As filed with the Securities and Exchange Commission on October 29, 2019

Registration No. 333 -234254

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

to

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

FIRST FINANCIAL BANKSHARES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Texas		6021		75-0944023
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification No.)

400 Pine Street

Abilene, Texas 79601

(325) 627-7155

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

F. Scott Dueser

Chairman of the Board, President and Chief Executive Officer

First Financial Bankshares, Inc.

400 Pine Street

Abilene, Texas 79601

(325) 627-7155

(325) 627-7393 (Fax)

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Michael G. Keeley, Esq.		Chet A. Fenimore, Esq.
Norton Rose Fulbright US LLP		Jeremy S. Lemmon, Esq.
2200 Ross Avenue, Suite 3600		Fenimore, Kay, Harrison & Ford, LLP
Dallas, Texas 75201-7932		812 San Antonio Street, Suite 600
(214) 855-3906		Austin, Texas 78701
(214) 855-8200 (Fax)		(512) 583-5901
		(512) 583-5940 (Fax)

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective and all other conditions to the proposed merger described herein have been satisfied or waived.

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:  ☐

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ☐

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “ emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		☒		Accelerated filer		☐
Non-accelerated filer		☐		Smaller reporting company		☐
				Emerging growth company		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

The information in this proxy statement/prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus is not an offer to sell these securities, and it is not soliciting to buy these securities, in any state where the offer or sale is not permitted.

 

PRELIMINARY—SUBJECT TO COMPLETION, DATED OCTOBER 29, 2019

PROXY STATEMENT/PROSPECTUS

 

TB&T BANCSHARES, INC.

 

 

PROPOSED MERGER—YOUR VOTE IS VERY IMPORTANT

 

 

Dear Shareholder:

You are cordially invited to attend the special meeting of shareholders of TB&T Bancshares, Inc., which we refer to as “TB&T,” to be held on December 3, 2019 at 3:00 p.m., local time, at the Phillips Event Center, 1929 Country Club Drive, Bryan, Texas 77802. At this special meeting, you will be asked to approve the Agreement and Plan of Reorganization, which we refer to as the “reorganization agreement,” dated September 19, 2019, by and among First Financial Bankshares, Inc., which we refer to as “First Financial,” Brazos Merger Sub, Inc., a wholly owned subsidiary of First Financial, which we refer to as “Merger Sub,” and TB&T, which provides for the acquisition of TB&T by First Financial. The acquisition of TB&T by First Financial will be completed pursuant to the terms and conditions of the reorganization agreement by means of a merger of Merger Sub with and into TB&T, which we refer to as the “merger,” with TB&T surviving as a wholly owned subsidiary of First Financial. Thereafter, First Financial will cause TB&T to merge with and into First Financial, with First Financial surviving the merger, which together with the merger we refer to as the “integrated mergers,” and subsequently, at such later time as First Financial may determine, First Financial will cause The Bank & Trust of Bryan/College Station to merge with and into First Financial Bank, N.A., with First Financial Bank, N.A. as the surviving bank.

If the merger is completed, all outstanding shares of TB&T common stock, other than cancelled shares and dissenting shares, will be converted, pursuant to the reorganization agreement, into the right to receive 1.2502 shares of First Financial common stock. In addition, in connection with the closing of the merger, TB&T may pay a special dividend, referred to as the “special dividend,” to its shareholders of up to $2.0 million in the aggregate on or prior to the closing of the merger. For illustration purposes only, based on the number of shares of First Financial common stock issued and outstanding as of October 29, 2019, the aggregate number of shares of First Financial common stock to be received by TB&T shareholders pursuant to the terms of the reorganization agreement would have provided TB&T shareholders with aggregate ownership of approximately 4.4% of the issued and outstanding shares of First Financial common stock after completion of the merger. The market value of the stock consideration will fluctuate with the market price of First Financial common stock and will not be known at the time TB&T shareholders vote on the reorganization agreement and the merger. First Financial common stock is listed on the NASDAQ Global Select Market under the symbol “FFIN.” On September 19, 2019, the last full trading day before the public announcement of the reorganization agreement, the last reported sale price of First Financial common stock was $33.11 per share, and on October 25, 2019, the latest practicable full trading day before the printing of this proxy statement/prospectus, the last reported sale price of First Financial common stock was $34.82 per share. We urge you to obtain current market quotations for First Financial’s common stock. There are no current market quotations for TB&T common stock because TB&T is a privately owned corporation and its common stock is not traded on any established public trading market.

The board of directors of TB&T has determined that the reorganization agreement and the transactions contemplated therein, including the merger, are fair to and in the best interests of TB&T and its shareholders, and approved and declared advisable the reorganization agreement and the transactions contemplated therein, including the merger. The TB&T board of directors recommends that you vote “FOR” the proposal to approve the reorganization agreement.

First Financial and TB&T intend that the merger will qualify for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, which we refer to as the “Code.” If the merger qualifies as a reorganization under Section 368(a) of the Code, a U.S. holder (as defined in this proxy statement/prospectus) of TB&T common stock who exchanges TB&T common stock for First Financial common stock and receives payment of the special dividend in cash, if any, should recognize gain (but not loss) in the exchange equal to the lesser of the cash received by such holder and the amount, if any, by which the cash plus the fair market value of First Financial common stock received by such holder exceeds the tax basis of such holder’s TB&T common stock surrendered in exchange therefor (in each case excluding cash received in lieu of a fractional share of First Financial common stock). Further, a U.S. holder of TB&T common stock generally will recognize gain or loss with respect to cash received in lieu of fractional shares of First Financial common stock that the U.S. holder would otherwise be entitled to receive.

Your vote is very important. Whether or not you plan to attend the special meeting, please take the time to vote by completing and mailing the enclosed proxy card to TB&T. Submitting a proxy now will not prevent you from being able to vote in person at the special meeting. If you sign, date and mail your proxy card without indicating your vote, your proxy will be counted as a vote “FOR” the proposal to adopt and approve the reorganization agreement and the transactions contemplated thereby. If you do not return your proxy card, abstain from voting or do not instruct your brokerage firm, bank, trust or other nominee how to vote any shares held for you in “street name,” the effect will be a vote “AGAINST” such proposal.

 

 

This proxy statement/prospectus contains a more complete description of the special meeting, the reorganization agreement and the transactions contemplated therein, including the merger. Please carefully read this entire proxy statement/prospectus, including the “Risk Factors,” beginning on page 17, for a discussion of the risks relating to the proposed merger and an investment in First Financial common stock. You may also obtain information about First Financial from documents that First Financial has filed with the Securities and Exchange Commission, which we refer to as the “SEC.”

We thank you for your continued support and look forward to seeing you at the special meeting.

Sincerely,

 

 

Timothy N. Bryan

Chairman and Chief Executive Officer

TB&T Bancshares, Inc.

 

 

Neither the SEC nor any state securities commission has approved or disapproved of the securities to be issued in connection with the merger or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.

The securities that First Financial is offering through this document are not savings or deposit accounts or other obligations of any bank or non-bank subsidiary of either of First Financial or TB&T, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

The date of this proxy statement/prospectus is October 29, 2019 and it is first being mailed to shareholders of TB&T on or about November 1, 2019.

TB&T BANCSHARES, INC.

1716 Briarcrest Drive, Suite 400

Bryan, Texas 77802

(979) 260-2100

 

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

 

 

NOTICE IS HEREBY GIVEN that a special meeting of the shareholders of TB&T Bancshares, Inc., or TB&T, will be held on December 3, 2019, at 3:00 p.m., local time, at the Phillips Event Center, 1929 Country Club Drive, Bryan, Texas 77802, for the following purposes:

 

1.

to approve the Agreement and Plan of Reorganization, dated September 19, 2019, by and among First Financial Bankshares, Inc., or First Financial, Brazos Merger Sub, Inc., a wholly owned subsidiary of First Financial referred to as Merger Sub, and TB&T, pursuant to which Merger Sub will merge with and into TB&T, which we refer to as the merger, with TB&T surviving the merger as a wholly owned subsidiary of First Financial, on and subject to the terms and conditions contained therein (which proposal we refer to as the “merger proposal”); and

 

2.

to approve one or more adjournments of the special meeting to a later date or dates, if the board of directors of TB&T determines such an adjournment is necessary to permit further solicitation of additional proxies (which proposal we refer to as the “adjournment proposal”).

Only shareholders of record at the close of business on October 28, 2019 will be entitled to notice of and to vote at the special meeting and any adjournments or postponements thereof. Approval of the merger proposal requires the affirmative vote of the holders of at least two-thirds of the outstanding shares of TB&T common stock entitled to vote. The adjournment proposal requires the affirmative vote of a majority of the shares of TB&T common stock present, in person or by proxy, for approval. The special meeting may be adjourned or postponed from time to time upon approval of adjournment proposal by TB&T’s shareholders without any notice other than by announcement at the meeting of the adjournment or postponement thereof, and any and all business for which notice is hereby given may be transacted at such adjourned or postponed meeting.

Shareholders of TB&T have the right to dissent from the merger and obtain payment in cash of the appraised fair value of their shares of TB&T common stock under applicable provisions of the Texas Business Organizations Code. In order for a shareholder of TB&T to perfect its right to dissent, such shareholder must file a written objection to the merger prior to the special meeting, must vote against the merger proposal and must file a written demand with First Financial within 20 days after the consummation of the merger for payment of the fair value of the shareholder’s shares of TB&T common stock. A copy of the applicable statutory provisions of the Texas Business Organizations Code is included as Appendix E to the accompanying proxy statement/prospectus and a summary of these provisions can be found under the caption “Proposal 1: Merger Proposal—Dissenters’ Rights of TB&T Shareholders.”

The board of directors of TB&T unanimously recommends that you vote (i) “FOR” the merger proposal and (ii) “FOR” the adjournment proposal.

Your Vote is Very Important. A proxy card is enclosed. Whether or not you plan to attend the special meeting, please complete, sign and date the proxy card and promptly mail it in the enclosed envelope. You may revoke your proxy card in the manner described in the proxy statement/prospectus at any time before the special meeting is called to order. If you attend the special meeting, you may vote in person if you wish, even if you have previously returned your proxy card.

This proxy statement/prospectus provides a detailed description of the TB&T special meeting, the merger proposal, and the adjournment proposal, the documents related to the merger and other related matters. You are

urged to read this proxy statement/prospectus, including any documents they refer you to, and its appendices carefully and in their entirety. We look forward with pleasure to seeing and visiting with you at the special meeting.

By Order of the Board of Directors,

 

 

Timothy N. Bryan

Chairman and Chief Executive Officer

TB&T Bancshares, Inc.

Bryan, Texas

October 29, 2019

HOW TO OBTAIN ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates important business and financial information about First Financial from documents filed with the SEC that have not been included in or delivered with this document. This information is described on page 78 under “Where You Can Find More Information.” This information is available to you without charge upon your written or oral request. You can obtain the documents incorporated by reference in this document through the SEC website at http://www.sec.gov or by requesting them in writing, by e-mail or by telephone at the appropriate address below:

First Financial Bankshares, Inc.

400 Pine Street

Abilene, Texas 79601

Attention: Investor Relations

Telephone (325) 627-7155

To obtain timely delivery of the documents before the special meeting of TB&T, you must request the information by November 25, 2019.

PLEASE NOTE

We have not authorized anyone to provide you with any information other than the information included in this document and the documents to which we refer you. If someone provides you with other information, please do not rely on it as being authorized by us.

This proxy statement/prospectus has been prepared as of October 29, 2019. There may be changes in the affairs of TB&T or First Financial since that date, which are not reflected in this document.

TABLE OF CONTENTS

 

		Page
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING			1
SUMMARY			6
The Companies			6
Proposed Merger of TB&T			7
Terms of the Merger (page 27)			7
Certain Material U. S. Federal Income Tax Consequences of the Integrated Mergers (page 55)			7
Opinion of Financial Advisor of TB&T (page 33)			8
First Financial’s Dividend Policy			8
Ownership of First Financial After the Merger			8
Market Prices of First Financial Common Stock (page 74)			8
The TB&T Special Shareholders’ Meeting (page 23)			9
Record Date Set at October 28, 2019; Approval of at Least Two-Thirds of Outstanding Shares Required to Approve the Reorganization Agreement (page 23)			9
TB&T’s Reasons for the Merger and Recommendations of TB&T’s Board (page 31)			9
Directors and Certain Officers of TB&T are Subject to a Voting Agreement (page 24)			9
Director Support Agreements (page 53)			10
Effective Time of the Merger (page 41)			10
Conversion; Exchange of TB&T Stock Certificates (page 41)			10
Conditions to Completion of the Merger (page 50)			10
Regulatory Approvals Required (page 60)			11
Amendments or Waiver (page 53)			11
Termination of the Reorganization Agreement (page 54)			11
Some of the Directors and Officers of TB&T Have Financial Interests in the Merger that Differ from Your Interests (page 52)			13
Comparison of Rights of Shareholders of First Financial and TB&T (page 64)			13
Dissenters’ Rights of Appraisal in the Merger (page 61)			13
SELECTED HISTORICAL FINANCIAL DATA OF FIRST FINANCIAL			15
RISK FACTORS			17
A WARNING ABOUT FORWARD-LOOKING STATEMENTS			21
GENERAL INFORMATION			23
TB&T SPECIAL SHAREHOLDERS’ MEETING			23
Date, Place and Time of the Special Meeting			23
Purpose			23
Record Date; Shares Entitle to Vote			23
Quorum; Vote Required			23
Shares Held by Directors and Named Executive Officers			24
Voting and Revocation of Proxies			24
Shares Held in Street Name			25
Solicitation of Proxies; Expenses			25
Recommendation of TB&T’s Board of Directors			25
Dissenters’ Rights			26
PROPOSAL 1: APPROVAL OF THE MERGER PROPOSAL			27
Terms of the Merger			27
Background of the Merger			28
Recommendation of TB&T’s Board of Directors and its Reasons for the Merger			31
Opinion of TB&T’s Financial Advisor			33
First Financial’s Reasons for the Merger			40

 

i

		Page
Effective Time of the Merger			41
Conversion; Exchange of TB&T Stock Certificates			41
Representations and Warranties of TB&T and First Financial			42
Covenants and Agreements			45
Conditions to Completion of the Merger			50
Interests of TB&T’s Directors and Officers in the Merger			52
Director Support Agreements			53
NASDAQ Listing			53
Amendment or Waiver of the Reorganization Agreement			53
Termination of the Reorganization Agreement			54
Expenses			55
Certain Material U.S. Federal Income Tax Consequences of the Merger			55
Accounting Treatment			59
Restrictions on Resales of First Financial Common Stock Received in the Merger			60
Regulatory Approvals Required for the Merger			60
Dissenters’ Rights of TB&T Shareholders			61
PROPOSAL 2: ADJOURNMENT OF THE SPECIAL MEETING			63
COMPARISON OF RIGHTS OF SHAREHOLDERS OF TB&T AND FIRST FINANCIAL			64
TEXAS ANTI-TAKEOVER STATUTES			70
BUSINESS OF TB&T BANCSHARES, INC.			71
General			71
Products and Services			71
Market Area			71
Competition			72
Employees			72
Legal Proceedings			72
BENEFICIAL OWNERSHIP OF TB&T COMMON STOCK BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS OF TB&T			73
COMPARATIVE MARKET PRICES AND DIVIDEND DATA			74
First Financial			74
TB&T			75
DESCRIPTION OF FIRST FINANCIAL CAPITAL STOCK			77
General			77
First Financial common stock			77
EXPERTS			77
LEGAL MATTERS			77
OTHER MATTERS			77
WHERE YOU CAN FIND MORE INFORMATION			78
Appendix A—Agreement and Plan of Reorganization
Appendix B—Form of TB&T Voting Agreement
Appendix C—Form of TB&T Director Support Agreement
Appendix D—Opinion of Stephens Inc.
Appendix  E—Provisions of the Texas Business Organizations Code Relating to Dissenters’ Rights

 

ii

 

1

 

2

 

3

 

4

 

5

 

6

 

7

 

8

 

9

 

10

 

11

 

12

 

13

 

14

 

15

 

16

RISK FACTORS

In addition to general investment risks and the other information contained in or incorporated by reference into this proxy statement/prospectus, including the matters addressed under the section “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 21 and the matters discussed under the caption “Risk Factors” in Annual Report on Form 10-K filed with the SEC by First Financial, for the year ended December 31, 2018, as updated by other reports filed with the SEC, you should carefully consider the following risk factors in deciding how to vote on the proposals presented in this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 78.

Risks Relating to the Merger

The merger may not be completed.

Completion of the merger is subject to regulatory approval. First Financial cannot assure you that it will be successful in obtaining required regulatory approvals. If First Financial is not successful in obtaining required regulatory approvals, the merger will not be completed. If such regulatory approvals are received, there can be no assurance to the timing of those approvals or whether any conditions will be imposed that would result in certain closing conditions of the merger not being satisfied.

The consummation of the merger is also subject to other conditions precedent described in the reorganization agreement. If a condition of either party is not satisfied, the other party may be able to terminate the reorganization agreement and, in such case, the transaction would not be consummated. The parties cannot assure you that all of the conditions precedent in the reorganization agreement will be satisfied or that the merger will be completed.

The value of the shares of First Financial common stock received as merger consideration will fluctuate, and shareholders of TB&T may receive more or less value, depending upon increases and decreases in market price of First Financial’s common stock between the date of the TB&T special meeting and the date shareholders of TB&T exchange their shares for the merger consideration.

If the merger is completed, each outstanding share of TB&T common stock, other than cancelled shares and dissenting shares, will be converted, pursuant to the reorganization agreement, into the right to receive 1.2502 shares of First Financial common stock. Any change in the market price of First Financial common stock prior to the completion of the merger will affect the market value of the merger consideration that TB&T shareholders will receive following completion of the merger. At the time of the TB&T special meeting and until the date that a TB&T shareholder receives the shares of First Financial common stock to be paid as merger consideration, such shareholder will not know the value that it will receive in exchange for shares of TB&T common stock because the price of First Financial’s common stock will fluctuate based on a variety of factors that are beyond the control of First Financial, including, but not limited to, general market and economic conditions, changes in First Financial’s business, operations and prospects and regulatory considerations.

The market price of First Financial common stock after the merger may be affected by factors different from those affecting TB&T common stock or First Financial common stock currently.

The businesses of First Financial and TB&T differ in some respects and, accordingly, the results of operations of the combined company and the market price of First Financial’s shares of common stock after the merger may be affected by factors different from those currently affecting the independent results of operations of each of First Financial and TB&T. For a discussion of the business of First Financial and of certain factors to consider in connection with that business, see the documents incorporated by reference into this proxy statement/prospectus and referred to under “Where You Can Find More Information.”

 

17

Because TB&T common stock is traded infrequently, it is difficult to determine how the fair value of TB&T common stock compares with the merger consideration.

TB&T common stock is not traded on any public markets. Any market for TB&T common stock has been illiquid and irregular. This lack of liquidity makes it difficult to determine the fair value of TB&T common stock.

Regulatory approvals may not be received, may take longer than expected or impose conditions that are not presently anticipated.

The Federal Reserve must approve First Financial’s acquisition of TB&T and the OCC must approve the merger of The Bank & Trust with and into First Financial Bank. On October 2, 2019, First Financial filed an application with the Federal Reserve to obtain approval of the merger under the BHC Act and First Financial Bank and The Bank & Trust filed an application with the OCC to obtain approval of bank merger. The Federal Reserve and the OCC will consider, among other factors, the competitive impact of the merger, the financial and managerial resources of our companies and our subsidiary banks and the convenience and needs of the communities to be served. As part of that consideration, we expect that the Federal Reserve and OCC will review issues related to capital position, safety and soundness, and legal and regulatory compliance. There can be no assurance as to whether this and other regulatory approvals will be received, the timing of those approvals or whether any conditions will be imposed.

Shareholders should bear in mind that regulatory approval reflects only the view that the merger does not contravene applicable competitive standards imposed by law, and that the merger is consistent with regulatory policies relating to safety and soundness. Further, regulatory approval is not an opinion that the proposed merger is favorable to the shareholders of either party to the merger from a financial point of view or that the regulatory authority has considered the adequacy of the terms of the merger. Regulatory approval is not an endorsement or recommendation of the merger.

TB&T will be subject to business uncertainties while the merger is pending.

Uncertainty about the effect of the merger on employees and customers of TB&T may have an adverse effect on TB&T and its wholly owned subsidiary, The Bank & Trust, and consequently on First Financial following completion of the merger. These uncertainties may impair TB&T’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with TB&T to seek to change existing business relationships with TB&T. Retention of certain employees of TB&T and The Bank & Trust may be challenging while the merger is pending, as certain employees may experience uncertainty about their future roles with First Financial. If key employees depart, First Financial’s business following the merger could be harmed. See the section entitled “Proposal 1: Approval of the Merger Proposal—Covenants and Agreements—Conduct of Business Pending Effective Time” beginning on page 45 of this proxy statement/prospectus for a description of the restrictive covenants to which TB&T is subject.

Combining our two banks may be more difficult, costly or time-consuming than we expect.

