What changed in this filing

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Item 1. Financial Statements

2020-07-28 compared with 2020-04-24 · 318 added, 215 removed, 644 unchanged (45% of the section changed)

1 unchanged sentence

The consolidated balance sheets of First Financial Bankshares, Inc.

(the “Company” or “we”) at March 31, 2020 and 2019 and December 31, 2019, and the consolidated statements of earnings, comprehensive earnings, shareholders’ equity and cash flows for the three months ended March 31, 2020 and 2019, follow on pages 3 through 7.

and Subsidiaries (the “Company” or “we”) at June 30, 2020 and 2019 (unaudited) and December 31, 2019, and the consolidated statements of earnings, comprehensive earnings and shareholders’ equity for the three and six-months

ended June 30, 2020 and 2019 (unaudited), and the consolidated statements of cash flows for the six-months

ended June 30, 2020 and 2019 (unaudited) and notes to consolidated financial statements (unaudited), follow on pages 4

FIRST FINANCIAL BANKSHARES, INC.

4 unchanged sentences

FEDERAL FUNDS SOLD

INTEREST-BEARING DEPOSITS IN BANKS

INTEREST-BEARING DEMAND DEPOSITS IN BANKS

Total cash and cash equivalents

5 unchanged sentences

Net loans held for investment

Held for sale ($ 39,659 at fair value at March 31, 2020;

$ 12,007 at March 31, 2019;

and $ 23,076 at December 31, 2019)

Held for sale ($ 63,293 , $ 18,981 and $ 23,076 at fair value at June 30, 2020 and 2019 and December 31, 2019, respectively)

BANK PREMISES AND EQUIPMENT, net

INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS, net

LIABILITIES AND SHAREHOLDERS’ EQUITY

7 unchanged sentences

SHAREHOLDERS’ EQUITY:

Common stock - ($ 0.01 par value, authorized 200,000,000 shares;

142,314,930 , 135,680,420 and 135,891,755 shares issued at March 31, 2020 and 2019 and December 31, 2019, respectively)

Common stock -

($ 0.01 par value, authorized 200,000,000 shares;

142,035,396 , 135,809,224 and 135,891,755 shares issued at June 30, 2020 and 2019 and December 31, 2019, respectively)

Capital surplus

1 unchanged sentence

Treasury stock (shares at cost:

928,417 , 928,678 and 927,408 at March 31, 2020 and 2019, and December 31, 2019, respectively)

932,018 , 929,441 and 927,408 at June 30, 2020 and 2019 and December 31,

2019, respectively)

Deferred compensation

Accumulated other comprehensive earnings (loss)

Accumulated other comprehensive earnings, net of income taxes

Total shareholders’ equity

5 unchanged sentences

(Dollars in thousands, except per share amounts)

Three Months Ended

Three Months Ended June 30,

Six Months Ended June 30,

INTEREST INCOME:

13 unchanged sentences

ATM, interchange and credit card fees

Real estate mortgage operations

Gain on sale and fees on mortgage loans

Net gain on sale of available-for-sale

securities (includes $ 2,062 and $ - for the three months ended March 31, 2020 and 2019, respectively, related to accumulated other comprehensive earnings reclassifications)

securities (includes $ 1,512 and $ 676 for the three -

months ended June 30, 2020 and 2019, respectively, and $ 3,574 and $ 676 for the six -

months ended June 30, 2020 and 2019, respectively, related to accumulated other comprehensive earnings reclassifications)

Net gain on sale of foreclosed assets

Net gain on sale of assets

Net gain (loss) on sale of assets

Interest on loan recoveries

1 unchanged sentence

NONINTEREST EXPENSE:

Salaries and employee benefits

Salaries, commissions and employee benefits

Loss from partial settlement of pension plan

Net occupancy expense

9 unchanged sentences

EARNINGS BEFORE INCOME TAXES

INCOME TAX EXPENSE

(includes $ 433 and $ - for the three months ended March 31, 2020 and 2019, respectively, related to income tax expense reclassification)

I NCOME TAX EXPENSE

(includes $ 318 and $ 142 for the three months ended June 30, 2020 and 2019, respectively, and $ 751 and $ 142 for the six months ended June 30, 2020 and 2019, respectively, related to income tax expense from reclassification items)

EARNINGS PER SHARE, BASIC

EARNINGS PER SHARE, ASSUMING DILUTION

EARNINGS PER SHARE, DILUTED

DIVIDENDS PER SHARE

4 unchanged sentences

(Dollars in thousands)

Three Months Ended

OTHER ITEMS OF COMPREHENSIVE EARNINGS (LOSS):

Three Months Ended June 30,

Six Months Ended June 30,

OTHER ITEMS OF COMPREHENSIVE EARNINGS:

Change in unrealized gain on investment securities available-for-sale,

before income taxes

Reclassification adjustment for realized gains on investment securities included in net earnings, before income taxes

Total other items of comprehensive earnings (loss)

Income tax benefit (expense) related to other items of comprehensive earnings

Reclassification adjustment for realized gains on investment securities included in net earnings,

before income tax

Total other items of comprehensive earnings

Income tax expense related to other items of comprehensive earnings

COMPREHENSIVE EARNINGS

7 unchanged sentences

Shareholders’

Balances at December 31, 2018

Balances at March 31, 2019 (unaudited)

Net earnings (unaudited)

Stock option exercises (unaudited)

Cash dividends declared, $ 0.11 per share (unaudited)

Change in unrealized gain in investment securities available-for-sale,

net of related income taxes (unaudited)

Shares purchased (redeemed) in connection with directors’ deferred compensation plan, net (unaudited)

