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Midwestone Financial GroupTM SM A N N U A L R E P O R T 2 0 0 6 Banks & Locations 87 Amarillo 40 First Financial Bank First Financial Bank First Financial Bank ABILENE CLYDE MORAN CLEBURNE BURLESON ALVARADO MIDLOTHIAN EASTLAND RANGER RISING STAR Hereford State Bank HEREFORD City National Bank MINERAL WELLS San Angelo National Bank SAN ANGELO First Financial Bank First Financial Bank SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR STEPHENVILLE GRANBURY GLEN ROSE First National Bank SWEETWATER ROBY TRENT Weatherford National Bank WEATHERFORD ALEDO WILLOW PARK Major Cities 27 Lubbock 87 20 84 87 Fort Worth Abilene Dallas 20 35 35 Midland Odessa 10 Profile First Financial Bankshares is a financial holding company headquartered in Abilene, Texas, with $2.9 billion in consolidated assets as of December 31, 2006. First Financial operates ten separately chartered affiliate banks with 44 locations in the Central, West and High Plains regions of Texas. The Company also operates a trust and asset management company with five locations and a technology services company. Listed on The NASDAQ Global Select Market under the trading symbol FFIN, its common stock is beneficially held by approximately 5,300 shareholders. Visit First Financial's Web site at http://www.ffin.com. www.ffin.com Because ... Community Matters. TM SM 1 Financial Highlights In thousands (except per share data) 2006 2005 Changes 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 Return on Average Assets Return on Average Equity Equity/Assets at Year-End Efficiency $46,029 2.22 24,460 1.18 $44,023 2.13 22,694 1.10 $2,738,314 $2,449,845 1,110,816 1,308,309 2,313,074 284,117 958,879 1,209,094 2,100,937 272,298 $2,850,165 $2,733,827 1,129,313 1,373,735 2,384,024 300,901 14.51 1,046,121 1,288,604 2,366,277 276,276 13.34 4.6% 4.2% 7.8% 7.3% 11.8% 15.8% 8.2% 10.1% 4.3% 4.3% 8.0% 6.6% 0.7% 8.9% 8.8% 1,299,628 1,150,027 13.0% 1.68 % 16.20 % 10.56 % 53.57 % 1.80 % 16.17 % 10.11 % 52.48 % 2 Financial Strength We best serve the needs of our communities, shareholders, customers and employees by growing First Financial Bankshares and practicing sound financial management. In 2006, First Financial experienced its 20th consecutive year of increased earnings and was again named to the Honor Roll by Keefe, Bruyette and Woods, Inc., which recognizes banks that have continually achieved annual increases in earnings during the past decade. First Financial was one of only 40 banks nationwide named to the KBW Honor Roll. The Company outperformed its peer group of similar-sized banks in 2006 on many key financial ratios. The charts on this page and the Financial Highlights on the accompanying page demonstrate the Company’s financial strength in 2006 on several key measurements. We also invite you to review the more comprehensive 10-year financial summary on page 20 of this annual report. For more financial information, please visit the investor relations section of the First Financial Web site at http://www.ffin.com, where you will find financial highlights, the Company’s quarterly earnings news releases and documents filed with the U.S. Securities and Exchange Commission, including the latest Form 10-K. $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Asset Growth (in millions) 0 5 8 , 2 $ 4 3 7 , 2 $ 5 1 3 , 2 $ 3 9 0 , 2 $ 3 9 9 , 1 $ 02 03 04 05 06 Loan Growth (in millions) Net Income Growth (in thousands) Net Interest Margin 4 7 3 , 1 $ 9 8 2 , 1 $ 4 6 1 , 1 $ 4 6 9 $ 8 8 9 $ 9 2 0 , 6 4 $ 3 2 0 , 4 4 $ 1 7 1 , 9 3 $ 3 5 9 , 3 3 $ 5 0 3 , 5 3 $ $54,000 $48,000 $42,000 $36,000 $30,000 $24,000 $18,000 $12,000 $6,000 $0 5% 4% 3% 2% 1% 0% % 8 7 . 4 % 4 4 . 4 % 9 4 . 4 % 9 4 . 4 % 6 4 . 4 02 03 04 05 06 02 03 04 05 06 02 03 04 05 06 Efficiency Ratio Return on Average Assets Return on Average Equity % 6 9 1 5 . % 2 5 2 5 . % 8 7 1 5 . % 8 4 2 5 . % 7 5 3 5 . % 8 7 1 . % 5 7 1 . % 2 8 1 . % 0 8 1 . % 8 6 1 . 2.00% 1.75% 1.50% 1.25% 1.00% 0.75% 0.50% 0.25% 0% % 7 1 6 1 . % 0 2 6 1 . % 7 9 4 1 . % 0 4 4 1 . % 9 0 5 1 . 18% 15% 12% 9% 6% 3% 0% 02 03 04 05 06 02 03 04 05 06 02 03 04 05 06 $1,500 $1,250 $1,000 $750 $250 $0 60% 50% 40% 30% 20% 10% 0% 3 Dear Fellow Shareholders: During 2006, one of our priorities was to integrate our latest acquisitions into our bank template and make our new branches profitable. The success of these efforts helped to make 2006 our 20th consecutive year of increased earnings. Net income grew 4.6% to $46.0 million from $44.0 million in 2005. On a basic per share basis, earnings grew 4.2% to $2.22 from $2.13. Net income grew even more—10.9%—if we exclude the gain realized in 2005 from our sale of ownership rights in the PULSE EFT network (the gain was $3.9 million pretax and $2.5 million after-tax). Net interest income, the major source of our earnings, increased 11.2% to $105.9 million from $95.2 million the previous year. Our net interest margin declined three basis points, to 4.46% from 4.49% in 2005. We were pleased that we were able to maintain our net interest margin as well as we did, since we again faced an unfavorable interest rate environment marked by upward pressure on deposit interest rates and a flat yield curve. Noninterest income increased by 1.1% to $44.7 million from $44.2 million; however, excluding the PULSE proceeds from 2005, noninterest income actually grew 10.9%. This increase was primarily fueled by growth in service charges, trust fees, real estate mortgage fees and debit card fees. Noninterest expense increased 9.9% to $83.1 million from $75.6 million. The increase was due primarily to additional salaries and employee benefits, facility expenses and amortization of intangibles related to our acquisition of The First National Bank of Bridgeport in December 2005. Our return on average assets decreased to 1.68% from 1.80% for 2005, mainly because of an 11.8% increase in average assets; however, the return continued to compare very favorably with our peer group average of 1.13%. Return on average equity increased to 16.20% from 16.17%, and also compared favorably with our peer group average of 13.11%. The efficiency ratio (the share of revenues consumed by operating expenses) increased to 53.57% from 52.48%, but was well below our peer group average of 60.86%. As of December 31, 2006, the Company’s consolidated assets totaled $2.85 billion, a 4.3% increase from $2.73 billion at the previous year-end. Loans increased 6.6% to $1.37 billion from $1.29 billion. Total deposits were $2.38 billion compared with $2.37 billion at the end of 2005. Demand deposits grew 10.0%, while interest-bearing deposits decreased 2.5%, reflecting our focus on managing our cost of funds. The balance sheet at year-end was again marked by strong asset quality and capital strength. Classified loans (those with some degree of risk) increased to 3.93% of total loans from 3.84% a year earlier. However, total nonperforming assets decreased to 0.30% of total loans and foreclosed assets from 0.33% at the end of 2005. Our 0.30% compares very favorably with the 0.57% reported by our peer group. At December 31, 2006, the allowance for loan losses increased to 1.18% of total loans from 1.14% at the end of 2005. We increased the reserve throughout the year to reflect overall loan growth, an increase in classified loans and recognition of economic changes including a slowing real estate market. Shareholders’ equity rose to $300.9 million at December 31, 2006, from $276.3 million a year earlier. On April 25, 2006, our Board of Directors declared a 7.1% increase in the quarterly cash dividend, raising it to $0.30 from $0.28 per share. This was our 20th consecutive year of cash dividend increases reflecting our growth and financial strength during the past