First Financial Bank and The Bank & Trust have historically operated and, until the bank merger is completed, will continue to operate, independently. It is possible that the integration process could result in the loss of key employees or disruption of each bank’s ongoing business or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with customers and employees or to achieve the anticipated benefits of the merger. As with any combination of banking institutions, there also may be business disruptions that cause us to lose customers or cause customers to take their deposits out of our banks. The success of the combined bank following the merger may depend in large part on the ability to integrate the two businesses, business models and cultures. If we are not able to integrate our operations successfully and timely, the expected benefits of the merger may not be realized.

 

18

Some of the directors and officers of TB&T may have interests and arrangements that may have influenced their decisions to support or recommend that you approve the merger proposal and the transactions contemplated therein.

TB&T’s shareholders should be aware that some of TB&T’s directors and executive officers may have interests in the merger and have arrangements that are different from, or in addition to, those of TB&T’s shareholders generally. The board of directors of TB&T was aware of these interests and considered these interests, among other matters, when making its decision to approve the reorganization agreement, and in recommending that TB&T’s shareholders vote in favor of approving the merger proposal. These interests include the following:

 

•

Indemnification and Insurance. First Financial has agreed to indemnify the directors and officers of TB&T against certain liabilities arising before the effective time of the merger and TB&T is paying to provide certain “tail” insurance for the benefit of the directors and officers of TB&T.

 

•

Employment Agreements. First Financial Bank has entered into employment agreements to be effective as of the effective time of the merger with, among other employees of The Bank & Trust, Timothy N. Bryan, Ivan M. Olson Jerry E. Fox and Michael A. Holmgreen. Among other matters, such employment agreements provide that each of Messrs. Bryan, Olson, Fox and Holmgreen may be entitled to receive retention payments if he remains employed with First Financial Bank as of the first and second anniversaries of the closing of the merger. Pursuant to these employment agreements, Messrs. Bryan, Olson, Fox and Holmgreen are expected to receive compensation following the merger for their continued service to First Financial Bank at substantially the same level as compared to their respective compensation with The Bank & Trust.

 

•

Employee Benefit Plans. On or as soon as reasonably practicable following the merger, employees of TB&T who continue on as employees of First Financial will be entitled to participate in the First Financial health and welfare benefit and similar plans on the same terms and conditions as employees of First Financial. Subject to certain exceptions, these employees will receive credit for their years of service to TB&T or The Bank & Trust for participation, vesting and benefit accrual purposes.

 

•

Retention Payments. Upon the closing of the merger, TB&T will pay retention bonuses totaling $3.0 million in the aggregate to certain key personnel of TB&T and The Bank & Trust to remain employed with the combined organization following the consummation of the merger.

For a more complete description of these interests, see “Proposal 1: Approval of the Merger Proposal—Interests of TB&T’s Directors and Officers in the Merger” beginning on page 52.

First Financial may fail to realize the cost savings estimated for the merger.

Although First Financial estimates that it will realize cost savings from the merger when integrated, it is possible that the estimates of the potential cost savings could turn out to be incorrect. For example, the combined purchasing power may not be as strong as expected, and therefore the cost savings could be reduced. In addition, unanticipated growth in First Financial’s business may require First Financial to continue to operate or maintain some facilities or support functions that are currently expected to be combined or reduced. The cost savings estimates also depend on our ability to combine the businesses of First Financial Bank and The Bank & Trust in a manner that permits those costs savings to be realized. If the estimates turn out to be incorrect or First Financial is not able to combine successfully the two banks, the anticipated cost savings may not be fully realized or realized at all, or may take longer to realize than expected.

TB&T shareholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.

The merger will transfer control of TB&T to First Financial and to the shareholders of First Financial. When the merger is completed, each TB&T shareholder (other than dissenting shareholders) will become a shareholder

 

19

of First Financial with a percentage ownership of First Financial much smaller than such shareholder’s percentage ownership of TB&T. Because of this, TB&T shareholders will have less influence on the management and policies of First Financial, and thus First Financial Bank, than they now have on the management and policies of TB&T.

If the merger is not completed, First Financial and TB&T will have incurred substantial expenses without realizing the expected benefits of the merger.

Each of First Financial and TB&T has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the reorganization agreement, as well as the costs and expenses of filing, printing and mailing this proxy statement/prospectus and all filing and other fees paid to the SEC in connection with the merger. If the merger is not completed, First Financial and TB&T would have to recognize these expenses without realizing the expected benefits of the merger.

The opinion of TB&T’s financial advisor received by the board of directors of TB&T prior to the signing of the reorganization agreement does not reflect changes in circumstances since the date of such opinion.

The opinion of TB&T’s financial advisor received by the board of directors of TB&T was delivered on September 18, 2019. Changes in the operations and prospects of First Financial or TB&T, general market and economic conditions and other factors that may be beyond the control of First Financial or TB&T may significantly alter the value of TB&T or the price of First Financial’s common stock by the time the merger is completed. The opinion speaks only as of the date of such opinion and not as of the date of this proxy statement/prospectus, the time the merger will be completed or as of any date other than the date of such opinion.

Litigation may be filed against First Financial, TB&T or their respective boards of directors or officers, which could prevent or delay the completion of the merger or result in the payment of damages following completion of the merger.

Lawsuits may be filed against First Financial, TB&T or their respective boards of directors or officers in connection with the merger, which could prevent or delay completion of the merger and result in substantial costs to First Financial and TB&T, including any costs associated with indemnification. The defense or settlement of any lawsuit or claim that remains unresolved at the time the merger is completed may adversely affect First Financial’s and TB&T’s business, financial condition, results of operations and cash flows following completion of the merger.

 

20

A WARNING ABOUT FORWARD-LOOKING STATEMENTS

Certain statements contained in this proxy statement/prospectus, including statements included or incorporated by reference in this proxy statement/prospectus, that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of operations of First Financial after the merger is completed as well as information about the merger. Words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “continue,” “should,” “may,” or similar expressions, or the negatives thereof, are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. Many possible events or factors could affect the future financial results and performance of each of our companies before the merger or First Financial after the merger, and could cause those results or performance to differ materially from those expressed in the forward-looking statements. These possible events or factors include, but are not limited to:

 

•

First Financial’s actual cost savings resulting from the merger are less than expected, First Financial is unable to realize those cost savings as soon as expected or First Financial incurs additional or unexpected costs;

 

•

First Financial’s revenues after the merger are less than expected;

 

•

deposit attrition, operating costs, customer loss and business disruption before and after the merger, including, without limitation, difficulties in maintaining relationships with employees, may be greater than First Financial expected;

 

•

competition among financial services companies may increase;

 

•

the risk that the businesses of First Financial Bank and The Bank & Trust will not be integrated successfully, or such integration may be more difficult, time-consuming or costly than expected;

 

•

the failure of TB&T’s shareholders to approve the merger proposal;

 

•

the ability to obtain the governmental approvals of the merger on the proposed terms and schedule;

 

•

changes in the level of nonperforming assets and charge-offs;

 

•

changes in the interest rate environment reduce First Financial’s or TB&T’s interest margins;

 

•

general business and economic conditions in the markets First Financial or TB&T serves change or are less favorable than expected;

 

•

legislative or regulatory changes adversely affect First Financial’s or TB&T’s businesses;

 

•

changes in tax rates, rules, regulations or policy;

 

•

changes occur in business conditions and inflation;

 

•

changes in commodity prices (i.e., oil and gas, cattle and wind energy);

 

•

personal or commercial customers’ bankruptcies increase;

 

•

changes occur in the securities markets; and

 

•

technology-related changes are harder to make or more expensive than expected.

For other factors, risks and uncertainties that could cause actual results to differ materially from estimates and projections contained in forward-looking statements, please read the “Risk Factors” section of this proxy statement/prospectus.

 

21

A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe we have chosen these assumptions or bases in good faith and that they are reasonable. However, we caution you that assumptions or bases almost always vary from actual results, and the differences between assumptions or bases and actual results can be material. Therefore, we caution you not to place undue reliance on our forward-looking statements. The forward-looking statements are made as of the date of this proxy statement/prospectus or the date of the applicable document incorporated by reference into this proxy statement/prospectus. We undertake no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

22

GENERAL INFORMATION

This document constitutes a proxy statement of TB&T and is being furnished to all record holders of TB&T common stock as of the close of business on October 28, 2019 in connection with the solicitation of proxies by the board of directors of TB&T to be used at the special meeting of shareholders of TB&T to be held on December 3, 2019. The purpose of the TB&T special meeting is to consider and vote to approve the merger proposal.

This document also constitutes a prospectus relating to the First Financial common stock to be issued to shareholders of TB&T common stock upon completion of the merger.

TB&T SPECIAL SHAREHOLDERS’ MEETING

Date, Place and Time of the Special Meeting

The special meeting of shareholders of TB&T will be held on December 3, 2019 at 3:00 p.m., local time, at the Phillips Event Center, 1929 Country Club Drive, Bryan, Texas 77802. The special meeting may be postponed to another date or place for proper purposes, including for the purpose of soliciting additional proxies.

Purpose

The purpose of the special meeting are to consider and vote on the following:

 

1.

the approval of the merger proposal; and

 

2.

the approval of the adjournment proposal, if necessary.

At this time, the board of directors of TB&T and the voting representatives are unaware of any matter, other than the matter set forth above, that may be presented for action at the special meeting.

Record Date; Shares Entitled to Vote

The close of business on October 28, 2019 is the record date. The holders of record of the outstanding shares of TB&T common stock as of the close of business on the record date are entitled to notice of, and to vote at, the special meeting, or any postponement thereof. At the close of business on the record date, there were 4,959,674 shares of TB&T common stock outstanding and entitled to vote at the special meeting. At the special meeting, the shareholders of TB&T will be entitled to one vote for each share of common stock owned as of the close of business on the record date.

Quorum; Vote Required

No business may be transacted at the special meeting of shareholders of TB&T unless a quorum is present. Holders representing at least a majority of the shares of TB&T common stock entitled to vote at the special meeting must be present, either in person or represented by proxy, to constitute a quorum at the special meeting. All shares of TB&T common stock represented at the special meeting of shareholders, including shares that are represented but that vote to abstain and broker non-votes, will be treated as present for purposes of determining the presence or absence of a quorum.

The vote of the holders of at least two-thirds of the outstanding TB&T common stock entitled to vote at the special meeting of shareholders is required to approve the reorganization agreement and the merger. As a result, if shares representing at least two-thirds of the shares of TB&T common stock outstanding on the close of business on the TB&T record date are not present, either in person or represented by proxy, at the special

 

23

meeting of shareholders, the presence of a quorum will still not permit the reorganization agreement and the merger to be approved at the special meeting. Only shares of TB&T common stock are entitled to vote at the special. Failures to vote, broker non-votes and abstentions will have the same effect as a vote against the merger proposal.

Shares Held by Directors and Named Executive Officers

As of the record date, all of the directors of TB&T (12 persons) and named executive officers of TB&T were entitled to vote, in the aggregate, 812,706 shares of TB&T common stock, or approximately 16.39% of the outstanding shares of the common stock entitled to vote at the special meeting. The directors, executive officers and certain principal shareholders of TB&T, solely in their capacity as shareholders of TB&T, have entered into a Voting Agreement, dated as of September 19, 2019, referred to as the “voting agreement” in this proxy statement/prospectus, pursuant to which each such shareholder agreed to vote his, her or its shares of TB&T common stock in favor of approval of the merger pursuant to the reorganization agreement. Under the terms of the voting agreement, such shareholders have also appointed First Financial as their proxy for voting their shares of TB&T common stock at the special meeting of shareholders. As of the record date, 1,425,345 shares of TB&T common stock, or approximately 28.7% of the outstanding shares of TB&T common stock entitled to vote at the TB&T special meeting, are bound by the voting agreement.

The foregoing description of the voting agreement is subject to, and qualified in its entirety by reference to, the voting agreement, a form of which is attached to this proxy statement/prospectus as Appendix B and is incorporated by reference into this proxy statement/prospectus.

Voting and Revocation of Proxies

Any holder of record of shares of TB&T common stock entitled to vote at the special meeting may vote by returning a signed proxy card by mail, or may vote in person by appearing at the special meeting. Proxies, in the form enclosed, which are properly executed and returned to TB&T and not subsequently revoked, will be voted in accordance with the instructions indicated on the proxies. Any properly executed proxy on which voting instructions are not specified will be voted “FOR” the merger proposal and “FOR” the adjournment proposal. The proxy also grants authority to the persons designated in such proxy to vote in accordance with their own judgment if an unscheduled matter is properly brought before the special meeting..

If you are a beneficial owner and hold your shares of TB&T common stock in “street name” through a brokerage firm, bank, trust or other nominee, you should instruct your nominee on how you wish to vote your shares of TB&T common stock using the instructions provided by your nominee. Under applicable rules, brokerage firms, banks, trusts and other nominees have the discretion to vote on routine matters. The merger proposal is a non-routine matter, and brokerage firms, banks, trusts and other nominees cannot vote on non-routine matters without your instructions. Broker non-votes are shares held by a brokerage firm, bank, trust or other nominee that are represented at the TB&T special meeting, but with respect to which the brokerage firm, bank, trust and other nominees is not instructed by the beneficial owner of such shares to vote on the particular proposal and the broker does not have discretionary voting power on such proposal. Therefore, it is important that you cast your vote or instruct your brokerage firm, bank, trust or other nominee on how you wish to vote your shares of TB&T common stock.

If you do not return your proxy card or attend the special meeting, your shares of TB&T common stock will not be voted, which will have the same effect as a vote against the merger. Even if you plan to attend the special meeting, if you hold your shares of TB&T common stock in your own name as the shareholder of record, please vote your shares of TB&T common stock by completing, signing, dating and returning the enclosed proxy card.

If you are the record holder of your shares, you may revoke any proxy given pursuant to this solicitation by the board of directors of TB&T at any time before it is voted at the special meeting by:

 

•

giving written notice to the Secretary of TB&T;

 

24

•

executing a proxy bearing a later date and filing that proxy with the Secretary of TB&T at or before the special meeting; or

 

•

attending and voting in person at the special meeting.

All written notices of revocation and other communications with respect to revocation or proxies must be received by TB&T no later than December 2, 2019, at 5:00 p.m. local time, which is the business day immediately prior to the special meeting and should be sent to: TB&T Bancshares, Inc., 1716 Briarcrest Drive, Suite 400, Bryan, Texas 77802, Attention: Jerry E. Fox, Corporate Secretary. If you hold your shares in street name with a brokerage firm, bank, trust or other nominee, you must contact such brokerage firm, bank, trust or other nominee if you wish to revoke your proxy.

Your presence without voting at the special meeting will not automatically revoke your proxy, and any revocation during the special meeting will not affect votes previously taken.

The secretary of TB&T will determine all questions as to validity, form, eligibility (including time of receipt) and acceptance of proxies. Its determination will be final and binding. The board of directors has the right to waive any irregularities or conditions as to the manner of voting. TB&T may accept your proxy by any form of communication permitted by the TBOC so long as TB&T is reasonably assured that the communication is authorized by you.

Shares Held in Street Name

Your brokerage firm, bank, trust or other nominee cannot vote your shares of TB&T common stock for or against approval and adoption of the merger proposal unless you tell the brokerage firm, bank, trust or other nominee how you wish to vote. To tell your nominee how to vote, you should follow the directions that your nominee provides to you. Please note that you may not vote your shares of TB&T common stock held in “street name” by returning a proxy card directly to TB&T or by voting in person at the special meeting unless you provide a “legal proxy,” which you must obtain from your nominee. If you do not instruct your broker or other nominee on how to vote your shares of TB&T common stock, your broker or other nominee may not vote your TB&T common shares, which will have the same effect as a vote against the merger proposal for purposes of the required vote. You should therefore provide your brokerage firm, bank, trust or other nominee with instructions as to how to vote your shares of TB&T common stock.

Solicitation of Proxies; Expenses

This proxy solicitation is made by the board of directors of TB&T. TB&T is responsible for its expenses incurred in preparing, assembling, printing and mailing this proxy statement/prospectus. Proxies will be solicited through the mail. Additionally, directors of TB&T intend to solicit proxies personally or by telephone or other means of communication. The directors will not be additionally compensated. TB&T will reimburse banks, brokers and other custodians, nominees and fiduciaries for their reasonable expenses in forwarding the proxy materials to beneficial owners.

Recommendation of TB&T’s Board of Directors

After considering various factors described in the section entitled “Proposal 1: Approval of the Merger Proposal—Recommendation of TB&T’s Board of Directors and its Reasons for the Merger,” the board of directors of TB&T has unanimously determined that the reorganization agreement and the transactions contemplated by the reorganization agreement, including the merger, are advisable and in the best interests of TB&T’s shareholders and has adopted and approved the reorganization agreement and the transactions contemplated by the reorganization agreement, including the merger. The board of directors recommends that you vote “FOR” the merger proposal and, if necessary, and “FOR” the adjournment proposal.

 

25

Dissenters’ Rights

Holders of shares of TB&T common stock are entitled to dissenters’ rights under Subchapter H of Chapter 10 of the TBOC, provided they satisfy the special conditions and conditions set forth therein. For a more detailed discussion of your dissenters’ rights and the requirements for perfecting your dissenters’ rights, see “Proposal 1: Approval of the Merger Proposal—Dissenters’ Rights of TB&T Shareholders” on page 61. In addition, a copy of Subchapter H of Chapter 10 of the TBOC is attached as Appendix E to this proxy statement/prospectus.

Assistance

If you need assistance in completing your proxy card, have questions regarding the special meeting or would like additional copies of this proxy statement/prospectus, please contact Jerry E. Fox, Corporate Secretary, at (979) 260-2106.

 

26

PROPOSAL 1: APPROVAL OF THE MERGER PROPOSAL

The following information describes material aspects of the merger pursuant to the reorganization agreement. It is not intended to be a complete description of all information relating to the merger pursuant to the reorganization agreement and is qualified in its entirety by reference to more detailed information contained in the appendices to this document, including the reorganization agreement. A copy of the reorganization agreement is included as Appendix A and is incorporated herein by reference. You are urged to read the appendices in their entirety.

Terms of the Merger

Structure of Merger. The reorganization agreement provides for the acquisition of TB&T and its wholly owned subsidiary, The Bank & Trust, by First Financial. If (i) the shareholders of TB&T approve the merger proposal at the special meeting, (ii) the required regulatory approvals are obtained, and (iii) the other conditions to the parties’ obligations to effect the transactions contemplated by the reorganization agreement are met or waived by the party entitled to do so, we anticipate that the transactions contemplated by the reorganization agreement will be completed in the first quarter of 2020, although delays could occur.

The first transaction contemplated by the reorganization agreements is the merger of Merger Sub, a wholly owned subsidiary of First Financial, with and into TB&T, with TB&T surviving the merger as a wholly owned subsidiary of First Financial. As a result of the merger, holders of TB&T common stock as of the effective time of the merger, other than canceled shares and dissenting shares, will be entitled to receive whole shares of First Financial common stock and cash payable in lieu of any fractional share. Following the merger, certificates for TB&T common stock will only represent the right to receive the merger consideration pursuant to the reorganization agreement, and otherwise will be null and void.

Following immediately after the merger, or at such later time as First Financial may determine in its sole discretion, First Financial will cause (i) TB&T to merge with and into First Financial, with First Financial as the surviving entity and TB&T ceasing its separate corporate existence and (ii) The Bank & Trust to merge with and into First Financial Bank, with First Financial Bank as the surviving bank and The Bank & Trust ceasing its separate corporate existence. As a result of the bank merger, the existing branches and main office of The Bank & Trust will become branches of First Financial Bank.

Merger Consideration. If the merger is completed, each outstanding share of TB&T common stock, other than cancelled shares and dissenting shares, will be converted, pursuant to the reorganization agreement, into the right to receive 1.2502 shares of First Financial common stock. Any fluctuation in the market price of First Financial common stock after the date of this proxy statement/prospectus will change the value of the shares of First Financial common stock that TB&T shareholders will receive. On September 19, 2019, the last full trading day before the public announcement of the reorganization agreement, the last reported sale price of First Financial common stock was $33.11 per share, and on October 25, 2019, the latest practicable full trading day prior to the printing of this proxy statement/prospectus, the last reported sale price of First Financial common stock was $34.82 per share. For illustration purposes only, based on the number of shares of First Financial common stock issued and outstanding as of October 29, 2019, the aggregate number of shares of First Financial common stock to be received by TB&T shareholders pursuant to the terms of the reorganization agreement would have provided TB&T shareholders with aggregate ownership of approximately 4.4% of the issued and outstanding shares of First Financial common stock after completion of the merger.

In connection with the closing of the merger, TB&T may pay a special dividend to its shareholders of up to $2.0 million in the aggregate. In the event that merger is not completed prior to the record date for determining the shareholders of First Financial who are entitled to receive any regular cash dividend on First Financial common stock for the first quarter of 2020, then TB&T shareholders will be entitled to receive an additional aggregate cash amount equal to (a) the per share cash dividend on First Financial common stock declared by the First Financial board of directors with the previously mentioned record date multiplied by (b) 6,275,806 (which is the approximate number of shares of First Financial common stock to be tendered as consideration for the merger). In each case, any dividend payable by TB&T would be paid prior to the closing of the merger.