Restricted stock grant (unaudited)

Cash dividends declared, $ 0.12

per share (unaudited)

Change in unrealized gain in investment securities available-for-sale, net of related income taxes (unaudited)

Shares purchased (redeemed) in connection with directors’

deferred compensation plan, net

Stock option expense (unaudited)

stock spllit in the form of a 100 % stock dividend (unaudited)

Balances at June 30, 2019 (unaudited)

Balances at March 31, 2020 (unaudited)

Net earnings (unaudited)

Stock option exercises (unaudited)

Restricted stock grant (unaudited)

Cash dividends declared, $ 0.13

share (unaudited)

Change in unrealized gain in investment securities available-for-sale, net of related income taxes (unaudited)

Shares purchased (redeemed) in

connection with directors’

deferred compensation plan, net

Stock option expense (unaudited)

Shares repurchased under stock

repurchase authorization

Balances at June 30, 2020 (unaudited)

FIRST FINANCIAL BANKSHARES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Dollars in thousands, except per share amounts)

Treasury Stock

Comprehensive

Shareholders’

Balances at December 31, 2018

Stock issued in acquisition of TB&T Bancshares, Inc.

Net earnings (unaudited)

1 unchanged sentence

Restricted stock grant (unaudited)

Cash dividends declared, $ 0.12 per share (unaudited)

Change in unrealized gain in investment securities available-for-sale,

net of related income taxes (unaudited)

Shares purchased (redeemed) in connection with directors’ deferred compensation plan, net (unaudited)

Cash dividends declared, $ 0.23

per share (unaudited)

Change in unrealized gain in investment securities available-for-sale, net of related income taxes (unaudited)

Shares purchased (redeemed) in

connection with directors’

deferred compensation plan, net

Stock option expense (unaudited)

Balances at March 31, 2020 (unaudited)

stock split in the form of a

100 % stock dividend (unaudited)

Balances at June 30, 2019 (unaudited)

Balances at December 31, 2019

Stock issued in acquisition of TB&T

Bancshares, Inc.

Net earnings (unaudited)

Stock option exercises (unaudited)

Restricted stock grant (unaudited)

Cash dividends declared, $ 0.25

per share (unaudited)

Change in unrealized gain in investment securities available-for-sale, net of related income taxes (unaudited)

Shares purchased (redeemed) in

connection with directors’

deferred compensation plan, net

Stock option expense (unaudited)

Shares repurchased under stock

repurchase authorization

Balances at June 30, 2020 (unaudited)

See notes to consolidated financial statements.

3 unchanged sentences

(Dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

1 unchanged sentence

Depreciation and amortization

Provision for credit loss expense

Securities premium amortization, net

Gain (loss) on sale of assets, net

Deferred federal income tax benefit

Provision for loan losses

Securities premium amortization (discount accretion), net

Gain on sale of assets, net

Deferred federal income tax (expense) benefit

Change in loans held-for-sale

5 unchanged sentences

Cash received in acquisition of TB&T Bancshares, Inc.

Net decrease in interest-bearing time deposits in banks

Activity in available-for-sale

Net decrease (increase) in loans

Purchases of bank premises and equipment and other assets

Net increase in loans

Purchases of bank premises and equipment

Proceeds from sale of bank premises and equipment and other assets

1 unchanged sentence

CASH FLOWS FROM FINANCING ACTIVITIES:

Net increase (decrease) in noninterest-bearing deposits

Net increase in noninterest-bearing deposits

Net increase in interest-bearing deposits

3 unchanged sentences

Dividends paid

Net cash provided by (used in) financing activities

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

Repurchase of stock

Net cash provided by financing activities

NET INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, beginning of period

1 unchanged sentence

SUPPLEMENTAL INFORMATION AND NONCASH TRANSACTIONS:

Investment securities purchased but not yet settled

Investment securities sold but not yet settled

Interest paid

Federal income taxes paid

Transfer of loans and bank premises to other real estate

Investment securities purchased but not settled

Restricted stock grant to officers and directors

Stock issued in acquisition of TB&T Bancshares, Inc.

See notes to consolidated financial statements.

5 unchanged sentences

First Financial Bankshares, Inc.

(a Texas corporation) (“Company”, “we” or “us”) is a financial holding company which owns all of the capital stock of one bank with 78 locations located in Texas as of March 31, 2020.

(a Texas corporation) (“Company”, “we” or “us”) is a financial holding company which owns all of the capital stock of one bank with 78 locations located in Texas as of June 30, 2020.

The Company’s subsidiary bank is First Financial Bank, National Association, Abilene, Texas.

2 unchanged sentences

A summary of significant accounting policies of the Company 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 accounting principles followed by the Company and the methods of applying them are in conformity with both United States generally accepted accounting principles (“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.

The preparation of financial statements in conformity with generally accepted accounting principles (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 Company’s significant estimates include its allowance for loan losses and its valuation of financial instruments.

The Company’s significant estimates include its allowance for loan losses and its valuation of securities.

Consolidation

2 unchanged sentences

Stock Split and Increase in Authorized Shares

On April 23, 2019, the Company’s Board of Directors declared a two-for-one stock split of the Company’s outstanding common shares effective on June 3, 2019.

On April 23, 2019, the Company’s Board of Directors declared a two-for-one stock split of the Company’s outstanding common

shares in the form of a 100% stock dividend

effective on June 3, 2019.

In addition, the shareholders of the Company approved an amendment to the Amended and Restated Certificate of Formation to increase the number of authorized shares to 200,000,000 .

All 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 to be issued pursuant to the stock split was reflected as a transfer from retained earnings to common stock in the consolidated financial statements as of and for the three-months ended March 31, 2019.