two decades. The market share price of our common stock at year-end was $41.86, up 19.4% from $35.06 at the end of 2005. The combination of share price appreciation and dividends paid produced a total return to shareholders of 22.8% for 2006. F. SCOTT DUESER, President and Chief Executive Officer In another development of note to shareholders, during 2006 NASDAQ included First Financial Bankshares in its new Global Select Market, which strives to have the highest initial listing standards of any stock exchange in the world based on financial and liquidity requirements. In January 2007, NASDAQ also announced that First Financial was one of 21 companies added to its Dividend Achievers Index, which recognizes companies that have increased their annual dividend payments for the last 10 or more consecutive years. Only 99 companies nationwide are on this list. OTHER HIGHLIGHTS We have been pursuing growth to better serve our customers and shareholders. Our December 2005 acquisition of The First National Bank of Bridgeport has yielded more benefits than expected and provided new growth opportunities. We combined this bank, located northwest of Fort Worth in Wise County, with our Southlake bank to create an organization with $296.2 million in assets at the end of 2006. The combined bank is well positioned to serve the needs of the rapidly growing communities in Wise and northern Tarrant counties. The results of this acquisition again demonstrate the success of our “one bank, ten charters” concept, which keeps banking decisions in the local community while making possible the greater efficiencies and expanded services of a larger bank. The new branches we opened in Willow Park, Granbury and Midlothian during 2005 became profitable on a monthly basis in less time than expected. Each of these communities is within our prime target for expansion—the area within a 50-mile radius of the Dallas-Fort Worth Metroplex. The populations of Midlothian, Granbury and Willow Park are all growing at double-digit rates, which is faster than the state and national averages, according to the U.S. Census Bureau. With these new branches and two others we added in 2005, we now total 44 banking locations and 60 ATMs. As we expand the First Financial family, we remain focused on providing superior customer service and attracting and retaining high-quality employees. We now have approximately 1,000 employees. To underscore our commitment to their professional development, in December 2006 we created the new position of Vice President of Training and Education and named Eric Thompson to the post. Our “Customer Service First” initiative, launched in the spring of 2005, is built around the concepts that “everything speaks” and that we need to examine what we do through the “lens of the customer.” As part of this program, we recognize our employees with WOW awards, which spotlight employees who go beyond the call of duty to assist a customer. Their stories are inspiring, and they are indicative of the customer service first culture we promote at every level of the organization. 4 Dear Fellow Shareholders: During 2006, one of our priorities was to integrate our latest acquisitions into our bank template and make all our new branches profitable. The success of these efforts helped to make 2006 our 20th consecutive year of increased earnings. Net income grew 4.6% to $46.0 million from $44.0 million in 2005. On a per share basis, earnings grew 4.2% to $2.22 from $2.13. Net income grew even more—10.9%—if we exclude the gain realized in 2005 from our sale of ownership rights in the PULSE EFT network (the gain was $3.9 million pretax and $2.5 million after-tax). Net interest income, the major source of our earnings, increased 11.2% to $105.9 million from $95.2 million the previous year. Our net interest margin declined three basis points, to 4.46% from 4.49% in 2005. We were pleased that we were able to maintain our net interest margin as well as we did, since we again faced an unfavorable interest rate environment marked by upward pressure on deposit interest rates and a flat yield curve. in service charges, trust fees, real estate mortgage fees and debit card fees. acquisition of The First National Bank of Bridgeport in December 2005. Noninterest income increased by 1.1% to $44.7 million from $44.2 million; however, excluding the PULSE proceeds from 2005, noninterest income actually grew 10.9%. This increase was primarily fueled by growth Noninterest expense increased 9.9% to $83.1 million from $75.6 million. The increase was due primarily to additional salaries and employee benefits, facility expenses and amortization of intangibles related to our Our return on average assets decreased to 1.68% from 1.80% for 2005, mainly because of an 11.8% increase in average assets; however, the return continued to compare very favorably with our peer group average of 1.13%. Return on average equity increased to 16.20% from 16.17%, and also compared favorably with our peer group average of 13.11%. The efficiency ratio (the share of revenues consumed by operating expenses) increased to 53.57% from 52.48%, but was well below our peer group average of 60.86%. As of December 31, 2006, the Company’s consolidated assets totaled $2.85 billion, a 4.3% increase from $2.73 billion at the previous year-end. Loans increased 6.6% to $1.37 billion from $1.29 billion. Total deposits were $2.38 billion compared with $2.37 billion at the end of 2005. Demand deposits grew 10.0%, while interest-bearing deposits decreased 2.5%, reflecting our focus on managing our cost of funds. The balance sheet at year-end was again marked by strong asset quality and capital strength. Classified loans (those with some degree of risk) increased to 3.93% of total loans from 3.84% a year earlier. However, total nonperforming assets decreased to 0.30% of total loans and foreclosed assets from 0.33% at the end of 2005. Our 0.30% compares very favorably with the 0.57% reported by our peer group. At December 31, 2006, the allowance for loan losses increased to 1.18% of total loans from 1.14% at the end of 2005. We increased the reserve throughout the year to reflect overall loan growth, an increase in classified loans, and recognition of economic changes including a slowing real estate market. Shareholders’ equity rose to $300.9 million at December 31, 2006, from $276.3 million a year earlier. On April 25, 2006, our Board of Directors declared a 7.1% increase in the quarterly cash dividend, raising it to $0.30 from $0.28 per share. This was our 20th consecutive year of cash dividend increases reflecting our growth and financial strength during the past two decades. The market share price of our common stock at year-end was $41.86, up 19.4% from $35.06 at the end of 2005. The combination of share price appreciation and dividends paid produced a total return to shareholders of 22.8% for 2006. In another development of note to shareholders, during 2006 NASDAQ included First Financial Bankshares in its new Global Select Market, which has the highest listing standards of any stock exchange in the world based on financial and liquidity requirements. OTHER HIGHLIGHTS We have been pursuing growth to better serve our customers and shareholders. Our December 2005 acquisition of The First National Bank of Bridgeport has yielded more benefits than expected and provided new growth opportunities. We combined this bank, located northwest of Fort Worth in Wise County, with our Southlake bank to create an organization with $296.2 million in assets at the end of 2006. The combined bank is well positioned to serve the needs of the rapidly growing communities in Wise and northern Tarrant counties. The results of this acquisition again demonstrate the success of our “one bank, ten