 

27

You should read this proxy statement/prospectus carefully to understand the value of the consideration you will receive in the merger.

Background of the Merger

The TB&T board of directors and management of TB&T regularly review TB&T’s future prospects for earnings and asset growth as well as the implementation and viability of TB&T’s strategic initiatives. From time to time, the TB&T board of directors and management of TB&T will review and discuss TB&T’s long-term objectives and consider ways to enhance shareholder value and performance of the organization. These strategic discussions have focused on, among other things, the business environment facing financial institutions in general and TB&T in particular, as well as conditions and ongoing consolidation in the financial services industry and strategic alternatives to enhance TB&T’s competitive position.

Over the past several years, the TB&T organization has taken a number of actions to enhance shareholder value, liquidity and return. These actions included stock repurchase programs from time to time, authorized by regulatory authorities.

From 2014 through 2018, Timothy N. Bryan, Chairman and Chief Executive Officer of TB&T and The Bank & Trust, met several times with Scott Dueser, President and Chief Executive Officer of First Financial, at the request of Mr. Dueser. During these preliminary meetings, Messrs. Bryan and Dueser generally discussed the viability of a business combination of their organizations and the anticipated benefits and challenges for completing a merger transaction. Mr. Bryan entertained Mr. Dueser’s request based on Mr. Bryan’s desire to enhance TB&T shareholder value and provide opportunities for shareholder liquidity. These meetings took place in Bryan/College Station and Abilene, Texas and included luncheons, dinners and periodic telephone conversations. In addition, the senior management teams of First Financial and TB&T met several times during this period, primarily on the front-end of this period, to discuss generally the anticipated benefits from and challenges to a merger, the integration of business cultures, and personnel and market considerations.

During the same time period from 2014 through 2018, TB&T, and prior to its formation in October 2017, The Bank & Trust, received informal expressions of interest from four other potential acquirors. In early 2017, First Financial made a formal written offer to The Bank & Trust, which was rejected. About this same time, a second publicly-traded Texas-based financial institution holding company made an oral acquisition offer to The Bank & Trust, which was also rejected. In terms of merger consideration, both offers were substantially less than the merger consideration provided for under the terms of the reorganization agreement.

As a result of an ongoing desire to provide shareholder liquidity and in light of the unsolicited offers that had been made to the TB&T organization, as discussed above, and as a result of a perceived recent improvement in market pricing for community bank franchises in Texas, in June of 2018, the TB&T board formed a strategic planning committee of the board of directors, chaired by Mr. Charles A. Ellison, to evaluate TB&T’s growth strategy, management succession and potential strategic opportunities involving TB&T, including potential acquisitions by TB&T of other institutions and branch offices, mergers of equals and the prospect of merging TB&T into a larger institution.

To further advance TB&T’s strategic growth objectives, on July 9, 2018, TB&T’s strategic planning committee met with representatives of Stephens Inc., or Stephens, to discuss potential acquisition opportunities and market conditions. At that meeting Stephens made a presentation to the strategic planning committee regarding the general state of the market for bank mergers and acquisitions in Texas and the Southwest. This presentation was made at the request of TB&T to provide the strategic planning committee with what was believed to be necessary information for evaluating market factors affecting TB&T’s strategic objectives and making sound recommendations to the TB&T board of directors regarding the strategic direction of TB&T and its consolidated organization. At the recommendation of the strategic planning committee, the TB&T board of directors determined to not pursue acquisition opportunities at that time and instead to make strategic investments in key leadership positions as necessary for the long-term viability of the organization.

 

28

In late March of 2019, Mr. Dueser met with Mr. Bryan and on behalf of First Financial made an oral offer to acquire TB&T. This offer was initially considered by Mr. Bryan and his executive management team and then by TB&T’s strategic planning committee. Based on various factors, including current market conditions, the recent financial performance of First Financial and TB&T and First Financial’s recent trading prices, the strategic planning committee determined that the offer from First Financial was viable and recommended that the full TB&T board of directors consider the offer.

During these preliminary discussions, Messrs. Dueser and Bryan negotiated certain aspects of the proposed merger consideration, including that the merger consideration would be comprised of a fixed number of shares of First Financial common stock, there would be no required minimum TB&T shareholders’ equity, the definitive agreement would not provide for any price adjustments based on TB&T’s performance or underperformance, and that TB&T generally would not have a termination right based on fluctuations in First Financial’s stock price or underperformance based on any peer bank index.

On May 9, 2019, First Financial submitted a written non-binding letter of interest to the TB&T board of directors, which indicated a proposal for aggregate merger consideration of $190 million, based on First Financial’s stock price of $30.98 and a fixed number of shares of First Financial common stock of 6,132,990, in exchange for all of the issued and outstanding shares of TB&T common stock. The letter of interest also indicated TB&T would be permitted to pay $3.0 million in pre-closing dividends to its shareholders. The parties continued to negotiate the terms of the merger following TB&T’s receipt of the letter of interest.

On May 13, 2019, representatives of Stephens met with the TB&T executive management, providing them with its analyses of the financial terms of the First Financial offer.

On May 20, 2019, First Financial submitted a revised written non-binding letter of interest to the TB&T board of directors, which indicated a proposal for aggregate merger consideration of $190 million, based on First Financial’s stock price of $30.275 and a fixed number of shares of First Financial common stock of 6,275,806, in exchange for all of the issued and outstanding shares of TB&T common stock. The letter of interest also indicated TB&T would be permitted to pay $3.0 million in pre-closing dividends to its shareholders and $2.0 million in discretionary bonuses to employees of TB&T and Bank & Trust. The letter included an exclusivity period through August 31, 2019 for due diligence and the negotiation of a definitive agreement. The parties continued to negotiate certain terms of the merger.

On May 28, 2019, First Financial submitted a second revised written non-binding letter of interest to the TB&T board of directors. There was no change to the merger consideration from that offered in the May 20, 2019 letter of interest. The revised letter of interest permitted TB&T to use a portion of the $3.0 million set aside for pre-closing dividends as retention bonuses for certain key personnel of TB&T and The Bank & Trust to remain employed with the combined organization following the consummation of the merger. The revised letter of interest also provided that all outstanding TB&T options and warrants would be exercised before closing and participate in the merger consideration or otherwise expire. The revised letter of interest also implied that the fixed number of First Financial shares constituting the merger consideration would be based on the TB&T common stock on a fully-diluted basis (assuming all outstanding TB&T options and warrants were exercised).

Upon receipt of the second revised letter of interest, the TB&T board of directors held a special meeting on May 28, 2019 to consider First Financial’s revised offer. After due consideration of the factors discussed above and other factors, and further deliberations, the TB&T board of directors determined that it was advisable and in the best interest of TB&T and its shareholders to execute the second revised letter of interest dated May 28, 2019 and pursue a transaction with First Financial generally based on the terms and conditions set forth in such letter of interest. As part of its evaluation of the First Financial offer, the TB&T board of directors considered, among other factors, the financial, business and legal terms of the First Financial offer, historical payments and rates of cash and stock dividends on outstanding common stock of First Financial and TB&T, historical trading multiples and performance of each organization’s common stock, the timetable for completing the transaction and the

 

29

exclusivity period proposed by First Financial, and the potential economies of scale and increased efficiencies of operations that could result from a combination with First Financial.

On June 10, 2019, First Financial entered into a confidentiality agreement with TB&T and The Bank & Trust. Upon the execution of the confidentiality agreement, First Financial established a virtual electronic data room to facilitate due diligence investigations. Senior management of First Financial met with senior management and directors of TB&T in Bryan, Texas, on June 6, 2019, to conduct certain due diligence investigations and to further discuss the merger and integration, personnel and operational matters, the philosophy and culture of the two organizations and the enhanced products and services that First Financial could bring to the Bryan/College Station, Texas market. Due diligence began in earnest the following week and progressed throughout the months of June and July, 2019. TB&T provided First Financial with non-public information regarding TB&T and The Bank & Trust to assist First Financial in its due diligence investigation of TB&T and to further assist in the negotiation of the terms and conditions of a definitive agreement. First Financial and TB&T conducted reciprocal due diligence on each other’s businesses, including with respect to regulatory, litigation, tax, financial and other matters.

On August 28, 2019, the parties extended the exclusivity period of the letter of interest until September 30, 2019.

TB&T received the initial draft of the reorganization agreement from First Financial on August 14, 2019 and the parties negotiated the terms of the reorganization agreement until the document was executed on September 19, 2019. On April 23, 2019, the First Financial board of directors declared a two-for-one stock split in the form of a 100% stock dividend effective for shareholders of record of First Financial on May 15, 2019 to be distributed on June 3, 2019. As a result of First Financial’s stock split and to adjust for rounding of the exchange ratio based on the fixed number of shares of First Financial common stock provided in the executed letter of interest, the merger consideration was adjusted to 6,275,806 shares of First Financial common stock.

On September 9, 2019, TB&T’s financial advisor, Stephens, and TB&T’s legal counsel, Fenimore, Kay, Harrison & Ford, LLP, conducted a reverse due diligence conference call with senior management of First Financial covering First Financial’s corporate strategy, credit quality and loan portfolio trends, financial performance for 2018 and year-to-date 2019 and key assumptions related to First Financial projected performance and earnings, certain operational matters and regulatory compliance and legal matters.

The TB&T board of directors was apprised of the negotiations with First Financial and progress on the transaction documents and due diligence investigations at each monthly meeting of the TB&T board in June, July and August, 2019.

On September 17, 2019, Stephens was formally engaged by TB&T to provide a fairness opinion to the TB&T board of directors with respect to the merger consideration provided for under the reorganization agreement.

On September 17, 2019, the management of First Financial met with the board of directors of First Financial to discuss the terms of the merger and the reorganization agreement. Following such session, the First Financial board of directors unanimously approved and authorized by written consent the reorganization agreement, the merger and the other transactions contemplated by the reorganization agreement, and authorized First Financial’s management to execute and deliver the reorganization agreement.

On September 18, 2019, the TB&T board of directors met with TB&T’s legal and financial advisors to consider and discuss the reorganization agreement, which was in its substantially final form. At this meeting, Stephens reviewed the financial aspects of the merger. At the conclusion of its presentation and after responding to questions from the TB&T board of directors, Stephens rendered to the TB&T board of directors its oral opinion that the aggregate merger consideration to be received by TB&T shareholders from First Financial in the

 

30

merger, which consisted of 6,275,806 shares of First Financial common stock, was fair to TB&T from a financial point of view. Stephens also delivered its written opinion, dated September 18, 2019, to the TB&T board of directors. Also, at this meeting, Fenimore, Kay, Harrison & Ford, LLP, TB&T’s legal counsel, reviewed the material legal terms of the reorganization agreement and ancillary legal documents to the reorganization agreement. TB&T’s legal counsel also reviewed in detail the business points, contingencies and timing considerations related to the merger. The TB&T board of directors asked a series of questions to TB&T’s advisors regarding the terms and conditions of the reorganization agreement and engaged in a full discussion regarding the proposed transaction.

Based upon the TB&T board’s review and discussion of the reorganization agreement, the opinion of Stephens and other relevant factors, the TB&T board of directors unanimously approved and authorized the reorganization agreement, the merger and the other transactions contemplated by the reorganization agreement, and authorized TB&T’s management to execute and deliver the reorganization agreement.

On September 19, 2019, TB&T, First Financial and Merger Sub executed the reorganization agreement, certain shareholders of TB&T executed the voting agreement and the directors of TB&T delivered to First Financial their director support agreement. First Financial issued a press release announcing the proposed transaction after the close of trading markets on September 19, 2019.

Recommendation of TB&T’s Board of Directors and its Reasons for the Merger

TB&T’s board of directors has unanimously approved the reorganization agreement and unanimously recommends that the shareholders of TB&T vote “FOR” the merger proposal.

The terms of the reorganization agreement, including the consideration to be paid to TB&T shareholders, were the result of arms-length negotiations between the representatives of TB&T and representatives of First Financial. In reaching its decision to approve the reorganization agreement and the merger and recommend the merger proposal to its shareholders, the board of directors of TB&T evaluated the merger and the reorganization agreement, in consultation with TB&T’s management, as well as its legal and financial advisors, and considered a number of positive factors, including the following material factors:

 

•

the TB&T board’s familiarity with and review of information concerning the business, results of operations, asset quality, financial condition, competitive position and future prospects of TB&T and The Bank and Trust;

 

•

the TB&T board’s knowledge of the current and prospective environment in which TB&T operates, including national, regional and local economic conditions and the interest rate environment, increased operating costs resulting from regulatory initiatives and compliance mandates, the competitive environment for banks, thrifts and other financial institutions generally and the increased regulatory burdens on financial institutions generally, evolving trends in technology, the trend toward consolidation in the banking industry and in the financial services industry, and the likely effects of these factors on TB&T’s potential for growth, development, productivity, profitability and strategic options;

 

•

the complementary aspects of TB&T’s and First Financial’s respective businesses, including customer focus, geographic coverage, business orientation and compatibility of the companies’ management and operating styles;

 

•

the results that TB&T could expect to obtain if it continued to operate independently, and the likely benefits to shareholders of that course of action, as compared with the value of the merger consideration offered by First Financial and TB&T’s belief that a merger with First Financial would allow TB&T shareholders to participate in the future performance of a combined, more diversified banking organization operating in a broader geographic area that would likely have better future prospects than TB&T was likely to achieve on a stand-alone basis or through other strategic alternatives;

 

31

•

the limited liquidity that TB&T shareholders have with respect to their investment in TB&T, for which there is no active public market, and that shareholders of TB&T will receive merger consideration in shares of First Financial common stock, which is publicly traded on the NASDAQ Global Select Market, which would be expected to provide such shareholders with increased liquidity of their investment;

 

•

that the number of shares of First Financial common stock to be issued to TB&T shareholders is fixed based on an exchange ratio of 1.2502 shares of First Financial common stock for each share of TB&T common stock outstanding as of the effective time of the merger;

 

•

the financial presentation of Stephens and the opinion of Stephens, dated as of September 18, 2019, that, as of the date of such opinion, and subject to the assumptions, limitations and qualifications set forth in the opinion, the aggregate merger consideration to be received by TB&T was fair, from a financial point of view, to TB&T (see “—Opinion of TB&T’s Financial Advisor,” beginning on page 33);

 

•

the treatment of the merger as a “reorganization” within the meaning of Section 368(a) of the Code with respect to TB&T common stock exchanged for First Financial common stock;

 

•

the ability of First Financial to pay the aggregate merger consideration without a financing contingency and without the need to obtain financing to close the transaction;

 

•

the regulatory and other approvals required in connection with the merger and the likelihood that the approvals needed to complete the merger will be obtained within a reasonable time and without unacceptable conditions;

 

•

the potential benefits and opportunities for employees of TB&T and The Bank & Trust as a result of both employment opportunities and benefit plans in a larger organization;

 

•

the merger with a larger holding company would provide the opportunity to realize economies of scale, increase efficiencies of operations and enhance the development of new products and services; and

 

•

the acceleration all of all unvested TB&T stock options and that all outstanding stock options and warrants may be exercised by the holders thereof prior to closing.

The TB&T board of directors also considered potential risks and potentially negative factors concerning the merger in connection with its deliberations of the proposed transaction, including the following material factors:

 

•

the challenges of combining the businesses, assets and workforces of two financial institutions;

 

•

the potential risk of diverting management focus and resources from other strategic opportunities and from operational matters while working to implement the merger;

 

•

the risks and costs to TB&T if the merger is not completed;

 

•

the fact that the merger consideration, which consists of shares of First Financial common stock (other than fractional shares that are paid in cash), provides less certainty of value to TB&T shareholders compared to a transaction in which they would receive only cash consideration;

 

•

the potential for unintended delays in the regulatory approval process;

 

•

the fact that the reorganization agreement prohibits TB&T from soliciting acquisition proposals or engaging in negotiations concerning or providing nonpublic information to any person relating to an acquisition proposal;

 

•

that some of TB&T’s directors and executive officers have other financial interests in the merger in addition to their interests as TB&T shareholders, including financial interests that are the result of existing compensation arrangements with TB&T and/or prospective compensation arrangements with First Financial and the manner in which such interests would be affected by the merger;

 

32

•

the requirement that TB&T conduct its business in the ordinary course and other restrictions on the conduct of TB&T’s business before completion of the merger, which may delay or prevent TB&T from undertaking business opportunities that may arise before completion of the merger;

 

•

the risk that the anticipated benefits of the merger, including the realization of synergies and cost savings, may not be realized or may take longer than expected to be realized; and

 

•

the possible effects during the pendency or upon completion of the transactions contemplated by the reorganization agreement, including any suit, action or proceeding initiated in respect of the merger.

The foregoing discussion of the factors considered by the TB&T board of directors is not intended to be exhaustive but does include all material factors considered by the TB&T board of directors in approving the merger and the reorganization agreement. In reaching its determination, the TB&T board of directors did not assign any relative or specific weights to different factors, and individual directors may have given different weights to different factors. Based on the reasons stated, the TB&T board of directors believed that the merger was in the best interest of TB&T’s shareholders, and therefore the TB&T board of directors unanimously approved the reorganization agreement and the merger. In addition, all members of the TB&T board of directors have entered into a voting agreement requiring them to vote their shares of TB&T common stock over which they have voting authority in favor of the reorganization agreement and the merger.

THE BOARD OF DIRECTORS OF TB&T UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF TB&T COMMON STOCK VOTE (I) “FOR” THE MERGER PROPOSAL AND (II) “FOR” THE ADJOURNMENT PROPOSAL.

Opinion of TB&T’s Financial Advisor

The fairness opinion and a summary of the underlying financial analyses of TB&T’s financial advisor, Stephens, is described below. The description contains projections, estimates and other forward-looking statements about the future earnings or other measures of the future performance of TB&T. The projections were based on numerous variables and assumptions, which are inherently uncertain, including factors related to general economic and competitive conditions. Accordingly, actual results could vary significantly from those set forth in the projections. You should review the copy of the fairness opinion, which is attached as Appendix D.

Stephens was retained to provide a fairness opinion to TB&T in connection with the proposed merger of TB&T with and into First Financial, referred to herein as the merger. TB&T requested the opinion of Stephens as to whether the merger was fair to TB&T from a financial point of view. On September 18, 2019, Stephens delivered its oral opinion to the board of directors and subsequently confirmed in a written opinion, dated September 18, 2019 that, as of that date and based upon and subject to the assumptions and qualifications stated in its written opinion, the consideration to be exchanged by First Financial for the outstanding common stock of TB&T in the merger was fair, from a financial point of view, to TB&T.

Stephens provided the opinion described above for the information and assistance of the board of directors of TB&T in connection with its consideration of whether to approve the reorganization agreement. The terms of the merger, including the amount and form of the consideration payable pursuant to the reorganization agreement to TB&T’s shareholders, were determined through negotiations between TB&T and First Financial, and were approved by the board of directors. Stephens did not recommend the amount or form of consideration payable pursuant to the reorganization agreement. The full text of the written opinion letter of Stephens, dated September 18, 2019, which sets forth assumptions made, procedures followed, matters considered, qualifications stated and limitations to the review undertaken in connection with its opinion is attached as Appendix D to this proxy statement/prospectus.

Stephens’ opinion does not address the merits of the underlying decision by TB&T to enter into the merger, the merits of the merger as compared to other alternatives potentially available to TB&T or the relative effects of

 

33

any alternative transaction in which TB&T might engage, nor is it intended to be a recommendation to any person as to how to vote on the proposal to approve the merger. In addition, Stephens was not asked to address, and Stephens’ opinion does not address, the fairness to, or any other consideration of, the holders of any class of securities, creditors or other constituencies of TB&T. Stephens was not asked to express any opinion, and does not express any opinion, as to the fairness of the amount or nature of the compensation to any of TB&T’s officers, directors or employees, or to any group of such officers, directors or employees, relative to the compensation to other shareholders of TB&T, including (but not limited to) any consideration expected to be received by any such persons in connection with the merger. Stephens’ fairness opinion committee approved the issuance of Stephens’ opinion.

In connection with rendering its opinion Stephens:

 

•

analyzed certain publicly available financial statements and reports regarding TB&T and First Financial;

 

•

analyzed certain audited financial statements regarding TB&T and First Financial;

 

•

analyzed certain internal financial statements and other financial and operating data concerning TB&T and First Financial prepared by management of TB&T and First Financial, respectively;

 

•

analyzed, on a pro forma basis, in reliance upon consensus research estimates and upon financial projections and other information and assumptions concerning TB&T provided by the management team of TB&T, the effect of the merger on the balance sheet, capitalization ratios, earnings and book value both in the aggregate and, where applicable, on a per share basis of TB&T;

 

•

reviewed the reported prices and trading activity for the common stock of First Financial;

 

•

compared the financial performance of TB&T and First Financial with that of certain other publicly-traded companies and their securities that Stephens deemed relevant to its analysis of the merger;

 

•

reviewed the financial terms, to the extent publicly available, of certain merger or acquisition transactions that Stephens deemed relevant to its analysis of the merger;

 

•

reviewed the then most recent draft of the reorganization agreement and related documents provided to Stephens by TB&T;

 

•

discussed with management of TB&T the operations of and future business prospects for TB&T and First Financial and the anticipated financial consequences of the merger to TB&T;

 

•

assisted in deliberations regarding the material terms of the merger and negotiations with First Financial; and

 

•

performed such other analyses and provided such other services as Stephens deemed appropriate.