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 in the consolidated financial statements as of and for the six -

months ended June 30, 2019.

Stock Repurchase

2 unchanged sentences

The stock repurchase plan

authorizes management to repurchase the stock at such time as repurchases are considered beneficial to the Company and stockholders.

authorizes management to repurchase the stock at such time as repurchases are considered beneficial to

the Company and 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.

Through March 31, 2020, no

shares were repurchased under this repurchase plan or the prior authorization that was to expire September 30, 2020.

Subsequent to March 31, 2020 and through April 21, 2020, the Company has

repurchased 263,464 shares totaling $ 6,480,000 .

Through June 30, 2020, 324,802 shares were repurchased totaling $ 8,008,000 under this repurchase plan.

Subsequent to June 30, 2020 and through July 28, 2020, no additional shares were repurchased.

were reti red.

On January 1, 2020, the Company acquired 100 % of the outstanding capital stock of TB&T Bancshares, Inc.

4 unchanged sentences

subsequent to the acquisition date, are included in the consolidated earnings of the Company.

ote 11 for additional information.

See note 11 for additional information.

Status of New Accounting Standard for Accounting for Allowance for Credit Losses

13 unchanged sentences

until the earlier of the termination date of the national emergency declaration by the President or December 31, 2020.

Due to the uncertainty on the economy and unemployment from COVID-19

and the sharp reduction in oil and gas prices, the Company has determined to delay its implementation of ASU 2016-13

The Company elected to delay its implementation of ASU 2016-13

and has calculated and recorded its provision for loan losses under the incurred loss model that existed prior to ASU 2016-13.

Prior to the CARES Act being signed and our decision to delay the implementation of CECL, we were completing our CECL implementation plan with our cross-functional working group, under the direction of our Chief Credit Officer along with our Chief Accounting Officer, Chief Lending Officer and Chief Financial Officer.

Prior to the CARES Act being signed and our election to delay the implementation of CECL, we were completing our CECL implementation plan with our cross-functional working group, under the direction of our Chief Credit Officer along with our Chief Accounting Officer, Chief Lending Officer and Chief Financial Officer.

The working group also included individuals from various functional areas including credit, risk management, accounting and information technology, among others.

Our implementation plan included assessment and documentation of processes, internal controls and data sources;

implementation plan include s

assessment and documentation of processes, internal controls and data sources;

model development, documentation and validation;

6 unchanged sentences

did 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 was effective in the first quarter of 2019 and required 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.

however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model.

The amended guidance was effective in the first quarter of 2019 and required 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 evaluated the provision of the new lease standard and, due to the small dollar amounts and number of lease agreements, all considered operating leases, the effect for the Company on January 1, 2019 was not significant.

10 unchanged sentences

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 unit’s 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.

An entity still has the option to perform the qualitative

assessment for a reporting unit to determine if a quantitative impairment test is necessary.

became effective for the Company on January 1, 2020 and did not have a significant impact on the Company’s financial statements.

ASU 2018-13, “Fair Value Measurement (Topic 820).

– Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.”

– Disclosure Framework -

Changes to the Disclosure Requirements for Fair Value Measurement.”

modifies the disclosure requirements on fair value measurements in Topic 820.

2 unchanged sentences

became effective on January 1, 2020 and did not have a significant impact on the Company’s financial statements.

ASU 2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.”

ASU 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for

tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

-12 also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

ASU 2019-12 is effective for the Company for annual reporting periods beginning after December 15, 2020, and interim periods within.

Adoption of ASU 2019-12 is not expected to have a material impact on the Company’s financial statements.

Investment Securities

13 unchanged sentences

In estimating other-than-temporary impairment losses, we consider (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Effective January 1, 2018, in accordance with ASU 2016-01

(see below), increases or decreases in the fair value of equity securities are recorded in earnings.

Prior to January 1, 2018, such increases or decreases were recorded similar to increases or decreases in available-for-sale

debt securities.

Increases or decreases in the fair value of equity securities are recorded in earnings.

The Company records its available-for-sale

33 unchanged sentences

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.

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.

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.

17 unchanged sentences

dependent loans are measured based on the present value of expected future cash flows or the loan’s observable market price.

At March 31, 2020 and 2019 and December 31, 2019, 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 less cost to sell.

At June 30, 2020 and 2019 and December 31, 2019, 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 less cost to sell.

From time to time, the Company modifies its loan agreement with a borrower.

7 unchanged sentences

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 March 31, 2020 and 2019, and December 31, 2019, substantially all of the Company’s troubled debt restructured loans are included in the non-accrual

As of June 30, 2020 and 2019, and December 31, 2019, substantially all of the Company’s troubled debt restructured loans were on

The provisions of the CARES Act included an election to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related to COVID-19

made between March 1, 2020 and the earlier of (i) December 31, 2020 or (ii)

60 days after the end of the COVID-19

made between March 1, 2020 and the earlier of (i) December 31, 2020 or (ii) 60 days after the end of the COVID-19

national emergency.

The relief can only

be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019.

The relief can only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019.

The Company elected to adopt these provisions of the CARES Act.

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 Company’s 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.

11 unchanged sentences

Valuation allowances on these impaired loans reflect only losses incurred after the acquisition.

The carrying amount of purchased credit impaired loans at March 31, 2020 and 2019 and December 31, 2019 were $ 7,773,000 , $ 859,000 and $ 251,000 , respectively, compared to a contractual balance of $ 10,411,000 , $ 1,196,000 and $ 345,000 , respectively.

Other purchased credit impaired loan disclosures were omitted due to immateriality.

