credit,
commitments to extend credit and federal funds sold to correspondent banks and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated
balance sheets.
Our exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for unfunded lines of credit,
commitments to extend credit and standby letters of credit is represented by the contractual notional amount of these instruments. We generally use the same credit policies in making commitments and conditional obligations as we do for
on-balance-sheet
instruments.
|
|
|
|
|
|
|
Total Notional
Amounts Committed
December 31, 2016
(in thousands)
|
|
Financial instruments whose contract amounts represent credit risk:
|
|
|
|
|
Unfunded lines of credit
|
|
$
|
549,000
|
|
Unfunded commitments to extend credit
|
|
|
199,235
|
|
Standby letters of credit
|
|
|
27,380
|
|
|
|
|
|
|
Total commercial commitments
|
|
$
|
775,615
|
|
|
|
|
|
|
Unfunded lines of credit and commitments to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. These commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent future cash requirements. We evaluate each customers creditworthiness on a
case-by-case
basis. The
amount of collateral obtained, as we deem necessary upon extension of credit, is based on our credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant, and equipment and
income-producing commercial properties.
Standby letters of credit are conditional commitments we issue to guarantee the performance of a customer to a
third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The average collateral value held on letters of credit usually exceeds the contract amount.
We believe we have no other
off-balance
sheet arrangements or transactions with unconsolidated, special purpose
entities that would expose us to liability that is not reflected on the face of the financial statements.
11.
|
CONCENTRATION OF CREDIT RISK:
|
The Company grants commercial, retail, agriculture and residential real
estate loans to customers primarily in North Central, Southeastern and West Texas. Although the Company has a diversified loan portfolio, a substantial portion of its borrowers ability to honor their commitments is dependent upon each local
economic sector. In addition, the Company holds mortgage related securities which are guaranteed by GNMA, FNMA or FHLMC or are collateralized by loans backed by these agencies.
F-31
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
12.
|
PENSION AND PROFIT SHARING PLANS:
|
The Companys defined benefit pension plan was frozen effective
January 1, 2004, whereby no new participants will be added to the Plan and no additional years of service will accrue to participants, unless the pension plan is reinstated at a future date. The pension plan covered substantially all of the
Companys employees at the time. The benefits for each employee were based on years of service and a percentage of the employees qualifying compensation during the final years of employment. The Companys funding policy was and is to
contribute annually the amount necessary to satisfy the Internal Revenue Services funding standards. Contributions to the pension plan, prior to freezing the plan, were intended to provide not only for benefits attributed to service to date
but also for those expected to be earned in the future. As a result of the Pension Protection Act of 2006 (the Protection Act), the Company will be required to contribute amounts in future years to fund any shortfalls. The Company has
evaluated the provisions of the Protection Act as well as the Internal Revenue Services funding standards to develop a plan for funding in future years. As a result, the Company made a contribution totaling $500,000 in both 2016 and 2015, and
is continuing to evaluate future funding amounts.
During 2016 and 2014, as permitted by the Internal Revenue Service, the Company offered settlement of a
portion of its pension obligations to those plan participants who no longer were employed by the Company. As a result of the partial settlement of the plan, the Company recognized $267,000 and $2,909,000 for the years ended December 31, 2016
and 2014, respectively, in additional pension expense, before income tax, a component of noninterest expense. The effect of this transaction was relatively neutral to shareholders equity since the recorded pension obligation associated with
the plan participants who accepted the settlement closely approximated the amount offered to such plan participants and the amount recognized in pension expense had been previously recognized as unrealized losses in other comprehensive earnings. In
connection with this partial settlement, the Company paid $649,000 and $10,626,000 out of pension plan assets and the number of participants was reduced by 38 and 335, in 2016 and 2014, respectively. The Companys investment risk and
administrative expense associated with the Companys pension plan has been significantly reduced going forward.