Stephens has relied on the accuracy and completeness of the information and financial data provided by TB&T and First Financial and of the other information reviewed by Stephens in connection with the preparation of Stephens’ opinion, and its opinion is based upon such information. Stephens has not assumed any responsibility for independent verification of the accuracy or completeness of any of such information and financial data. The managements of TB&T and First Financial have assured Stephens that they are not aware of any relevant information that has been omitted or remains undisclosed to Stephens. Stephens has not assumed any responsibility for making or undertaking an independent evaluation or appraisal of any of the assets or liabilities of TB&T or of First Financial, and Stephens has not been furnished with any such evaluations or appraisals; nor has Stephens evaluated the solvency or fair value of TB&T or of First Financial under any laws relating to bankruptcy, insolvency or similar matters. Stephens has not assumed any obligation to conduct any physical inspection of the properties or facilities of TB&T or First Financial. With respect to the financial forecasts prepared by the management of TB&T, including the forecasts of potential cost savings or synergies, Stephens has assumed that such financial forecasts have been reasonably prepared and reflect the best currently

 

34

available estimates and judgments of the management of TB&T as to the future financial performance of TB&T and that the financial results reflected by such projections will be realized as predicted. In addition, Stephens has not received or reviewed any individual credit files nor has Stephens made an evaluation of the adequacy of the allowance for loan losses of TB&T or First Financial. Stephens has also assumed that the representations and warranties contained in the reorganization agreement and all related documents are true, correct and complete in all material respects.

Stephens’ opinion is necessarily based upon market, economic and other conditions as they exist and can be evaluated on, and on the information made available to Stephens as of, September 18, 2019. It should be understood that subsequent developments may affect the opinion and that Stephens does not have any obligations to update, revise or reaffirm its opinion. Stephens has assumed that the merger will be consummated on the terms of the latest draft of the reorganization agreement provided to Stephens, without material waiver or modification. Stephens has assumed that in the course of obtaining the necessary regulatory, lending or other consents or approvals (contractual or otherwise) for the merger, no restrictions, including any divestiture requirements or amendments or modifications, will be imposed that would have a material adverse effect on the contemplated benefits of the merger to TB&T or its shareholders. Stephens is not expressing any opinion herein as to the price at which the common stock or any other securities of TB&T will trade following the announcement of the merger.

The following is a summary of the material financial analyses performed and material factors considered by Stephens in connection with its opinion. Stephens performed certain procedures, including each of the financial analyses described below, and reviewed with TB&T’s executive management and board of directors the assumptions upon which the analyses were based, as well as other factors. Although this summary does not purport to describe all of the analyses performed or factors considered by Stephens within this regard, it does set forth those considered by Stephens to be material in arriving at its opinion. The order of the summaries of analyses described does not represent the relative importance or weight given to those analyses by Stephens. It should be noted that in arriving at its opinion, Stephens did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, Stephens believes that its analysis must be considered as a whole and that considering any portion of such analyses and factors, without considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying its opinion.

Summary of Proposed Transaction: Pursuant to the reorganization agreement and for purposes of its opinion, Stephens assumed the consideration to be exchanged by First Financial for the outstanding TB&T common stock to have an aggregate value of $209.0 million, subject to potential adjustments as more fully defined in the reorganization agreement. At the time of Stephens’ opinion, the reorganization agreement provided that First Financial will issue a total of 6,275,806 shares worth approximately $209.0 million, based upon First Financial’s stock valued at $30.30 per share, based on the closing price as of September 13, 2019. Based upon the unaudited financial information as of and for the twelve months ended June 30, 2019, Stephens calculated the following transaction multiples:

 

Transaction Value / Tangible Book Value:			2.99	x
Transaction Value / Last Twelve Months (“LTM”) Earnings:			19.6	x
Transaction Value / 2019 Estimated Net Income:			18.6	x
Core Deposit Premium:			28.3	%

Note: The last twelve months net income of the acquired company based on the most recent available financial statements prior to announcement. Estimated 2019 net income based on assumptions provided by TB&T management.

Relevant Public Companies Analysis: Stephens compared the financial condition, operating statistics and market valuation of TB&T to selected relevant public companies and their stock trading prices. Stephens selected the companies outlined below because their relative asset size and financial performance, among other factors,

 

35

are reasonably similar to TB&T; however, no selected company below is identical to TB&T. A complete analysis involves complex considerations and qualitative judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading values of the relevant public companies. Mathematical analysis (such as determining the mean or the median) is not in itself a meaningful method of using relevant public company data.

Relevant Public Companies—TB&T Bancshares, Inc.:

Stephens selected the following relevant public companies with assets between $400 million and $1.5 billion, with a Last Twelve Months Core ROAA greater than 1.25% (total assets noted parenthetically):

 

•

Ames National Corporation ($1.47 billion)

 

•

Bank of Commerce Holdings ($1.44 billion)

 

•

MBT Financial Corp. ($1.33 billion)

 

•

Select Bancorp, Inc. ($1.32 billion)

 

•

Marlin Business Services Corp. ($1.28 billion)

 

•

National Bankshares, Inc. ($1.27 billion)

 

•

Capital Bancorp, Inc. ($1.23 billion)

 

•

Northeast Bank ($1.15 billion)

 

•

OP Bancorp ($1.13 billion)

 

•

Peoples Bancorp of North Carolina, Inc. ($1.12 billion)

 

•

United Security Bancshares ($1.00 billion)

 

•

Plumas Bancorp ($839 million)

 

•

First Capital, Inc. ($835 million)

 

•

Bank7 Corp. ($798 million)

 

•

First National Corporation ($778 million)

 

•

Union Bankshares, Inc. ($774 million)

 

•

Esquire Financial Holdings, Inc. ($732 million)

To perform this analysis, Stephens examined publicly available financial information as of and for the last twelve month period ended June 30, 2019, or the most recently reported period available, and the market trading multiples of the relevant public companies based on September 13, 2019 closing prices. The financial data included in the table presented below may not correspond precisely to the data reported in historical financial statements as a result of the assumptions and methods used by Stephens to compute the financial data presented. The table below contains selected information utilized by Stephens in the analysis:

 

		TB&T				25th Percentile				Median				75th Percentile
LTM Core Return on Average Equity			16.8	%			11.5	%			12.9	%			14.4	%
LTM Core Return on Average Assets			1.78	%			1.30	%			1.38	%			1.75	%
Tangible Common Equity / Tangible Assets			11.2	%			10.2	%			11.6	%			13.1	%
NPAs Plus 90 Days PD / Loans Plus OREO			0.02	%			0.66	%			0.73	%			1.47	%
Price / Tangible Book Value per Share			—				1.34	x			1.53	x			1.67	x
Price / LTM EPS			—				11.7	x			12.9	x			16.2	x
Price / 2019 Estimated EPS			—				10.3	x			12.8	x			14.2	x

 

Source: SNL Financial

 

36

Relevant Texas Transactions Analysis: Stephens analyzed selected transaction multiples and related financial data for relevant transactions in Texas announced since January 1, 2018 with target assets between $400 million and $1.5 billion, with a Last Twelve Months ROAA greater than 1.00%. The following transactions were considered by Stephens because each acquired company’s relative asset size, financial performance and markets of operation, among other factors, is reasonably similar to TB&T’s (in each case, the first named company was the acquirer and the second named company was the acquired company and the transaction announcement date is noted parenthetically):

 

•

South Plains Financial, Inc. / West Texas State Bank (7/25/19)

 

•

BancFirst Corporation / Pegasus Bank (4/24/19)

 

•

Spirit of Texas Bancshares, Inc. / First Beeville Financial Corporation (11/27/18)

 

•

Allegiance Bancshares, Inc. / Post Oak Bancshares, Inc. (4/30/18)

 

•

BancorpSouth Bank / Icon Capital Corporation (4/18/18)

Stephens considered these selected transactions to be reasonably similar, but not identical, to the merger. A complete analysis involves complex considerations and qualitative judgments concerning differences in the selected transactions and other factors that could affect the transaction values in those selected transactions to which the merger is being compared. Mathematical analysis (such as determining the mean or the median) is not in itself a meaningful method of using selected transaction data. Stephens compared certain proposed transaction multiples of the merger to the 25^th percentile, median, mean and 75^th percentile transaction multiples of the relevant transactions:

 

		TB&T				25th Percentile				Median				75th Percentile
Target LTM ROAE			16.8	%			10.6	%			11.0	%			14.7	%
Target LTM ROAA			1.78	%			1.16	%			1.17	%			1.23	%
Target NPAs / Total Assets			0.0	%			0.2	%			0.3	%			0.7	%
Target TCE / TA			11.2	%			8.4	%			8.5	%			11.0	%
Transaction Value / Tangible Book Value			2.99	x			1.85	x			2.18	x			2.24	x
Transaction Value / LTM Earnings(1)			19.6	x			15.9	x			17.1	x			20.8	x
Core Deposit Premium			28.3	%			8.9	%			13.9	%			16.0	%

 

(1) When necessary for comparables, reflects the impact of a 21% tax effect due to subchapter S corporate status

Source: SNL Financial

Relevant Nationwide Transactions Analysis: Stephens analyzed selected transaction multiples and related financial data for relevant nationwide transactions announced since January 1, 2018 with target assets between $400 million and $1.5 billion, with a Last Twelve Months ROAA greater than 1.25%. The following transactions were considered by Stephens because each acquired company’s relative asset size and financial performance, among other factors, is reasonably similar to TB&T (in each case, the first named company was the acquirer and the second named company was the acquired company and the transaction announcement date is noted parenthetically):

 

•

Wintrust Financial Corporation / SBC, Incorporated (7/25/19)

 

•

Heritage Commerce Corp. / Presidio Bank (5/16/19)

 

•

Glacier Bancorp, Inc. / Heritage Bancorp (4/3/19)

 

•

BancorpSouth Bank / Summit Financial Enterprises, Inc. (3/5/19)

 

•

Spirit of Texas Bancshares, Inc. / First Beeville Financial Corporation (11/27/18)

 

•

First Citizens BancShares, Inc. / Biscayne Bancshares, Inc. (11/16/18)

 

37

•

MidWestOne Financial Group, Inc. / ATBancorp (8/22/18)

 

•

National Commerce Corporation / Landmark Bancshares, Inc. (4/24/18)

Stephens considered these selected transactions to be reasonably similar, but not identical, to the merger. A complete analysis involves complex considerations and qualitative judgments concerning differences in the selected transactions and other factors that could affect the transaction values in those selected transactions to which the merger is being compared. Mathematical analysis (such as determining the mean or the median) is not in itself a meaningful method of using selected transaction data. Stephens compared certain proposed transaction multiples of the merger to the 25^th percentile, median, mean and 75^th percentile transaction multiples of the relevant transactions:

 

		TB&T				25th Percentile				Median				75th Percentile
Target LTM ROAE			16.8	%			13.6	%			14.8	%			17.3	%
Target LTM ROAA			1.78	%			1.36	%			1.48	%			1.61	%
Target NPAs / Total Assets			0.0	%			0.4	%			0.8	%			1.1	%
Target TCE / TA			11.2	%			8.4	%			8.8	%			11.0	%
Transaction Value / Tangible Book Value			2.99	x			1.77	x			1.83	x			2.08	x
Transaction Value / LTM Earnings(1)			19.6	x			12.1	x			13.4	x			14.6	x
Core Deposit Premium			28.3	%			9.3	%			10.8	%			15.1	%

 

(1) When necessary for comparables, reflects the impact of a 21% tax effect due to subchapter S corporate status

Source: SNL Financial

Discounted Cash Flow Analysis: Stephens performed a discounted cash flow analysis using projections developed by TB&T executive management. Stephens calculated a range of implied equity values for TB&T based upon the discounted net present value of the projected after-tax free cash flows for the projected period. Stephens determined the amount of cash flow assuming (i) a terminal earnings multiple of 12.0x, (ii) dividend payments for earnings and excess capital above a tangible common equity to tangible asset ratio of 9.0% from 2019 to 2023 and (iii) the present value of TB&T’s implied terminal value at the end of such period. Stephens calculated the terminal value of TB&T based on 2024 estimated earnings and multiples of 11.0x to 13.0x. Stephens considered discount rates from 12.0% to 14.0%. Based on this analysis, Stephens derived a range for the implied equity value of TB&T from $132.3 to $160.3 million.

Financial Impact Analysis: Stephens analyzed the estimated merger consequences of certain pro forma combined income statement and balance sheet information of TB&T and First Financial. Stephens discussed key assumptions regarding the expected accounting treatment, potential cost savings and other acquisition adjustments resulting from the merger with management of TB&T and First Financial. Stephens’ analysis utilized consensus earnings estimates for First Financial as of September 13, 2019, as well as earnings estimates for TB&T provided by TB&T executive management. Based on this analysis, Stephens estimated that the merger would likely be accretive to First Financial’s consensus earnings per share following the closing of the merger and would be accretive to First Financial’s tangible book value per share. Stephens also estimated that First Financial would maintain capital ratios in excess of those required by First Financial to be considered well-capitalized under existing regulations. The actual results achieved by First Financial following the merger will likely vary from these projected results analyzed by Stephens, and the variations may be material.

Miscellaneous: As part of Stephens’ investment banking business, Stephens regularly issues fairness opinions and is continually engaged in the valuation of companies and their securities in connection with business reorganizations, private placements, negotiated underwritings, mergers and acquisitions and valuations for estate, corporate and other purposes.

Stephens served as financial adviser to TB&T in connection with the merger, and will receive from TB&T a customary fee for its services as financial adviser to TB&T, a portion of which is contingent upon the

 

38

consummation of the merger. Stephens also received a fee from TB&T for providing its opinion to the board of directors. TB&T has also agreed to indemnify Stephens for certain liabilities arising out of its engagement, including certain liabilities that could arise out of it providing the Opinion letter. During the past two years Stephens has not received any fees from the Company or the Buyer in connection with investment banking services, and Stephens has received compensation for securities brokerage services in customary amounts from First Financial or its affiliates. In the ordinary course of business, Stephens Inc. and its affiliates at any time may hold long or short positions, and may trade or otherwise effect transactions as principal or for the accounts of customers, in debt or equity securities or options on securities of TB&T or of any other participant in the merger.

Conclusion: Based upon the foregoing and its general experience as investment bankers, and subject to the assumptions and qualifications set forth in its fairness opinion letter, Stephens concluded that the consideration to be exchanged by TB&T in the merger is fair to TB&T from a financial point of view. The full text of the fairness opinion is included as Appendix D to this proxy statement/prospectus.

Certain Unaudited Prospective Financial Information of TB&T

TB&T does not as a matter of course make public projections as to future performance, revenues, earnings or other financial results due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, TB&T is including in this document certain unaudited prospective financial information that was made available to TB&T’s financial advisor in connection with the merger. The inclusion of this information should not be regarded as an indication that any of TB&T, Stephens or First Financial or any of their respective representatives considered, or now considers, the information to be necessarily predictive of actual future results.

This information, which was prepared by management of TB&T, was prepared solely for internal use and is subjective in many respects. The unaudited prospective financial information reflects numerous estimates and assumptions made with respect to business, economic, market, competition, regulatory and financial conditions and matters specific to the business of TB&T, all of which are difficult to predict and many of which are beyond the control of TB&T. The unaudited prospective financial information reflects assumptions as to certain business decisions that are subject to change and, in many respects, subjective judgment, and thus is susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. TB&T can give no assurance that the unaudited prospective financial information and the underlying estimates and assumptions will be realized. In addition, because the unaudited prospective financial information covers multiple years, the information by its nature becomes less predictive with each successive year. Actual results may differ materially from those set forth below, and important factors that may affect actual results and cause the unaudited prospective financial information to be inaccurate include, but are not limited to, risks and uncertainties relating to the business of TB&T, industry performance, general business and economic conditions, customer requirements, competition and adverse changes in applicable laws, regulations or policies. For other factors that could cause actual results to differ, please see the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 17 and page 21, respectively, of this proxy statement/prospectus.

The unaudited prospective financial information was not prepared with a view toward public disclosure, nor was it prepared with a view toward compliance with generally accepted accounting principles of the United States, which we refer to as “GAAP,” published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. In addition, the unaudited prospective financial information requires significant estimates and assumptions that make it inherently less comparable to the similarly titled GAAP measures in the historical GAAP financial statements of TB&T. Neither TB&T’s independent accountants, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the unaudited prospective financial information shown below, nor have they expressed any opinion or any other form of assurance on such information or its achievability.

Furthermore, the unaudited prospective financial information does not take into account any circumstances or events occurring after the date it was prepared. TB&T can give no assurance that, had the unaudited

 

39

prospective financial information been prepared either as of the date of the reorganization agreement or as of the date of this proxy statement/prospectus, similar estimates and assumptions would be used. TB&T does not intend to, and disclaims any obligation to, make publicly available any update or other revision to the unaudited prospective financial information to reflect circumstances existing since their preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error, or to reflect changes in general economic or industry conditions. The unaudited prospective financial information does not take into account the possible financial and other effects on either First Financial or TB&T, as applicable, of the merger and does not attempt to predict or suggest future results of the combined company. The unaudited prospective financial information does not give effect to the impact of negotiating or executing the reorganization agreement, the expenses that may be incurred in connection with consummating the merger, the potential synergies that may be achieved by the combined company as a result of the merger, the effect of any business or strategic decision or action that has been or will be taken as a result of the reorganization agreement having been executed, or the effect on either TB&T or First Financial, as applicable, of any business or strategic decisions or actions that would likely have been taken if the reorganization agreement had not been executed, but which were instead altered, accelerated, postponed or not taken in anticipation of the merger. Further, the unaudited prospective financial information does not take into account the effect on either First Financial or TB&T, as applicable, of any possible failure of the merger to occur. None of First Financial, TB&T or Stephens or their respective affiliates, officers, directors, advisors or other representatives has made, makes or is authorized in the future to make any representation to any shareholder of TB&T or First Financial, or any other person, regarding TB&T’s actual performance compared to the information contained in the unaudited prospective financial information or that the projected results will be achieved. The inclusion of the unaudited prospective financial information should not be deemed an admission or representation by TB&T or First Financial that it is viewed as material information of TB&T, particularly in light of the inherent risks and uncertainties associated with such forecasts. The summary of the unaudited prospective financial information included below is not being included to influence your decision whether to vote for the merger and the transactions contemplated in connection with the merger, but is being provided solely because it was made available to TB&T’s financial advisor in connection with the merger.

In light of the foregoing, and considering that the special meeting of shareholders of TB&T will be held several months after the unaudited prospective financial information was prepared, as well as the uncertainties inherent in any forecasted information, shareholders of TB&T are cautioned not to place unwarranted reliance on such information in connection with their consideration of the merger.

For purposes of performing a valuation analysis of TB&T, on a stand-alone basis, Stephens used projections of TB&T net income available to common shareholders as prepared by TB&T management of $11.25 million for the year ended December 31, 2019 and $12.25 million for the year ended December 31, 2020. In addition, based on the guidance of TB&T’s management, Stephens assumed an annual growth rate with respect to TB&T’s net income available to common shareholders of 8.0% for the three years thereafter.

First Financial’s Reasons for the Merger

As a part of First Financial’s growth strategy, First Financial routinely evaluates opportunities to acquire financial institutions. The acquisition of TB&T and its wholly owned subsidiary The Bank & Trust is consistent with First Financial’s expansion strategy. First Financial’s board of directors, senior management and certain lenders reviewed the business, financial condition, results of operation and prospects for The Bank & Trust, the market condition of the market area in which The Bank & Trust conducts business, the compatibility of the management and the proposed financial terms of the transaction. In addition, management of First Financial believes that the transaction will expand First Financial’s footprint in Central Texas and the markets surrounding Bryan/College Station, provide opportunities for future growth, and provide the potential to realize cost savings. First Financial’s board of directors also considered the financial condition and valuation for both TB&T and First Financial as well as the financial and other effects the transaction would have on First Financial’s shareholders.

 

40

While management of First Financial believes that revenue opportunities will be achieved and costs savings will be obtained following the transaction, First Financial has not quantified the amount of enhancements or projected the areas of operation in which such enhancements will occur.

In view of the variety of factors considered in connection with its evaluation of the transaction, the First Financial board did not find it useful to and did not attempt to quantify, rank or otherwise assign relative weights to factors it considered. Further, individual directors may have given differing weights to different factors. In addition, the First Financial board did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination. Rather, the board conducted an overall analysis of the factors it considered material, including thorough discussions with, and questioning of, First Financial’s management.

