First Financial Bankshares Annual Report 2003

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FY2003 Annual Report · First Financial Bankshares

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A Family of Community BanksSM

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

Financial Highlights

Letter to Shareholders

Trust Division

Technology Division

Subsidiary Bank Reports

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

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.

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

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.

Trust Assets (in millions)

Senior Officers

$1,000

$900

$800

$700

$600

$500

$400

$300

$200

$100

$986

$992

$959

$911

$845

Trust Fees (in millions)

$6.02

$5.89

$5.83

$5.50

$5.10

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

$1.600

$1.587

Joe Ayres
Senior Vice President
Stephenville

$1.424

$1.324

$1.216

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.

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.

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

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

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

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

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

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

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

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

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

B e yon
F
a
ceVa

.
e

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.

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

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

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

0.28

J. Bruce Hildebrand
Executive Vice President
and Chief Financial Officer

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

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

0.24

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

400 Pine Street, Abilene, Texas 79601
www.ffin.com