The carrying amount of purchased credit impaired loans at June 30, 2020 and 2019 and December 31, 2019 were $ 7,275,000 , $ 464,000 and $ 251,000 , respectively, compared to a contractual balance of $ 9,818,000 , $ 750,000 and $ 345,000 , respectively.

Other purchased credit impaired loan disclosures have been omitted due to immateriality.

Other Real Estate

10 unchanged sentences

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.

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.

There was no impairment recorded for the three-months ended March 31, 2020 or 2019.

There was no impairment recorded for the three and six -

months ended June 30, 2020 or 2019 , respectively.

Securities Sold Under Agreements To Repurchase

8 unchanged sentences

Unrealized net gains on the Company’s available-for-sale

securities (after applicable income tax expense) totaling $ 123,576,000 and $ 31,830,000 at March 31, 2020 and 2019, respectively, and the minimum pension liability (after applicable income tax benefit) totaling ($ 1,324 ,000) at March 31, 2019, are included in accumulated other comprehensive income.

There were no amounts under the minimum pension liability at March 31, 2020 (see note 9).

securities (after applicable income tax expense) totaling $ 151,236,000 and $ 60,571,000 at June 30, 2020 and 2019, respectively, and the minimum pension liability (after applicable income tax benefit) totaling ($ 1,324,000 ) at June 30, 2019, are included in accumulated other comprehensive income.

There were no amounts under the minimum pension liability at June 30, 2020 (see note 9).

The Company’s provision for income taxes is based on income before income taxes adjusted for permanent differences between financial reporting and taxable income.

3 unchanged sentences

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 $ 341,000 and $ 312,000 for the three-months ended March 31, 2020 and 2019, respectively.

The Company recorded stock option expense totaling $ 349,000 and $ 313,000 for the three-months ended June 30, 2020 and 2019, respectively.

The Company recorded stock option expense totaling $ 689,000 and $ 625,000 for the six-months

ended June 30, 2020 and 2019, 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 $ 450,000 and $ 340,000 , respectively, for the three-months ended March 31, 2020 and 2019, respectively.

ote 8 for further information.

The Company recorded expenses associated with its director and officer restricted stock grants totaling $ 482,000 and $ 345,000 , for the three-months ended June 30, 2020 and 2019, respectively.

The Company recorded expenses associated with its director and officer restricted stock grants totaling $ 932,000 and $ 685,000 for the six-months

ended June 30, 2020 and 2019, respectively.

See note 8 for further information.

Advertising Costs

2 unchanged sentences

Net earnings per share (“EPS”) are computed by dividing net earnings by the weighted average number of common shares outstanding during the period.

The Company calculates dilutive EPS assuming all outstanding stock options to purchase common shares 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 shares at the average market price during the respective year.

Anti-dilutive shares

at March 31, 2020 are excluded from the computation of EPS.

There were no such anti-dilutive stock options for the three-months

ended March 31, 2019.

The Company calculates dilutive EPS assuming all outstanding stock options to purchase common shares and unvested restricted stock shares have been exercised and/or vested 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 shares at the average market price during the respective period

Anti-dilutive shares for the three and six-months

ended June 30, 2020 were 448,000 and 35,000 , respectively, and excluded from the computation of EPS.

For the three and six-

ended June 30, 2019, there were no anti-dilutive.

The following table reconciles the computation of basic EPS to dilutive EPS:

(in thousands)

For the three-months ended March 31, 2020:

For the three-months ended June 30, 2020:

Net earnings per share, basic

Effect of stock options and stock grants

Net earnings per share, assuming dilution

For the three-ended March 31, 2019:

Net earnings per share, diluted

(in thousands)

For the six-months

ended June 30, 2020:

Net earnings per share, basic

Effect of stock options and stock grants

Net earnings per share, assuming dilution

Note 2 - Interest-bearing Time Deposits in Banks and Securities

Interest-bearing time deposits in banks totaled $ 1,458 ,000 at March 31, 2019.

At March 31, 2020 and December 31, 2019, all interest-bearing time deposits in banks have matured.

Net earnings per share, diluted

(in thousands)

For the three-months ended June 30, 2019:

Net earnings per share, basic

Effect of stock options and stock grants

Net earnings per share, diluted

(in thousands)

For the six-months

ended June 30, 2019:

Net earnings per share, basic

Effect of stock options and stock grants

Net earnings per share, diluted

A summary of the Company’s available-for-sale

securities follows (in thousands):

March 31, 2020

June 30, 2020

Holding Gains

6 unchanged sentences

Total securities available-for-sale

March 31, 2019

June 30, 2019

Holding Gains

18 unchanged sentences

These securities include collateralized mortgage obligations (CMOs) and other asset backed securities.

The expected maturities of these securities at March 31, 2020 were computed by using scheduled amortization of balances and historical prepayment rates.

At March 31, 2020 and 2019, and December 31, 2019, the Company did not hold CMOs that entail higher risks than standard mortgage-backed securities.

The expected maturities of these securities at June 30, 2020 were computed by using scheduled amortization of balances and historical prepayment rates.

At June 30, 2020 and 2019, and December 31, 2019, the Company did not hold CMOs that entail higher risks than standard mortgage-backed securities.

The amortized cost and estimated fair value of available-for-sale

securities at March 31, 2020 by contractual and expected maturity, are shown below (in thousands):

securities at June 30, 2020 by contractual and expected maturity, are shown below (in thousands):

Due within one year

7 unchanged sentences

12 Months or Longer

March 31, 2020

June 30, 2020

Treasury securities

Obligations of states and political subdivisions

Corporate bonds and other

Residential mortgage-backed securities

2 unchanged sentences

12 Months or Longer

March 31, 2019

June 30, 2019

Obligations of states and political subdivisions

Corporate bonds and other

Residential mortgage-backed securities

3 unchanged sentences

December 31, 2019

Obligations of state and

political subdivisions

Obligations of state and political subdivisions

Residential mortgage-backed securities

Commercial mortgage-backed securities

The number of investments in an unrealized loss position totaled 46 at March 31, 2020.