Using an actuarial measurement date
of December 31, 2016 and 2015, benefit obligation activity and fair value of plan assets for the years ended December 31, 2016 and 2015, and a statement of the funded status as of December 31, 2016 and 2015, are as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
Reconciliation of benefit obligations:
|
|
|
|
|
|
|
|
|
Benefit obligation at January 1
|
|
$
|
16,002
|
|
|
$
|
15,581
|
|
Interest cost on projected benefit obligation
|
|
|
665
|
|
|
|
622
|
|
Actuarial loss (gain)
|
|
|
139
|
|
|
|
635
|
|
Benefits paid, including partial settlement of certain participant balances
|
|
|
(1,353
|
)
|
|
|
(836
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at December 31
|
|
$
|
15,453
|
|
|
$
|
16,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of fair value of plan assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets at January 1
|
|
$
|
14,820
|
|
|
$
|
15,458
|
|
Actual return on plan assets
|
|
|
1,820
|
|
|
|
(302
|
)
|
Employer contributions
|
|
|
500
|
|
|
|
500
|
|
Benefits paid, including partial settlement of certain participant balances
|
|
|
(1,353
|
)
|
|
|
(836
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at December 31
|
|
|
15,787
|
|
|
|
14,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
$
|
334
|
|
|
$
|
(1,182
|
)
|
|
|
|
|
|
|
|
|
|
F-32
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Amounts recognized as a component of accumulated other comprehensive earnings as of
year-end
that have not been recognized as a component of the net period benefit cost of the Companys defined benefit pension plan are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
Net actuarial loss
|
|
$
|
(4,688
|
)
|
|
$
|
(6,098
|
)
|
Deferred tax benefit
|
|
|
1,641
|
|
|
|
2,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts included in accumulated other comprehensive earnings, net of tax
|
|
$
|
(3,047
|
)
|
|
$
|
(3,964
|
)
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost for the years ended December 31, 2016, 2015, and 2014, are as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Service cost - benefits earned during the period
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Interest cost on projected benefit obligation
|
|
|
665
|
|
|
|
622
|
|
|
|
1,131
|
|
Expected return on plan assets
|
|
|
(912
|
)
|
|
|
(948
|
)
|
|
|
(1,497
|
)
|
Amortization of unrecognized net loss
|
|
|
375
|
|
|
|
222
|
|
|
|
337
|
|
Recognized loss on partial settlement of certain participant balances
|
|
|
267
|
|
|
|
|
|
|
|
2,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension benefit expense (benefit)
|
|
$
|
395
|
|
|
$
|
(104
|
)
|
|
$
|
2,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth the rates used in the actuarial calculations of the present value of benefit obligations and
net periodic pension cost and the rate of return on plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Weighted average discount rate
|
|
|
4.25
|
%
|
|
|
4.25
|
%
|
|
|
4.10
|
%
|
|
|
|
|
Expected long-term rate of return on assets
|
|
|
6.25
|
%
|
|
|
6.25
|
%
|
|
|
6.25
|
%
|
The weighted average discount rate is estimated based on setting a discount rate to establish an obligation for pension
benefits equivalent to an amount that, if invested in high quality fixed income securities, would produce a return that matches the expected benefit payment stream. The expected long-term rate of return on plan assets is based on historical returns
and expectations of future returns based on asset mix, after consultation with our investment advisors and actuaries.
The major type of plan assets in
the pension plan and the targeted allocation percentage as of December 31, 2016 and 2015 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
Allocation
|
|
|
December 31, 2015
Allocation
|
|
|
Targeted
Allocation
|
|
Equity securities
|
|
|
77
|
%
|
|
|
74
|
%
|
|
|
75
|
%
|
Debt securities
|
|
|
22
|
%
|
|
|
25
|
%
|
|
|
25
|
%
|
Cash and equivalents
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
|
|
F-33
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
The range and weighted average final maturities of debt securities held in the pension plan as of
December 31, 2016 are 2.52 to 11.34 years and approximately 5.08 years, respectively. Assets held in the pension plan are considered either Level 1 consisting of the money market funds, publicly traded common stocks and publically traded
mutual funds or Level 2 consisting of obligations of state and political subdivisions, corporate bonds and mortgage-backed securities. There were no Level 3 securities. See note 8 for a discussion of the fair value hierarchy. The breakdown
by level is as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
|
Total Fair
Value
|
|
Money market fund
|
|
$
|
100
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
100
|
|
Obligations of state and political subdivisions
|
|
|
|
|
|
|
659
|
|
|
|
|
|
|
|
659
|
|
Corporate bonds
|
|
|
|
|
|
|
885
|
|
|
|
|
|
|
|
885
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
956
|
|
|
|
|
|
|
|
956
|
|
Corporate stocks and mutual funds
|
|
|
13,187
|
|
|
|
|
|
|
|
|
|
|
|
13,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
13,287
|
|
|
$
|
2,500
|
|
|
$
|
|
|
|
$
|
15,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Financial Trust & Asset Management Company, National Association, a wholly owned subsidiary of the Company,
manages the pension plan assets as well as the profit sharing plan assets (see below). The investment strategy and targeted allocations are based on similar strategies First Financial Trust & Asset Management Company, National Association
employs for most of its managed accounts whereby appropriate diversification is achieved. First Financial Trust & Asset Management Company, National Association is prohibited from holding investments deemed to be high risk by the Office of
the Comptroller of the Currency.