Effective Time of the Merger

The merger will become effective at the date and time specified in the certificate of merger to be filed with the Secretary of State of the State of Texas regarding the merger. If the shareholders of TB&T approve the merger pursuant to the reorganization agreement at the special meeting, and if all required regulatory approvals are obtained and the other conditions to the parties’ obligations to effect the merger are met or waived by the party entitled to do so, we anticipate that the merger will be completed in the first quarter of 2020, although delays could occur. We cannot assure you that we can obtain the necessary shareholder and regulatory approvals or that the other conditions to completion of the merger set forth in the reorganization agreement can or will be satisfied.

Conversion; Exchange of TB&T Stock Certificates

The conversion of TB&T common stock into the right to receive the merger consideration will occur automatically at the effective time of the merger. After completion of the merger, the exchange agent will exchange certificates representing shares of TB&T common stock for the merger consideration to be received pursuant to the terms of the reorganization agreement.

Letter of Transmittal; Dividends

At or promptly after the effective time of the merger, First Financial will deposit with or make available to the exchange agent shares of First Financial common stock to be exchanged for shares of TB&T common stock in accordance with the reorganization agreement and any cash payable in lieu of fractional shares (the “Exchange Fund”). With the intent to be within five days of the effective time of the merger, First Financial will cause the exchange agent to mail to each record holder of TB&T common stock a letter of transmittal and instructions describing the procedures for surrendering stock certificates representing shares of TB&T common stock in exchange for shares of First Financial common stock. The shares of First Financial common stock issuable in exchange for the shares of TB&T common stock will be issued in uncertificated book-entry form. Please do not send the exchange agent any stock certificates until you receive these instructions and the letter of transmittal. Stock certificates delivered to the exchange agent without a properly completed letter of transmittal will be rejected and returned for corrective action.

Until surrendered in accordance with the instructions of the exchange agent, other than shares of TB&T common stock subject to the exercise of dissenters’ rights, each stock certificate representing shares of TB&T common stock will represent after the effective time of the merger only the right to receive, without interest, the merger consideration and any cash in lieu of a fractional share of First Financial common stock to be issued or paid upon surrender of such stock certificate and any dividends or distributions to which such holder is entitled pursuant to the reorganization agreement. Subject to the terms of the reorganization agreement, each record holder of TB&T common stock will generally be entitled to receive without interest, the amount of dividends or other distributions with a record date after the effective time of the merger that are payable with respect to whole shares of First Financial common stock.

 

41

Any portion of the Exchange Fund that remains unclaimed by the shareholders of TB&T at the expiration of six months after the effective time of the merger will be paid to First Financial. In such event, any former shareholders of TB&T who have not previously complied with exchange procedures set forth in the reorganization agreement and instructions from the exchange agent will look only to First Financial with respect to the merger consideration, any cash in lieu of any fractional shares and any unpaid dividends and distributions on the First Financial common stock as determined pursuant to the reorganization agreement, in each case, without any interest.

Lost Certificates

If any certificate representing shares of TB&T common stock is lost, stolen or destroyed, upon the making of an affidavit of such fact by the person claiming the certificate to be lost, stolen or destroyed and, if required by First Financial or the exchange agent, the posting by such person of a bond in such amount as the exchange agent may determine is reasonably necessary as indemnity against any claim that may be made against it with respect to such certificate, the exchange agent will issue in exchange for the lost, stolen or destroyed certificate the merger consideration, cash in lieu of fractional shares and any dividends or other distributions that have been payable or become payable in respect of the shares of First Financial common stock represented by that certificate pursuant to the reorganization agreement.

Withholding

First Financial and the exchange agent, as the case may be, will be entitled to deduct and withhold, if necessary, from any consideration payable pursuant to the reorganization agreement to any holder of TB&T common stock such amounts as First Financial or the exchange agent is required to deduct or withhold under applicable tax laws, and any such withheld amounts that are paid to the appropriate taxing authorities will be treated for purposes of the reorganization agreement as having been paid to the holder of TB&T common stock from whom such amounts were deducted or withheld.

Fractional Shares

First Financial will not issue any fractional shares of First Financial common stock in the merger. TB&T shareholders who would otherwise be entitled to a fraction of a share of First Financial common stock upon the completion of the merger will instead receive, for the fraction of a share, an amount in cash (rounded to the nearest cent), determined by multiplying the fractional share by $30.28, without interest.

Representations and Warranties of TB&T and First Financial

The reorganization agreement and this summary of the representations and warranties in this section are included to provide you with information regarding the terms of the reorganization agreement. Factual disclosures about First Financial and TB&T contained in this proxy statement/prospectus or in the public reports of First Financial filed with the SEC may supplement, update or modify the factual disclosures about First Financial and TB&T contained in the reorganization agreement. The reorganization agreement contains representations and warranties of First Financial and TB&T that may be subject to limitations, qualifications or exceptions agreed upon by the parties, including being qualified by confidential disclosures, and may be subject to a contractual standard of materiality that differs from the materiality standard that applies to reports and documents filed with the SEC. In particular, in your review of the representations and warranties contained in the reorganization agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purpose of establishing circumstances in which a party to the reorganization agreement may have the right not to consummate the merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the reorganization agreement. The representations and warranties, other provisions of the reorganization agreement or any description of these provisions should not be read alone, but instead should be

 

42

read only in conjunction with the information provided elsewhere in this proxy statement/prospectus, the documents incorporated by reference into this proxy statement/prospectus and the other reports, statements and filings that First Financial publicly files with the SEC. See “Where You Can Find More Information.”

The reorganization agreement contains customary representations and warranties of each of First Financial and TB&T relating to their respective businesses. The representations and warranties in the reorganization agreement do not survive the effective time.

The reorganization agreement contains representations and warranties made by TB&T relating to a number of matters, including the following:

 

•

corporate matters, including due organization and qualification and subsidiaries;

 

•

authority relative to execution and delivery of the reorganization agreement;

 

•

capitalization;

 

•

compliance with laws;

 

•

the absence of conflicts with, or violations of, organizational documents or other obligations as a result of the merger;

 

•

financial statements;

 

•

the absence of undisclosed liabilities;

 

•

legal proceedings;

 

•

consents and approvals, required governmental and other regulatory filings in connection with the merger;

 

•

title to assets;

 

•

the absence of certain changes or events;

 

•

certain contracts;

 

•

certain tax matters;

 

•

insurance matters;

 

•

the absence of any material adverse change;

 

•

intellectual property;

 

•

related party transactions;

 

•

validity and enforceability of debt instruments;

 

•

condition of assets;

 

•

environmental matters;

 

•

regulatory compliance;

 

•

absence of certain business practices;

 

•

books and records;

 

•

forms of instruments;

 

•

fiduciary responsibilities;

 

•

guaranties;

 

•

voting agreements and shareholders’ agreements;

 

43

•

employment matters;

 

•

employee benefits;

 

•

certain obligations to employees;

 

•

interest rate risk management;

 

•

internal controls;

 

•

compliance with the various specified statutes, rules and regulations;

 

•

the accuracy of information supplied for inclusion in this proxy statement/prospectus and other similar documents;

 

•

intercompany agreements;

 

•

the nature of the representations in the reorganization agreement;

 

•

inapplicability of takeover statutes; and

 

•

receipt by the TB&T’s board of directors of an opinion from TB&T’s financial advisor.

The reorganization agreement contains representations and warranties made by First Financial relating to a more limited number of matters, including the following:

 

•

corporate matters, including due organization and qualification and subsidiaries;

 

•

authority relative to execution and delivery of the reorganization agreement;

 

•

capitalization;

 

•

filings with the SEC, certain compliance matters and financial statements;

 

•

compliance with laws; and the absence of conflicts with, or violations of, organizational documents or other obligations as a result of the merger;

 

•

the absence of undisclosed liabilities;

 

•

legal proceedings;

 

•

consents and approvals, required governmental and other regulatory filings in connection with the merger;

 

•

regulatory compliance;

 

•

the accuracy of information supplied for inclusion in this proxy statement/prospectus and other similar documents;

 

•

the absence of certain changes or events;

 

•

disclosure controls and procedures;

 

•

certain tax matters;

 

•

employee benefits; and

 

•

the nature of the representations in the reorganization agreement.

Certain representations and warranties of First Financial and TB&T are qualified as to “materiality” or “material adverse change.” For purposes of the reorganization agreement, a “material adverse change” means, with respect to either First Financial or TB&T, any event, occurrence, fact, condition, effect or change that is, or would reasonably expect to become, materially adverse to the business, results of operations, condition (financial or otherwise), assets, properties, liabilities (absolute, accrued, contingent or otherwise) or reserves, taken as a

 

44

whole, or the ability of the parties to consummate the transactions contemplated by the reorganization agreement on a timely basis; provided, however, that none of the following shall constitute, or shall be considered in determining whether there has occurred, and no event, circumstance, change or effect resulting from or arising out of any of the following shall constitute a material adverse change: (i) any changes in laws or interpretations thereof that are generally applicable to the banking or savings industries; (ii) changes in GAAP or regulatory accounting principles, which we refer to as “RAP,” that are generally applicable to the banking or savings industries; (iii) expenses incurred in connection with the transactions contemplated by the reorganization agreement; (iv) changes in global, national or regional political conditions or general economic or market conditions in the United States or the State of Texas, including changes in prevailing interest rates, credit availability and liquidity, currency exchange rates, and price levels or trading volumes in the United States or foreign securities markets affecting other companies in the financial services industry; (v) general changes in the credit markets or general downgrades in the credit markets; (vi) actions or omissions of a party taken as required by the reorganization agreement or with the prior informed written consent of the other party or parties in contemplation of the transactions contemplated by the reorganization agreement; (vii) any outbreak or escalation of hostilities, declared or undeclared acts of war or terrorism; or (viii) any change resulting from the announcement or pendency of any of the transactions contemplated by the reorganization agreement; provided, however, that in the case of clauses (i) through (vii), such party is not affected to a greater extent than other persons, bank holding companies or insured depository institutions in the industry in which such party operates.

Covenants and Agreements

Conduct of Businesses Prior to the Completion of the Merger

From the date of the reorganization agreement to and including the closing date of the merger, unless otherwise permitted in writing by First Financial, TB&T will, and will cause The Bank & Trust to:

 

•

operate (including, without limitation, the making of, or agreeing to make, any loans or other extensions of credit) only in the ordinary course of business and consistent with past practices and safe and sound banking principles;

 

•

except as required by prudent business practices, use commercially reasonable efforts to preserve its business organization intact and to retain its present directors, officers, employees, key personnel and customers, depositors and goodwill and to maintain all assets owned, leased or used by it (whether under its control or the control of others), in good operating condition and repair, ordinary wear and tear excepted;

 

•

perform all of its obligations under any material contracts, leases and documents relating to or affecting its assets, properties and business, except such obligations as TB&T or any of its subsidiaries may in good faith reasonably dispute;

 

•

maintain in full force and effect all insurance policies now in effect or renewals thereof and give all notices and present all claims under all insurance policies in due and timely fashion;

 

•

timely file, subject to extensions, all reports required to be filed with any governmental entity and observe and conform, in all material respects, to all applicable laws, except those being contested in good faith by appropriate proceedings;

 

•

timely file, subject to extensions, all tax returns required to be filed by it and timely pay all taxes that become due and payable, except those being contested in good faith by appropriate proceedings;

 

•

promptly notify First Financial of any tax proceeding or claim pending or threatened against or with respect to TB&T or any of its subsidiaries;

 

•

withhold from each payment made to each of its employees, independent contractors, creditors and other third parties the amount of all taxes required to be withheld therefrom and pay the same to the proper governmental entity when due;

 

45

•

account for all transactions and prepare all financial statements in accordance with GAAP (unless otherwise instructed by RAP in which instance account for such transaction in accordance with RAP);

 

•

promptly classify and charge off loans and make appropriate adjustments to loss reserves in accordance with GAAP, RAP and the instructions to the Call Report and the Uniform Retail Credit Classification and Account Management Policy;

 

•

maintain the allowance for loan and lease losses account in an amount adequate in all material respects to provide for all losses, net of recoveries relating to loans previously charged off, on all outstanding loans and in compliance with applicable regulatory requirements;

 

•

pay or accrue all costs, expenses and other charges to be incurred in connection with the merger, including, but not limited to, all legal fees, accounting fees, consulting fees and brokerage fees, prior to the calculation date (the fifth business day immediately preceding the closing date); and

 

•

ensure that all accruals for taxes are accounted for in the ordinary course of business, consistent with past practices and in accordance with its GAAP (unless otherwise instructed by RAP in which case such accrual will be accounted for in accordance with RAP).

From the date of the reorganization agreement to closing, unless permitted by the reorganization agreement or First Financial consents in writing, TB&T will not, and will not allow The Bank & Trust to:

 

•

take or fail to take any action that would cause the representations and warranties made by TB&T to be inaccurate at the time of the closing or preclude TB&T from making such representations and warranties at the time of the closing;

 

•

merge into, consolidate with or sell its assets to any other person or entity, change or amend TB&T’s or any of its subsidiaries’ articles of incorporation or bylaws, increase the number of shares of common stock of TB&T (other than by exercise of options or warrants that were outstanding as of the signing of the reorganization agreement) or any of its subsidiaries’ stock outstanding or increase the amount of the The Bank & Trust’s surplus (as calculated in accordance with the instructions to the Call Report);

 

•

except as explicitly permitted under the reorganization agreement or in accordance with applicable law or pursuant to a contract existing as of the date of the reorganization agreement, engage in any transaction with any affiliated person or allow such persons to acquire any assets from TB&T or any of its subsidiaries, except (i) in the form of wages, salaries, fees for services, reimbursement of expenses and benefits already granted or accrued under the employee plans in effect at the signing of the reorganization agreement, or (ii) any deposit (in any amount) made by an officer, director or employee;

 

•

except for the payment of the special dividend in connection with the closing of the merger, declare, set aside or pay any dividends or make any other distribution to its shareholders (including any share dividend, dividends in kind or other distribution) whether in cash, shares or other property or purchase, retire or redeem, or obligate itself to purchase, retire or redeem, any of its capital shares or other securities;

 

•

discharge or satisfy any lien or pay any obligation or liability, whether absolute or contingent, due or to become due, except in the ordinary course of business consistent with past practices and except for liabilities incurred in connection with the transactions contemplated hereby;

 

•

issue, reserve for issuance, grant, sell or authorize the issuance of any shares of its capital stock or other securities or subscriptions, options, warrants, calls, rights or commitments of any kind relating to the issuance thereto;

 

•

accelerate the vesting of pension or other benefits in favor of employees of TB&T or any of its subsidiaries except according to the employee plans or as otherwise contemplated by the reorganization agreement or as required by applicable law;

 

•

acquire any capital stock or other equity securities or acquire any equity or ownership interest in any bank, corporation, partnership or other entity (except (i) through settlement of indebtedness,

 

46

foreclosure, or the exercise of creditors’ remedies or (ii) in a fiduciary capacity, the ownership of which does not expose it to any liability from the business, operations or liabilities of such Person);

 

•

mortgage, pledge or subject to lien any of its property, business or assets, tangible or intangible, except (i) certain permitted encumbrances and (ii) pledges of assets to secure public funds deposits;

 

•

except for sales of investment securities in the ordinary course of business, sell, transfer, lease to others or otherwise dispose of any of its assets, or cancel or compromise any debt or claim, or waive or release any right or claim of a market value in excess of $50,000;

 

•

except for certain payments contemplated by the reorganization agreement, make any change in the rate or timing of payment of compensation, commission, bonus or other direct or indirect remuneration payable, or pay or agree or orally promise to pay, conditionally or otherwise, any bonus, extra compensation, pension or severance or vacation pay, to or for the benefit of any of its shareholders, directors, officers, employees or agents, other than annual increases in compensation consistent with past practices, and bonuses, commissions, and incentives consistent with past and normal practices to its employees and officers;

 

•

except for certain payments contemplated by the reorganization agreement, enter into any employment or consulting contract (other than as contemplated by the terms of the employee plans or the reorganization agreement) or other agreement with any current or proposed director, officer or employee or adopt, amend any employment agreement, amend in any material respect or terminate any pension, employee welfare, retirement, stock purchase, stock option, phantom stock, stock appreciation rights, termination, severance, income protection, golden parachute, savings or profit-sharing plan (including trust agreements and insurance contracts embodying such plans), any deferred compensation, or collective bargaining agreement, any group insurance contract or any other incentive, welfare or employee benefit plan or agreement for the benefit of its directors, employees or former employees, except as required by applicable law or the reorganization agreement;

 

•

make any capital expenditures or capital additions or betterments except for such capital expenditures or capital additions that are set forth in writing in the budget provided to First Financial or that are necessary to prevent substantial deterioration of the condition of a property;

 

•

sell or dispose of, or otherwise divest itself of the ownership, possession, custody or control, of any corporate books or records of any nature that, in accordance with sound business practice, normally are retained for a period of time after their use, creation or receipt, except at the end of the normal retention period;

 

•

make any, or acquiesce with any, change in any (i) credit underwriting standards or practices, including loan loss reserves, (ii) asset liability management techniques, (iii) accounting methods, principles or practices, except as required by changes in GAAP as concurred by TB&T’s independent auditors, or as required by any applicable regulatory agency, (iv) tax election, change in taxable year, accounting methods for tax purposes, amendment of a tax return, restriction on any assessment period relating to taxes, settlement of any tax claim or assessment relating to TB&T or any of its subsidiaries, “closing agreement” within the meaning of Section 7121 of the Code (or any similar provision of state, local or foreign law), or surrender any claim to a refund, or (v) any extension or waiver of the limitation period applicable to any tax claim or assessment relating to TB&T or its subsidiaries;

 

•

reduce the amount of The Bank & Trust’s allowance for loan losses except through charge offs;

 

•

purchase any investment securities, other than purchases of obligations of the U.S. Treasury (or any agency thereof) with a duration of four (4) years or less and an AA rating by at least one nationally recognized ratings agency;

 

•

renew, extend the maturity of, or alter any of the terms of any loan classified by TB&T as “special mention,” “substandard,” or “impaired” or other words of similar import;

 

•

enter into any acquisitions or leases of real property, including new leases and lease extensions.

 

47

For a complete description of such restrictions on the conduct of the business of TB&T, we refer you to the reorganization agreement, which is attached as Appendix A to this proxy statement/prospectus.

Regulatory Matters

First Financial and TB&T have agreed to use their commercially reasonable efforts to promptly prepare and file or cause to be filed applications for all regulatory approvals required to be obtained by each of the parties in connection with the reorganization agreement and the transactions contemplated thereby.

Employee Matters

Subject to the right of subsequent amendment, modification, replacement or termination in the sole discretion of First Financial, each former employee of The Bank & Trust that becomes employed by First Financial or its subsidiaries after the effective time of the merger shall be entitled, as an employee of First Financial or its subsidiaries, to participate in the employee benefit plans of First Financial in effect as of the date of the reorganization agreement; provided, that such continuing employee is eligible to participate and, if required, selected for participation therein under the terms thereof and makes any required contributions. All such participation shall be subject to such terms of such plans as may be in effect from time to time and the reorganization agreement is not intended to give any such employee any rights or privileges superior to those of other similarly situated employees of First Financial or its subsidiaries. The provisions of the reorganization agreement shall not be deemed or construed so as to provide duplication of similar benefits but, subject to that qualification, First Financial shall, for purposes of vesting and any age or period of service requirements for commencement of participation with respect to any employee benefit plans in which a continuing employee may participate (excluding any defined benefit pension plan), credit each continuing employee with his or her term of service with TB&T or The Bank & Trust to the extent such service was recognized under the analogous employee benefit plan of TB&T.

Director and Officer Indemnification and Insurance

The reorganization agreement provides that for a three year period after the effective time of the merger, and subject to the limitations contained in applicable Federal Reserve, OCC and FDIC regulations and to any limitations contained in the TB&T governance documents, First Financial will indemnify, defend and hold harmless each director and officer of TB&T or The Bank & Trust as of the effective time of the merger, against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of matters existing or occurring at or before the effective time of the merger, whether asserted or claimed before, at or after the effective time of the merger that arise in whole or in part out of or pertaining to the fact that he or she was acting in his or her capacity as a director or officer of the TB&T or The Bank & Trust.

Prior to closing, TB&T will obtain an extended reporting period policy, with terms and coverage reasonable for such policies, covering directors and officers of TB&T and The Bank & Trust for a period of not less than three (3) years from the closing date.

No Solicitation

TB&T agreed that neither it, nor The Bank & Trust, nor any of their respective directors or officers will take any action to:

 

•

initiate, solicit, encourage or otherwise facilitate any inquiries, provide any information to or negotiate with any other party any proposal or offer that constitutes, or may reasonably be expected to lead to an acquisition proposal;

 

48

•

enter into or maintain or continue discussions or negotiate with any person in furtherance of such inquiries or to obtain an acquisition proposal; or

 

•

agree to, approve, recommend, or endorse any acquisition proposal, or authorize or permit any of its or their directors or officers to take any such action.

TB&T has agreed to notify First Financial orally (within one business day) and in writing (as promptly as practicable) of any such inquiries and proposals received by TB&T or The Bank & Trust or any of its respective directors or officers, relating to any of such matters.