The number of investments in an unrealized loss position totaled 14 at June 30, 2020.

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 March 31, 2020 compared to the time of purchase.

The unrealized losses noted are interest rate related due to the level of interest rates at June 30, 2020 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 March 31, 2020, 86.82 % of our available-for-sale

At June 30, 2020, 88.76 % of our available-for-sale

securities that are obligations of states and political subdivisions were issued within the State of Texas, of which 51.14 % are guaranteed by the Texas Permanent School Fund.

At March 31, 2020, $ 2,608,731 ,000 of the Company’s securities were pledged as collateral for public or trust fund deposits, repurchase agreements and for other purposes required or permitted by law.

During the three months ended March 31, 2020 and 2019, sales of investment securities that were classified as available-for-sale

At June 30, 2020, $ 2,685,828 ,000 of

the Company’s securities were pledged as collateral for public or trust fund deposits, repurchase agreements, a borrowing line with the Federal Reserve Bank of Dallas and for other purposes required or permitted by law.

During the three months ended June 30, 2020 and 2019, sales of investment securities that were classified as available-for-sale

totaled $ 157,521 ,000 and $ 65,821 ,000, respectively.

Gross realized gains from security sales during the first quarter of 2020 and 2019 totaled $ 2,062,000 and $ 4,000 , respectively.

Gross realized losses from security sales during first quarter of 2019 totaled $ 4,000 .

There were no gross realized losses from security sales during the first quarter of 2020.

Gross realized gains from security sales during the second quarter of 2020 and 2019 totaled $ 1,516,000 and $ 689,000 , respectively.

Gross realized losses from security sales during the three-month period ended June 30,

020 and 2019 totaled $ 4,000 and $ 13,000 , respectively.

During the six months ended June 30, 2020 and 2019, sales of investment securities classified as available-for-sale

totaled $ 252,958 ,000 and $ 66,052 ,000, respectively.

Gross realized gains from security sales during the six-month

periods ended June 30, 2020 and 2019 totaled $ 3,578,000 and $ 693,000 , respectively.

Gross realized losses from security sales during the six-month

periods ended June 30, 2020 and 2019 totaled $ 4,000 and $ 17,000 , respectively.

The specific identification method was used to determine cost in order to compute the realized gains and losses.

Note 3 – Loans Held for Investment and Allowance for Credit Losses

Note 3 – Loans Held-for-Investment and Allowance for Loan Losses

Loans held-for-investment

by class of financing receivables are as follows (in thousands):

Total loans held-for-investment

The Company’s non-accrual

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Loans still accruing and past due 90 days or more

Troubled debt restructured loans**

Includes $ 7,773,000 , $ 859,000 and $ 251,000 of purchased credit impaired loans as of March 31, 2020 and 2019, and December 31, 2019, respectively.

Troubled debt restructured

Includes $ 7,275,000 , $ 464,000 and $ 251,000 of purchased credit impaired loans as of June 30, 2020 and 2019, and December 31, 2019, respectively.

Troubled debt restructured loans of $ 4,673,000 , $ 3,906,000 and $ 4,791,000 , whose interest collection, after considering economic and business conditions and collection efforts, is doubtful are included in non-accrual

loans at March 31, 2020 and 2019, and December 31, 2019, respectively.

loans at June 30, 2020 and 2019, and December 31, 2019, respectively.

The Company’s recorded investment in impaired loans and the related valuation allowance are as follows (in thousands):

March 31, 2020

March 31, 2019

June 30, 2020

June 30, 2019

December 31, 2019

The Company had $ 39,724,000 , $ 27,860,000 and $ 25,770,000 in non-accrual,

past due 90 days or more and still accruing, restructured loans and foreclosed assets at March 31, 2020 and 2019, and December 31, 2019, respectively.

Non-accrual loans at March 31, 2020 and 2019, and December 31, 2019, consisted of the following by class of financing receivables (in thousands):

No significant additional funds are committed to be advanced in connection with impaired loans as of March 31, 2020.

The Company’s impaired loans and related allowance are summarized in the following table as of March 31, 2020 and 2019 and December 31, 2019 by class of financing receivables (in thousands).

past due 90 days or more and still accruing, restructured loans and foreclosed assets at June 30, 2020 and 2019, and December 31, 2019, respectively.

loans at June 30, 2020 and 2019, and December 31, 2019, consisted of the following by class of financing receivables (in thousands):

No significant additional funds are committed to be advanced in connection with impaired loans as of June 30, 2020.

The Company’s impaired loans and related allowance 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.

March 31, 2020

June 30, 2020

Includes $ 7,275,000 of purchased credit impaired loans.

March 31, 2019

June 30, 2019

Includes $ 464,000 of purchased credit impaired loans.

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The Company recognized interest income on impaired loans prior to being recognized as impaired of approximately $ 750,000 during the year ended December 31, 2019.

Such amounts for the three-month periods ended March 31, 2020 and 2019 were not significant.

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.

Such amounts for the three-month and six-month

periods ended June 30, 2020 and 2019 were not significant.

From a credit risk standpoint, the Company rates its loans in one of f ive

(i) pass, (ii) special mention, (iii) substandard, (iv) doubtful or (v) loss (which are charged-off).