charters” concept, which keeps banking decisions in the local community while making possible the greater efficiencies and expanded services of a larger bank. The new branches we opened in Willow Park, Granbury and Midlothian during 2005 became profitable on a monthly basis in less time than expected. Each of these communities is within our prime target for expansion—the area within a 50-mile radius of the Dallas-Fort Worth Metroplex. The populations of Midlothian, Granbury and Willow Park are all growing at double-digit rates, which is faster than the state and national averages, according to the U.S. Census Bureau. With these new branches and two others we added in 2005, we now total 44 banking locations and 60 ATMs. As we expand the First Financial family, we remain focused on providing superior customer service and attracting and retaining high-quality employees. We now have approximately 1,000 employees. To underscore our commitment to their professional development, in December 2006 we created the new position of Vice President of Training and Education, and named Eric Thompson to the post. Our “Customer Service First” initiative, launched in the spring of 2005, is built around the concepts that “everything speaks” and that we need to examine what we do through the “lens of the customer.” As part of this program, we recognize our employees with WOW awards, which spotlight employees who go beyond the call of duty to assist a customer. Their stories are inspiring, and they are indicative of the customer service–first culture we promote at every level of the organization. The population of Texas is becoming more diverse, and First Financial wants to be the bank of choice for all neighborhoods. With that goal in mind, in late 2005 we created a Multicultural Development program that includes a Multicultural Committee comprised of representatives from each bank. Last year, this program made great progress in expanding our financial products and services to meet the banking needs of the growing Hispanic community. For example, we have recently launched two initiatives, Directo a Mexico and La Cuenta, which are designed to provide an easy, safe way to transfer funds internationally. We also made our banking locations more welcoming with Spanish-language signs and printed materials. Two of our banks and one of our subsidiaries named new leaders in 2006. Ron Butler, formerly President and CEO of our Stephenville bank, became President and CEO of our Abilene bank, the largest member of the First Financial family. Ron is a highly experienced banker and has been with our company since 1993. Meanwhile, First Financial Bank, Stephenville, named Ron Mullins as its new President and CEO. Ron brings 28 years of Texas banking experience; most recently, he was market President for Wells Fargo Bank in Midland. First Financial Trust & Asset Management Company also announced a new President and CEO. Kirk W. Thaxton, who has had more than 20 years’ experience with our company, filled this important position. Kirk replaced Robert S. Patterson, who retired after leading our trust operations for 12 years. Bob will remain on the First Financial Trust & Asset Management board and serve as a consultant to our company. We are pleased to announce that Tucker S. Bridwell, President of Mansfeldt Investment Corporation and President of the Dian Graves Owen Foundation, has accepted nomination for election as a director of the Company at our Annual Shareholders Meeting in April. Tucker, a CPA, has served on the board of First Financial Bank, Abilene, for 20 years and has a long history of business and civic involvement in Abilene and Texas. He presently serves on the Board of Directors and Audit Committee of Petrohawk Energy Corporation, which is publicly traded on NASDAQ. He has served on the boards of several other prominent organizations, including the Texas Department of Economic Development, the Development Corporation of Abilene, the Abilene Industrial Foundation, Hendrick Medical Center Foundation, the Community Foundation of Abilene, the Abilene Chamber of Commerce and McMurry University. Tucker earned his BBA and MBA from Southern Methodist University. LOOKING AHEAD First Financial Bankshares is well positioned to meet the financial needs of its communities and to provide long-term growth to its shareholders. Over the coming year, we will focus on growing our loan portfolio, improving our loan-to-deposit ratio and improving our efficiency ratio. Equally important, we will strive to effectively manage our net interest margin to counter the effects of the unfavorable flat yield curve. And we will continue to leverage our strengths in treasury management, mortgage lending, trust services and student loans, all of which are areas in which we see opportunities for further growth. First Financial has successfully completed eight bank acquisitions during the past decade. We are interested in making further acquisitions, but we are a disciplined and patient buyer. We will continue to look for banks (and also opportunities to open new branches) in growing communities with attractive infrastructure and amenities, preferably within 50 miles of the Dallas-Fort Worth Metroplex and along the Interstate 35 corridor in Texas. Many independent bank owners who are considering selling are attracted to our concept of allowing local banks to maintain their own boards of directors and keep decision making local. Our approach also appeals to experienced bankers who want to remain actively involved in managing their community bank after its acquisition. “Because Community Matters” is the theme of this year’s annual report. At First Financial, we are committed to being the bank of choice in each community we serve and to being actively involved in the life of that community. To run our banks, we turn to hometown people who know their communities best. We salute our employees, at every level of the organization, for their dedication to this company and their All of us on the management team recognize that we work for you, our shareholders. We work daily to grow the Company and manage it well so that we can increase profitability and reward our shareholders. Thank commitment to building the civic life of their communities. you for your investment in and support of First Financial Bankshares. F. Scott Dueser President and Chief Executive Officer First Financial Bankshares, Inc. Tucker came by and read his paragraph this morning. Mansefeldt is misspelled in the letter. It is missing an e. LOOKING AHEAD First Financial Bankshares is well positioned to meet the financial needs of its communities and to provide long-term growth to its shareholders. Over the coming year, we will focus on growing our loan portfolio, improving our loan-to-deposit ratio and improving our efficiency ratio. Equally important, we will strive to effectively manage our net interest margin to counter the effects of the unfavorable flat yield curve. And we will continue to leverage our strengths in treasury management, mortgage lending, trust services and student loans, areas in which we see opportunities for further growth. First Financial has successfully completed ten bank acquisitions during the past decade. We are interested in making further acquisitions, but we are a disciplined and patient buyer. We will continue to look for banks (and also opportunities to open new branches) in growing communities with attractive infrastructure and amenities, preferably within 50 miles of the Dallas-Fort Worth Metroplex and along the Interstate 35 and 20 corridors in Texas. Many independent bank owners who are considering selling are attracted to our concept of allowing local banks to maintain their own boards of directors and keep decision making