For purposes of the reorganization agreement, an acquisition proposal is any proposal involving: (a) a merger, consolidation, or any similar transaction of any entity with TB&T or any subsidiary of TB&T, (b) a purchase, lease or other acquisition of all or substantially all the assets of TB&T or any subsidiary of TB&T, (c) a purchase or other acquisition of “beneficial ownership” by any “person” or “group” (as such terms are defined in Section 13(d)(3) of Exchange Act) (including by way of merger, consolidation, share exchange, or otherwise) that would cause such person or group to become the beneficial owner of any securities of TB&T or any subsidiary of TB&T after September 19, 2019, (d) a tender or exchange offer to acquire any securities of TB&T or any subsidiary of TB&T, (e) a public proxy or consent solicitation made to the shareholders of TB&T or any subsidiary of TB&T seeking proxies in opposition to any proposal relating to any of the transactions contemplated by the reorganization agreement, or (f) the making of a bona fide offer or proposal to the board of directors or shareholders of TB&T or any subsidiary of TB&T to engage in one or more of the transactions referenced above.

TB&T Option Vesting, Exercise and Cancellation

The reorganization agreement requires that in advance of the closing of the merger, the board of directors of TB&T (or, if appropriate, a committee thereof) take all necessary actions to cause the vesting of any unvested options to purchase TB&T common stock granted pursuant to the TB&T equity incentive plan. In this regard, effective as of October 1, 2019, the TB&T board of directors accelerated the vesting of all outstanding options to purchase TB&T common stock. In addition, under the terms of the reorganization agreement, TB&T has agreed to use its commercially reasonable efforts to cause all holders of options to purchase common stock of TB&T to exercise such options prior to the closing of the merger. The reorganization agreement also requires that TB&T terminate and cancel all options to purchase common stock of TB&T that are not exercised in the time frame specified by the reorganization agreement.

TB&T Warrant Exercise and Cancellation

The reorganization agreement requires TB&T to use its commercially reasonable efforts to cause all holders of warrants to purchase TB&T common stock to exercise such warrants prior to the closing of the merger. By the terms of the warrant agreements, all outstanding warrants to purchase shares of TB&T common stock will expire on December 31, 2019.

Repayment of Certain Loans Secured by Stock of The Bank & Trust

The reorganization agreement requires that prior to closing of the merger, TB&T shall take all actions necessary to repay all indebtedness owed under a certain line of credit and to cause any security interest, pledge, lien or other encumbrance on the capital stock of The Bank & Trust to be removed, released and terminated.

Certain Additional Covenants

The reorganization agreement also contains additional covenants, including, among others, covenants relating to efforts to perform and fulfill all conditions and obligations under the reorganization agreement,

 

49

holding the special meeting, the recommendation of the board of directors of TB&T, the filing and preparation of this joint proxy statement/prospectus, due diligence and access to the information, properties and personnel of TB&T and The Bank & Trust, financial statements, breaches of representations, warranties and covenants, notices relating to litigation, notices relating to the occurrence of a material change, obtaining required consents and approvals, environmental due diligence and investigations, the termination of certain employee benefit plans, the termination of certain contracts, tax matters, supplemental disclosure schedules, assistance with planning the integration of the operations of TB&T and First Financial, the absence of control over the other party’s business, voting agreements, director support agreements, director and officer releases, and the listing of the shares of First Financial common stock to be issued in the merger.

Conditions to Completion of the Merger

The reorganization agreement contains a number of conditions to the obligations of First Financial and TB&T to complete the merger which must be satisfied as of the closing date of the merger.

TB&T’s obligations to complete the merger are subject to the satisfaction or waiver of the following conditions:

 

•

subject to certain materiality and material adverse change exceptions, each of the representations and warranties of First Financial set forth in the reorganization agreement will be true and correct in all respects at and as of the date of the reorganization agreement and at and as of the closing date as though made at and as of the closing date (unless any such representation or warranty is made only as of a specific date, in which case as of such specific date);

 

•

First Financial and Merger Sub have, or have caused to be, performed or observed, in all material respects, all obligations and agreements required to be performed or observed by First Financial and Merger Sub under the reorganization agreement on or prior to the closing date;

 

•

the merger proposal having been approved by the requisite vote of TB&T’s shareholders;

 

•

TB&T and First Financial having received approvals, acquiescences or consents of the transactions contemplated by the reorganization agreement from all necessary governmental entities and certain the third parties, and all applicable waiting periods having expired; and such approvals and the transactions contemplated by the reorganization agreement not having been contested or threatened to be contested by any federal or state governmental entity or by any other third party by formal proceedings;

 

•

no action having been taken, and no statute, rule, regulation or order being promulgated, enacted, entered, enforced or deemed applicable to the reorganization agreement or the transactions contemplated thereby by any federal, state or foreign government or governmental entity or by any court, including the entry of a preliminary or permanent injunction, which, if successful, would (a) make the reorganization agreement or any other agreement contemplated thereby, or the transactions contemplated thereby illegal, invalid or unenforceable, (b) impose material limits on the ability of any party to the reorganization agreement to complete the reorganization agreement or any other agreement contemplated thereby, or the transactions contemplated thereby, or (c) if the reorganization agreement or any other agreement contemplated thereby, or the transactions contemplated thereby are completed, subject TB&T or any officer, director, shareholder or employee of TB&T to criminal or civil liability. Further, no action or proceeding before any court or governmental entity, by any government or governmental entity or by any other person is threatened, instituted or pending that would reasonably be expected to result in any of the consequences described above;

 

•

TB&T shall have received all documents required to be received from First Financial on or prior to the closing date in form and substance reasonably satisfactory to TB&T;

 

•

there having been no material adverse change with respect to First Financial since September 19, 2019;

 

50

•

the registration statement of which this proxy statement/prospectus is a part, including any amendments or supplements thereto, shall be effective under the Securities Act of 1933, as amended, referred to in this proxy statement/prospectus as the “Securities Act,” and no stop order suspending the effectiveness of the registration statement shall be in effect or proceedings for such purpose pending before or threatened by the SEC. All state securities permits or approvals required by applicable state securities laws to consummate the transactions contemplated by the reorganization agreement shall have been received and remain in effect;

 

•

the shares of First Financial Stock to be issued pursuant to the reorganization agreement shall have been approved for listing on the NASDAQ Global Select Market; and

 

•

TB&T will have received from Fenimore, Kay, Harrison & Ford, LLP an opinion to the effect that the integrated mergers should qualify as a “reorganization” within the meaning of Section 368(a) of the Code.

First Financial’s obligations to complete the merger are subject to the satisfaction or waiver of the following conditions:

 

•

subject to certain materiality and material adverse change exceptions, each of the representations and warranties of TB&T set forth in the reorganization agreement will be true and correct in all respects at and as of the date of the reorganization agreement and at and as of the closing date as though made at and as of the closing date (unless any such representation or warranty is made only as of a specific date, in which case as of such specific date);

 

•

TB&T has, or has caused to be, performed or observed, in all material respects, all obligations and agreements required to be performed or observed by TB&T under the reorganization agreement on or prior to the closing date;

 

•

the merger proposal having been approved by the requisite vote of TB&T’s shareholders;

 

•

TB&T and First Financial having received approvals, acquiescences or consents of the transactions contemplated by the reorganization agreement from all necessary governmental entities and certain the third parties, and all applicable waiting periods having expired; and such approvals and the transactions contemplated by the reorganization agreement not having been contested or threatened to be contested by any federal or state governmental entity or by any other third party by formal proceedings;

 

•

no action having been taken, and no statute, rule, regulation or order being promulgated, enacted, entered, enforced or deemed applicable to the reorganization agreement or the transactions contemplated thereby by any federal, state or foreign government or governmental entity or by any court, including the entry of a preliminary or permanent injunction, which, if successful, would (a) make the reorganization agreement or any other agreement contemplated thereby, or the transactions contemplated thereby illegal, invalid or unenforceable, (b) impose material limits on the ability of any party to the reorganization agreement to complete the reorganization agreement or any other agreement contemplated thereby, or the transactions contemplated thereby, or (c) if the reorganization agreement or any other agreement contemplated thereby, or the transactions contemplated thereby are completed, subject First Financial or any officer, director, shareholder or employee of First Financial to criminal or civil liability. Further, no action or proceeding before any court or governmental entity, by any government or governmental entity or by any other person is threatened, instituted or pending that would reasonably be expected to result in any of the consequences described above;

 

•

First Financial having received from each of the directors of TB&T an instrument dated as of the closing date releasing TB&T, its subsidiaries and each of its affiliates, successors and assigns, from any and all claims of such directors (except to certain matters described therein). Further, First Financial having received from each of the specified officers of TB&T an instrument dated as of the closing date releasing TB&T, its subsidiaries and each of its affiliates, successors and assigns, from any and all claims of such officers;

 

51

•

there having been no material adverse change with respect to TB&T since September 19, 2019;

 

•

First Financial having received evidence reasonably satisfactory to it that, as of the effective time of the merger, all employee plans of TB&T (other than such plans First Financial elects not to terminate) have been terminated in accordance with the terms of such employee plans of TB&T, the Code, ERISA and all other applicable laws on a basis satisfactory to First Financial in its reasonable discretion and that, to the extent required by the employee plans or applicable law, affected participants have been notified of such terminations and/or integrations;

 

•

the voting agreements of any TB&T shareholders providing that such shareholders will approve the merger proposal remaining in full force and effect, and the TB&T shareholders party thereto not being in material breach of such voting agreements;

 

•

the support agreements of each TB&T director remaining in full force and effect, and no director being in material breach of such support agreements;

 

•

First Financial will have received fully executed employment agreements from TB&T for certain employees of The Bank & Trust;

 

•

the registration statement of which this proxy statement/prospectus is a part, including any amendments or supplements thereto, shall be effective under the Securities Act and no stop order suspending the effectiveness of the registration statement shall be in effect or proceedings for such purpose pending before or threatened by the SEC. All state securities permits or approvals required by applicable state securities laws to consummate the transactions contemplated by the reorganization agreement shall have been received and remain in effect; and

 

•

holders of not more than 5% of the outstanding shares of TB&T common stock having duly exercised their appraisal rights under the TBOC;

 

•

First Financial will have received all documents required to be received from TB&T on or prior to the closing date, all in form and substance reasonably satisfactory to First Financial;

 

•

each holder of an option to purchase common stock of TB&T shall have exercised such option or TB&T has compensated in cash such holder of an option to purchase common stock of TB&T for the termination and cancellation of such option prior to the closing date and TB&T shall have terminated and cancelled all options to purchase common stock of TB&T as of the closing date;

 

•

First Financial will have received from TB&T certain tax documents in form and substance satisfactory to First Financial, dated as of the closing date and executed by TB&T;

 

•

First Financial will have received from Norton Rose Fulbright US LLP an opinion to the effect that the integrated mergers should qualify as a “reorganization” within the meaning of Section 368(a) of the Code;

 

•

TB&T shall have taken all actions required to repay all indebtedness owed pursuant to a certain line of credit, and any security interest, pledge, lien or other encumbrance on the capital stock of The Bank & Trust shall have been removed, released and terminated; and

 

•

each holder of a warrant to acquire TB&T common stock shall have exercised (or elected to not exercise, in which case such warrant will be cancelled) such warrant prior to the closing date.

Any condition to the completion of the merger, except the required shareholder and regulatory approvals, and the absence of an order or ruling prohibiting the merger, may be waived in writing by the party to the reorganization agreement entitled to the benefit of such condition. We cannot be certain when or if the conditions to the merger will be satisfied or waived, or that the merger will be completed.

Interests of TB&T’s Directors and Officers in the Merger

In considering the recommendation of the board of directors of TB&T with respect to the merger proposal, you should be aware that some of TB&T’s directors and executive officers may have interests in the merger that

 

52

are different from, or in addition to, the interests of the TB&T shareholders generally. Interests of directors and executive officers that may be different from or in addition to the interests of the TB&T shareholders include:

 

•

Indemnification and Insurance. First Financial has agreed to indemnify the directors and officers of TB&T against certain liabilities arising before the effective time of the merger and TB&T is paying to provide certain “tail” insurance for the benefit of the directors and officers of TB&T.

 

•

Employment Agreements. First Financial Bank has entered into employment agreements to be effective as of the effective time of the merger with, among other employees of The Bank & Trust, Timothy N. Bryan, Ivan M. Olson Jerry E. Fox and Michael A. Holmgreen. Among other matters, such employment agreements provide that each of Messrs. Bryan, Olson, Fox and Holmgreen may be entitled to receive retention payments if he remains employed with First Financial Bank as of the first and second anniversaries of the closing of the merger. Pursuant to these employment agreements, Messrs. Bryan, Olson, Fox and Holmgreen are expected to receive compensation following the merger for their continued service to First Financial Bank at substantially the same level as compared to their respective compensation with The Bank & Trust.

 

•

Employee Benefit Plans. On or as soon as reasonably practicable following the merger, employees of TB&T who continue on as employees of First Financial will be entitled to participate in the First Financial health and welfare benefit and similar plans on the same terms and conditions as employees of First Financial. Subject to certain exceptions, these employees will receive credit for their years of service to TB&T or The Bank & Trust for participation, vesting and benefit accrual purposes.

 

•

Retention Payments. Upon the closing of the merger, TB&T will pay retention bonuses totaling $3.0 million in the aggregate to certain key personnel of TB&T and The Bank & Trust to remain employed with the combined organization following the consummation of the merger.

Director Support Agreements

In connection with entering into the reorganization agreement, each of the directors of TB&T entered into a director support agreement with First Financial pursuant to which they agreed to refrain from harming the goodwill of TB&T and to certain post-closing restrictive covenants.

The foregoing description of the director support agreement is subject to, and qualified in its entirety by reference to, the director support agreement, a form of which is attached to this proxy statement/prospectus as Appendix C and is incorporated by reference into this proxy statement/prospectus.

NASDAQ Listing

First Financial agreed to file with NASDAQ Global Select Market all documents with respect to the listing of the shares of First Financial common stock to be issued in the merger.

Amendment or Waiver of the Reorganization Agreement

No termination, cancellation, modification, amendment, deletion, addition or other change to the reorganization agreement, or any provision thereof, or waiver of any right or remedy therein provided, is effective for any purpose unless specifically set forth in a writing executed by the party against which enforcement of the amendment, modification or supplement is sough. The waiver of any right or remedy in respect to any occurrence or event on one occasion is not deemed a waiver of such right or remedy in respect to such occurrence or event on any other occasion.

The reorganization agreement may be amended at any time prior to or after approval of the merger proposal by the shareholders of TB&T but, after any submission of the reorganization agreement to such shareholders for approval, no amendment of the reorganization agreement will be made that reduces the consideration payable to TB&T or that materially and adversely affects the rights of shareholders of TB&T under the reorganization agreement without the requisite approval of such shareholders.

 

53

Termination of the Reorganization Agreement

The reorganization agreement can be terminated at any time prior to completion of the merger in the following circumstances:

 

•

by the mutual written consent of First Financial and TB&T;

 

•

by either TB&T or First Financial (as long as the terminating party is not in material breach of any representation, warranty, covenant or other agreement contained in the reorganization agreement) if the conditions precedent to such party’s obligations to close have not been met or waived by May 15, 2020; provided, however, that such date may be extended to such later date as agreed upon by TB&T and First Financial;

 

•

by either First Financial or TB&T if any of the transactions contemplated by the reorganization agreement are disapproved by any regulatory agency or authority whose approval is required to complete such transactions or if any court of competent jurisdiction in the United States or other federal or state governmental entity has issued an order, decree or ruling or taken any other action restraining, enjoining, invalidating or otherwise prohibiting the reorganization agreement or the transactions contemplated thereby and such disapproval, order, decree, ruling or other action is final and nonappealable; provided, however, that the party seeking to terminate the reorganization agreement for this reason is required to use its commercially reasonable efforts to contest, appeal and remove such order, decree, ruling or other action;

 

•

by either First Financial or TB&T if it reasonably determines, in good faith and after consulting with counsel, there is substantial likelihood that any necessary regulatory approval will not be obtained or will be obtained only upon a condition or conditions that could reasonably be expected to be materially burdensome on, or materially impair the anticipated benefits of the merger to, First Financial and its subsidiaries and affiliates, taken as a whole;

 

•

by either First Financial or TB&T if there has been any material adverse change with respect to the other party;

 

•

subject to certain cure rights, by First Financial or TB&T, if there shall have been a breach of any of the covenants or agreements or any of the representations or warranties (or any such representation or warranty shall cease to be true and correct) set forth in the reorganization agreement or any other agreement contemplated in the reorganization agreement on the part of the other party to the reorganization agreement, which breach or failure to be true and correct, either individually or in the aggregate with all other breaches (or inaccuracies of such representations and warranties), would constitute, if occurring or continuing on the closing date, the failure of a closing condition; provided, however, that the right to terminate the reorganization agreement for this reason shall not be available to a party if it is then in material breach of any of its representations, warranties, covenants or agreements set forth in the reorganization agreement;

 

•

by First Financial or TB&T, if TB&T does not receive the required shareholder approval at the TB&T special meeting or any adjournment or postponement thereof; provided, that TB&T may only terminate the reorganization agreement for this reason if the board of directors of TB&T recommended that the shareholders of TB&T vote in favor of the approval merger proposal;

 

•

by First Financial, if First Financial disapproves of the results of the certain environmental inspections, secondary investigation or other environmental survey conducted in accordance with the terms of the reorganization agreement;

 

•

by First Financial if TB&T or The Bank & Trust enter into any formal or informal administrative action with a governmental entity or any such action is threatened by a governmental entity; and

 

•

by First Financial, if (i) TB&T has mailed this proxy statement/prospectus to its shareholders and TB&T does not hold the special meeting within 60 days thereafter, (ii) the board of directors of TB&T

 

54

fails to recommend that the TB&T shareholders vote in favor of approval of the merger proposal, or (iii) the individuals that executed a voting agreement or a director support agreement have violated the terms thereof.

Expenses

TB&T and First Financial will each pay their respective expenses incurred in connection with the preparation and performance of their respective obligations under the reorganization agreement, whether or not the transactions provided for in the reorganization agreement are completed, including, but not limited to, fees and expenses of their own counsel, financial or other consultants, investment bankers and accountants, and filing, registration, application and printing fees. Similarly, each of TB&T and First Financial agreed to indemnify the other party against any amounts owed to any agent, representative or broker of the other party.

Certain Material U.S. Federal Income Tax Consequences of the Integrated Mergers

The following discussion addresses certain material U.S. federal income tax consequences of the integrated mergers to U.S. holders (defined below) of shares of TB&T common stock that exchange their shares of TB&T common stock for shares of First Financial common stock in the integrated mergers or that exercise their dissenters’ rights. The following discussion is based on, and subject to, the Code, the Treasury regulations promulgated under the Code, court decisions, and administrative rulings, all of which are in effect as of the date hereof, and all of which are subject to change, possibly with retroactive effect and differing interpretations.

This is addressed to TB&T shareholders that hold TB&T common stock and will hold the First Financial common stock received in exchange for their TB&T common stock as a capital asset within the meaning of Section 1221 of the Code (generally assets held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be applicable to TB&T shareholders in light of their particular circumstances or to TB&T shareholders subject to special treatment under U.S. federal income tax law, including, without limitation:

 

•

shareholders who are not U.S. holders (as defined below);

 

•

S corporations, partnerships or other pass-through entities (or investors in S corporations, partnerships or other pass-through entities);

 

•

banks, thrifts, or other financial institutions;

 

•

insurance companies;

 

•

mutual funds;

 

•

regulated investment companies;

 

•

real estate investment trusts;

 

•

retirement plans, individual retirement accounts or other tax-deferred accounts;

 

•

holders of TB&T common stock subject to the alternative minimum tax provisions of the Code;

 

•

tax-exempt organizations;

 

•

controlled foreign corporations or passive foreign investment companies;

 

•

brokers, banks or dealers in securities or currencies;

 

•

traders in securities that elect to use a mark-to-market method of accounting;

 

•

persons whose functional currency is not the U.S. dollar;

 

•

shareholders who hold their shares of TB&T common stock as part of a hedge, straddle, constructive sale, conversion or other integrated transaction;

 

55

•

shareholders who acquired their shares of TB&T common stock pursuant to the exercise of employee stock options or otherwise acquired shares as compensation or through a tax-qualified retirement plan;

 

•

persons subject to special tax accounting rules as a result of any item of gross income with respect to TB&T common stock being taken into account in an “applicable financial statement” (as defined in the Code); and

 

•

United States expatriates or certain former citizens or long-term residents of the United States.

If a partnership or other entity or arrangement taxed as a partnership for U.S. federal income tax purposes holds shares of TB&T common stock, the tax treatment of a partner in the partnership will depend upon the status of the partner and the activities of the partner and partnership. The tax consequences to partnerships and partners in such partnerships are not addressed in this proxy statement/prospectus. Partnerships and partners in such partnerships should consult their own tax advisors about the tax consequences of the merger to them.