An estimate of the undiscounted projected future payments to eligible participants for the next five years and the
following five years in the aggregate is as follows (in thousands):
|
|
|
|
|
Year Ending December 31,
|
|
|
|
|
|
2017
|
|
|
856
|
|
2018
|
|
|
872
|
|
2019
|
|
|
892
|
|
2020
|
|
|
913
|
|
2021
|
|
|
935
|
|
2022 forward
|
|
|
4,861
|
|
As of December 31, 2016 and 2015, the pension plans total assets included First Financial Bankshares, Inc. common
stock valued at approximately $2,786,000 and $1,859,000, respectively.
The Company also provides a profit sharing plan, which covers substantially all
full-time employees. The profit sharing plan is a defined contribution plan and allows employees to contribute a percentage of their base annual salary. Employees are fully vested to the extent of their contributions and become fully vested in the
Companys contributions over a
six-year
vesting period. Costs related to the Companys defined contribution plan totaled approximately $3,221,000, $5,455,000 and $5,324,000 in 2016, 2015 and 2014,
respectively, and are included in salaries and employee benefits in the accompanying consolidated statements of earnings. As of December 31, 2016 and 2015, the profit sharing plans assets included First Financial Bankshares, Inc. common
stock valued at approximately $60,270,000 and $41,599,000, respectively.
In 2004, after freezing our pension plan, we added a safe harbor match to the
401(k) plan. We match a maximum of 4% on employee deferrals of 5% of their employee compensation. Total expense for this matching in 2016, 2015 and 2014 was $2,331,000, $2,043,000 and $1,699,000, respectively, and is included in salaries and
employee benefits in the statements of earnings.
The Company has a directors deferred compensation plan whereby the directors may elect to defer up
to 100% of their directors fees. All deferred compensation is invested in the Companys common stock held in a rabbi trust. The stock is held in nominee name of the trustee, and the principal and earnings of the trust are held separate
and apart from other funds of the Company, and are used exclusively for the uses and purposes of the deferred compensation agreement. The accounts of the trust have been consolidated in the financial statements of the Company.
F-34
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
13.
|
DIVIDENDS FROM SUBSIDIARIES:
|
At December 31, 2016, approximately $170,730,000 was available for
the declaration of dividends by the Companys subsidiaries without the prior approval of regulatory agencies.
Banking regulators measure capital adequacy by means of the risk-based capital
ratios and the leverage ratio under the Basel III regulatory capital framework and prompt corrective action regulations. The risk-based capital rules provide for the weighting of assets and
off-balance-sheet
commitments and contingencies according to prescribed risk categories. Regulatory capital is then divided by risk-weighted assets to determine the risk-adjusted capital ratios. The leverage ratio is computed by dividing shareholders equity
less intangible assets by
quarter-to-date
average assets less intangible assets.
Beginning in January 2016, under the Basel III regulatory capital framework, the implementation of the capital conservation buffer was effective for the
Company starting at the 0.625% level and increasing 0.625% each year thereafter, until it reaches 2.5% on January 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress and requires increased
capital levels for the purpose of capital distributions and other payments. Failure to meet the amount of the buffer will result in restrictions on the Companys ability to make capital distributions, including dividend payments and stock
repurchases, and to pay discretionary bonuses to executive officers.