local. Our approach also appeals to experienced bankers who want to remain actively involved in managing their community bank after its acquisition. “Because Community Matters” is the theme of this year’s annual report. At First Financial, we are committed to being the bank of choice in each community we serve and to being actively involved in the life of that community. To run our banks, we turn to hometown people who know their communities best. We salute our employees, at every level of the organization, for their dedication to this company and their commitment to building the civic life of their communities. All of us on the management team recognize that we work for you, our shareholders. We work daily to grow the Company and manage it well so that we can increase profitability and reward our shareholders. Thank you for your investment in and support of First Financial Bankshares. F. Scott Dueser President and Chief Executive Officer First Financial Bankshares, Inc. The population of Texas is becoming more diverse, and First Financial wants to be the bank of choice for all neighborhoods. With that goal in mind, in late 2005 we created a Multicultural Development program that includes a Multicultural Committee comprised of representatives from each bank. Last year, this program made great progress in expanding our financial products and services to meet the banking needs of the growing Hispanic community. For example, we have recently launched two initiatives, Directo a Mexico and La Cuenta, which are designed to provide an easy, safe way to transfer funds internationally. We also made our banking locations more welcoming with Spanish-language signs and printed materials. Two of our banks and one of our subsidiaries named new leaders in 2006. Ron Butler, formerly President and CEO of our Stephenville bank, became President and CEO of our Abilene bank, the largest member of the First Financial family. Ron is a highly experienced banker and has been with our company since 1993. Meanwhile, First Financial Bank, Stephenville, named Ron Mullins as its new President and CEO. Ron brings 28 years of banking experience; most recently, he was market President for Wells Fargo Bank in Midland. First Financial Trust & Asset Management Company also announced a new President and CEO. Kirk W. Thaxton, who has more than 20 years’ experience with our company, filled this important position. Kirk replaced Robert S. Patterson, who retired after leading our trust operations for 12 years. Bob will remain on the First Financial Trust & Asset Management board and will serve as a consultant to our company. We are pleased to announce that Tucker S. Bridwell, President of Mansefeldt Investment Corporation and President of the Dian Graves Owen Foundation, has accepted nomination for election as a director of the Company at our Annual Shareholders Meeting in April. Tucker, a CPA, has served on the board of First Financial Bank, Abilene, for 20 years and has a long history of business and civic involvement in Abilene and Texas. He presently serves on the Board of Directors and Audit Committee of Petrohawk Energy Corporation, which is publicly traded on NASDAQ. He has served on the boards of several other prominent organizations, including the Texas Department of Economic Development, the Development Corporation of Abilene, the Abilene Industrial Foundation, Hendrick Medical Center Foundation, the Community Foundation of Abilene, the Abilene Chamber of Commerce and McMurry University. Tucker earned his BBA and MBA degrees from Southern Methodist University. Because ... Community Matters. Scott Dueser, a member of the Texas Tech Board of Regents and the Abilene Community Partners, helped raise $15.5 million to establish a branch of the Texas Tech School of Pharmacy in Abilene. The school, which will be located in the North Abilene medical district, will host 160 students and 40 professors and staff members adding to the economic development of Abilene, enhancing local educational resources with its doctorate program and providing improved health care to the area. Back Row L-R: Sharon McDonald, Greathouse Foundation; Ron Butler, First Financial Bank, Abilene; Tucker Bridwell, Dian Graves Owen Foundation; Larry Gill, Dodge Jones Foundation; Laura Moore, Hendrick Medical Center Front Row L-R: Scott Dueser, Texas Tech Regent and President/CEO of First Financial Bankshares; School of Pharmacy Dean Arthur A. Nelson Jr., Ph.D. 5 Board of Directors Seated L -R: Steve Stephens, Dian Stai, Bynum Miers, Kenneth Murphy Standing L -R: Kade Matthews, Scott Dueser, Derrell Johnson, Johnny Trotter, David Copeland, Mac Coalson, Joseph Canon, Murray Edwards BOARD MEMBER YEAR ELECTED COMMITTEE APPOINTMENT* BOARD MEMBER YEAR ELECTED COMMITTEE APPOINTMENT* 1971 1996 1 3 1996 1, 3, 4 1998 1, 2, 4 1991 2006 2000 1 2 Kenneth T. Murphy Chairman of the Board Joseph E. Canon, J.D. Executive Director Dodge Jones Foundation Mac A. Coalson Mac A. Coalson Real Estate David Copeland President, SIPCO, Inc. and Shelton Family Foundation F. Scott Dueser President and Chief Executive Officer Murray Edwards Principal, The Edwards Group Derrell E. Johnson Former President and CEO Rady and Associates Consulting Engineers *COMMITTEES Kade Matthews Ranching and Investments 1998 3 Bynum Miers Ranching Dian Graves Stai Chair, Mansefeldt Investment Corporation Director, Dian Graves Owen Foundation F.L. (Steve) Stephens Retired Chairman and CEO, Town & Country Food Stores, Inc. Johnny E. Trotter President and CEO Livestock Investors, Ltd. 1992 1, 2, 4 1993 3 1998 1, 3, 4 2003 1, 2, 4 For more information on First Financial Bankshares’ Board of Directors, please visit our Web site at www.ffin.com 1 Executive Committee – F. Scott Dueser, Chairman 2 Audit Committee – David Copeland, Chairman 3 Compensation Committee – F.L. (Steve) Stephens, Chairman 4 Nominating/Corporate Governance Committee – Mac A. Coalson, Chairman 6 First Financial Trust & Asset Management Company, N.A. LOCATIONS Abilene Office 400 Pine St. (325) 627-7100 San Angelo Office 301 W. Beauregard (325) 659-5987 Stephenville Office 2201 W. South Loop (254) 918-6262 Sweetwater Office 201 Elm (325) 235-6640 Metroplex Office 550 Bailey Ave. Suite 510 Fort Worth (817) 410-2920 Seated L -R: Joe Ayres (Stephenville) and Robert Patterson (DFW Metroplex) Standing L -R: David Byrd (San Angelo), Konrad Halbert (DFW Metroplex), Kirk Thaxton (Abilene) and Michael Sheehan (Sweetwater) OFFICERS Kirk W. Thaxton President & CEO Richard Young Executive Vice President Manager, Abilene Office David Byrd Executive Vice President Manager, San Angelo Office Joe R. Ayres Senior Vice President Manager, Stephenville Office Michael D. Sheehan Senior Vice President Manager, Sweetwater Office Konrad S. Halbert Senior Vice President Manager, Metroplex Office Ralph Gibson Senior Vice President Manager, Investments Larry Cleveland Senior Vice President Manager, Operations Randy Spiva Senior Vice President Manager, Oil & Gas David B. Pitzer Senior Vice President Manager, Real Property HIGHLIGHTS FOR 2006: • Increased assets 13 percent or $150 million during 2006 to finish the year with a book value of $1.3 billion. • Experienced net income growth of 105 percent in our Sweetwater office. • Experienced asset growth for the year of $103 million in our Abilene office. • Hired Ralph Gibson as our new Investment Manager following the retirement of Jerry Nelson. • Elected Kirk W. Thaxton as President and CEO following the retirement of Robert Patterson. Trust Assets (in millions) Trust Fees (in millions) Trust Net Income (in millions) 0 0 3 1 $ , 0 5 1 1 $ , 8 6 0 1 $ , 6 8 9 $ 2 9 9 $ $1,300 $1,000 $800 $600 $400 $200 $0 . 6 6 7 $ . 7 0 7 $ . 7 3 6 $ . 4 8 5 $ . 2 0 6 $ $8 $7 $6 $5 $4 $3 $2 $1 $0 6 7 0 2 $ . 