In addition, the discussion does not address any state, local or foreign tax consequences of the integrated mergers, nor does it address any U.S. federal tax consequences other than income tax (e.g., U.S. federal gift or estate taxes). Determining the actual tax consequences of the integrated mergers to you may be complex. They will depend on your specific situation and on factors that are not within the control of TB&T or First Financial. You should consult with your own tax advisor as to the tax consequences of the integrated mergers in your particular circumstances.

U.S. Holders

For purposes of this discussion, the term “U.S. holder” means a beneficial holder of TB&T common stock that is for United States federal income tax purposes:

 

•

an individual citizen or resident of the U.S.;

 

•

a corporation (including any entity treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof or the District of Columbia;

 

•

a trust that (i) is subject to both the primary supervision of a court within the United States and the control of one or more U.S. persons; or (ii) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person; or

 

•

an estate that is subject to U.S. federal income tax on its income regardless of its source.

DETERMINING THE ACTUAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE INTEGRATED MERGERS TO A U.S. HOLDER MAY BE COMPLEX AND WILL DEPEND, IN PART, ON SUCH HOLDER’S PARTICULAR CIRCUMSTANCES. U.S. HOLDERS OF TB&T COMMON STOCK ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE TAX CONSEQUENCES OF THE INTEGRATED MERGERS IN THEIR PARTICULAR CIRCUMSTANCES.

U.S. Federal Income Tax Consequences of the Integrated Mergers Generally

First Financial and TB&T intend that the integrated mergers will together be treated as a single transaction that qualifies as a “reorganization” within the meaning of Section 368(a) of the Code. The obligations of First Financial and TB&T to complete the integrated mergers is conditioned on, among other things, the receipt by First Financial of a tax opinion from Norton Rose Fulbright US LLP and by TB&T of a tax opinion from Fenimore, Kay, Harrison & Ford, LLP (which we refer to collectively as the “opinions”), each dated as of the closing date of the integrated mergers, to the effect that, on the basis of facts, representations and assumptions described or referenced in such opinions, the integrated mergers taken together will qualify as a “reorganization” within the meaning of Section 368(a) of the Code.

 

56

The opinions will be based on certain customary assumptions, including the assumption that the integrated mergers will be completed in the manner set forth in the reorganization agreement and the registration statement on Form S-4 of which this proxy statement/prospectus is a part. The opinions also will be based on customary representations and warranties from First Financial and TB&T, as well as certain covenants and undertakings by First Financial and TB&T. If any of the assumptions, representations, warranties, covenants or undertakings is or becomes incorrect, incomplete, inaccurate or is violated, the validity of the opinions described above may be affected and the U.S. federal income tax consequences of the integrated mergers could differ materially from those described in this proxy statement/prospectus.

The opinions will not be binding on the IRS or any court. Neither First Financial nor TB&T intends to request any ruling from the IRS as to the U.S. federal income tax consequences of the integrated mergers. Accordingly, there can be no assurance that the IRS will not assert, and a court will not sustain, a position contrary to the position addressed below or in the opinions. The following discussion regarding the U.S. federal income tax consequences of the integrated mergers assumes that the integrated mergers will be treated as a “reorganization” within the meaning of Section 368(a) of the Code.

U.S. Federal Income Tax Consequences to U.S. Holders

Receipt of the Special Dividend

In connection with the integrated mergers, TB&T may distribute cash to the U.S. holders of TB&T common stock equal to the special dividend. Although the matter is not free from doubt, First Financial and TB&T intend to treat the special dividend as additional consideration received by a U.S. holder in exchange for such holder’s TB&T common stock with the U.S. federal income tax consequences described below under the heading “—Exchange of Shares of TB&T Common Stock for Shares of First Financial Common Stock and Special Dividend.”

Whether the IRS will agree with First Financial’s and TB&T’s federal income tax reporting of the special dividend is uncertain. Moreover, if the IRS were to challenge the federal income tax reporting by First Financial and TB&T of the special dividend, it is uncertain whether a court would sustain First Financial’s and TB&T’s reporting position. If the IRS treats the cash distributed by TB&T to U.S. holders of TB&T common stock as a dividend by TB&T to its U.S. holders rather than as additional consideration in the merger, such distribution will be taxable to such holders as a dividend to the extent of TB&T’s current and accumulate earnings and profits as determined under the Code, with any portion of the distribution that exceeds TB&T’s current and accumulated earnings and profits applied first to reduce the U.S. holder’s tax basis in such holder’s TB&T common stock to the extent of such holder’s tax basis and then as gain from the disposition of the TB&T common stock.

The remainder of this discussion assumes that the special dividend will be treated as additional consideration received by a U.S. holder in exchange for such holder’s TB&T common stock.

Exchange of Shares of TB&T Common Stock for Shares of First Financial Common Stock and Special Dividend. A U.S. holder who receives First Financial common stock and the special dividend in exchange for such holder’s TB&T common stock will recognize gain (but not loss) equal to the lesser of: (i) the amount, if any, of the special dividend received by such holder of TB&T common stock (in each case excluding any cash received in lieu of a fractional share of First Financial common stock, which treatment is discussed below) and (ii) the amount by which the sum of the fair market value of the First Financial common stock and the special dividend received by a holder of TB&T common stock exceeds such holder’s tax basis in its TB&T common stock. Any gain recognized by a U.S. holder could be taxed as a capital gain or a dividend, as described below. Any gain recognized by a U.S. holder generally will be long-term capital gain if, as of the effective date of the merger, such holder’s holding period with respect to the TB&T common stock surrendered exceeds one year. For U.S. holders of shares of TB&T common stock that are non-corporate holders, long-term capital gain generally will be taxed at a U.S. federal income tax rate that is lower than the rate for ordinary income or for short-term capital gains. The deductibility of capital losses is subject to limitations.

 

57

The aggregate tax basis of the shares of First Financial common stock received (including any fractional share of First Financial common stock deemed issued and redeemed as described below) by a U.S. holder will be equal to such U.S. holder’s aggregate tax basis in shares of TB&T common stock surrendered in exchange for the shares of First Financial common stock, plus any taxable gain recognized in the merger by such U.S. holder (excluding gain as a result of cash received in lieu of a fractional share) regardless of whether such gain is classified as capital gain or dividend income, and minus any special dividend received (other than cash in lieu of a fractional share) by the U.S. holder in the merger. The holding period for shares of First Financial common stock received in the merger (including a fractional share of First Financial common stock deemed received and redeemed as described below) by a U.S. holder will include such U.S. holder’s holding period for the TB&T common stock surrendered in exchange for the First Financial common stock. If a TB&T shareholder has differing tax bases and/or holding periods in respect of shares of TB&T common stock, such TB&T shareholder should consult with its own tax advisor with respect to the determination of the tax bases and/or holding periods of the particular shares of First Financial common stock received.

Cash Received in Lieu of a Fractional Share. A U.S. holder of shares of TB&T common stock who receives cash in lieu of a fractional share of First Financial common stock will be treated as having received a fractional share of First Financial common stock pursuant to the integrated mergers and then as having sold the fractional share for cash in a redemption by First Financial. As a result, except to the extent the cash received in lieu of a fractional share of First Financial common stock is treated as a dividend (as discussed below), such U.S. holder will generally recognize gain or loss equal to the difference between the amount of cash received and the basis in his or her fractional share interest as set forth above. This gain or loss will generally be capital gain or loss, and will be long-term capital gain or loss if, as of the effective date of the integrated mergers, such U.S. holder’s holding period for the TB&T shares surrendered in the integrated mergers is greater than one year. For U.S. holders of shares of TB&T common stock that are non-corporate holders, long-term capital gain generally will be taxed at a U.S. federal income tax rate that is lower than the rate for ordinary income or for short-term capital gains. The deductibility of capital losses is subject to limitations.

Potential Treatment of Cash as a Dividend. The determination of whether the gain recognized by a U.S. holder in the exchange will be treated as capital gain or a dividend depends upon whether and to what extent the exchange reduces the U.S. holder’s deemed percentage stock ownership of First Financial. In determining a U.S. holder’s deemed stock percentage in First Financial, a U.S. holder may, under the constructive ownership rules, be deemed to own stock of First Financial that is owned by other persons or stock of First Financial underlying a U.S. holder’s option to purchase in addition to the stock of First Financial actually owned by the U.S. holder. These rules are complex and dependent upon the specific factual circumstances particular to each U.S. holder. Consequently, each U.S. holder that may be subject to these rules should consult its tax advisor as to the application of these rules to the particular facts relevant to such holder.

Dissenters. Upon the proper exercise of dissenters’ rights, a U.S. holder of shares of TB&T common stock will exchange all of the shares of TB&T common stock actually owned by such holder solely for cash and will recognize gain or loss equal to the difference between the amount of cash received, which for this purpose includes the special dividend, and such holder’s tax basis in the shares of TB&T common stock surrendered. The gain or loss will be long-term capital gain or loss if the U.S. holder’s holding period with respect to the TB&T common stock surrendered is more than one year. The deductibility of capital losses is subject to limitations. In some cases, if the U.S. holder owns shares of First Financial common stock actually or constructively after the integrated mergers, the cash received could be treated as a dividend, in which case such holder may recognize dividend income up to the amount of cash received. Because the possibility of dividend treatment depends upon each U.S. holder’s particular circumstances, including the application of constructive ownership rules, U.S. holders of TB&T common stock are urged to consult their own tax advisors regarding the application of the foregoing rules to their particular circumstances.

 

58

Backup Withholding and Information Reporting

U.S. holders of TB&T common stock other than certain exempt recipients may be subject to information reporting and backup withholding (currently at a rate of 24%) on any cash payments received in connection with the integrated mergers. A U.S. holder generally will not be subject to backup withholding, however, if the U.S. holder:

 

•

furnishes a correct taxpayer identification number, certifies that the U.S. holder is not subject to backup withholding on the Form W-9 or successor form included in the election form/letter of transmittal the U.S. holder will receive and otherwise complies with all the applicable requirements of the backup withholding rules; or

 

•

provides proof that the U.S. holder is otherwise exempt from backup withholding.

Any amounts withheld from payments to U.S. holders of TB&T common stock under the backup withholding rules are not an additional tax and generally will be allowed as a refund or credit against such holder’s applicable U.S. federal income tax liability, provided the required information is timely furnished to the IRS. U.S. holders of TB&T common stock should consult their own tax advisors regarding the application of backup withholding based on their particular circumstances and the availability of, and procedure for, obtaining an exemption from backup withholding.

Medicare Tax

If a U.S. holder that is an individual has modified gross income for the taxable year over a certain threshold ($125,000 and $250,000 depending upon the individual’s U.S. federal income tax filing status), such an individual is subject to a 3.8% tax (the “Medicare Tax”) on the lesser of: (i) his or her “net investment income” for the relevant taxable year; or (ii) the excess of his or her modified gross income for the taxable year over his or her applicable threshold ($125,000 and $250,000 depending upon the individual’s U.S. federal income tax filing status). In the case of an estate or trust, the Medicare Tax will be imposed on the lesser of: (i) undistributed net investment income, or (ii) the excess of its adjusted gross income over the dollar amount at which the highest income tax bracket applicable to an estate or trust begins for the relevant taxable year. Net investment income generally would include any capital gain incurred in connection with the integrated mergers (including gain treated as dividend income), as well as other items of interest, dividends, capital gains, and rental or royalty income.

THE PRECEDING DISCUSSION IS INTENDED ONLY AS AN OVERVIEW OF CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE INTEGRATED MERGERS. IT IS NOT A COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS THAT MAY BE IMPORTANT TO YOU. THUS, YOU ARE STRONGLY ENCOURAGED TO CONSULT YOUR OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES RESULTING FROM THE INTEGRATED MERGERS, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.

Accounting Treatment

The merger will be accounted for under the acquisition method of accounting under accounting principles generally accepted in the United States of America. Under this method, TB&T’s assets and liabilities as of the date of the merger will be recorded at their respective fair values. Any difference between the purchase price for TB&T and the fair value of the identifiable net assets acquired (including core deposit intangibles) will be recorded as goodwill. In accordance with ASC Topic 805, Business Combinations, issued in July 2001, the goodwill resulting from the merger will not be amortized to expense, but instead will be reviewed for impairment at least annually and to the extent goodwill is impaired, its carrying value will be written down to its implied fair value and a charge will be made to earnings. Core deposit and other intangibles with definite useful lives

 

59

recorded by First Financial in connection with the merger will be amortized to expense in accordance with such rules. The consolidated financial statements of First Financial issued after the merger will reflect the results attributable to the acquired operations of TB&T beginning on the date of completion of the merger.

Restrictions on Resales of First Financial Common Stock Received in the Merger

The shares of First Financial common stock issued in the merger will not be subject to any restrictions on transfer arising under the Securities Act, except for shares of First Financial common stock issued to any TB&T shareholder who may be deemed to be an “affiliate” of First Financial after completion of the merger. “Affiliates” generally are defined as persons or entities who control, are controlled by or are under common control with First Financial at or after the effective time of the merger and generally include executive officers, directors and beneficial owners of 10% or more of the common stock of First Financial. TB&T shareholders who are not affiliates of First Financial after the completion of the merger may sell their shares of First Financial common stock at any time.

To the knowledge of TB&T, no TB&T shareholder who receives First Financial common stock will be deemed to be an affiliate of First Financial upon completion of the merger. In the event a TB&T shareholder become an affiliates of First Financial after completion of the merger, any sales of First Financial common stock will be subject to the volume and sale limitations of Rule 144 under the Securities Act, until such former TB&T Shareholder is no longer an affiliate of First Financial. This proxy statement/prospectus does not cover resales of First Financial common stock received by any person upon completion of the merger, and no person is authorized to make any use of this proxy statement/prospectus in connection with any resale.

Regulatory Approvals Required for the Merger

First Financial’s acquisition of TB&T must be approved by the Federal Reserve. On October 2, 2019, First Financial filed the required application with the Federal Reserve Bank of Dallas to request the Federal Reserve’s approval under the BHC Act.

In addition, the bank merger of The Bank & Trust with and into First Financial Bank requires the approval of the OCC. On October 2, 2019, First Financial Bank and The Bank & Trust filed an application with the OCC to obtain approval of bank merger. The U.S. Department of Justice will have between 15 and 30 days following approval by the OCC to challenge the approval on antitrust grounds. While TB&T and First Financial do not know of any reason that the Department of Justice would challenge regulatory approval by the OCC and believe that the likelihood of such action is remote, there can be no assurance that the Department of Justice will not initiate such a proceeding, or if such a proceeding is initiated, as to the result of any such challenge.

The merger cannot proceed in the absence of these required regulatory approvals. The approval of any notice or application merely implies satisfaction of regulatory criteria for approval, and does not include review of the merger from the standpoint of the adequacy of the consideration to be received by, or fairness to, shareholders. Regulatory approval does not constitute an endorsement or recommendation of the proposed transaction.

We cannot assure you as to whether or when the requisite regulatory approvals will be obtained, and, if obtained, we cannot assure you as to the date of receipt of any of these approvals, the terms thereof or the absence of any litigation challenging them. Likewise, we cannot assure you that the Department of Justice or a state attorney general will not attempt to challenge the merger on antitrust grounds, or, if such a challenge is made, as to the result of that challenge.

First Financial and TB&T are not aware of any material governmental approvals or actions that are required prior to the parties’ completion of the merger other than those described in this proxy statement/prospectus. If any additional governmental approvals or actions are required, the parties presently intend to seek those approvals or actions. However, the parties cannot assure you that any of these additional approvals or actions will be obtained.

 

60

Although the approval of the Texas Department of Banking is not required for the merger of The Bank & Trust with and into First Financial Bank, a copy of the application filed with the Federal Reserve was filed with the Texas Department of Banking on October 8, 2019.

Dissenters’ Rights of TB&T Shareholders

General. If you hold one or more shares of TB&T common stock, you are entitled to dissenters’ rights under Texas law and have the right to dissent from the merger and have the appraised fair value of your shares of TB&T common stock paid to you in cash. The appraised fair value may be more or less than the value of the shares of First Financial common stock and, if applicable, cash, being paid in the merger in exchange for the common stock of TB&T. If you are contemplating exercising your right to dissent, we urge you to read carefully the provisions of Chapter 10, Subchapter H of the TBOC, which are attached to this proxy statement/prospectus as Appendix E, and consult with your legal counsel before electing or attempting to exercise these rights. The following discussion describes the steps you must take if you want to exercise your right to dissent. You should read this summary and the full text of the law carefully.

How to Exercise and Perfect Your Right to Dissent. To be eligible to exercise your right to dissent to the merger:

 

(i)

you must, prior to the TB&T special meeting, provide TB&T with a written objection to the merger that states that you intend to exercise your right to dissent if the reorganization agreement is approved and the merger is completed and that provides an address to which TB&T may send a notice if the merger is completed;

 

(ii)

you must vote your shares of TB&T common stock against approval of the merger proposal at the special meeting in person or by proxy; and

 

(iii)

you must, not later than the 20th day after First Financial (which will be the successor to TB&T) sends you notice that the merger was completed, provide First Financial with (1) a written demand for payment of the fair value of the shares of TB&T common stock that you own which states the number and class of shares of TB&T capital stock you own, your estimate of the fair value of such stock and an address to which a notice relating to the dissent and appraisal procedures may be sent and (2) your certificates representing TB&T common stock.

If you intend to dissent from the merger, you should send the notice to:

TB&T Bancshares, Inc.

1716 Briarcrest Drive, Suite 400

Bryan, Texas 77802

Attention: Chairman and CEO

If you fail to (i) send the written objection to the merger in the proper form prior to the TB&T special meeting, (ii) vote your shares of TB&T common stock at the special meeting against the approval of the merger proposal or (iii) submit your demand for payment in the proper form on a timely basis, you will lose your right to dissent from the merger. If you fail to submit to First Financial on a timely basis the certificates representing the shares of TB&T common stock that you hold after you have submitted the demand for payment as described above, First Financial will have the option to terminate your right of dissent as to your shares of TB&T common stock. In any instance of a termination or loss of your right of dissent, you will instead receive the consideration authorized by the board of directors of TB&T and calculated in accordance with the reorganization agreement following consummation of the merger. If you comply with items (i) and (ii) above and the merger is completed, First Financial will send you a written notice advising you that the merger has been completed. First Financial must deliver this notice to you within 10 days after the merger is completed.

Your Demand for Payment. If the merger is completed, you have provided your written objection to the merger to TB&T in a timely manner and in proper form and you have voted against the merger proposal at the

 

61

special meeting as described above and you desire to receive the fair value of your shares of TB&T common stock in cash, you must, within 20 days of the date on which First Financial sends to you the notice of the effectiveness of the merger, give First Financial a written demand for payment of the fair value of your shares of TB&T common stock. The fair value of your shares of TB&T common stock will be the value of the shares on the day immediately preceding the merger, excluding any appreciation or depreciation in anticipation of the merger. After the merger is completed, your written demand and any notice sent to First Financial must be addressed to:

First Financial Bankshares, Inc.

400 Pine Street

Abilene, Texas 79601

Attention: President and Secretary

Your written demand must include a demand for payment for your shares for which rights of dissent and appraisal are sought and must state the number of shares and class of TB&T common stock you own and your estimate of the fair value of your shares of TB&T common stock and an address to which a notice relating to the dissent and appraisal procedures may be sent. This written demand must be delivered to First Financial within 20 days of the date on which First Financial sends to you the notice of the effectiveness of the merger. If your written demand for payment in proper form is not received by First Financial within that 20 day period, you will be bound by the merger and you will not be entitled to receive a cash payment representing the fair value of your shares of TB&T common stock. Instead, you will receive shares of First Financial common stock and, if applicable, cash as the merger consideration set forth in the reorganization agreement.

Delivery of Stock Certificates. If you have satisfied the requirements for the exercise of your right to dissent described above, including the delivery of the written demand for payment to First Financial as described above, you must, not later than the 20th day after you make your written demand for payment to First Financial, submit to First Financial your certificate or certificates representing the shares of TB&T common stock that you own, as the case may be. You may submit those certificates with your demand for payment if you prefer. In accordance with the provisions of the TBOC, First Financial will note on each such certificate that you have demanded payment of the fair value of the shares of TB&T common stock that were represented by such certificate under the provisions of the TBOC relating to the rights of dissenting owners. If you fail to submit all of the certificates representing the shares of TB&T common stock for which you have exercised the right of dissent in a timely fashion, First Financial will have the right to terminate your rights of dissent and appraisal with respect to all of your shares of TB&T common stock unless a court, for good cause shown, directs First Financial not to terminate those rights.

First Financial’s Actions Upon Receipt of Your Demand for Payment. Within 20 days after First Financial receives your demand for payment and your estimate of the fair value of your shares of TB&T common stock, First Financial must send you written notice stating whether or not it accepts your estimate of the fair value of your shares.

If First Financial accepts your estimate, First Financial will notify you that it will pay the amount of your estimated fair value within 90 days of the merger being completed. First Financial will make this payment to you only if you have surrendered the share certificates representing your shares of TB&T common stock, duly endorsed for transfer, to First Financial.

If First Financial does not accept your estimate, First Financial will notify you of this fact and will make an offer of an alternative estimate of the fair value of your shares that it is willing to pay you within 120 days of the merger being completed, which you may accept within 90 days or decline.