As of December 31, 2016 and 2015, we had a total risk-based capital ratio of
18.45% and 16.97%, a Tier 1 capital to risk-weighted assets ratio of 17.30% and 15.90%; a common equity Tier 1 capital to risk-weighted assets ratio of 17.30% and 15.90%, and a Tier 1 leverage ratio of 10.71% and 9.96%, respectively. The regulatory
capital ratios as of December 31, 2016 and 2015 were calculated under Basel III rules. There is no threshold for well-capitalized status for bank holding companies.
As of December 31, 2016 and 2015, the regulatory capital ratios of the Company and Bank under the Basel III regulatory capital framework are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
Minimum Capital
Required Under
Basel III
Phase-In
|
|
|
Minimum Capital
Required-Basel III
Fully
Phased-In
|
|
|
Required to be
Considered Well-
Capitalized
|
|
As of December 31, 2016:
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
|
|
|
|
|
|
|
|
Total Capital to Risk-Weighted Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
739,959
|
|
|
|
18.45
|
%
|
|
$
|
345,827
|
|
|
|
8.625
|
%
|
|
$
|
421,007
|
|
|
|
10.50
|
%
|
|
|
|
|
|
|
N/A
|
|
First Financial Bank, N.A.
|
|
$
|
633,403
|
|
|
|
15.84
|
%
|
|
$
|
344,930
|
|
|
|
8.625
|
%
|
|
$
|
419,915
|
|
|
|
10.50
|
%
|
|
$
|
399,919
|
|
|
|
10.00
|
%
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital to Risk-Weighted Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
693,584
|
|
|
|
17.30
|
%
|
|
$
|
265,635
|
|
|
|
6.625
|
%
|
|
$
|
340,815
|
|
|
|
8.50
|
%
|
|
|
|
|
|
|
N/A
|
|
First Financial Bank, N.A.
|
|
$
|
587,028
|
|
|
|
14.68
|
%
|
|
$
|
264,946
|
|
|
|
6.625
|
%
|
|
$
|
339,931
|
|
|
|
8.50
|
%
|
|
$
|
319,935
|
|
|
|
8.00
|
%
|
|
|
|
|
|
|
|
|
|
Common Equity Tier 1 Capital to Risk-Weighted Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
693,584
|
|
|
|
17.30
|
%
|
|
$
|
205,491
|
|
|
|
5.125
|
%
|
|
$
|
280,671
|
|
|
|
7.00
|
%
|
|
|
|
|
|
|
N/A
|
|
First Financial Bank, N.A.
|
|
$
|
587,028
|
|
|
|
14.68
|
%
|
|
$
|
204,959
|
|
|
|
5.125
|
%
|
|
$
|
279,943
|
|
|
|
7.00
|
%
|
|
$
|
259,947
|
|
|
|
6.50
|
%
|
|
|
|
|
|
|
|
|
|
Leverage Ratio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
693,584
|
|
|
|
10.71
|
%
|
|
$
|
258,978
|
|
|
|
4.00
|
%
|
|
$
|
258,978
|
|
|
|
4.00
|
%
|
|
|
|
|
|
|
N/A
|
|
First Financial Bank, N.A.
|
|
$
|
587,028
|
|
|
|
9.10
|
%
|
|
$
|
257,941
|
|
|
|
4.00
|
%
|
|
$
|
257,941
|
|
|
|
4.00
|
%
|
|
$
|
322,426
|
|
|
|
5.00
|
%
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital to Risk-Weighted Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
672,920
|
|
|
|
16.97
|
%
|
|
$
|
318,528
|
|
|
|
8.00
|
%
|
|
$
|
418,068
|
|
|
|
10.50
|
%
|
|
|
|
|
|
|
N/A
|
|
First Financial Bank, N.A.
|
|
$
|
570,910
|
|
|
|
14.37
|
%
|
|
$
|
317,788
|
|
|
|
8.00
|
%
|
|
$
|
417,097
|
|
|
|
10.50
|
%
|
|
$
|
397,235
|
|
|
|
10.00
|
%
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital to Risk-Weighted Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
630,413
|
|
|
|
15.90
|
%
|
|
$
|
238,896
|
|
|
|
6.00
|
%
|
|
$
|
338,436
|
|
|
|
8.50
|
%
|
|
|
|
|
|
|
N/A
|
|
First Financial Bank, N.A.