9 0 9 1 $ . $2.0 $1.8 $1.6 $1.4 $1.2 $0 6 9 5 . 1 $ 7 8 5 . 1 $ 4 2 3 . 1 $ 02 03 04 05 06 02 03 04 05 06 02 03 04 05 06 7 Because Community Matters WHAT MAKES FIRST FINANCIAL BANKSHARES DIFFERENT FROM OTHER BANKS? We’re a community-focused company. Even though we operate in a growing number of Texas markets, First Financial Bankshares continues to believe that decisions are best made at the local level. That’s why we operate ten separately chartered banks, with local boards of directors, local bank presidents and local decision-making. Our customers don’t have to wait for someone in Abilene – or Dallas or Atlanta or New York – to decide on their loans. Decisions can be made quickly and efficiently on the local level. Another distinguishing feature of our company is our passion for superior customer service. That’s why we introduced our “Customer Service First” initiative in 2005. We put customers first, looking at what we do through the eyes of the customers, and we keep banking decisions at the local community level – that sums up what makes First Financial Bankshares different. KEEPING DECISION-MAKING AT THE LOCAL COMMUNITY LEVEL SOUNDS GREAT, BUT ISN’T IT MORE DIFFICULT TO OPERATE TEN SEPARATELY CHARTERED BANKS? WHY NOT CONSOLIDATE ALL OF THESE LOCAL BANK SUBSIDIARIES INTO ONE BANK FOR GREATER EFFICIENCY? Banking has always been a local business. No one better knows the needs of the local community than the bank officers, employees and board members who live and work there. That’s why we believe operating separately chartered banks makes sense – for us and for our customers. Behind the teller line, however, our ten banks operate as one bank, so we can operate with greater efficiency. We call this our “one bank, ten charters” concept. We’ve consolidated many of the backroom operations, such as investment securities, accounting, check processing, technology and employee benefits, which improves the local bank’s efficiency and frees the local bank management to concentrate on what they do best – serving the banking needs of the local community. As a result, our efficiency ratio is far better than the average bank, ending the year at 53.57 percent. The “one bank, ten charters” concept works well for us, our customers and our employees. MANY BANKS ARE EXPANDING ACROSS STATE LINES. WHY DOES FIRST FINANCIAL OPERATE ONLY WITHIN TEXAS? Two answers: First, we’re blessed to be located in one of the nation’s largest, fastest-growing and most economically diverse states. With nearly 23 million residents, Texas has more people than any other state except California. The population of Texas grew 9.6 percent from 2000-2005, nearly double the national rate, according to the U.S. Census Bureau. Many of the communities in which we operate are growing faster than the statewide average, as shown below: POPULATION GROWTH 2000-2005* BRIDGEPORT AND WISE COUNTY FORT WORTH/TARRANT COUNTY 16.2% 12.1% WEATHERFORD, WILLOW PARK, ALEDO GRANBURY AND HOOD COUNTY 16.2% 16.6% CLEBURNE, MIDLOTHIAN, JOHNSON COUNTY 15.4% *Source: U.S. Census Bureau The economic diversity of our Texas markets is another plus. These economies include dynamic centers of higher education, agriculture, energy and natural resources, health care, tourism, retirement living, manufacturing and distribution. We have plenty of growth opportunities right here in Texas, so we believe there’s no need to look elsewhere. Second, we stick to what we know. We understand the people and economies in the Central, West and High Plains regions of Texas, so that’s where we keep our focus. We believe companies get into trouble when they venture too far away from their core business or markets. THE OUT-OF-STATE BANKS COMING INTO TEXAS ALL SEEM FOCUSED ON OPENING BRANCHES IN THE LARGEST METROPOLITAN MARKETS -- DALLAS, FORT WORTH, HOUSTON, AUSTIN AND SAN ANTONIO. WHY DOESN’T FIRST FINANCIAL OPERATE BANKS IN THESE CITIES? Our “community matters” way of doing business works best for us in small and mid-size markets, where people want to live and we can play a prominent role in the economic, civic and cultural life of the community. Our goal is to serve these communities well and to experience growth as these markets continue to expand. In many instances, banking competition is also less fierce in smaller markets, making it easier for us to operate rationally and attract and retain high-caliber employees who prefer not only our community-banker concept but also the high quality of life in smaller cities. 8 FIRST FINANCIAL HAS BEEN PROMOTING ITS “CUSTOMER SERVICE FIRST” INITIATIVE. WHAT’S BEHIND THIS PROGRAM AND HOW DEEP IS THE COMPANY’S COMMITMENT TO CUSTOMER SERVICE? The “Customer Service First” initiative was launched in the spring of 2005, but putting customers first has been integral to the way we do business since we first opened our doors in 1890. We strive to view everything we do through the lens of the customer, to ensure that we provide the best customer service experience at every step of the way. Among other things, the Customer Service First initiative recognizes our employees for exceptional service to our customers. Since the program was launched, we’ve honored more than 70 employees with “WOW” awards for going above and beyond the call of duty to serve our customers. WHAT OTHER NEW STRATEGIC INITIATIVES HAVE BEEN INTRODUCED RECENTLY AT FIRST FINANCIAL? Keeping community focused and putting customers first requires committed, motivated and well-trained employees. We’re proud of our dedicated employees at First Financial. In December 2006, we named Eric Thompson as our company’s Vice President of Training and Education. Eric is leading a new initiative to provide expanded training to employees at all of our banks, which we believe will pay big dividends in the future. At the same time, we recognize that the population of Texas is changing and becoming more diverse. In late 2005, we created a multicultural development program and named Daniel Ortiz as Vice President. Thanks to Daniel’s leadership, we have launched new services such as Directo a Mexico, which offers customers the opportunity to send money to Mexico using the Automated Clearing House (ACH) system, the same method used domestically for direct deposit of checks, and La Cuenta, which allows bank customers to provide access to funds to friends or family in another country using La Cuenta ATM cards. CAN YOU GIVE US SOME INSIGHTS INTO FIRST FINANCIAL’S GROWTH STRATEGY? Over the years, we’ve grown First Financial three ways: by growing our banks internally, through opening new branch locations and by acquisition of other banks. During the past decade, since the beginning of 1996, we’ve completed ten bank acquisitions and more than doubled total assets from $1.26 billion to $2.85 billion. We’ve also established a trust and asset management company and a technology services company, both of which operate as subsidiaries of First Financial Bankshares. Looking ahead, we will continue to grow locally by better serving the needs of our customers and putting them first in all of our decisions. We continually look for new branch locations, so we can serve our customers more conveniently, and we’re always cultivating relationships with other Texas bankers who may have an interest in being acquired by us at some point in the future. WHEN TARGETING BANKS FOR ACQUISITIONS, WHAT DO YOU LOOK FOR? Most importantly, the bank needs to be in the type of community that fits our profile. We like growing communities with good amenities – schools, infrastructure, commerce and lifestyle. We prefer non-metropolitan markets, either within a 50-mile radius of the Dallas/Fort Worth metroplex or along the Interstate 35 and 20 corridors in Texas. Banks in the $100 million to $250 million asset size