The ratings of loans reflect a judgment about the risks of default and loss associated with the loan.

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by class of financing receivables and portfolio segments, which are the same (in thousands):

March 31, 2020

March 31, 2019

June 30, 2020

June 30, 2019

December 31, 2019

The Company’s past due loans are as follows (in thousands):

March 31, 2020

March 31, 2019

June 30, 2020

June 30, 2019

December 31, 2019

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The following table details the allowance for loan losses by portfolio segment (in thousands).

There were no allowances for purchased credit impaired loans at March 31, 2020 and 2019, and December 31, 2019.

There were no allowances for purchased credit impaired loans at June 30, 2020 and 2019, and December 31, 2019.

Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

March 31, 2020

June 30, 2020

Loans individually evaluated for impairment

Loans collectively evaluated for impairment

March 31, 2019

June 30, 2019

Loans individually evaluated for impairment

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Changes in the allowance for loan losses are summarized as follows by portfolio segment (in thousands):

Three months ended March 31, 2020

Three months ended June 30, 2020

Beginning balance

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Ending balance

Three months ended March 31, 2019

Three months ended June 30, 2019

Beginning balance

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Ending balance

Six months ended June 30, 2020

Beginning balance

Provision for loan losses

Ending balance

Six months ended June 30, 2019

Beginning balance

Provision for loan losses

Ending balance

The Company’s recorded investment in loans related to the balance in the allowance for loan losses on the basis of the Company’s impairment methodology is as follows (in thousands).

Purchased credit impaired loans of $ 7,773,000 , $ 859,000 and $ 251,000 at March 31, 2020 and 2019, and December 31, 2019, respectively, are included in loans individually evaluated for impairment.

March 31, 2020

Purchased credit impaired loans of $ 7,275,000 , $ 464,000 and $ 251,000 at June 30, 2020 and 2019, and December 31, 2019, respectively, are included in loans individually evaluated for impairment.

June 30, 2020

Loans individually evaluated for impairment

Loans collectively evaluated for impairment

March 31, 2019

June 30, 2019

Loans individually evaluated for impairment

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The Company’s loans that were modified and considered troubled debt restructurings are as follows (in thousands):

Three Months Ended March 31, 2020

Three Months Ended March 31, 2019

Three Months Ended June 30, 2020

Six Months Ended June 30, 2020

Three Months Ended June 30, 2019

Six Months Ended June 30, 2019

The balances below provide information as to how the loans were modified as troubled debt restructured loans (in thousands):

Three Months Ended March 31, 2020

Three Months Ended March 31, 2019

During the three months ended March 31, 2020 and 2019, no loans were modified as a troubled debt restructured loan within the previous 12 months and for which there was a payment default.

Three Months Ended June 30, 2020

Six Months Ended June 30, 2020

Three Months Ended June 30, 2019

Six Months Ended June 30, 2019

During the three -

months ended June 30, 2020 and 2019, no loans were modified as a troubled debt restructured loan within the previous 12 months and for which there was a payment default.

During the six -

months ended June 30, 2020 and 2019, no loans were modified as a troubled debt

loan 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 due or more or results in the foreclosure and repossession of the applicable collateral.

As of March 31, 2020, the Company has no commitments to lend additional funds to loan customers whose terms have been modified in troubled debt restructurings.

As of June 30, 2020, the Company has no commitments to lend additional funds to loan customers whose terms have been modified in troubled debt restructurings.

As discussed in note 1 to these financial statements, the CARES Act provided banks an option to elect to not account for certain loan modifications related to COVID-19

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modifications.

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, 2

00 loans totaling $ 468,539,000 million in outstanding loans subject to deferral and modification agreements, representing 10.30 % of outstanding loans held for investment, excluding PPP loans.

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 March 31, 2020, $ 2,717,982,000 in loans held by our bank subsidiary were subject to blanket liens as security for this line of credit.

At March 31, 2020, there was $ 446,000,000 outstanding under this line of credit.

At June 30, 2020, $ 3,134,584,000 in loans held by our bank subsidiary were subject to blanket liens as security for this line of credit.

At June 30, 2020, there was no balance outstanding under this line of credit.

Note 4 - Loans Held for Sale

The Company originates certain mortgage loans for sale in the secondary market.

The Company’s historic losses as a result of these indemnities have been insignificant.

Loans held for sale totaled $ 42,034 ,000, $ 14,446 ,000 and $ 28,228 ,000 at March 31, 2020 and 2019, and December 31, 2019, respectively.

At March 31, 2020 and 2019, and December 31, 2019, $ 2,375,000 ,

$ 2,439,000 and $ 5,152,000 are valued at the lower of cost or fair value, and the remaining amounts were valued under the fair value option.

Loans held for sale totaled $ 66,370 ,000, $ 22,305 ,000 and $ 28,228 ,000 at June 30, 2020 and 2019, and December 31, 2019, respectively.

At June 30, 2020 and 2019, and December 31, 2019, $ 3,077,000 , $ 3,324,000 and $ 5,152,000 are valued at the lower of cost or fair value, and the remaining amounts are valued under the fair value option.

The change to the fair value option for loans held for sale was effective at June 30, 2018 and was done in conjunction with the Company’s move to mandatory delivery in the secondary market and the purchase of forward mortgage-backed securities to manage the changes in fair value (see note 5 for additional information).

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The Company has no continuing ownership in any residential mortgage loans sold.

Note 5 - Derivative Financial Instruments

The Company originates certain mortgage loans for sale in the secondary market.

The Company’s historic losses as a result of these indemnities have been insignificant.