|
|
$
|
528,403
|
|
|
|
13.30
|
%
|
|
$
|
238,341
|
|
|
|
6.00
|
%
|
|
$
|
337,650
|
|
|
|
8.50
|
%
|
|
$
|
317,788
|
|
|
|
8.00
|
%
|
|
|
|
|
|
|
|
|
|
Common Equity Tier 1 Capital to Risk-Weighted Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
630,413
|
|
|
|
15.90
|
%
|
|
$
|
179,172
|
|
|
|
4.50
|
%
|
|
$
|
278,712
|
|
|
|
7.00
|
%
|
|
|
|
|
|
|
N/A
|
|
First Financial Bank, N.A.
|
|
$
|
528,403
|
|
|
|
13.30
|
%
|
|
$
|
178,756
|
|
|
|
4.50
|
%
|
|
$
|
278,065
|
|
|
|
7.00
|
%
|
|
$
|
258,203
|
|
|
|
6.50
|
%
|
|
|
|
|
|
|
|
|
|
Leverage Ratio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
630,413
|
|
|
|
9.96
|
%
|
|
$
|
256,368
|
|
|
|
4.00
|
%
|
|
$
|
256,368
|
|
|
|
4.00
|
%
|
|
|
|
|
|
|
N/A
|
|
First Financial Bank, N.A.
|
|
$
|
528,403
|
|
|
|
8.37
|
%
|
|
$
|
252,419
|
|
|
|
4.00
|
%
|
|
$
|
252,419
|
|
|
|
4.00
|
%
|
|
$
|
315,524
|
|
|
|
5.00
|
%
|
F-35
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
We have performed a preliminary assessment using the regulatory capital estimation tool made available by the
OCC and believe the Company and Bank are prepared to meet the new requirements upon full adoption of Basel III that will be effective December 31, 2019.
In connection with the adoption of the Basel III regulatory capital framework, our subsidiary bank made the election to continue to exclude most accumulated
other comprehensive income (AOCI) from capital in connection with its March 31, 2015 quarterly financial filing and, in effect, to retain the AOCI treatment under the prior capital rules.
In connection with the First Financial Trust & Asset Management Company, National Associations (the Trust Company) application to
obtain our trust charter, the Trust Company is required to maintain tangible net assets of $2,000,000 at all times. As of December 31, 2016, our Trust Company had tangible net assets totaling $14,300,000.
Our subsidiary bank may be required at times to maintain reserve balances with the Federal Reserve Bank. At December 31, 2016 and 2015, the subsidiary
banks reserve balances were $4,340,000 and $17,725,000, respectively.
15.
|
STOCK OPTION PLAN AND RESTRICTED STOCK PLAN:
|
The Company has an incentive stock plan to provide for the
granting of options to employees of the Company at prices not less than market at the date of grant. At December 31, 2016, the Company had allocated 3,337,000 shares of stock for issuance under the plan. The plan provides that options granted
are exercisable after two years from date of grant at a rate of 20% each year cumulatively during the
10-year
term of the option. Shares are issued under the stock option plan from available authorized shares.
An analysis of stock option activity for the year ended December 31, 2016 is presented in the table and narrative below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
Average
|
|
|
|
|
|
|
Shares
|
|
|
Weighted-
Average Ex. Price
|
|
|
Remaining
Contractual
Term (Years)
|
|
|
Aggregate Intrinsic
Value ($000)
|
|
Outstanding, beginning of year
|
|
|
1,231,346
|
|
|
$
|
26.70
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(82,871
|
)
|
|
|
15.69
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(54,440
|
)
|
|
|
(29.52
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, end of year
|
|
|
1,094,035
|
|
|
|
27.40
|
|
|
|
6.56
|
|
|
$
|
19,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of year
|
|
|
422,945
|
|
|
$
|
20.38
|
|
|
|
4.29
|
|
|
$
|
10,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-36
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
The options outstanding at December 31, 2016, had exercise prices ranging between $13.66 and $33.89.