fit our “sweet spot” for acquisition, but we’ll consider banks that are larger or smaller, or that are in other areas of Texas if we believe they would be a good fit to our existing company. HOW CAN I LEARN MORE ABOUT FIRST FINANCIAL BANKSHARES AND KEEP UP WITH NEW DEVELOPMENTS? Our corporate Web site is the most complete and up-to-date source for news about First Financial Bankshares. You can visit it at http://www.ffin.com. Under the “investor relations” tab, you’ll find the full text of the company’s news releases, copies of previous years’ annual reports, biographical profiles of the company’s executive management team, information about our stock, and access to documents filed with the U.S. Securities and Exchange Commission, such as Form 10-K, 10-Q and 8-K filings. We also encourage all shareholders, employees and other interested parties to sign up for our free e-mail service. You can choose to receive daily e-mails with the closing stock price, or e-mail messages when the company issues a news release, files a new document with the SEC or posts a new investor slide presentation on its Web site. You can sign up online at http://www.ffin.com/email. Finally, shareholders are invited to attend our Annual Meeting of Shareholders, which is scheduled for April 24, 2007, in Abilene. More details about the Annual Meeting may be found on the back inside cover of this report and in the proxy statement that is mailed to all shareholders. 9 First Financial Bank, N.A. CHARTERED 1890 ABILENE, CLYDE, MORAN RON BUTLER, President and CEO, at The Grace, an Abilene landmark since 1909. MAIN OFFICE .......................................... (325) 627-7200 400 Pine ................................................. Abilene, Texas 79601 LOCATIONS 4400 Buffalo Gap Road 4350 Southwest Drive 920 N. Willis 3300 S. 14th Street 1010 N. Judge Ely Blvd. 701 Pine 1345 Barrow 2617 Antilley Road 1650 State Highway 351 718 Elm 400 Ground ............................... ................................ ............................................. ..................................... .............................. .................................................... ............................................... ..................................... .............................. ..................................................... ............................................... Abilene, Texas 79606 Abilene, Texas 79606 Abilene, Texas 79603 Abilene, Texas 79605 Abilene, Texas 79601 Abilene, Texas 79601 Abilene, Texas 79605 Abilene, Texas 79606 Abilene, Texas 79601 Clyde, Texas 79510 Moran, Texas 76464 SENIOR OFFICERS F. Scott Dueser Chairman of the Board Ron Butler President and Chief Executive Officer Tom Boecking Executive Vice President South Branch Ben McAnally Executive Vice President Treasury Management DIRECTORS J. Michael Alexander President James M. Alexander & Co. Tucker S. Bridwell, President and Chief Executive Officer Mansefeldt Investment Corp. Ron Butler President and Chief Executive Officer Joseph E. Canon Executive Director Dodge Jones Foundation David Copeland President Shelton Family Foundation Joe Crawford President Abilene Aero, Inc. Mike Denny President Batjer and Associates F. Scott Dueser First Financial Bankshares, Inc. Murray Edwards Principal, The Edwards Group Allan D. Frizzell Executive Vice President Enrich Oil Corporation Tom O’Neil Executive Vice President River Oaks Branch John Prince Executive Vice President Personal Loans Marelyn Shedd Executive Vice President Commercial Loans Charles E. Tennesson Executive Vice President, Chief Financial Officer and Cashier Tim Lancaster Chairman, CEO and President Hendrick Health System Bynum Miers Rancher Stanley Morris, Jr. Investments Kenneth T. Murphy First Financial Bankshares, Inc. Dian Graves Stai Chair Mansefeldt Investment Corp. Director Dian Graves Owen Foundation Leigh Taliaferro, M.D. Physician DIRECTOR EMERITUS Raymond A. McDaniel, Jr. Investments ADVISORY Bob J. Surovik McMahon Surovik Suttle, P.C. Steve Suttle McMahon Surovik Suttle, P.C. Because ... community matters, First Financial Bank and its employees are leaders in many community organizations including United Way of Abilene and Big Brothers Big Sisters. The bank won the Pinnacle Award in 2006 from the United Way of Abilene for exceeding its contribution goal. In addition, First Financial has been voted the Abilene Reporter-News Readers’ Choice Award for Best Bank for more than 10 consecutive years. ★★ 41% Taylor, Callahan & Shackelford Counties Deposit Market Share IN THOUSANDS DEC. 31, 2006 DEC. 31, 2005 Assets Loans Deposits Equity Net Income Return on Average Assets Efficiency Ratio $926,227 $898,412 392,334 762,285 69,789 13,898 388,944 788,043 68,393 13,992 1.60% 50.37% 1.63% 51.65% 10 CLEBURNE, BURLESON, ALVARADO, MIDLOTHIAN First Financial Bank, N.A. CHARTERED 1927 MAIN OFFICE ........................... (817) 556-5000 or (800) 226-2940 403 N. Main ........................................ Cleburne, Texas 76033 MATT REYNOLDS, President and CEO. Johnson County benefits from the Barnett Shale, one of the largest gas fields in the nation. LOCATIONS 200 N. Ridgeway 1900 S.W. Wilshire 201 E. Highway 67 1490 E. Main ................................. ............................. .............................. ...................................... Cleburne, Texas 76033 Burleson, Texas 76028 Alvarado, Texas 76009 Midlothian, Texas 76065 SENIOR OFFICERS Matt Reynolds President and Chief Executive Officer Craig Beskow Executive Vice President and Cashier DIRECTORS Perry Elliott Chairman of the Board Matt Reynolds President and Chief Executive Officer Albert A. Archer Chairman of the Board Walls Industries, Inc. Gary Bennett Bennett Printing & Office Supply Because ... Brad Evans Executive Vice President Derek Schmidt Executive Vice President F. Scott Dueser First Financial Bankshares, Inc. ★★ Jim Easdon Investments Hollis E. (Gene) Joslin Investments Brent D. Magers Investments George Marti Marti Enterprises Cleburne’s Cinco de Mayo celebration had not been held for two years, but it was revived in 2006 thanks to the leadership of First Financial Bank’s Multicultural Committee, led by Cynthia Allen, Dora Vasquez and Alfred Vega (from L-R). They worked with the Cleburne Chamber of Commerce to bring back this popular day of games, dances, food and fellowship. First Financial Bank is active in many civic causes in Johnson and Ellis counties, including the American Cancer Society’s annual Relay for Life. 20% Johnson County Deposit Market Share IN THOUSANDS DEC. 31, 2006 DEC. 31, 2005 Assets Loans Deposits Equity Net Income Return on Average Assets Efficiency Ratio $234,613 $238,114 115,550 214,417 18,584 3,761 110,711 217,663 18,269 3,379 1.62% 57.77% 1.48% 56.92% 11 First Financial Bank, N.A. CHARTERED 1934 EASTLAND, RANGER, RISING STAR TOMMY J. BARROW, Chairman, President and CEO, at Old Rip, an Eastland County legend. MAIN OFFICE .......................................... (254) 629-6100 201 E. Main .............................................. Eastland, Texas 76448 LOCATIONS 106 Main 206 West College ................................................. ...................................... Ranger, Texas 76470 Rising Star, Texas 76471 SENIOR OFFICERS Tommy J. Barrow Chairman of the Board, President and Chief Executive Officer Jim Davidson Senior Vice President and Cashier Clint S. Ferguson Executive Vice President Jonathan Newton Senior Vice President DIRECTORS Tommy J. Barrow Chairman of the Board, President and Chief Executive Officer Doug Crawley Rancher Clint S. Ferguson Executive Vice President Doug Ford Retired President and Chief Executive Officer Peoples State Bank, Clyde 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 ★★ 48% Eastland