Derivative Financial Instruments

The Company enters into interest rate lock commitments (“IRLCs”) with customers to originate residential mortgage loans at a specific interest rate that are ultimately sold in the secondary market.

These commitments, which contain fixed expiration dates, offer the borrower an interest rate guarantee provided the loan meets underwriting guidelines and closes within the timeframe established by the Company.

Beginning in the second quarter of 2018, the Company purchased forward mortgage-backed securities contracts to manage the changes in fair value associated with changes in interest rates related to a portion of the IRLCs.

These instruments are typically entered into at the time the IRLC is made.

The Company purchases forward mortgage-backed securities contracts to manage the changes in fair value associated with changes in interest rates related to a portion of the IRLCs.

These instruments are typically entered into at the time the IRLC is made in the aggregate.

These financial instruments are not designated as hedging instruments and are used for asset and liability management needs.

All derivatives are carried at fair value in either other assets or other liabilities.

The fair values of IRLCs are based on current secondary market prices for underlying loans and estimated servicing value with similar coupons, maturity and credit quality, subject to the anticipated loan funding probability (pull-through rate).

All derivatives are carried at fair value in either other assets or other liabilities, through earnings in the statement of earnings.

The fair value of IRLCs is subject to change primarily due to changes in interest rates and the estimated pull-through rate.

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Forward mortgage-backed securities contracts are exchange-traded or traded within highly active dealer markets.

In order to determine the fair value of these instruments, the Company utilizes the exchange price or dealer market price for the particular derivative contract and these instruments are therefore classified as Level 2 in the fair value disclosures (see note 10).

in the fair value disclosures (see note 10).

The estimated fair values are subject to change primarily due to changes in interest rates.

The impact of these forward contracts is included in gain on sale and fees on mortgage loans in the statement of earnings.

The following table provides the outstanding notional balances and fair values of outstanding derivative positions (dollars in thousands):

March 31, 2020:

June 30, 2020:

Forward mortgage-backed securities trades

March 31, 2019:

June 30, 2019:

Forward mortgage-backed securities trades

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provisions and therefore the Company does not offset such agreements for financial reporting purposes.

Note 7 - Income Taxes

Income tax expense was $ 7,234 ,000 for the first quarter of 2020 as compared to $ 7,367 ,000 for the same period in 2019.

The Company’s effective tax rates on pretax income were 16.27 % and 16.15 % for the first quarters of 2020 and 2019, respectively.

Income tax expense was $ 10,663 ,000 for the second quarter of 2020 as compared to $ 8,594 ,000 for the same period in 2019.

The Company’s effective tax rates on pretax income were 16.63 % and 16.96 % for the second quarters of 2020 and 2019, respectively.

Income tax expense was $ 17,898 ,000 for the six months ended June 30, 2020 as compared to $ 15,959 ,000 for the same period in 2019.

The Company’s effective tax rates on pretax income were 16.48 % and 16.57 % for the six months ended June 30,

2020 and 2019, respectively.

The effective tax rates differ from the statutory federal tax rate of 21 % primarily due to tax exempt interest income earned on certain investment securities and loans, the deductibility of dividends paid to our employee stock ownership plan and excess tax benefits related to our directors’ deferred compensation plan.

Note 8 - Stock Option Plan and Restricted Stock Plan

Stock Option Plan and Restricted Stock Plan

The Company grants incentive stock options for a fixed number of shares with an exercise price equal to the fair value of the shares at the date of grant to employees.

On June 26, 2019, the Company granted 398,850 incentive stock options with an exercise price of $ 29.70 per share.

The fair value of the options was $ 7.31 per share and was estimated using the Black-Scholes options pricing model with the following weighted average assumptions:

The fair value of the options was $ 7.31 per option and was estimated using the Black-Scholes options pricing model with the following weighted average assumptions:

risk free interest rate of 1.83 %;

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Other stock option disclosures for this grant have not been provided due to insignificance.

The Company recorded stock option expense totaling $ 341,000 and $ 312,000 for the three-month periods ended March 31, 2020 and 2019, respectively.

The Company recorded stock option expense totaling $ 349,000 and $ 313,000 for the three-month periods ended June 30, 2020 and 2019, respectively.

The Company recorded stock option expense totaling $ 689,000 and $ 625,000 for the six months ended June 30, 2020 and 2019, respectively.

The additional disclosure requirements under authoritative accounting guidance have been omitted due to the amounts being insignificant.

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of nine of the existing directors and two new directors, 21,714 restricted shares with a total value of $ 660,000 were granted to these non-employee

directors and will be expensed over the period from the grant date to April 28, 2020, the Company’s next annual shareholders’ meeting at which the directors’ term expires.

directors and was expensed over the period from the grant date to April 28, 2020, the Company’s next annual

shareholders’ meeting at which the directors’ term expired.

On January 28, 2020, upon the election of a new director, 434 restricted shares with a total value of $ 15,000 were granted to this non-employee

director and will be expensed over the period from the grant date to April 28, 2020, the Company’s next annual shareholders’ meeting at which the director term expires.

The Company recorded director expense related to these restricted share grants of $ 175,000 and $ 135,000 for the three-month periods ended March 31, 2020 and 2019, respectively.

On October 25, 2016, the Company granted 30,810 restricted stock shares with a total value of $ 560,000 to certain officers that are being expensed over the vesting period of three years .

director and was expensed over the period from the grant date to April 28, 2020, the Company’s next annual

shareholders’ meeting at which the director term expired.

On April 28, 2020, upon the re-election

of ten of the existing directors, 21,560 restricted shares with a total value of $ 600,000 were granted to these non-employee

directors and will be expensed over the period from the grant date to April 27, 2021, the Company’s next annual shareholders’ meeting at which the directors’ term expires.

