First Financial Bankshares Announces Second Quarter Earnings Results

ABILENE, Texas, July 23, 2020 /PRNewswire/ -- First Financial Bankshares, Inc. (NASDAQ: FFIN) today reported earnings for the second quarter of 2020 of $53.47 million when compared with earnings of $42.09 million in the same quarter last year and $37.23 million in the first quarter of 2020. Basic and diluted earnings per share were $0.38 for the second quarter of 2020 compared with $0.31 in the same quarter a year ago and $0.26 for the first quarter of 2020.

All amounts for the three and six-months ended June 30, 2020, include the results of the Company's acquisition of TB&T Bancshares, Inc. and its wholly-owned subsidiary, The Bank & Trust of Bryan/College Station, Texas which was effective January 1, 2020. As of the acquisition date, The Bank & Trust of Bryan/College Station had total assets of $631.26 million, total loans of $455.18 million and total deposits of $548.38 million. The Company recorded a $7.65 million discount on the acquired loan portfolio.

"We are very pleased with our second quarter earnings performance, especially in the current environment of a pandemic, the shutdown of the economy and lower oil and gas prices," said F. Scott Dueser, Chairman, President and CEO. "We could not be prouder of our team that responded quickly to the SBA-PPP program and funded nearly 6,500 loans totaling over $700 million which not only took care of our existing customers but brought many new loan and depository customers from other banks that were not as well prepared to offer the PPP program or chose not to participate at all. We responded to the pandemic by protecting our employees and customers while keeping our doors open and working very long hours to make sure that our customers were taken care of well. At the same time, we had record mortgage closings. Although it was a tough quarter, we navigated well through the challenges and continue to stay TEXAS STRONG."

Overall, net interest income for the second quarter of 2020 increased $8.33 million and $17.62 million from the first quarter of 2020 and the second quarter of 2019, respectively. Net interest income was positively impacted by the Company's participation in the Small Business Administration Paycheck Protection Program (PPP), an increase in investment securities and the reduction in interest rates paid on deposits. The following table summarizes key net interest income and net interest margin metrics for the second and first quarters of 2020 and the second quarter of 2019:

The Company processed approximately 6,500 PPP loans and funded $703.12 million ($586.03 million in average balances for the second quarter of 2020). The Company received PPP related origination fees totaling approximately $26.07 million and incurred incremental direct origination costs of $3.62 million, both of which have been deferred and are being amortized over the shorter of the repayment period or 24 months, the contractual life of these loans, totaling $2.83 million in the second quarter of 2020.

The provision for loan losses was $8.70 million in the second quarter of 2020 compared with $9.85 million in the first quarter of 2020 and $600 thousand in the second quarter of 2019. The Company's provision for loan losses in the second quarter of 2020 continues to reflect uncertainty surrounding the economic impact caused by the coronavirus (COVID-19) and the decline in oil and gas prices. At June 30, 2020, the allowance for loan losses totaled $68.95 million, or 1.31 percent of loans held for investment, or 1.52 percent of loans held for investment excluding PPP loans, compared to $60.44 million at March 31, 2020, or 1.30 percent of loans held for investment.

Accounting Standards Update (ASU) 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (CECL), became effective for the Company on January 1, 2020. However, the COVID-19 related legislation included an option for entities to delay the implementation of CECL until the earlier of the termination date of the national emergency declaration by the President, or December 31, 2020. The Company elected to delay implementation of CECL and has calculated and recorded the provision for loan losses for the quarter under the incurred loss model that existed prior to CECL.  The CECL related modeling continues to be refined as the Company moves to adopt CECL later this year. 

Nonperforming assets as a percentage of loans and foreclosed assets totaled 0.75 percent at June 30, 2020, compared with 0.86 percent at March 31, 2020, and 0.69 percent at June 30, 2019. Classified loans totaled $200.90 million at June 30, 2020, compared to $190.35 million at March 31, 2020, and $126.04 million at June 30, 2019.