Stock options have been adjusted retroactively for the effects of stock dividends and splits.
The following table summarizes information concerning
outstanding and vested stock options as of December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise Price
|
|
|
Number
Outstanding
|
|
|
Remaining
Contracted
Life (Years)
|
|
|
Number Vested
|
|
$
|
13.66
|
|
|
|
36,522
|
|
|
|
0.1
|
|
|
|
36,522
|
|
|
16.78
|
|
|
|
123,473
|
|
|
|
2.4
|
|
|
|
123,473
|
|
|
15.73
|
|
|
|
180,380
|
|
|
|
4.8
|
|
|
|
136,460
|
|
|
30.85
|
|
|
|
320,410
|
|
|
|
6.8
|
|
|
|
126,490
|
|
$
|
33.89
|
|
|
|
433,250
|
|
|
|
8.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,094,035
|
|
|
|
|
|
|
|
422,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of the options granted during 2015 were estimated using the Black-Scholes options pricing model with the
following weighted-average assumptions: risk-free interest rate of 1.89%; expected dividend yield of 1.89%; expected life of 5.78 years; and expected volatility of 23.36%.
The weighted-average grant-date fair value of options granted during 2015 was $6.72. There were no grants during 2014 and 2016. The total intrinsic value of
options exercised during the years ended December 31, 2016, 2015, and 2014, was $1,226,000, $1,539,000 and $1,738,000, respectively.
As of
December 31, 2016, there was $3,058,000 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 2.14
years. The total fair value of shares vested during the years ended December 31, 2016, 2015, and 2014 was $592,000, $810,000 and $382,000.
The
aggregate intrinsic value of vested stock options at December 31, 2016 totaled $10,498,000.
On April 28, 2015, shareholders of the Company
approved a restricted stock plan for selected employees, officers,
non-employee
directors and consultants. At December 31, 2016, the Company had allocated 439,000 shares of stock for issuance under the
plan.
On July 21, 2015, 7,070 shares were granted to the ten
non-employee
directors. Total value of these
shares totaled $250,000 and was expensed over the period from grant date to April 26, 2016, the next scheduled annual shareholders meeting at which the directors current term expired. On April 26, 2016, upon
re-election
of existing directors, 7,660 shares with a total value of $250,000 were granted to the ten
non-employee
directors and is being expensed over the period from grant
day to April 25, 2017, the next scheduled annual shareholders meeting at which the current directors current term will expire. The Company recorded director expense related to these restricted stock grants of $278,000 and $139,000
for the year ended December 31, 2016 and 2015, respectively.
On October 27, 2015, the Company granted 31,273 shares with a total value of
$1,060,000 to certain officers that is being expensed over the vesting period of three years. On October 25, 2016, the Company granted 15,405 shares with a total value of $560,000 to certain officers that is being expensed over the vesting
period of three years. The Company recorded restricted stock expense for officers of $381,000 and $62,000, respectively, for the year ended December 31, 2016 and 2015.
F-37
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
16.
