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First Financial Bankshares Inc. Reports Operating Results (10-Q)

May 05, 2009 | About:

First Financial Bankshares Inc. (FFIN) filed Quarterly Report for the period ended 2009-03-31.

FIRST FINL BANKSHARES INC. is a registered multi-bank holding company. First Financial Bankshares Inc. has a market cap of $1.06 billion; its shares were traded at around $51 with a P/E ratio of 19.8 and P/S ratio of 5.1. The dividend yield of First Financial Bankshares Inc. stocks is 2.7%. First Financial Bankshares Inc. had an annual average earning growth of 12% over the past 5 years.

Highlight of Business Operations:

Tax equivalent net interest income for the first quarter of 2009 amounted to $34.2 million as compared to $31.4 million for the same period last year. Our yield on interest earning assets decreased approximately 85 basis points while our rates paid on interest bearing liabilities decreased 143 basis points. The increase in volume of average interest earning assets of $153.1 million partially offset the decrease in rates, but overall resulted in a decrease of $4.1 million in interest income. Average interest bearing liabilities increased $38.2 million. The impact of the moderate increase in the volume of interest bearing liabilities was offset by a decrease in rates paid resulting in a decline in interest expense totaling $6.9 million. Average earning assets were $2.91 billion for the first quarter of 2009, which were 5.6% greater than for the first quarter of 2008. Average interest bearing liabilities were $2.00 billion for the first quarter of 2009, which were 1.9% greater than for the first quarter of 2008. The Companys interest spread increased to 4.44% for 2009 from 3.88% for 2008. The Companys net interest margin was 4.76% for the first quarter of 2009, an increase of 18 basis points compared to 4.58% for the same period of 2008, and down 1 basis point from the 4.77% level for the fourth quarter of 2008. Our net interest margin increased slightly from prior periods despite the volatile interest rate environment which saw the Federal funds rate drop 200 basis points from March 2008 through December 2008. Should interest rates remain at the current low levels, we anticipate that the impact of lower yields on loans and investment securities and competition for deposits will put downward pressure on our net interest margin.

The provision for loan losses for the first quarter of 2009 was $1.8 million compared to $1.1 million for the same period in 2008. The increase in the provision for loan losses recorded in the first quarter of 2009 resulted from the slowdown in the economy and the increase in nonperforming loans. Gross charge-offs for the quarter ended March 31, 2009, totaled $893 thousand compared to $288 thousand for the same period of 2008. Recoveries of previously charged-off loans totaled $255 thousand in the quarter ended March 31, 2009, as compared to $135 thousand in the same period of 2008. On an annualized basis, net charge-offs as a percentage of average loans were 0.17% for the first quarter of 2009, as compared to 0.04% for the same period in 2008. The Companys allowance for loan losses totaled $22.7 million at March 31, 2009, up $4.3 million from the balance of $18.4 million at March 31, 2008, and up $1.1 million from the balance of $21.5 million at December 31, 2008. The Companys allowance as a percentage of nonperforming loans amounted 233.5% at March 31, 2009 compared to 465.0% at March 31, 2008, and 216.8% at December 31, 2008.

Total noninterest income for the first quarter of 2009 was $11.5 million, as compared to $12.3 million for the same period last year. Trust fees totaled $2.1 million for 2009, down $253 thousand over the same period in 2008, reflecting declines in the market value of the equity investments under management and lower oil and gas prices, offset in part by a growth of $223 million in trust assets under management over the prior year. The market value of trust assets managed totaled $1.9 billion at March 31, 2009, compared to $1.8 billion at March 31, 2008. The book value of trust assets managed totaled $1.7 billion at March 31, 2009, compared to $1.5 billion at March 31, 2008. Service charges on deposit accounts totaled $5.1 million for the first quarter of 2009, compared to $5.5 million for the same period of 2008, a decrease of $384 thousand reflecting primarily a decline in usage of our overdraft privilege product. Fees from the Companys real estate mortgage operations of $588 thousand represented a slight decrease from the $605 thousand recognized in the first quarter of 2008. ATM and credit card fees increased 8.8% to $2.2 million versus $2.0 million a year ago, indicative of continued increases in the use of debit cards and growth in net new deposit accounts. A net gain of $616 thousand on the sale of approximately $73.7 million in student loans, approximately 86% of the student loan portfolio, was recorded in the first quarter of 2009, compared to a net gain of $283 thousand recorded in the same period last year on the sale of $9.4 million in student loans. The Company recognized a net gain of $1.7 million on the sale of $62.7 million in student loans for the year ended December 31, 2008, the most significant portion was realized in the second quarter of 2008. The Company has suspended its student lending activities as a result of changes mandated by the Department of Education that significantly reduced the profitability of the student loan program. It is currently anticipated that the remaining portfolio of student loans will be sold in the second or third quarter of this year.

Noninterest expense for the first quarter of 2009 amounted to $22.9 million, as compared to $22.7 million for the same period in 2008. Salaries and employee benefits expense, the Companys largest noninterest expense item, decreased 4.4% to $12.0 million in 2009, down $556 thousand from the same period in 2008. The decrease in salaries and benefits expense reflected decreases in healthcare costs of $342 thousand and employee profit sharing of $550 thousand. Net occupancy expense was $1.6 million for the first quarter of 2009, an increase of 1.8% over the same period last year. Equipment expense was $1.9 million for the quarter ended March 31, 2009, an increase of $93 thousand over the first quarter of 2008. FDIC insurance premiums were $951 thousand in the first quarter of 2009 compared to $133 thousand for the same period last year. The increase in the FDIC insurance premiums is the result of having utilized FDIC insurance premium credits in prior periods and an increase in 2009 of the FDIC insurance premium rates. The FDIC is currently considering an additional special assessment that could further significantly increase this expense for the Company for the remainder of 2009.

Loans totaled $1.48 billion, $1.57 billion and $1.54 billion at March 31, 2009, December 31, 2008 and March 31, 2008, respectively. Loans held for investment at March 31, 2009, were $1.47 billion, a decrease of $14.1 million from the March 31, 2008 balance. As compared to March 31, 2008, loans held for investment at March 31, 2009, reflect (i) a $13.2 million decrease in commercial, financial and agricultural loans; (ii) a $1.1 million decrease in real estate loans; and (iii) a $0.3 million increase in consumer loans. Loans held for sale at March 31, 2009, were $14.2 million, a decrease of $42.2 million from the March 31, 2008 balance, substantially all as a result of the sale of student loans recorded in the first quarter of 2009. At March 31, 2009, loans held for sale were comprised of $9.8 million in student loans and $4.5 million in residential mortgage loans.

Investment securities, including trading securities, at March 31, 2009, totaled $1.33 billion as compared to $1.32 billion at year-end 2008 and $1.12 billion at March 31, 2008. The net unrealized gain in the investment portfolio at March 31, 2009, was $35.4 million. At March 31, 2009, gross unrealized gains totaled $40.7 million and gross unrealized losses totaled $5.3 million. We do not believe these unrealized losses are other than temporary as (1) we do not have the intent to sell our securities prior to recovery and (2) it is more likely than not that we will not have to sell our securities prior to recovery. The unrealized losses noted are interest rate related due to the level of short-term and intermediate interest rates at March 31, 2009. 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.

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Rating: 3.3/5 (3 votes)

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