Beginning in mid-March of 2020, the Company began offering deferral and modification of principle and/or interest payments to selected borrowers on a case-by-case basis. At June 30, 2020, the Company had approximately 2,200 loans totaling $468.54 million in outstanding loans subject to deferral and modification agreements, representing 10.30 percent of outstanding loans held for investment, excluding PPP loans.

At June 30, 2020, loans with oil and gas industry exposure, excluding PPP loans, totaled $128.14 million, or 2.78 percent of total loans, excluding PPP loans. These loans comprised $28.37 million of classified loans including $3.70 million in nonperforming loan totals. At June 30, 2020, the Company's allowance for loan loss specific reserves on its total oil and gas loan portfolio totaled 4.17 percent of total oil and gas loans, excluding PPP loans, and net charge-offs totaled $195 thousand and $801 thousand for the three and six-months ended June 30, 2020, respectively.

In addition, at June 30, 2020, loan balances in the retail/restaurant/hospitality industries, excluding PPP loans, totaled $338.76 million or 7.34 percent of the Company's total loans, excluding PPP loans. These loans comprised $15.84 million of classified loans including $5.75 million in nonperforming loan totals.   Net charge-offs related to this portfolio totaled $178 thousand and $308 thousand for the three and six-months ended June 30, 2020, respectively.

Noninterest income in the second quarter of 2020 rose to $36.92 million compared with $27.98 million in the same quarter a year ago. Trust fees decreased $66 thousand to $6.96 million in the second quarter of 2020 compared with $7.03 million in the same quarter last year. The fair value of trust assets managed increased to $6.78 billion from $6.19 billion a year ago. Service charges on deposits decreased to $4.32 million compared with $5.37 million in the same quarter a year ago due largely to the lack of economic activity caused by the pandemic during the second quarter of 2020. ATM, interchange and credit card fees increased 9.48 percent to $8.05 million compared with $7.35 million in the same quarter last year due to continued growth in the number of debit cards issued and our Bryan/College Station acquisition.  Mortgage related income increased 189.68 percent to $13.68 million compared with $4.72 million in the same quarter a year ago due to a significant increase in the volume of loans originated.  The Company's mortgage loan pipeline increased to $182.14 million as of June 30, 2020, when compared to $65.90 million at June 30, 2019. Also included in noninterest income during the second quarter of 2020 was a gain on sale of securities of $1.51 million compared to $676 thousand from the same quarter a year ago.

Noninterest expense for the second quarter of 2020 totaled $53.32 million compared to $48.30 million in the second quarter of 2019. The Company's efficiency ratio in the second quarter of 2020 was 41.32 percent compared with 47.71 percent in the same quarter last year. Included in noninterest expense in the second quarter of 2020 were salary and employee benefit costs of $30.81 million compared to $27.39 million in the same quarter a year ago, primarily driven by the Bryan/College Station acquisition, annual merit-based pay increases and higher mortgage related commissions, offset by the deferral of $3.62 million in PPP loan origination costs. Also included in noninterest expense in the second quarter of 2020 were conversion related costs totaling $583.46 thousand as a result of the Bryan/College Station acquisition.

As of June 30, 2020, consolidated assets for the Company totaled $10.34 billion compared to $9.70 billion at March 31, 2020 and $7.98 billion at June 30, 2019. Loans totaled $5.32 billion at June 30, 2020, compared with loans of $4.68 billion at March 31, 2020, and $4.06 billion at June 30, 2019. Deposits totaled $8.16 billion at June 30, 2020, compared to $7.21 billion at March 31, 2020, and $6.37 billion at June 30, 2019. Additional information related to the Company's loan and deposit balances are as follows:

Shareholders' equity rose to $1.58 billion as of June 30, 2020, compared with $1.53 billion at March 31, 2020, and $1.16 billion at June 30, 2019, primarily from the Bryan/College Station acquisition. At June 30, 2020, the Company's capital ratios significantly exceeded all well-capitalized requirements.

About First Financial Bankshares:

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

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

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