|
CONDENSED FINANCIAL INFORMATION - PARENT COMPANY:
|
Condensed Balance Sheets-December 31, 2016 and
2015
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Cash in subsidiary bank
|
|
$
|
15,070
|
|
|
$
|
12,311
|
|
Cash in unaffiliated banks
|
|
|
2
|
|
|
|
2
|
|
Interest-bearing deposits in subsidiary bank
|
|
|
78,179
|
|
|
|
78,160
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
|
93,251
|
|
|
|
90,473
|
|
|
|
|
Securities
available-for-sale,
at fair value
|
|
|
11,593
|
|
|
|
12,062
|
|
Investment in and advances to subsidiaries, at equity
|
|
|
744,971
|
|
|
|
713,909
|
|
Intangible assets
|
|
|
723
|
|
|
|
723
|
|
Other assets
|
|
|
2,668
|
|
|
|
3,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
853,206
|
|
|
$
|
820,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
15,321
|
|
|
$
|
15,874
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
661
|
|
|
|
660
|
|
Capital surplus
|
|
|
372,245
|
|
|
|
368,925
|
|
Retained earnings
|
|
|
446,534
|
|
|
|
388,006
|
|
Treasury stock
|
|
|
(6,671
|
)
|
|
|
(6,296
|
)
|
Deferred compensation
|
|
|
6,671
|
|
|
|
6,296
|
|
Accumulated other comprehensive earnings
|
|
|
18,445
|
|
|
|
47,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
837,885
|
|
|
|
804,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
853,206
|
|
|
$
|
820,860
|
|
|
|
|
|
|
|
|
|
|
F-38
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Condensed Statements of Earnings-
For the Years Ended December 31, 2016, 2015 and 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends from subsidiaries
|
|
$
|
48,800
|
|
|
$
|
51,200
|
|
|
$
|
34,000
|
|
Excess of earnings over dividends of subsidiaries
|
|
|
58,809
|
|
|
|
52,911
|
|
|
|
58,539
|
|
|
|
|
|
Other
|
|
|
4,184
|
|
|
|
4,185
|
|
|
|
3,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Income
|
|
|
111,793
|
|
|
|
108,296
|
|
|
|
96,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
5,655
|
|
|
|
6,067
|
|
|
|
5,595
|
|
Other operating expenses
|
|
|
3,531
|
|
|
|
4,439
|
|
|
|
3,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expense
|
|
|
9,186
|
|
|
|
10,506
|
|
|
|
8,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes
|
|
|
102,607
|
|
|
|
97,790
|
|
|
|
87,352
|
|
|
|
|
|
Income tax benefit
|
|
|
2,167
|
|
|
|
2,591
|
|
|
|
2,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
104,774
|
|
|
$
|
100,381
|
|
|
$
|
89,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-39
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Condensed Statements of Cash Flows-
For the Years Ended December 31, 2016, 2015, and 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
104,774
|
|
|
$
|
100,381
|
|
|
$
|
89,559
|
|
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess of earnings over dividends of subsidiary bank
|
|
|
(58,809
|
)
|
|
|
(52,911
|
)
|
|
|
(58,539
|
)
|
Depreciation and amortization, net
|
|
|
208
|
|
|
|
197
|
|
|
|
200
|
|
Decrease (increase) in other assets
|
|
|
1,702
|
|
|
|
507
|
|
|
|
(150
|
)
|
Increase (decrease) in other liabilities
|
|
|
(1,374
|
)
|
|
|
3,743
|
|
|
|
(314
|
)
|
Other
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
46,509
|
|
|
|
51,917
|
|
|
|
30,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash received (paid) in connection with acquisition of banks
|
|
|
|
|
|
|
13,125
|
|
|
|
|
|
Net decrease in interest-bearing time deposits in unaffiliated banks
|
|
|
|
|
|
|
|
|
|
|
480
|
|
Purchases of bank premises and equipment
|
|
|
(94
|
)
|
|
|
(107
|
)
|
|
|
(780
|
)
|
Repayment from (of advances to) investment in and advances to subsidiaries, net
|
|
|
|
|
|
|
5,800
|
|
|
|
(3,300
|
)
|
Other
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in (provided by) investing activities
|
|
|
(84
|
)
|
|
|
18,818
|
|
|
|
(3,600
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of subordinated debt
|
|
|
|
|
|
|
(13,125
|
)
|
|
|
|
|
Proceeds of stock issuances
|
|
|
1,260
|
|
|
|
1,545
|
|
|
|
1,437
|
|
Cash dividends paid
|
|
|
(44,907
|
)
|
|
|
(38,767
|
)
|
|
|
(34,578
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(43,647
|
)
|
|
|
(50,347
|
)
|
|
|
(33,141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
2,778
|
|
|
|
20,388
|
|
|
|
(5,985
|
)
|
|
|
|
|
Cash and cash equivalents, beginning of year
|
|
|
90,473
|
|
|
|
70,085
|
|
|
|
76,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
93,251
|
|
|
$
|
90,473
|
|
|
$
|
70,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-40
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
17.
