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FIRST FINANCIAL BANKSHARES INC

FFIN
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Business Summary

First Financial Bankshares, Inc. operates as a financial holding company registered under the Bank Holding Company Act of 1956, as amended, and its wholly-owned subsidiaries conduct a full-service commercial banking business primarily in Central, North Central, Southeast and West Texas. As of December 31, 2025, the Company had 79 financial centers across Texas, and its primary service area is the State of Texas, which had approximately 31.7 million residents as of December 31, 2024, with a population growth of 17.60% from 2014-2024 according to the U.S. Census Bureau. The Company's economies include dynamic centers of higher education, agriculture, wind energy and natural resources, retail, military, technology, healthcare, tourism, retirement living, manufacturing and distribution, lumber and fishing.

Commercial banking in Texas is highly competitive, and the Company holds less than 1% of the state's deposits, representing a smaller segment of the market share in Texas. The Company's bank regions compete against highly competitive banks, thrifts, savings and loan associations, small loan companies, credit unions, mortgage companies, insurance companies, Fintech, and brokerage firms, some of which are larger than the Company in terms of capital, resources and personnel. The Company believes its community approach to doing business works best in small and mid-size markets where it can play a prominent role in the economic, civic and cultural life of the community, and in many instances, banking competition is less intense in smaller markets.

The Company generates most of its revenue from interest on loans and investments, trust fees, gain on sale of mortgage loans and service charges and fees on deposit accounts. Its primary source of funding for loans and investments are deposits held by its bank subsidiary, First Financial Bank. The Company's largest expenses are salaries and related employee benefits. The Company measures its performance by calculating its return on average assets, return on average equity, regulatory capital ratios, net interest margin and efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income on a tax equivalent basis and noninterest income.

Through its subsidiaries, the Company conducts a full-service commercial banking business, including accepting and holding checking, savings and time deposits, making loans, offering automated teller machines, drive-in and night deposit services, safe deposit facilities, remote deposit capture, internet banking, mobile banking, payroll cards, funds transfer, and performing other customary commercial banking services. The Company also provides securities brokerage services through an arrangement with an unrelated third-party in its Abilene and San Angelo regions. Additionally, the Company provides full-service trust and wealth management activities through its trust company, First Financial Trust & Asset Management Company, which has nine locations in Texas and offers personal trust services including wealth management, administration of estates, oil and gas management, farm and ranch, property management, testamentary trusts, revocable and irrevocable trusts and agency accounts, as well as administration of all types of retirement and employee benefit accounts including 401(k) profit sharing plans and IRAs.

The Company's loan portfolio is diversified across several segments. As of December 31, 2025, loans held-for-investment totaled $8,158,276 thousand. The Company's trust company subsidiary had assets under management of $11.94 billion at December 31, 2025, compared to $10.83 billion at December 31, 2024. Trust fees for 2025 were $51,861 thousand, an increase of $4,412 thousand, or 9.30% , compared to 2024. Mortgage related income for 2025 was $15,550 thousand, an increase of $2,367 thousand, or 17.95% , compared to 2024. The Company's exposure to credits related to the oil and gas industry was approximately 3.86% of total loans HFI as of December 31, 2025.

On July 22, 2025, the Company's Board of Directors extended the authorization to repurchase up to 5,000,000 common shares through July 31, 2026. There have been no repurchases during 2024 or 2025. The Company's subsidiaries paid aggregate dividends to the Company of $149.40 million in 2025 and $55.50 million in 2024. As of December 31, 2025, the Company's subsidiaries could have declared in the aggregate additional dividends of $366.54 million from retained net profits, without obtaining regulatory approvals. The Company is in the process of constructing a new branch location in its existing markets in Franklin and Beaumont, Texas, and is also constructing a new motor bank that will replace an existing stand alone motor bank in Abilene, Texas.

Net earnings for 2025 were $253.58 million compared to net earnings of $223.51 million for 2024, reflecting an increase of $30.07 million , or 13.45% . The increase in earnings for 2025 over 2024 was primarily attributable to the overall growth in net interest income driven by strong growth in the Company's interest earning assets. Net earnings for 2024 were $223.51 million compared to $198.98 million for 2023, reflecting an increase of $24.53 million , or 12.33% . On a diluted net earnings per share basis, net earnings were $1.77 for 2025, as compared to $1.56 for 2024 and $1.39 for 2023. The return on average assets was 1.76% for 2025, as compared to 1.68% for 2024 and 1.55% for 2023. The return on average equity was 14.59% for 2025, as compared to 14.51% for 2024 and to 14.99% for 2023.

Business Outlook

The Company intends to continue to grow organically by serving the needs of its customers and putting them first in all of its decisions. It continually evaluates branch locations in its current communities as well as new markets and remains interested in pursuing opportunities to acquire high quality banks in the future. When considering banks for acquisition, the subject bank generally needs to be well managed and profitable and align with the Company's corporate culture. The Company has traditionally served rural and suburban communities and seeks to enter growing communities consistent with its legacy markets, generally focusing on non-metropolitan markets around Dallas/Fort Worth, Houston, San Antonio or Austin or along the Interstate 35, 45, 10 and 20 corridors in Texas as well as in East Texas and the Texas Hill Country area. Banks between $1.0 billion and $5.0 billion in asset size fit the Company's "sweet spot" for acquisition, but it would consider banks that are larger or that are in other areas of Texas if they would be a cultural and financial fit.

The Company's growth strategy also includes opening new branch locations. As of December 31, 2025, the Company had 79 financial centers across Texas. The Company is in the process of constructing a new branch location in its existing markets in Franklin and Beaumont, Texas, and is also constructing a new motor bank that will replace an existing stand alone motor bank in Abilene, Texas. The Company anticipates that funding for any acquisitions or expansions would be provided from its existing cash balances, available dividends from its subsidiaries, utilization of available lines of credit, issuance of common stock to the acquired company's shareholders and future debt or equity offerings.

The Company's efficiency ratio for 2025 was 45.53% , as compared to 47.23% for 2024 and 47.26% for 2023. Salaries and employee benefits for 2025 totaled $174.55 million , an increase of $21.26 million , or 13.87% , as compared to 2024. The net increase reflected an increase of $3.00 million in profit sharing expense and $3.16 million in officer bonus and incentive accruals related to growth in earnings over the prior year. Additionally, officer and employee salaries increased for merit-based pay increases, an increase in headcount, as well as market adjustments for front line staff over the past year.

As of December 31, 2025, the Company employed approximately 1,600 employees, with approximately 1,500 full-time and 100 part-time. The Company's management believes that its employee relations have been and will continue to be good, and none of its employees are represented by collective bargaining agreements. The Company provides a number of internally developed training programs and encourages associates to attend selected external programs, and for potential future management, requires attendance at a graduate school of banking, TBA Leadership course and FFIN University, which is a year long internal course. The Company also provides educational assistance for employees to further their professional development.

On July 22, 2025, the Company's Board of Directors extended the authorization to repurchase up to 5,000,000 common shares through July 31, 2026. The stock repurchase plan authorizes management to repurchase and retire the stock at such time as repurchases and retirements are considered beneficial to the Company and stockholders. There have been no repurchases during 2024 or 2025. The Company's subsidiaries paid aggregate dividends to the Company of $149.40 million in 2025 and $55.50 million in 2024. As of December 31, 2025, the Company's subsidiaries could have declared in the aggregate additional dividends of $366.54 million from retained net profits, without obtaining regulatory approvals.

The Company faces several headwinds and constraints. The Company is subject to interest rate risk, and after an extended period at a target rate of 0-0.25%, the Federal Reserve Board began aggressively increasing interest rates in March 2022 and continuing into 2023 reaching a target range of 5.25% to 5.50%. Beginning in September 2024, the Federal Reserve Board began lowering interest rates resulting in a target rate range of 3.50% to 3.75% at December 31, 2025. The Company's business is concentrated in Texas, and a downturn in the economy of Texas may adversely affect its business. The volatility in oil and gas prices results in uncertainty about the Texas economy, and while the Company considers its exposure to credits related to the oil and gas industry to not be significant, at approximately 3.86% of total loans HFI as of December 31, 2025, should the price of oil and gas decline and/or remain at low prices for an extended period, the general economic conditions in its Texas markets could be negatively affected. Additionally, the Company's trust revenues may be impacted by oil and gas prices which represented approximately 14% and 16% of total trust revenues in 2025 and 2024, respectively.

The Company is subject to heightened regulatory requirements as its total assets exceed $10 billion, with total assets of approximately $15.45 billion as of December 31, 2025. The Dodd-Frank Act and its associated regulations impose various additional requirements on banks and bank holding companies with $10 billion or more in total assets, including a more frequent and enhanced regulatory examination regime. In July 2022, the Company became subject to the Durbin Amendment which reduced its interchange income per transaction in 2022 and going forward. The Company is also subject to the Volcker Rule now that it has exceeded $10 billion in assets. In the fourth quarter of 2023, and the first quarter of 2024, the FDIC imposed a special assessment to a total of $2.06 million to the Company's Bank in response to the FDIC-insured financial institutions that failed in March 2023.

Risk Factors

The Company is subject to significant interest rate risk, as its profitability is dependent on net interest income, and changes in monetary policy, including the Federal Reserve's rate adjustments from a target range of 5.25% to 5.50% down to 3.50% to 3.75% at December 31, 2025, could adversely affect earnings. Credit risk is material, with the allowance for credit losses at 1.29% of period-end loans and net charge-offs of 0.29% of average loans in 2025, and the Company's loan portfolio is concentrated in Texas, where a downturn in the state's economy, including volatility in oil and gas prices (to which the Company has approximately 3.86% exposure), could impair borrower repayment. The Company faces liquidity risk, with a net unrealized loss of $342.03 million on its available-for-sale securities portfolio as of December 31, 2025, and a substantial portion of its liabilities are demand deposits payable on demand while a substantial portion of its assets are loans that cannot be called or sold in the same time frame. The Company is subject to heightened regulatory requirements as its total assets exceed $10 billion, including the Durbin Amendment's debit card interchange fee restrictions and the Volcker Rule, and the FDIC imposed a special assessment totaling $2.06 million in response to bank failures in March 2023. The Company's business is concentrated in Texas, and a downturn in the Texas economy, including the volatility in oil and gas prices, could have a material adverse effect on its business.

Management Priorities

Management's message emphasizes the Company's community-bank concept and its focus on the State of Texas, one of the nation's largest, fastest-growing and most economically diverse states. Management states that the Company's goal is to serve its communities well and to benefit from the growth as these markets continue to expand. Management highlights that the Company has grown in three ways: by growing organically, by opening new branch locations and by acquiring other banks, and since 1997, has completed fourteen bank acquisitions and increased total assets from $1.57 billion to $15.45 billion as of December 31, 2025. Looking ahead, management intends to continue to grow organically by serving the needs of customers and putting them first in all decisions, and remains interested in pursuing opportunities to acquire high quality banks in the future. Management also emphasizes the Company's "Excellence in Customer Service" culture, including its 21 Non-Negotiables of Customer Service, which were developed with the assistance of Horst Schulze, the founder of The Ritz Carlton Hotel Company and an independent consultant to the Company for the last seven years.

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — General
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  4. [4] Item 1, Business — Competition
  5. [5] Item 1, Business — Services Offered by Our Subsidiaries
  6. [6] Item 7, MD&A — Selected Financial Data
  7. [7] Item 7, MD&A — Results of Operations, Noninterest Income
  8. [8] Item 7, MD&A — Results of Operations, Noninterest Income
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  15. [15] Item 1A, Risk Factors — External and Market Related Risks
  16. [16] Item 5, Market for Registrant's Common Equity — Purchases of Equity Securities
  17. [17] Item 1, Business — Supervision and Regulation, Payment of Dividends
  18. [18] Item 1, Business — Supervision and Regulation, Payment of Dividends
  19. [19] Item 1, Business — Supervision and Regulation, Payment of Dividends
  20. [20] Item 7, MD&A — Results of Operations, Performance Summary
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  28. [28] Item 7, MD&A — Selected Financial Data
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  37. [37] Item 1, Business — General
  38. [38] Item 7, MD&A — Results of Operations, Noninterest Expense
  39. [39] Item 7, MD&A — Results of Operations, Noninterest Expense
  40. [40] Item 7, MD&A — Results of Operations, Noninterest Expense
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  45. [45] Item 7, MD&A — Results of Operations, Noninterest Expense
  46. [46] Item 1, Business — Human Capital
  47. [47] Item 1, Business — Human Capital
  48. [48] Item 1, Business — Human Capital
  49. [49] Item 5, Market for Registrant's Common Equity — Purchases of Equity Securities
  50. [50] Item 1, Business — Supervision and Regulation, Payment of Dividends
  51. [51] Item 1, Business — Supervision and Regulation, Payment of Dividends
  52. [52] Item 1, Business — Supervision and Regulation, Payment of Dividends
  53. [53] Item 1A, Risk Factors — External and Market Related Risks
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  56. [56] Item 1A, Risk Factors — Compliance and Regulatory Risks
  57. [57] Item 1, Business — Supervision and Regulation, Deposit Insurance Coverage and Assessments
  58. [58] Item 7, MD&A — Selected Financial Data
  59. [59] Item 7, MD&A — Selected Financial Data
  60. [60] Item 1A, Risk Factors — External and Market Related Risks
  61. [61] Item 1A, Risk Factors — Liquidity Risk
  62. [62] Item 1, Business — Supervision and Regulation, Deposit Insurance Coverage and Assessments
  63. [63] Item 1, Business — General
  64. [64] Item 1, Business — General
  65. [65] Item 7, MD&A — Selected Financial Data
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  79. [79] Item 7, MD&A — Results of Operations, Noninterest Expense
  80. [80] Item 7, MD&A — Results of Operations, Noninterest Expense
  81. [81] Item 7, MD&A — Selected Financial Data
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  85. [85] Item 7, MD&A — Results of Operations, Net Interest Income
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  93. [93] Item 1A, Risk Factors — Liquidity Risk
  94. [94] Item 7, MD&A — Results of Operations, Noninterest Income
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Analysis on 6/21/2026