First Financial Bankshares Inc.
) gained 0.9% since the company reported a top-line growth in its
third-quarter 2013 result release on Oct 17. Earnings per share
of 61 cents however missed the Zacks Consensus Estimate by 4
cents. This also compares unfavorably with the year-ago earnings
of 63 cents.
Results were adversely affected by an increase in operating
expenses, deteriorating profitability ratios and higher provision
for credit losses. However, increase in net interest and
non-interest income, and an improved asset quality were the
positives for the quarter.
Net income for the quarter came in at $19.6 million, declining
1.2% year over year.
Performance in Detail
The company's total revenue came in at $63.7 million, up 14.2%
from $55.8 million in the prior-year quarter. Further, revenues
marginally beat the Zacks Consensus Estimate of $63.0 million.
Net interest income increased 16.3% year over year to $45.5
million. However, on a taxable equivalent basis, net interest
margin declined to 4.25% from 4.26% in the prior-year quarter.
Non-interest income rose 10.17% year over year to $17.18 million.
The increase was primarily attributable to a rise in trust fees,
ATM, interchange and credit card fees as well as real estate
Non-interest expense came in at $35.53 million compared with
$27.20 million in the year-ago quarter. The increase reflects
technology contract termination and conservation costs of $3.40
million owing to the acquisition of Orange Savings Bank and
increase in personnel, legal, tax and professional fees.
The efficiency ratio increased to 53.10% from 46.61% in the
prior-year quarter. A rise in efficiency ratio indicates
deterioration in profitability.
As of Sep 30, 2013, total loans were $2.6 billion, up 30% from
$2.0 billion as of Jun 30, 2012. Total deposits increased 16.3%
year over year to $4.0 billion.
Asset quality exhibited an improvement in the quarter. The
allowance for loan losses marginally decreased from $34.9 million
to $34.8 million year over year. The ratio of allowance for loan
losses to total loans dipped to 1.33% from 1.74% in the
Net charge-offs were 0.10% of average loans on an annualized
basis, down from 0.12% in the prior-year quarter. Total
nonperforming assets were $28.5 million, down 7.2% from the
year-ago period. Moreover, nonperforming assets were 0.56% of
total assets, down from 0.71% in the prior-year quarter.
However, provision for credit losses increased to $1.3 million
from $0.9 million in the year-ago quarter.
Profitability and Capital Ratios
First Financial's capital and profitability ratios deteriorated
in the third quarter. As of Sep 30, 2013, Tier-1 risk-based
capital ratio was 15.37%, compared with 17.66% as of Sep 30,
2012. Moreover, total risk-based capital ratio came in at 16.49%
against 18.92% at the end of the year-ago quarter.
Tier 1 leverage ratio was 9.77%, compared with 10.49% at the end
of the year-ago quarter.
First Financial's strategic acquisitions and organic growth is
quite impressive. Moreover, the company's strong balance sheet is
expected to bode well for its overall expansion going forward.
However, the prevailing low interest-rate environment, sluggish
economic growth, non-diverse footprint and a stringent regulatory
landscape are expected to adversely affect the company's
financials in the subsequent quarters.
First Financial carries a Zacks Rank #2 (Buy).
Some other Southwest banks worth considering include
Banc of California, Inc.
Prosperity Bancshares Inc
). While Banc of California carries a Zacks Rank #1 (Strong Buy),
the other two hold a Rank #2 (Buy).
BANC OF CA INC (BANC): Free Stock Analysis
BANCFIRST OKLA (BANF): Free Stock Analysis
FIRST FIN BK-TX (FFIN): Free Stock Analysis
PROSPERITY BCSH (PB): Free Stock Analysis
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