Payment of the Fair Value of Your Shares of TB&T Common Stock Upon Agreement of an Estimate. If you and First Financial have reached an agreement on the fair value of your shares of TB&T common stock within 90

 

62

days after the merger is completed, First Financial must pay you the agreed amount within 120 days after the merger is completed, provided that you have surrendered the share certificates representing your shares of TB&T common stock, duly endorsed for transfer, to First Financial.

Commencement of Legal Proceedings if a Demand for Payment Remains Unsettled. If you and First Financial have not reached an agreement as to the fair market value of your shares of TB&T common stock within 90 days after the merger is completed, you or First Financial may, within 60 days after the expiration of such 90 day period, commence proceedings in Taylor County, Texas, asking the court to determine the fair value of your shares of TB&T common stock. The court will determine if you have complied with provisions of the TBOC regarding their right of dissent and if you have become entitled to a valuation of and payment for your shares of TB&T common stock. The court will appoint one or more qualified persons to act as appraisers to determine the fair value of your shares in the manner prescribed by the TBOC. The appraisers will determine the fair value of your shares and will report this value to the court. The court will consider the report, and both you and First Financial may address the court about the report. The court will determine the fair value of your shares and direct First Financial to pay that amount, plus interest, which will begin to accrue 91 days after the merger is completed. The court may require you to share in the court costs relating to the matter to the extent the court deems it fair and equitable that you do so.

Rights as a Shareholder. If you have made a written demand on First Financial for payment of the fair value of your shares of TB&T common stock, you will not thereafter be entitled to vote or exercise any other rights as a shareholder except the right to receive payment for your shares as described herein and the right to maintain an appropriate action to obtain relief on the ground that the merger would be or was fraudulent. In the absence of fraud in the transaction, your right under the dissent provisions described herein is the exclusive remedy for the recovery of the value of your shares of TB&T common stock or money damages with respect to the merger.

Withdrawal of Demand. If you have made a written demand on First Financial for payment of the fair value of your TB&T common stock, you may withdraw such demand at any time before payment for your shares has been made or before a petition has been filed with a court for determination of the fair value of your shares. If you withdraw your demand or are otherwise unsuccessful in asserting your dissenters’ rights, you will be bound by the merger and your status as a shareholder will be restored without prejudice to any corporate proceedings, dividends or distributions which may have occurred during the interim.

Income Tax Consequences. See “—Certain Material U.S. Federal Income Tax Consequences of the Integrated Mergers” on page 55 for a discussion on how the federal income tax consequences of your action will change if you elect to dissent from the merger.

PROPOSAL 2: ADJOURNMENT OF THE SPECIAL MEETING

The special meeting may be adjourned or postponed to a later date or dates in order to permit further solicitation of proxies. In order to allow proxies that have been received at the time of the meeting to be voted for an adjournment, if necessary, the voting representatives and board of directors of TB&T are submitting the question of adjournment/postponement to the TB&T shareholders as a separate matter for their consideration. The voting representatives and the board of directors of TB&T recommend that its shareholders vote “FOR” the adjournment proposal. If it is necessary to adjourn or postpone the special meeting, no notice of such adjourned or postponed meeting is required to be given to TB&T’s shareholders. To adjourn or postpone the special meeting, the affirmative vote of a majority of the shares of TB&T common stock present, in person or by proxy, at the meeting is required.

The board of directors of TB&T recommends that you vote “FOR” the adjournment proposal.

 

63

COMPARISON OF RIGHTS OF SHAREHOLDERS

OF TB&T AND FIRST FINANCIAL

The rights of shareholders of TB&T under the certificate of formation and bylaws of TB&T will differ in some respects from the rights that shareholders of TB&T will have as shareholders of First Financial under the certificate of formation and bylaws of First Financial. Copies of First Financial’s certificate of formation and bylaws have been previously filed by First Financial with the SEC. Copies of TB&T’s certificate of formation and bylaws are available upon written request from TB&T.

Certain differences between the provisions contained in the certificate of formation and bylaws of TB&T, and the certificate of formation and bylaws of First Financial, as such differences may affect the rights of shareholders, are summarized below. The summary set forth below is not intended to be complete and is qualified by reference to Texas law and, the certificate of formation and bylaws of TB&T and the certificate of formation and bylaws of First Financial. If the merger is consummated, holders of TB&T common stock (other than dissenting shareholders) will become holders of First Financial common stock, and their rights as holders of First Financial common stock will be governed by the TBOC and First Financial’s certificate of formation and bylaws.

Summary of Material Differences Between Current Rights of

Shareholders of TB&T and Rights Those Persons

Will Have as Shareholders of First Financial

 

		TB&T		First Financial
Capitalization:		The certificate of formation of TB&T authorizes the issuance of up to 10,000,000 shares of common stock, par value $1.00 per share.		The certificate of formation of First Financial authorizes the issuance of up to 200,000,000 shares of common stock, par value $0.01 per share.
Corporate Governance:		The rights of TB&T shareholders are governed by Texas law and the certificate of formation and bylaws of TB&T.		The rights of First Financial shareholders are governed by Texas law and the certificate of formation and bylaws of First Financial.
Convertibility of Stock:		TB&T common stock is not convertible into any other securities of TB&T.		First Financial common stock is not convertible into any other securities of First Financial.
Preemptive Rights:		Under Texas law, there are no statutory preemptive rights unless expressly provided in the corporation’s certificate of formation. The certificate of formation of TB&T does not provide for statutory preemptive rights.		The certificate of formation of First Financial denies preemptive rights.
Election of Directors:		Directors of TB&T are elected by a plurality of the votes cast by the shareholders entitled to vote in the election of directors at a meeting of the shareholders at which a quorum is present. Any individual that receives the plurality of the votes cast, up to the number of directors to be elected in such election, shall be elected to the board.		Directors of First Financial are elected by a majority of the votes cast by the holders entitled to vote at the meeting.   First Financial shareholders are not permitted to cumulate their votes in the election of directors. Each share of First Financial stock has one vote for each nominee for director.

 

64

		TB&T		First Financial
		No cumulative voting is permitted for the election of directors pursuant to the certificate of formation.		If the number of director nominees exceeds the number of directors to be elected, the directors shall be elected by a plurality of the voting power of the shares entitled to vote who are present, in person or by proxy, at any such meeting and entitled to vote on the election of directors.   A majority of the votes cast means that the number of shares voted “for” a proposal, including the election of directors, must exceed the number of shares voted “against,” or “withheld” for, that proposal, and an abstention shall not constitute a vote cast. If, for any cause, the entire board of directors shall not have been elected at an annual meeting, any vacancies may be filled by an election as soon thereafter as convenient at a special meeting of the shareholders called for that purpose in the manner provided in the bylaws.
Removal of Directors and Board Vacancies:		TB&T’s bylaws provide that at any meeting of TB&T’s shareholders, any director or the entire board of directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at any election of directors.		First Financial’s bylaws provide that at any meeting of First Financial’s shareholders, any director or the entire board of directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at any election of directors.
		Any vacancies existing in the board of directors of TB&T may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the board of directors. A director elected to fill a vacancy will be elected for the unexpired term of his predecessor in office.		Any vacancies existing in the board of directors of First Financial may be filled by election at an annual or special meeting of the shareholders or by the affirmative vote of a majority of the remaining directors though less than a quorum of the board of directors. A director elected to fill a vacancy will be elected for the unexpired term of his predecessor in office.
		A directorship to be filled by reason of an increase in the number of directors may be filled by the board of directors for a term of office continuing only until the next election of one or more		A directorship to be filled by reason of an increase in the number of directors either may be filled by the board of directors for a term of office continuing only until the next election

 

65

		TB&T		First Financial
		directors by the shareholders; provided, that the board of directors may not fill more than two such directorships during the period between any two successive annual meetings of shareholders.		of one or more directors by the shareholders or may be filled by election at an annual meeting or at a special meeting of the shareholders entitled to vote called for that purpose; provided that the board of directors may not fill more than two such directorships during the period between any two successive annual meetings of shareholders.
Vote Required for Certain Shareholder Actions:		TB&T’s bylaws provide that if a quorum exists, action on any matter must be approved by the affirmative vote of a majority of the votes cast, unless applicable law, the certificate of formation, the bylaws or a resolution adopted by the board of directors requires a different number of affirmative votes. Each share of TB&T common stock has one vote for each matter properly brought before the shareholders.		First Financial’s bylaws provide that if a quorum exists, action on any matter, including the election of directors, by a voting group shall be approved by the affirmative vote of a majority of the votes cast, unless the certificate of formation, bylaws or applicable law require a greater number of affirmative votes. The bylaws also provide that a majority of the votes cast means that the number of shares voted “for” a proposal, including the election of directors, must exceed the number of shares voted “against,” or “withheld” for, that proposal, and an abstention shall not constitute a vote cast.
Amendment of Certificate of Formation:		TB&T’s certificate of formation may be amended in accordance with the TBOC. Under the TBOC, amendments to a corporation’s certificate of formation generally must be approved by the affirmative vote of the holders of two-thirds of the outstanding shares entitled to vote on the amendment.		First Financial’s certificate of formation may be amended in accordance with the TBOC. Under the TBOC, amendments to a corporation’s certificate of formation generally must be approved by the affirmative vote of the holders of two-thirds of the outstanding shares entitled to vote on the amendment.
Amendment of Bylaws:		TB&T’s bylaws provide that the bylaws may be altered, amended or repealed and new bylaws may be adopted by the affirmative vote of a majority of the board of directors present at any meeting at which a quorum is present, subject to repeal or change by the affirmative vote of a majority of the shareholders.		First Financial’s bylaws provide that the bylaws may be altered, amended or repealed and new bylaws may be adopted by the affirmative vote of a majority of the board of directors, subject to repeal or change by the affirmative vote of a majority of the shareholders.

 

66

		TB&T		First Financial
Shareholder Actions Without a Meeting:		TB&T’s certificate of formation provides that shareholder action may be taken without a meeting if a written consent or consents setting forth the action taken is signed by shareholders representing not less than the minimum number of votes that would have been necessary to take such an action at a meeting at which the holders of all shares entitled to vote were present and voted.		First Financial’s certificate of formation does not provide for less than unanimous consent when shareholder action is taken without a meeting, and therefore, no action may be taken by written consent unless all shareholders agree.
Special Meetings of Shareholders:		TB&T’s bylaws provide that special meetings of shareholders may be called at any time by the chairman of the board, by the chief executive officer, by the president, by the board of directors, or by the holders of 50% of the outstanding shares of the corporation entitled to vote at the proposed special meeting.		First Financial’s bylaws provide that special meetings of the shareholders may be called only by the chairman of the board joined by at least three members of the board of directors, or a majority of the board of directors, and shall be called by the chairman of the board or secretary at the request in writing of shareholders owning not less than 20% of the issued and outstanding shares of First Financial entitled to vote at such meeting.
Nomination of Directors:		Nominations for election to the TB&T board of directors may be made by the board of directors or by any shareholder entitled to vote in the election of directors, provided the shareholder gives timely written notice of such intention. To be timely, notice given in the context of an annual meeting of shareholders must be received by TB&T not less than 90 days nor more than 120 days in advance of the first anniversary of the preceding year’s annual meeting; provided, however, if the annual meeting is not within 30 days before or after such anniversary date, notice by the shareholder in order to be timely must be so received not later than the 15th day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever first occurs.		Nominations for election to the First Financial board of directors may be made by the board of directors or by any shareholder entitled to vote in the election of directors, provided the shareholder gives timely written notice of such intention. To be timely, notice given in the context of an annual meeting of shareholders must be received by First Financial not less than 120 days nor more than 150 days in advance of the first anniversary of the preceding year’s annual meeting.
Shareholder Proposal of Business:		Proposals for business to be brought before an annual shareholder meeting may be made by the board of directors or by any shareholder entitled to vote in		Proposals for business to be brought before an annual shareholder meeting may be made by the board of directors or by any shareholder entitled to vote

 

67

		TB&T		First Financial
		such meeting. If a proposal is made by a shareholder, the shareholder must give timely written notice. To be timely, notice must be received by TB&T not less than 90 nor more than 120 days in advance of the first anniversary of the preceding year’s annual meeting; provided, however, if the annual meeting is not within 30 days before or after such anniversary date, notice by the shareholder in order to be timely must be so received not later than the 15th day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever first occurs.		in such meeting. If a proposal is made by a shareholder, the shareholder must give timely written notice. To be timely, notice must be received by First Financial not less than 90 nor more than 120 days in advance of the first anniversary of the preceding year’s annual meeting.
Indemnification; Limitation of Director Liability:		TB&T’s certificate of formation provides for mandatory indemnification to the fullest extent allowed by Texas law for all former or present directors or officers and all persons who were serving at the request of TB&T as a director, officer, or agent of another entity.   TB&T’s certificate of formation provides that the personal liability of the directors and officers of TB&T for monetary damages shall be eliminated to the fullest extent permitted by applicable law.   The certificate of formation permits TB&T to purchase and maintain insurance on behalf of indemnified persons.		First Financial’s certificate of formation and bylaws provide for mandatory indemnification to the fullest extent allowed by Texas law for all former or present directors or officers and all persons who were serving at the request of First Financial as a director, officer, or agent of another entity.   First Financial’s certificate of formation provides that a director shall not be liable to First Financial’s or its shareholders for monetary damages for an act or omission in his or her capacity as a director, except for liability for:   •  breach of the duty of loyalty to First Financial or its shareholders;   •  an act or omission not in good faith or that involves intentional misconduct or a knowing violation of the law;   •  a transaction from which the director received an improper benefit, whether or not the benefit resulted from an action taken within the scope of the director’s office;

 

68

		TB&T		First Financial
				•  an act or omission for which the liability of the director is expressly provided by statute; or   •  an act related to an unlawful stock repurchase or payment of a dividend.   First Financial’s certificate of formation and bylaws provide that the corporation shall have the power to purchase and maintain insurance on behalf of the directors against any liability incurred by directors in such a capacity or arising out of such person’s status.

 

69

TEXAS ANTI-TAKEOVER STATUTES

First Financial is subject to the affiliated business combinations provisions of Chapter 21, Subchapter M of the TBOC (Sections 21.601 through 21.610), which provide that a Texas corporation may not engage in certain business combinations, including mergers, consolidations and asset sales, with a person, or an affiliate or associate of such person, who is an “Affiliated Shareholder” (generally defined as the holder of 20% or more of the corporation’s voting shares) for a period of three years from the date such person became an Affiliated Shareholder unless: (1) the business combination or purchase or acquisition of shares made by the Affiliated Shareholder was approved by the board of directors of the corporation before the Affiliated Shareholder became an Affiliated Shareholder or (2) the business combination was approved by the affirmative vote of the holders of at least two-thirds of the outstanding voting shares of the corporation not beneficially owned by the Affiliated Shareholder, at a meeting of shareholders called for that purpose (and not by written consent), not less than six months after the Affiliated Shareholder became an Affiliated Shareholder.

The affiliated business combinations provisions of the TBOC are not applicable to:

 

•

the business combination of a corporation:

 

(a)

where the corporation’s original certificate of formation or bylaws contain a provision expressly electing not to be governed by the affiliated business combinations provisions of the TBOC;

 

(b)

that adopted an amendment to its certificate of formation or bylaws before December 31, 1997, expressly electing not to be governed by the affiliated business combinations provisions of the TBOC; or

 

(c)

that adopts an amendment to its certificate of formation or bylaws after December 31, 1997, by the affirmative vote of the holders, other than Affiliated Shareholders, of at least two-thirds of the outstanding voting shares of the corporation, expressly electing not to be governed by the affiliated business combinations provisions of the TBOC;

 

•

a business combination of a corporation with an Affiliated Shareholder that became an Affiliated Shareholder inadvertently, if the Affiliated Shareholder:

 

(a)

as soon as practicable divests itself of enough shares to no longer be an Affiliated Shareholder; and

 

(b)

would not at any time within the three-year period preceding the announcement of the business combination have been an Affiliated Shareholder but for the inadvertent acquisition;

 

•

a business combination with an Affiliated Shareholder that was the beneficial owner of 20% or more of the outstanding voting shares of the corporation on December 31, 1996, and continuously until the announcement date of the business combination;

 

•

a business combination with an Affiliated Shareholder who became an Affiliated Shareholder through a transfer of shares of the corporation by will or intestate succession and continuously was such an Affiliated Shareholder until the announcement date of the business combination; or

 

•

a business combination of a corporation with a wholly owned subsidiary if the subsidiary is not an affiliate or associate of the Affiliated Shareholder other than by reason of the Affiliated Shareholder’s beneficial ownership of the voting shares of the corporation.

Neither First Financial’s certificate of formation nor its bylaws contain any provision expressly providing that First Financial will not be subject to the affiliated business combinations provisions of the TBOC. The affiliated business combinations provisions of the TBOC may have the effect of inhibiting a non-negotiated merger or other business combination involving First Financial, even if such event(s) would be beneficial to the shareholders of First Financial.

 

70

BUSINESS OF TB&T BANCSHARES, INC.

General

TB&T was incorporated as a Texas corporation in October 2017 to serve as a bank holding company for The Bank & Trust. TB&T does not, as an entity, engage in separate business activities of a material nature apart from the activities it performs for The Bank & Trust. Its primary activities are to provide assistance in the management and coordination of The Bank & Trust’s financial resources. TB&T has no significant assets other than all of the outstanding common stock of The Bank & Trust. TB&T derives its revenues primarily from the operations of The Bank & Trust in the form of dividends received from The Bank & Trust.

The Bank & Trust is the successor to Texas Enterprise Bank, chartered in 2006, under Texas law. In 2009, Texas Enterprise Bank acquired the Bryan/College Station, Texas branches of The Bank and Trust, S.S.B., Del Rio, Texas, and changed its name to The Bank & Trust of Bryan/College Station. Since its inception, The Bank & Trust has generally grown organically without any significant acquisitions.

As a bank holding company, TB&T is subject to supervision and regulation by the Federal Reserve in accordance with the requirements set forth in the BHC Act and by the rules and regulations issued by the Federal Reserve.

As of September 30, 2019, TB&T, on a consolidated basis, had total assets of $630.2 million, total net loans of $436.2 million, total deposits of $552.8 million and total shareholders’ equity of $76.1 million. TB&T does not file reports with the SEC. TB&T does, however, voluntarily provide annual reports, including audited financial statements, to its shareholders in connection with its annual meeting.

Products and Services

The Bank & Trust is a traditional commercial bank offering a wide variety of services to satisfy the needs of the consumer and commercial customers in its primary market areas. The Bank & Trust offers most types of loans for any legitimate purpose, including loans to small- and medium-sized businesses for the purpose of purchasing equipment, inventory, facilities or for working capital and agricultural loans. Consumer loans offered include loans for the purpose of purchasing automobiles, recreational vehicles, personal residences and household goods, and for home improvements needs. Further, The Bank & Trust offers mortgage loans to borrowers to purchase, improve and refinance one-to-four family properties, as well as larger multifamily properties. The Bank & Trust also makes real estate development and construction loans and most types of commercial real estate loans, both owner-occupied and non-owner-occupied. Additionally, The Bank & Trust provides business and personal depository products and services, including checking and savings accounts, certificates of deposit, money market accounts, debit cards, online banking, direct deposit services, business accounts and cash management services. Safe deposit boxes, money orders and wire transfer services are also available. The Bank & Trust’s business is not seasonal in any material respect.

The Bank & Trust funds its lending activities primarily from the core deposit base. The Bank & Trust obtains deposits from the local market with no material portion (in excess of 10% of total deposits) dependent upon any one person or entity.

Market Area

The Bank & Trust currently has five banking locations, three of which are located in Bryan, Brazos County, Texas, and the other two of which are located in College Station, Brazos County, Texas. The Bank & Trust’s business is not dependent on one or a few major customers.

 

71

Competition

The table below lists The Bank & Trust’s deposit market share for the sole market area in which The Bank & Trust provides services, using data provided by the FDIC’s Summary of Deposits reported as of June 30, 2019.

 

Market Area		Market Rank				No. of Institutions in Market				Branch Count				Deposits In Market (in millions)				Market Share (%)
College Station-Bryan, Texas MSA			4				23				5			$	538.3				8.99	%

Each activity in which TB&T is engaged involves competition with other banks, as well as with nonbanking financial institutions and nonfinancial enterprises. In addition to competing with other commercial banks within and outside its primary service area, TB&T competes with other financial institutions engaged in the business of making loans or accepting deposits, such as savings and loan associations, credit unions, insurance companies, small loan companies, financial companies, mortgage companies, real estate investment trusts, certain governmental agencies, credit card organizations and other enterprises. TB&T also competes with suppliers of equipment in furnishing equipment financing. Banks and other financial institutions with which TB&T competes may have capital resources and legal loan limits substantially higher than those maintained by TB&T.

Employees

As of September 30, 2019, TB&T had 83 full-time equivalent employees, none of whom is covered by a collective bargaining agreement.

Legal Proceedings

There are no threatened or pending legal proceedings against TB&T which, if determined adversely, would, in the opinion of management, have a material adverse effect on the business of TB&T’s financial condition, results of operations or cash flows.

 

72