The Company recorded director expense related to these restricted share grants of $ 160,000 and $ 135,000 for the three-month periods ended June 30, 2020 and 2019, respectively.

The Company recorded director expense related to these restricted stock grants of $ 335,000 and $ 270,000 for the six months ended June 30, 2020 and 2019, respectively.

On October 24, 2017, the Company granted 28,382 restricted shares with a total value of $ 655,000 to certain officers that are being expensed over the vesting period of one to three years .

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On January 28, 2020, the Company granted 2,979 restricted shares with a total value of $ 103,000 to certain officers that will be expensed over a three-year vesting period.

The Company recorded restricted stock expense for officers of $ 275,000 and $ 205,000 for the three-month periods ended March 31, 2020 and 2019, respectively.

Note 9 - Pension Plan

On May 18, 2020, the Company granted 7,176 restricted shares with a total value of $ 200,000

to an officer

that will be expensed over a three-year vesting period.

The Company recorded restricted stock expense for officers of $ 322,000 and $ 210,000 for the three-month periods ended June 30, 2020 and 2019, respectively.

The Company recorded restricted stock expense for officers of $ 597,000 and $ 415,000 for the six-month periods ended June 30, 2020 and 2019, respectively.

The Company had a defined benefit pension plan that was frozen effective January 1, 2004, whereby no new participants were added to the Plan and no additional years of service accrued to participants.

The pension plan covered substantially all of the Company’s employees at the time.

The benefits for each employee were based on years of service and a percentage of the employee’s qualifying compensation during the final years of employment.

The Company’s funding policy was to contribute annually the amount necessary to satisfy the Internal Revenue Service’s 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.

The Company made no contribution to the plan in 2020 or 2019.

In December 2018, due to the rising interest rate environment, the Company determined it was in the best interest of its shareholders to work toward terminating its pension obligation.

In December 2018, the Company determined it was in the best interest of its shareholders to work toward terminating its pension obligation.

The Company annuitized approximately 53 % of the pension benefit obligation at that time and recorded a loss on settlement totaling $ 1,546,000 for the year ended December 31, 2018.

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At December 31, 2019, all balances in the pension plan were zero and the Company’s obligation has been extinguished.

For the three-month ended March 31, 2019, the Company recorded pension related expense totaling $ 923,000 .

For the three- and six-month

periods ended June 30, 2019, the Company recorded pension related expense totaling $ 19,000 and $ 942,000 , respectively.

Note 10 - 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.

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.

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IRLCs and forward mortgage-backed securities trades.

There were no transfers between Level 1 and Level 2 or Level 2 and Level 3 during the three months ended March 31, 2020 and 2019, and the year ended December 31, 2019.

There were no transfers between Level 1 and Level 2 or Level 2 and Level 3 during the three and six -

months ended June 30, 2020 and 2019, and the year ended December 31, 2019.

The following table summarizes the Company’s available-for-sale

securities which are measured at fair value on a recurring basis, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (dollars in thousands):

March 31, 2020

securities, loans held-for-sale,

and derivatives which are measured at fair value on a recurring basis, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (dollars in thousands):

June 30, 2020

Available-for-sale

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Obligations of states and political subdivisions

Corporate bonds

Residential mortgage-backed securities

3 unchanged sentences

Forward mortgage-backed securities trades

March 31, 2019

June 30, 2019

Available-for-sale

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Collateral values are estimated using Level 2 inputs based on observable market data.

At March 31, 2020, impaired loans with a carrying value of $ 28,106 ,000 were reduced by specific valuation reserves totaling $ 3,386 ,000 resulting in a net fair value of $ 24,720 ,000.

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 three months ended March 31, 2020 and 2019 include other real estate owned which, subsequent to their initial transfer to other real estate owned from loans, were re-measured

At June 30, 2020, impaired loans with a carrying value of $ 17,682,000 were reduced by specific valuation reserves totaling $ 3,046,000 resulting in a net fair value of $ 14,636,000 .

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 three and six-

months ended June 30

, 2020 and 2019 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.

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There were no other real estate owned properties that were re-measured

subsequent to their initial transfer to other real estate owned during the three months ended March 31, 2020 and 2019.

At March 31, 2020 and 2019, and December 31, 2019, other real estate owned totaled $ 982,000 , $ 612,000 and $ 982,000 , respectively.

subsequent to their initial transfer to other real estate owned during the three- and six-months

ended June 30, 2020 and 2019.

At June 30, 2020 and 2019, and December 31, 2019, other real estate owned totaled $ 202,000 , $ 635,000 and $ 982,000 , 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.

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Federal Funds Sold

Interest-bearing deposits in banks

Interest-bearing demand deposits in banks

Interest-bearing time deposits in banks

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made a $ 1,920,000 special dividend to its shareholders prior to closing of the transaction.

At closing, TB&T Bancshares, Inc.

At closing, a wholly -

owned subsidiary of the Company merged into TB&T Bancshares, Inc.

and immediately thereafter TB&T Bancshares, Inc.

was merged into the Company and The Bank & Trust of Bryan/College Station, Texas, was merged into First Financial Bank, National Association, Abilene, Texas, a wholly-owned subsidiary of the Company.

2 unchanged sentences

The results of operations from this acquisition are included in the consolidated earnings of the Company commencing January 1, 2020.

The following table presents the amounts recorded on the consolidated balance sheet on the acquisition date (dollars in thousands):

The following table presents the preliminary amounts recorded on the consolidated balance sheet on the acquisition date (dollars in thousands):

Fair value of consideration paid:

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements