First Financial Bankshares
Annual Report 2003

Plain-text annual report

A Family of Community BanksSM TM Annual Report 2003 Corporate Profile First Financial Bankshares, Inc. is a financial holding company headquartered in Abilene, Texas, with consolidated assets of $2.1 billion as of December 31, 2003. The corporation has 10 affiliate banks and a trust company, which provide services from 28 full-service locations in the Central, West and High Plains regions of Texas. The common stock of First Financial Bankshares, Inc. is beneficially held by approximately 4,500 shareholders and is listed on The NASDAQ Stock Market® under the symbol FFIN. Inside Front Cover Corporate Profile 1 2 4 5 6 Financial Highlights Letter to Shareholders Trust Division Technology Division Subsidiary Bank Reports 16 Selected Financial Data Inside Back Cover Corporate Information Getting more than your money’s worth. Taking things at face value comes naturally at First Financial Bankshares. After all, we built our reputation on eye-to-eye, handshake banking. But we also recognize the value of going beyond what’s expected, of seeing the forest as well as the trees – especially when it comes to our customers and shareholders. It motivated our investment in technology this year. One that significantly increased efficiencies among our affiliate banks. And it continues to inspire all of our efforts to make banking at the First Financial family of banks a valuable, as well as a profitable, experience. In Thousands (except per share data) 2003 2002 Change Financial Highlights For the Year Net Income Basic Earnings per Share Dividends Declared Dividends per Share Averages for the Year Assets Securities Loans Deposits Shareholders’ Equity At Year-End Assets Securities Loans Deposits Shareholders’ Equity Book Value per Share Trust Assets Key Ratios $ 35,305 $ 33,953 4.0% 2.28 18,746 1.21 2.20 16,680 1.08 2,020,185 1,907,999 866,719 946,173 1,739,232 245,128 748,654 942,101 1,644,170 226,768 2,092,571 1,993,183 910,302 987,523 772,256 964,040 1,796,271 1,711,562 251,487 16.25 991,896 238,768 15.45 986,224 3.6 12.4 12.0 5.9 15.8 0.4 5.8 8.1 5.0 17.9 2.4 4.9 5.3 5.2 0.6 Return on Average Assets 1.75% 1.78% Return on Average Equity Equity/Assets at Year-End Efficiency 14.40 12.02 52.52 14.97 11.98 51.96 1 Dear Shareholders: First Financial Bankshares achieved its 17th consecutive increase in net income last year. Growing 4.0%, net income totaled $35.3 million compared with $34.0 million in 2002. On a per share basis, earnings grew 3.6% to $2.28 from $2.20. Over the past 10 years, earnings have grown at a compounded annual rate of 11.42%. The major challenge we faced in 2003 was the interest rate environment. Rates declined to their lowest levels in 40 years, which compressed our interest margins. The main factors causing this compression were lower rates on loans and accelerated amortization of premiums on mortgage-backed bonds. We were pleased that we were able to manage our interest rate risk as well as we did; however, the compressed interest margins decreased our net interest income by 2.2%. This decrease was offset by lower loan loss provisions, an increase in real estate mortgage fees, income from the sale of two properties and additional premiums on the early sale of student loans. Key profitability ratios were slightly affected by the compressed interest margins. Our return on average assets decreased to 1.75% from 1.78% in 2002. This still compares favorably with the average of 1.20% recorded by our peer group (bank holding companies of similar size). Return on average equity decreased to 14.40% from 14.97% in 2002. The efficiency ratio (the share of revenues consumed by operating expenses) increased slightly to 52.52% from 51.96% in 2002, but it continued to compare favorably with our peer group’s average of 61.74%. Consolidated assets at year-end 2003 totaled $2.093 billion, up 5.0% from $1.993 billion at the end of 2002. Loans increased 2.4% to $987.5 million from $964.0 million. Contributing to this $23.5 million growth was a $22.1 million increase in commercial and agriculture loans and a $37.4 million increase in real estate loans. However, these gains were offset by a $16.4 million decline in consumer loans and a $19.7 million reduction in student loans. The decline in consumer loans was primarily due to lack of demand for automobile loans resulting from the availability of 0% financing from new car manufacturers. The decline in student loans came from the accelerated sale of $53.0 million of such loans so the Company could obtain an increased premium on the sale. Deposits grew by 4.9% to $1.796 billion, fueled primarily by an 11.1% increase in noninterest-bearing demand deposits and a 13.1% rise in interest-bearing demand deposits. First Financial continued to have strong asset quality and capital strength. Classified loans (those at risk to some degree) increased slightly to 3.95% of total loans from 3.72% a year earlier. Total nonperforming assets decreased to 0.32% of total loans from 0.44% in 2002. Shareholder equity grew to $251.5 million at the end of 2003, creating a strong equity-to-assets ratio of 12.02%. In recognition of the Company’s capital strength, the Board raised cash dividends by 10.7% in the second quarter. The increase was accomplished through a 25% stock dividend and a change in the quarterly cash dividend to $0.31 per share. The market price of our common stock at year-end was $41.12 per share, up 35.3% from $30.40 at the end of 2002. The combination of share price appreciation and dividend payments produced a total return to shareholders for 2003 of 39.2%. We continued to strengthen our infrastructure in 2003 and build a stronger foundation for growth. In January 2003, we formed First Technology Services, Inc. and named Gary Webb as Chairman of the Board and Gary Tucker as President. The new company reflects our commitment to staying on the leading edge of technology in order to expand our products and services and gain operating efficiencies for our Company. On October 3, 2003, we announced the formation of First Financial Trust & Asset Management Company, N.A., and named Robert Patterson as President. On January 1, 2004, the trust departments of First National Bank of Abilene, San Angelo National Bank, Stephenville Bank & Trust Co. and First National Bank, Sweetwater, were consolidated into the new company, providing it with assets of $991.9 million. The formation of the trust company will allow us to expand our financial management services to our other banks as well as to new markets. We invite you to find out more about our two new companies on pages 4 and 5 of this annual report. Besides these latest additions, the First Financial family consists of 10 separately chartered community banks that are directed by local boards and focus on the needs of their local communities. We continue to believe that this localized structure is the best for delivering outstanding service to our customers, great benefits to our communities and excellent financial results to our shareholders. But we also need to be able to take advantage of our collective strengths and facilities in providing products and services to our customers. To that end, we have designed new, highly competitive depository products that will be standardized throughout our banks. In addition, we have had our banks sign agency agreements that will allow each of them to service the needs of the other banks’ customers. We are presently putting the technology in place to provide this service, and we will present the new concept to our customers by midyear. Customers will then have the ability to use any of our 28 locations and over 50 automated teller machines (ATMs) for their depository and loan servicing needs. During 2004, we will also introduce many other new products and services that will make us more competitive and will add income potential. The offerings will include enhanced overdraft privileges, debt protection and home equity lines of credit. 2 In March 2004, we announced that we had entered into a definitive agreement to acquire Liberty National Bank, Granbury, Texas, for a contemplated cash purchase price of $12.8 million. Liberty National had approximately $60 million in total assets and $6 million in shareholder equity as of December 31, 2003. A growing and vibrant community, Granbury is 40 miles southwest of Fort Worth and is centrally located between four of our eastern banks. We expect to finalize the transaction in mid 2004, following regulatory approval. Weatherford National Bank has announced plans to open a branch bank in Willow Park (a community between Weatherford and Fort Worth), and First Financial Bank, Cleburne has announced that it will open a new branch in Mansfield (which is south of Fort Worth). Both of these are fast-growing communities with excellent demographics. The Willow Park branch should open prior to the end of 2004, and the Mansfield branch in early 2005. Each of these branch openings fits well into our long-term strategy of strengthening our presence in growing communities within a 50-mile radius of the Dallas/Fort Worth Metroplex. I could not be more pleased with our management team, consisting of Bruce Hildebrand, Gary Webb, Robert Patterson, Gary Gragg and each of our presidents. This team has diligently worked together to move your company forward and accomplish the many goals set out in our strategic plan. We are also pleased that Ken Murphy, our Chairman of the Board and retired President and CEO, has chosen to extend his consulting agreement with the Company for an additional year. His counsel and wisdom continue to be very valuable to us. In addition, we appreciate the support and direction from our Board members, who give of their expertise so willingly. All of us at the Company – management, associates and Board members – realize the importance of going the extra distance for our shareholders and customers. Thank you for your support of and investment in First Financial Bankshares. F. Scott Dueser President and Chief Executive Officer, First Financial Bankshares Inc. l to r: Gary S. Gragg, J. Bruce Hildebrand, F. Scott Dueser, Gary L. Webb and Robert S. Patterson 3 First Financial Trust & Asset Management Company, N.A. With the resurgence of the stock market in the final three quarters of 2003, our trust departments in Abilene, San Angelo, Stephenville and Sweetwater produced solid revenue for the year of $6.02 million, an increase of 3.2% over the prior year. This provided a contribution of after-tax income of $1.6 million, an increase of 19.9% over 2002. Assets grew modestly to $991.9 million at December 31, 2003. Using a proven investment strategy of well-diversified portfolios with appropriate, individually designed asset allocation, our portfolio managers again generated exceptional returns for our customers. In the nine years Jerry Nelson has managed our Investment Department, the average yearly equity return has been 12.01%, or 171 basis points above our historic benchmark, the Lipper Large Cap Growth & Value Index. Several initiatives reached fruition during 2003: • We formed First Financial Trust & Asset Management Company, N.A. on October 1. As a limited-purpose national bank, we can now provide combined superior trust services not only to our sister banks, but in other cities and locations throughout the state. Effective January 1, 2004, the trust departments of our banks in Abilene, San Angelo, Stephenville and Sweetwater were consolidated into our new trust company. We remain committed to delivering professional, highly personalized service to our customers on a local basis. • To elevate the investment process in the Trust Department of Stephenville Bank & Trust, we added Chris Montoya as Portfolio Manager on January 1, 2003. His outstanding investment advice has benefited our Stephenville customers. • On April 1, we successfully converted First National Bank, Sweetwater, to the SEI Corporation Trust Accounting System. Now all our trust locations use this same operating system, enhancing our ability to provide a uniform, high-quality product to our customers. We enter 2004 with skilled, experienced, focused professionals delivering firsthand trust and investment management services. Each trust office offers financial products and services to meet today’s multidisciplined investment needs. We remain committed to providing one-on-one service to each and every customer, rather than relegating accounts to a service center. We are actively seeking staff to serve Cleburne, Southlake and Weatherford markets. First Financial Trust & Asset Management Company is well-poised to continue its contribution of strong performance and results for our customers and shareholders. 4 Trust Assets (in millions) Senior Officers $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 $986 $992 $959 $911 $845 99 00 01 02 03 Trust Fees (in millions) $6.02 $6 $5 $4 $3 $2 $1 $0 $5.89 $5.83 $5.50 $5.10 99 00 01 02 03 Robert S. Patterson President and CEO Kirk Thaxton Executive Vice President Abilene David Byrd Executive Vice President San Angelo Trust Net Income (in millions) $1.6 $1.5 $1.4 $1.3 $1.2 $1.1 $0 $1.600 $1.587 Joe Ayres Senior Vice President Stephenville $1.424 $1.324 $1.216 99 00 01 02 03 Janis McDowell Senior Vice President Sweetwater Senior Officers First Technology Services, Inc. First Technology Services, Inc. (FTS), a wholly-owned subsidiary, was launched on January 1, 2003, to build and support a superior technology infrastructure for our family of community banks. Formed from the technology department of our Abilene bank, FTS now leads initiatives across First Financial Bankshares to better utilize our family of banks’ broad resources while increasing accountability to all employees, customers and shareholders. FTS executed a number of successful initiatives during 2003, significantly improving the quality, capacity and flexibility of our technology infrastructure. Chief among our accomplishments were: Gary L. Webb Chairman • Implementation of remote check-processing capabilities in Hereford and Cleburne. The Cleburne site, which replaces a third-party processor, captures checks from our Weatherford, Mineral Wells, Stephenville and Cleburne banks. This site will also support future processing growth in the Dallas/Fort Worth area and represents an annual savings of approximately $500 thousand. • Implementation of agency agreements, along with new teller and account-opening systems throughout the banks, will allow our frontline staff to serve account holders from any of our banks with greater efficiency and accuracy. This will give our customers more choices and greater banking freedom, and further leverages our 28 banking locations. • Improvements in our corporate cash-management systems allow our commercial customers greater flexibility in how and when they bank, along with better protection against corporate check fraud. Gary Tucker President and CEO • Implementation of new check fraud systems protects our banks and our customers against the growing industry problem of fraudulent checks and check kiting schemes. • Initiation of deposit product redesign and standardization will create a common set of deposit products across all our banks. These highly competitive, standardized products, along with our new deposit system, further enable us to support all customers from any of our banking locations. FTS will build on these successes and strengthen our technology foundation in 2004 with initiatives such as: • Introduction of a new e-mail system will provide greater messaging and collaboration capabilities for all employees, as well as establish a foundation for future enhancements. • Implementation of a company-wide, state-of-the-art telecom system will improve our telecommunications and customer service while reducing operating costs. • Installation of new lending and mortgage software will allow quicker decision making and greater integration with other applications. • Development of new Web sites for all of our banks will provide our customers with better information in an easier-to-use format. Added consistency from site to site will also enhance our marketing initiatives and serve as an important tool for strengthening the First Financial brand across all our banks, while decreasing our overall Web development and maintenance costs. FTS provides the technology resources for our current operations while anticipating future growth needs. By building a solid infrastructure to create the capacity for internal growth and the scalability for potential acquisitions, FTS helps position First Financial Bankshares for a future of expansion and profitability. 5 First National Bank of Abilene Taylor County Deposit Market Share 45% Main Office 400 Pine Street Abilene, Texas 79601 Chartered 1890 Branches 4400 Buffalo Gap Road Abilene, Texas 79606 4350 Southwest Drive Abilene, Texas 79606 920 N. Willis Abilene, Texas 79603 3300 S. 14th Street Abilene, Texas 79605 1010 N. Judge Ely Blvd. Abilene, Texas 79601 701 Pine Street Abilene, Texas 79601 1345 Barrow Street Abilene, Texas 79605 Senior Officers F. Scott Dueser Chairman of the Board Chuck Cowell President and Chief Executive Officer Leo Dennis Executive Vice President, Chief Financial Officer and Cashier Ron Fogle Executive Vice President, Commercial Loans Robert S. Patterson Executive Vice President and Senior Trust Officer John Prince Executive Vice President, Personal Loans Kirk Thaxton Executive Vice President and Senior Trust Officer Directors Chuck Cowell President and Chief Executive Officer J. Michael Alexander President, James M. Alexander & Co. 6 Tucker S. Bridwell President and Chief Executive Officer, Mansefeldt Investments, Inc. Joseph E. Canon Executive Director, Dodge Jones Foundation David Copeland President, Shelton Family Foundation Joe Crawford President, Abilene Aero, Inc. F. Scott Dueser First Financial Bankshares, Inc. Charles Ezzell Investments Allan D. Frizzell Executive Vice President, Enrich Oil Corporation Raymond A. McDaniel, Jr. Investments Bynum Miers Rancher William D. Minter Vice President, CameraMouse Stanley Morris, Jr. Investments Kenneth T. Murphy First Financial Bankshares, Inc. Dian Graves Stai Investments Michael C. Waters, F.A.C.H.E. President, Hendrick Health System Advisory Bob J. Surovik McMahon, Surovik, Suttle, Buhrmann, Hicks, Gill & Cannon, P.C. Steve Suttle McMahon, Surovik, Suttle, Buhrmann, Hicks, Gill & Cannon, P.C. Directors Emeritus James M. Parker President, Parker Properties, Inc. Jack D. Ramsey, M.D. Physician In Thousands Dec. 31, 2003 Dec. 31, 2002 Assets Loans Deposits Equity Net Income Return on Average Assets $753,864 $705,468 339,444 660,824 67,050 14,966 353,564 624,262 68,670 14,277 2.07% 2.12% Efficiency Ratio 48.21 50.86 Chuck Cowell President and Chief Executive Officer In Thousands Dec. 31, 2003 Dec. 31, 2002 Assets Loans Deposits Equity Net Income Return on Average Assets $211,094 $205,591 104,161 189,382 20,043 3,554 106,755 182,715 20,334 3,451 1.75% 1.72% Efficiency Ratio 52.69 51.13 Ronald E. Schneider Chairman of the Board, President and Chief Executive Officer First Financial Bank, N.A. Johnson County Deposit Market Share 21% Main Office 403 N. Main Cleburne, Texas 76033 Chartered 1927 Branches 200 N. Ridgeway Cleburne, Texas 76033 1900 S.W. Wilshire Burleson, Texas 76028 201 E. Highway 67 Alvarado, Texas 76009 Senior Officers Ronald E. Schneider Chairman of the Board, President and Chief Executive Officer Perry Ginn Executive Vice President Homer S. Pittman, Jr. Executive Vice President and Cashier Derek Schmidt Executive Vice President Directors Ronald E. Schneider Chairman of the Board, President and Chief Executive Officer Albert A. Archer Chairman of the Board, Walls Industries, Inc. Gary Bennett Bennett Printing & Office Supply Robert T. Childress Investments F. Scott Dueser First Financial Bankshares, Inc. Jim Easdon Investments J. Bruce Hildebrand First Financial Bankshares, Inc. Hollis E. (Gene) Joslin Investments Brent D. Magers Chief Executive Officer and Administrator, Walls Regional Hospital George Marti Marti Enterprises 7 Eastland National Bank Eastland County Deposit Market Share 26% Office 201 E. Main Eastland, Texas 76448 Chartered 1934 Senior Officers Tommy J. Barrow Chairman of the Board, President and Chief Executive Officer Clint S. Ferguson Executive Vice President Jim Davidson Senior Vice President and Cashier Directors Tommy J. Barrow Chairman of the Board, President and Chief Executive Officer F. Scott Dueser First Financial Bankshares, Inc. Clint S. Ferguson Executive Vice President J. Bruce Hildebrand First Financial Bankshares, Inc. Jim Keffer President, EBAA Iron Sales, Inc. Mike T. Perry President, Kinnaird, Rossander & Perry Agency, Inc. Dale Squiers, R.Ph. Owner, Eastland Drug Company Tommy Warford Turner, Seaberry and Warford, Attorneys M.D. White, Jr. President and Owner, Ace Hardware Store Eastland/Cisco 8 In Thousands Dec. 31, 2003 Dec. 31, 2002 Assets Loans Deposits Equity Net Income Return on Average Assets $58,005 $59,090 30,921 52,076 5,921 1,061 31,931 50,109 6,113 1,016 1.83% 1.70% Efficiency Ratio 55.01 54.38 Tommy J. Barrow Chairman of the Board, President and Chief Executive Officer In Thousands Dec. 31, 2003 Dec. 31, 2002 Assets Loans Deposits Equity Net Income Return on Average Assets Efficiency Ratio $93,299 $80,976 53,549 82,244 8,558 1,311 38,383 71,926 8,529 1,205 1.53% 56.31 1.48% 55.19 Mike Mauldin Chairman of the Board, President and Chief Executive Officer Hereford State Bank Deaf Smith County Deposit Market Share 45% Office 212 E. Third Street Hereford, Texas 79045 Chartered 1947 Senior Officers Mike Mauldin Chairman of the Board, President and Chief Executive Officer Jeff Brown Senior Vice President Mike Cullen Senior Vice President Steve Gilbert Senior Vice President and Cashier Directors Mike Mauldin Chairman of the Board, President and Chief Executive Officer Joe Artho Retired General Manager, Hereford Grain Corp. Terry Brumlow Retired Banker F. Scott Dueser First Financial Bankshares, Inc. Steve Lewis, D.V.M. Manager and Senior Partner, Hereford Veterinary Clinic Garth Merrick President and Chief Executive Officer, Merrick Petfoods, Inc. Allen Parson Restaurateur and Investments Craig Smith Retired Banker and Rancher Jerry Stevens Vice President and General Manager, Stevens 5-Star Car and Truck Center Johnny E. Trotter President and Chief Executive Officer, Livestock Investors, Ltd. Roger Williams Farming Advisory Director Terry Langehennig Cowsert, Line and Langehennig, Attorneys 9 City National Bank, Mineral Wells Palo Pinto County Deposit Market Share 25% Office 1900 E. Hubbard Mineral Wells, Texas 76067 Chartered 1925 Senior Officers Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Brad Seay Executive Vice President, Lending Mike Mearse Senior Vice President Eddie Gregory Vice President Kay Hudspeth Cashier Directors Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer F. Scott Dueser First Financial Bankshares, Inc. Doyle Lee Chairman, President and CEO, Weatherford National Bank Terry L. Murphy President and Chief Executive Officer, Murphy and Murphy, Inc. Don O’Neal Don O’Neal Distributing Company, Inc., O’Neal Enterprises, Inc. David Ramsey, M.D. Family Practice Center Brad Seay Executive Vice President, Lending Jimmy Seay Investments and Ranching Walter Joe Thomas, D.D.S. Dentist 10 In Thousands Dec. 31, 2003 Dec. 31, 2002 Assets Loans Deposits Equity Net Income Return on Average Assets $98,124 $93,969 53,779 86,412 9,628 1,813 51,224 84,043 9,538 1,659 1.86% 1.79% Efficiency Ratio 46.12 46.86 Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer In Thousands Dec. 31, 2003 Dec. 31, 2002 Assets Loans Deposits Equity Net Income Return on Average Assets $323,847 $303,124 124,076 261,590 29,730 5,020 115,450 251,931 30,634 4,917 1.63% 1.70% Efficiency Ratio 49.36 50.64 Michael L. Boyd President and Chief Executive Officer San Angelo National Bank Tom Green County Deposit Market Share 25% Main Office 301 W. Beauregard San Angelo, Texas 76903 Chartered 1997 Branch 3471 Knickerbocker San Angelo, Texas 76904 Senior Officers Michael L. Boyd President and Chief Executive Officer David Byrd Executive Vice President and Trust Officer Robert Pate Executive Vice President Katherine Reeves Executive Vice President and Cashier Directors Dal DeWees Chairman of the Board Michael L. Boyd President and Chief Executive Officer W. Dan Cravy, M.D. Physician Rick DeHoyos Partner Ratliff, Edwards & DeHoyos David B. Drake Investment Advisor F. Scott Dueser First Financial Bankshares, Inc. Doug Eakman Owner, Pecos Street Pharmacy Ron Giddiens Investments/Business Consulting Joe Henderson President, Porter Henderson Implement Company, Inc. J. Bruce Hildebrand First Financial Bankshares, Inc. Robert D. Housley President and Owner, Housley Communications David F. Lupton President, Angelo Glass & Mirror Company, Inc. Bill Pfluger Rancher Barbara Riley President, Olio, Inc. Richard W. Salmon Investments John E. Schwartz, Sr. Farmer/Rancher Mary Jane Steadman Attorney, Real Estate Investment Management F.L. (Steve) Stephens Retired Chairman and Chief Executive Officer, Town & Country Food Stores, Inc. Advisory Jim Johnson Shannon, Porter, Johnson, Pfluger, Davis & Joynton, LLP 11 First Financial Bank, N.A. Southlake Cities of Southlake, Keller and Roanoke Deposit Market Share 8% In Thousands Dec. 31, 2003 Dec. 31, 2002 Assets Loans Deposits Equity Net Income Return on Average Assets $74,410 $67,750 54,441 64,478 6,297 661 45,132 61,532 6,295 412 0.94% 0.62% Efficiency ratio 75.54 76.58 Mark L. Jones President and Chief Executive Officer Main Office 3205 E. Highway 114 Southlake, Texas 76092 Chartered 1985 Branches 95 Trophy Club Drive Trophy Club, Texas 76262 891 E. Keller Parkway Suite 100 Keller, Texas 76248 Senior Officers Mark L. Jones President and Chief Executive Officer F. Mills Shallene Senior Vice President J. Sean Shope Senior Vice President Joe Stubbs Senior Vice President and Cashier Directors Perry D. Elliott Chairman of the Board James E. Burger Burger Construction Jack Dortch Jack Dortch Insurance Agency F. Scott Dueser First Financial Bankshares, Inc. J. Bruce Hildebrand First Financial Bankshares, Inc. Derrell E. Johnson President, American Council of Engineering Companies Life Health Trust Mark L. Jones President and Chief Executive Officer K. Wayne Lee President, DDFW Properties Jim Ridenour President, Sunbelt Station Service 12 Stephenville Bank & Trust Co. Erath County Deposit Market Share 32% In Thousands Dec. 31, 2003 Dec. 31, 2002 Assets Loans Deposits Equity Net Income Return on Average Assets $147,980 $138,260 76,814 134,317 13,306 2,004 75,454 125,226 12,755 2,313 1.42% 1.75% Efficiency Ratio 51.19 47.93 Ron Butler President and Chief Executive Officer Main Office 2201 W. South Loop Stephenville, Texas 76401 Chartered 1923 Branches 1875 Lingleville Road Stephenville, Texas 76401 199 N. Columbia Stephenville, Texas 76401 Senior Officers Ron Butler President and Chief Executive Officer Perry D. Elliott Vice Chairman Ken Luker Executive Vice President Monty Bedwell Senior Vice President Dereece Howell Senior Vice President and Cashier Robert Lemons Senior Vice President Terry McCoy Senior Vice President Robert Reeves Senior Vice President Directors James C. Terrell, Jr., M.D. Chairman of the Board Perry D. Elliott Vice Chairman Ron Butler President and Chief Executive Officer William L. Corbin Investments F. Scott Dueser First Financial Bankshares, Inc. Charles P. Gillespie, Jr. Engineer J. Bruce Hildebrand First Financial Bankshares, Inc. Bill Parham Parham & Parham, CPAs Jerry Parham Investments Jack Parks Farmer Ronald E. Schneider First Financial Bank, Cleburne Frank Terrell, M.D. Ophthalmologist John Terrill Attorney Advisory W.L. Nix Investments 13 First National Bank, Sweetwater Nolan and Fisher Counties Deposit Market Share 40% Main Office 201 Elm Street Sweetwater, Texas 79556 Chartered 1948 Branches 123 N. Concho Roby, Texas 79543 117 N. Main Trent, Texas 79561 Senior Officers J.V. Martin Chairman of the Board, President and Chief Executive Officer Kirby Andrews Executive Vice President, Lending Donnie Ruppert Executive Vice President and Controller Rodney Foster Senior Vice President, Lending Janis McDowell Senior Vice President, Trust Officer Directors J.V. Martin Chairman of the Board, President and Chief Executive Officer Glenn D. Bennett Bennett & Associates Louis Brooks, Jr. Ranching, Brooks-Maberry, Inc. Bill W. Burns President, Bill Burns Oil Co., Inc. Ronnie Cox Owner, Cox Jewelry F. Scott Dueser First Financial Bankshares, Inc. Cecil J. King Retired President, Citizens State Bank, Roby Thomas L. Rees, Sr. Rees and Rees, Attorneys 14 In Thousands Dec. 31, 2003 Dec. 31, 2002 Assets Loans Deposits Equity Net Income Return on Average Assets $121,055 $112,079 49,012 109,253 11,179 2,271 49,487 100,306 11,114 2,078 1.90% 1.99% Efficiency Ratio 51.99 48.59 J.V. Martin Chairman of the Board, President and Chief Executive Officer d B e yon F a ceVa . e u l Weatherford National Bank Parker County Deposit Market Share 25% In Thousands Dec. 31, 2003 Dec. 31, 2002 Assets Loans Deposits Equity Net Income Return on Average Assets $219,303 $211,235 101,326 198,561 20,117 3,934 96,660 189,630 20,526 3,862 1.95% 1.97% Efficiency Ratio 49.11 48.39 Main Office 101 N. Main Street Weatherford, Texas 76086 Chartered 1984 Branches 101 College Park Drive Weatherford, Texas 76086 1214 N. Main Street Weatherford, Texas 76086 505 Farm Road 1187 Aledo, Texas 76008 Doyle Lee Chairman of the Board, President and Chief Executive Officer Senior Officers Doyle Lee Chairman of the Board, President and Chief Executive Officer Bob Bradberry Executive Vice President Jay Gibbs Executive Vice President Paul Baker Senior Vice President Jean Bryan Senior Vice President Larry Mangrem Senior Vice President and Cashier Louis Sneed Senior Vice President Directors Doyle Lee Chairman of the Board, President and Chief Executive Officer Stephen G. Brogdon, D.D.S. General and Cosmetic Dentistry Mac A. Coalson Real Estate and Ranching F. Scott Dueser First Financial Bankshares, Inc. Clay Hicks Oil and Gas Investments Nan Kingsley President, Bluestern Studios, Inc. Dave Lang President, Dralco, Inc. 15 Selected Financial Data In Thousands (except per share data) Year-End Total Assets(1) Shareholders’ Equity(1) Net Income(1) Basic Earnings per Share(2) Cash Dividends per Share(2) Stock Dividends and Splits Year-End Book Value per Share(2) Year-End Market Value per Share(2) 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 Ten-Year Compound Growth Rate $2,092,571 $251,487 $35,305 $2.28 $1.21 5/4 split $16.25 $41.12 1,993,183 238,768 33,953 1,929,694 213,654 29,355 1,753,814 196,121 28,316 1,723,369 178,663 25,690 1,686,647 169,449 23,254 1,573,509 148,226 20,063 1,262,041 131,161 18,122 1,062,325 114,917 16,355 1,001,906 103,908 13,112 2.20 1.91 1.82 1.65 1.50 1.36 1.26 1.22 0.98 1.08 0.93 0.82 0.72 0.64 0.56 0.50 0.45 0.41 – 5/4 split – – 15.45 13.86 12.74 11.46 10% dividend 10.90 5/4 split 5/4 split – 5/4 split 9.97 9.09 8.53 7.74 30.40 24.08 20.12 19.68 22.40 24.95 18.62 12.47 9.95 8.51% 10.77% 11.42% 8.06% 12.88% – 8.50% 12.76% (1) As originally reported at the close of each year and prior to restatements for pooling-of-interests. (2) Adjusted for stock dividends and splits. 2003 Common Stock Market Value and Dividend Data Quarter Fourth Third Second First High Low Close Dividends $43.89 $37.12 $41.12 $0.31 41.02 38.80 32.34 32.35 28.01 27.78 36.96 33.46 28.40 0.31 0.31 0.28 J. Bruce Hildebrand Executive Vice President and Chief Financial Officer 16 Officers Kenneth T. Murphy Chairman of the Board F. Scott Dueser President and Chief Executive Officer J. Bruce Hildebrand Executive Vice President and Chief Financial Officer Gary L. Webb Executive Vice President Gary S. Gragg Senior Vice President Robert S. Patterson Senior Vice President, Trust Services William A. Rowe Vice President, Investment Securities Gaila Kilpatrick Administrative Officer Directors Kenneth T. Murphy Chairman of the Board Joseph E. Canon Executive Director, Dodge Jones Foundation Mac A. Coalson Real Estate and Ranching David Copeland President, Shelton Family Foundation F. Scott Dueser President and Chief Executive Officer Derrell E. Johnson President, American Council of Engineering Companies Life Health Trust Kade Matthews Ranching and Investments Raymond A. McDaniel, Jr. Investments Bynum Miers Ranching James M. Parker President, Parker Properties, Inc. Jack D. Ramsey, M.D. Physician Dian Graves Stai Investments F.L. (Steve) Stephens Retired Chairman and Chief Executive Officer, Town & Country Food Stores, Inc. Johnny E. Trotter President and Chief Executive Officer, Livestock Investors, Ltd. 2002 Common Stock Market Value and Dividend Data Quarter Fourth Third Second First High Low Close Dividends $33.60 $27.72 $30.40 $0.28 33.38 34.40 27.44 27.88 26.40 23.44 29.15 33.47 26.57 0.28 0.28 0.24 Corporate Information Annual Meeting Tuesday, April 27, 2004 Abilene Civic Center 1100 N. Sixth Street Abilene, Texas 79601 Corporate Offices 400 Pine Street Abilene, Texas 79601 325.627.7155 ffin@abilene.com http://www.ffin.com Corporate Mailing Address P.O. Box 701 Abilene, Texas 79604 Common Stock Listing The NASDAQ Stock Market® Symbol: FFIN For Financial Information, Contact: J. Bruce Hildebrand Executive Vice President 325.627.7167 Transfer Agent The Bank of New York 1.866.828.8173 Address Shareholder Inquiries to: Shareholder Relations Dept. P.O. Box 11258 Church Street Station New York, NY 10286 E-mail Address: shareowner-svcs@bankofny.com The Bank of New York Stock Transfer Website: http://www.stockbny.com Send Certificates for Transfer and Address Changes to: Receive and Deliver Dept. P.O. Box 11002 Church Street Station New York, NY 10286 Independent Public Auditors Ernst & Young LLP A Family of Community BanksSM TM 400 Pine Street, Abilene, Texas 79601 www.ffin.com 

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