|
CASH FLOW INFORMATION:
|
Supplemental information on cash flows and noncash transactions is as follows
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
5,465
|
|
|
$
|
4,085
|
|
|
$
|
4,231
|
|
Federal income taxes paid
|
|
|
28,348
|
|
|
|
29,674
|
|
|
|
28,711
|
|
|
|
|
|
Schedule of noncash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets acquired through foreclosure
|
|
|
2,269
|
|
|
|
203
|
|
|
|
1,385
|
|
Investment securities purchased but not settled
|
|
|
12,381
|
|
|
|
|
|
|
|
1,248
|
|
18.
|
ACQUISITIONS AND ASSET PURCHASE:
|
On April 1, 2015, we entered into an agreement and plan of
reorganization to acquire FBC Bancshares, Inc. and its wholly owned bank subsidiary, First Bank, N.A., Conroe, Texas. On July 31, 2015, the transaction was completed. Pursuant to the agreement, we issued 1,755,374 shares of the Companys
common stock in exchange for all of the outstanding shares of FBC Bancshares, Inc. At closing, FBC Bancshares, Inc. was merged into the Company and First Bank, N.A., Conroe, Texas, was merged into First Financial Bank, National Association, Abilene,
Texas, a wholly owned subsidiary of the Company. The primary purpose of the acquisition was to expand the Companys market share along Interstate Highway 45 in southern Texas, north of Houston. Factors that contributed to a purchase price
resulting in goodwill include First Bank, N.A.s historic record of earnings, strong local economic environment and opportunity for growth. The results of operations from this acquisition are included in the consolidated earnings of the Company
commencing August 1, 2015.
The assets acquired and liabilities assumed were recorded on the consolidated balance sheet at estimated fair value on
the acquisition date. The acquisition was not considered to be a significant business combination. The following table presents the amounts recorded on the consolidated balance sheet on the acquisition date (dollars in thousands):
|
|
|
|
|
Fair value of consideration paid:
|
|
|
|
|
Common stock issued (1,755,374 shares)
|
|
$
|
59,648
|
|
|
|
|
|
|
|
|
Fair value of identifiable assets acquired:
|
|
|
|
|
Cash and cash equivalents
|
|
|
65,197
|
|
Securities
available-for-sale
|
|
|
42,903
|
|
Loans
|
|
|
248,380
|
|
Identifiable intangible assets
|
|
|
2,343
|
|
Other assets
|
|
|
15,262
|
|
|
|
|
|
|
Total identifiable assets acquired
|
|
|
374,085
|
|
|
|
|
|
|
|
|
Fair value of liabilities assumed:
|
|
|
|
|
Deposits
|
|
|
343,583
|
|
Subordinated debt
|
|
|
13,125
|
|
Other liabilities
|
|
|
1,651
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
358,359
|
|
|
|
|
|
|
|
|
Fair value of net identifiable assets acquired
|
|
|
15,726
|
|
|
|
|
|
|
|
|
Goodwill resulting from acquisition
|
|
$
|
43,922
|
|
|
|
|
|
|
F-41
FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2016, 2015 and 2014
Goodwill recorded in the acquisition was accounted for in accordance with the authoritative business
combination guidance. Accordingly, goodwill will not be amortized, but will be tested for impairment annually. The goodwill recorded is not deductible for federal income tax purposes.
The subordinated debt of $13,125,000 was paid off August 3, 2015, subsequent to closing.
The fair value of total loans acquired was $248,380,000 at acquisition compared to contractual amounts of $252,458,000. The fair value of purchased credit
impaired loans at acquisition was $1,398,000 compared to contractual amounts of $1,704,000. Additional purchased credit impaired loan disclosures were omitted due to immateriality. All other acquired loans were considered performing loans.
First Bank, N.A. had branches in Conroe, Magnolia, Tomball, Willis, Cut and Shoot and Huntsville, all located north of Houston, Texas. In February 2016, the
Company closed First Banks Huntsville location and consolidated the branch with the Companys existing Huntsville location.
On April 8,
2015, the Company announced that it had entered into an asset purchase agreement with 4Trust Mortgage, Inc. for a cash purchase price of $1,900,000. The asset purchase was finalized on June 1, 2015. The total asset purchase price exceeded the
estimated fair value of assets purchased by approximately $1,750,000 and the Company recorded such excess as goodwill.
F-42
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