County Deposit Market Share IN THOUSANDS DEC. 31, 2006 DEC. 31, 2005 Assets Loans Deposits Equity Net Income Return on Average Assets Efficiency Ratio $136,681 $148,599 46,377 117,333 15,280 2,312 49,626 128,436 14,104 1,644 1.70% 49.74% 1.48% 55.40% Because ... First Financial Bank in Eastland County is a major supporter of the annual Eastland County Junior Livestock Auction. Pictured here, from left, are Kayla Vestal, Livestock Show winner, along with bank officers Clint Ferguson, Jonathan Newton and Sharon Jordan. The bank also provides financial and volunteer support for the local Chambers of Commerce, including Eastland’s annual Rip Fest, and for school district youth activities in Eastland, Ranger and Rising Star. 12 HEREFORD Hereford State Bank CHARTERED 1947 MAIN OFFICE .......................................... (806) 363-8200 212 E. Third ............................................. Hereford, Texas 79045 MIKE MAULDIN, Chairman, President and CEO. Hereford is known as the “Beef Capital of the World.” SENIOR OFFICERS Mike Mauldin Chairman of the Board, President and Chief Executive Officer Kent Jackson Executive Vice President and Chief Credit Officer Steve Gilbert Executive Vice President and Cashier Jeff Brown Senior Vice President and Security Officer DIRECTORS Mike Mauldin Chairman of the Board, President and Chief Executive Officer F. Scott Dueser First Financial Bankshares, Inc. Steve Lewis, D.V.M. Manager and Senior Partner Hereford Veterinary Clinic Kade Matthews Ranching and Investments Garth Merrick President and Chief Executive Officer, Merrick Petfoods, Inc. Allen Parson Restaurateur and Investments Craig Smith Rancher and Retired Chairman of the Board, President and Chief Executive Officer, Hereford State Bank 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 Farmer Because ... Hereford State Bank employees actively support the annual American Cancer Society Relay for Life. HSB board member Johnny Trotter donated a gym and the bank employees organized a “Win a Gym” raffle. They also sold barbecue lunches to be named top relay fundraiser. The bank’s community involvement runs deep. United Way honored Hereford State Bank this year with its prestigious “Champion of the High Plains Award.” Bank officer Charlene Sanders won the “Honorary Bull Chip Award” from the Hereford Chamber of Commerce and was named “Fan of the Year” at the Hereford High School Sports Award Program. ★★ 45% Deaf Smith County Deposit Market Share IN THOUSANDS DEC. 31, 2006 DEC. 31, 2005 Assets Loans Deposits Equity Net Income Return on Average Assets Efficiency Ratio $118,398 $104,821 76,431 103,587 8,268 1,796 67,637 87,621 8,346 1,736 1.73% 50.18% 1.72% 50.53% 13 City National Bank CHARTERED 1925 MINERAL WELLS KEN WILLIAMSON, Chairman, President and CEO, at Possum Kingdom Lake in Palo Pinto County. MAIN OFFICE .............................................. (940) 327-5400 1900 E. Hubbard ................................ Mineral Wells, Texas 76067 SENIOR OFFICERS Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Eddie Gregory Senior Vice President and Cashier Brad Seay Executive Vice President Lending Mike Mearse Senior Vice President Lending DIRECTORS Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer F. Scott Dueser First Financial Bankshares, Inc. Doyle Lee Chairman and CEO Weatherford National Bank Paul McGettes Chief Financial Officer Upham Oil & Gas Company, L.P. Terry L. Murphy President and Chief Executive Officer Murphy and Murphy, Inc. Don O’Neal O’Neal Distributing Company, Inc., O’Neal Enterprises, Inc. David Ramsey, M.D. Family Practice Center Walter Joe Thomas, D.D.S. Dentist Because ... City National Bank is a proud corporate sponsor of the Brazos Foundation which has given more than $100,000 in donations to local organizations. The bank is also active in many other civic groups including the United Way and Mineral Wells Chamber of Commerce. Pictured below is Joe Ruelas, CNB officer and a member of the Navy Reserves, standing above the Brazos River, a symbol of life in Palo Pinto County. ★★ 29% Palo Pinto County Deposit Market Share IN THOUSANDS DEC. 31, 2006 DEC. 31, 2005 Assets Loans Deposits Equity Net Income Return on Average Assets Efficiency Ratio $130,803 $129,535 77,756 111,320 17,405 2,385 69,486 112,318 16,830 2,177 1.81% 44.87% 1.81% 45.01% 14 SAN ANGELO San Angelo National Bank CHARTERED 1975 MAIN OFFICE .......................................... (325) 659-5900 301 W. Beauregard ................................ San Angelo, Texas 76903 MIKE BOYD, Chairman, President and CEO, pictured at the San Angelo Visitors Center on the Concho River. LOCATIONS 3471 Knickerbocker ................................ San Angelo, Texas 76904 SENIOR OFFICERS Michael L. Boyd Chairman of the Board, President and Chief Executive Officer Katherine Reeves Executive Vice President and Cashier Robert Pate Executive Vice President DIRECTORS Michael L. Boyd Chairman of the Board, President and Chief Executive Officer Robert D. Housley President and Owner Housley Communications David F. Lupton President Angelo Glass & Mirror Company, Inc. Bill Pfluger Rancher Barbara Riley Retired 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 CEO Town & Country Food Stores, Inc. W. Dan Cravy, M.D. Physician Rick DeHoyos Attorney Ratliff, Edwards & DeHoyos David B. Drake Investment Advisor PrimeVest 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. Because ... The Spring Chicken Affair, the annual fundraiser for the West Texas Rehabilitation Center, has raised more than half a million dollars since its inception 24 years ago, and San Angelo National Bank has been an active sponsor since the beginning. West Texas Rehabilitation Center serves 20,000 children and adults each year. The bank rallied community support in 2006 for Alexa Nichols, pictured right, who was paralyzed in a diving accident. Pictured with Alexa are her dad, Craig Nichols, therapist Jimmy Villers, and bank officers Lori Davis and Robert Pate. San Angelo National Bank supports many other community causes, including Meals for the Elderly. ★★ 22% Tom Green County Deposit Market Share IN THOUSANDS DEC. 31, 2006 DEC. 31, 2005 Assets Loans Deposits Equity Net Income Return on Average Assets Efficiency Ratio $322,142 $310,673 124,634 259,372 42,868 5,525 116,438 264,318 42,759 5,814 1.82% 44.73% 1.95% 42.93% 15 First Financial Bank, N.A. CHARTERED 1907 SOUTHLAKE, TROPHY CLUB, KELLER, BRIDGEPORT, BOYD, DECATUR MARK JONES, President and CEO, at the Southlake Town Square. MAIN OFFICE .......................................... (817) 410-2915 3205 E. Highway 114 .................................. Southlake, Texas 76092 LOCATIONS 95 Trophy Club Drive 891 E. Keller Parkway, Suite 100 909 Stevens 609 Rock Island Avenue 1415 S. FM 51 .............................. ........................ .............................................. ................................... ............................................... Trophy Club, Texas 76262 Keller, Texas 76248 Bridgeport, Texas 76426 Boyd, Texas 76023 Decatur, Texas 76234 SENIOR OFFICERS Mark L. Jones President and Chief Executive Officer F. Mills Shallene Wise County Market President DIRECTORS Perry D. Elliott Chairman of the Board James E. Burger Burger Construction William Ray Cook, Jr., CPA Cook McDonald & Co. Jack Dortch Jack Dortch Insurance Agency F. Scott Dueser First Financial Bankshares, Inc. Barry Green Attorney and Partner Smith & Green, P.C., Law Firm J. Bruce Hildebrand First Financial Bankshares, Inc. Derrell E. Johnson Former President and CEO Rady Associates Consulting Engineers J. Sean Shope Senior Vice President Homer Pittman, Jr. Senior Vice President and Chief Financial Officer Mark L. Jones President and Chief Executive Officer K. Wayne Lee President, DDFW Properties Ralph Manoushagian Land Manager Approach Resources, Inc. Oil & Gas Exploration Dr. David Ray Family Physician Jim Ridenour President Sunbelt Station Service DIRECTORS EMERITUS M. L. Manoushagian Oil & Gas Investments & Real Estate Billie C. Green Retired President First National Bank of Bridgeport ★★ Cities of Southlake, Keller and Trophy Club Deposit Market Share: 9% Cities of Bridgeport, Boyd and Decatur Deposit Market Share: 27% IN THOUSANDS DEC. 31, 2006 DEC. 31, 2005 Assets Loans Deposits Equity Net Income Return on Average Assets Efficiency Ratio $296,210 $272,927 158,951 247,351 33,910 3,602 141,794 233,139 32,672 1,184 1.29% 60.02% 1.02% 68.00% Because ... Bank officer Beverly Lindsey, pictured here in front of the Wise County Courthouse, was named “Citizen of the Year” by the Decatur Chamber of Commerce for her active community involvement, including the Wise County Spirit of Christmas event, the Decatur Main Street Committee, the Northwest Independent School District Education Foundation and the Wise County Regional Health System Foundation. In Bridgeport, the bank is active in the Bridgeport Educational Foundation which raises money for college scholarships and funds classroom grants for teachers to purchase additional supplies and teaching materials. 16 STEPHENVILLE, GRANBURY, GLEN ROSE First Financial Bank, N.A. CHARTERED 1997 MAIN OFFICE ........................................... (254) 965-5036 2201 W. South Loop ................................ Stephenville, Texas 76401 RON MULLINS, President and CEO, observes a practice session for the Tarleton State University basketball team. LOCATIONS 1875 Lingleville Road 199 N. Columbia 400 Big Bend Trail 2007 East Highway 377 1600 S. Morgan 5310 E. Hwy. 377, Suite 300 (mortgage production office) ............................ .................................... ..................................... ................................ ......................................... ........................ Stephenville, Texas 76401 Stephenville, Texas 76401 Glen Rose, Texas 76043 Granbury, Texas 76049 Granbury, Texas 76048 Granbury, Texas 76049 SENIOR OFFICERS Ron N. Mullins President and Chief Executive Officer John Power Glen Rose Market President Bart Rodgers Granbury Market President DIRECTORS Perry D. Elliott Chairman of the Board Ron N. Mullins President and Chief Executive Officer William L. Corbin Investments Dereece Howell Executive Vice President and Cashier Robert Lemons Executive Vice President Ken Luker Executive Vice President Bill Hooks Owner Hooks Lakeside Motors Bill Parham Parham & Parham, CPAs Jerry Parham Investments F. Scott Dueser First Financial Bankshares, Inc. Royce Swaim Owner, Swaim Farm & Ranch J. Bruce Hildebrand First Financial Bankshares, Inc. Frank Terrell, M.D. Ophthalmologist Ron Butler First Financial Bank, NA Abilene John Terrill District Attorney ★★ 23% Erath, Hood, Somervell Counties Deposit Market Share IN THOUSANDS DEC. 31, 2006 DEC. 31, 2005 Assets Loans Deposits Equity Net Income Return on Average Assets Efficiency Ratio $302,258 $295,567 183,998 260,415 38,482 5,245 164,739 255,448 34,321 4,502 1.74% 51.97% 1.67% 52.47% Because ... Tarleton State University plays a prominent role in the life of Stephenville, where First Financial Bank supports the university in many ways, including the TSU Texan Club, Tarleton Alumni Association, Tarleton Rodeo Team and TSU Foundation. Bank officer Mindy Wooley is pictured here with TSU cheerleaders at First Financial’s custom-designed ATM located across the street from the university. The bank is also active in many other civic organizations including the United Way and the American Cancer Society Relay for Life. 17 First National Bank CHARTERED 1948 SWEETWATER, ROBY, TRENT J.V. MARTIN, Chairman, President and CEO. Nolan County is the wind energy capital of Texas. MAIN OFFICE .......................................... (325) 235-6600 201 Elm ................................................ Sweetwater, Texas 79556 LOCATIONS 123 N. Concho 117 N. Main ............................................... ................................................... Roby, Texas 79543 Trent, Texas 79561 SENIOR OFFICERS J.V. Martin Chairman of the Board, President and Chief Executive Officer Melody Collins Senior Vice President Loan Operations Rodney Foster Senior Vice President Lending Kirby Andrews Executive Vice President Lending Donnie Ruppert Executive Vice President and Cashier/Controller DIRECTORS J.V. Martin Chairman of the Board, President and Chief Executive Officer J. Bruce Hildebrand First Financial Bankshares, Inc. Louis Brooks, Jr. Rancher Bill W. Burns President Bill Burns Oil Co., Inc. Ronnie Cox Owner Cox Jewelry Jay Lawrence President MAL Enterprises, Inc. Thomas L. Rees, Sr. Rees and Rees, Attorneys DIRECTOR EMERITUS Glenn D. Bennett Bennett & Associates Because ... First National Bank's Kirby Andrews, past president of the Sweetwater Chamber of Commerce (second from right), heads a planning meeting for the community's famous annual Rattlesnake Round-up. Like other First Financial family banks, the Sweetwater bank is also a strong supporter of the United Way and Relay for Life. L -R: Mickey Hayes, John Spaulding, Russ Petty, Kirby Andrews, Chris Maxwell ★★ 41% Nolan and Fisher Counties Deposit Market Share IN THOUSANDS DEC. 31, 2006 DEC. 31, 2005 Assets Loans Deposits Equity Net Income Return on Average Assets Efficiency Ratio $122,463 $119,391 59,421 110,009 10,285 2,004 53,785 108,912 10,222 2,001 1.63% 51.59% 1.69% 50.13% 18 WEATHERFORD, ALEDO, WILLOW PARK Weatherford National Bank CHARTERED 1984 MAIN OFFICE ................ (817) 598-2500 or (817) 596-0307 Metro 101 N. Main ......................................... Weatherford, Texas 76086 JAY GIBBS, President, and DOYLE LEE, Chairman and CEO, survey Parker County’s growing homebuilding industry. LOCATIONS 101 College Park Drive 1214 N. Main 201 N. Main 505 Farm Road 1187 4100 E. I-20 South Service Road .......................... ......................................... ......................................... ............................... .............. Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Aledo, Texas 76008 Willow Park, Texas 76087 SENIOR OFFICERS Doyle Lee Chairman of the Board and Chief Executive Officer Jay Gibbs President Kent Hudson Senior Vice President Larry Mangrem Executive Vice President and Cashier Bob Bradberry Executive Vice President Louis Sneed Senior Vice President F. Scott Dueser First Financial Bankshares, Inc. Jay Gibbs President Clay Hicks Oil and Gas Investments Nan Kingsley President Bluestem Studios, Inc. Mike White, O.D. Therapeutic Optometrist ★★ 26% Parker County Deposit Market Share IN THOUSANDS DEC. 31, 2006 DEC. 31, 2005 Assets Loans Deposits Equity Net Income Return on Average Assets Efficiency Ratio $308,265 $272,493 138,283 276,459 22,730 5,036 125,446 247,134 21,862 4,512 1.76% 51.65% 1.79% 51.97% DIRECTORS Doyle Lee Chairman of the Board and Chief Executive Officer Greg L. Barron President G.L. Barron Company, Inc. Stephen G. Brogdon, D.D.S. General and Cosmetic Dentistry Mac A. Coalson Mac A. Coalson Real Estate Because ... Education matters in booming Parker County. Weatherford National Bank is a major supporter of local schools, with bank officers active in the Weatherford ISD’s Education Foundation, PTA and Junior Achievement. Vice President Dave Cowley (center) is a member of the Weatherford ISD Board of Trustees. Assistant Vice President Elizabeth McGee (left) serves on several WISD committees and works with the English As A Second Language program. Justin Hooper (right), VP and manager of the bank’s Willow Park office,volunteers in high school business classes. Weatherford National was named “Large Business of the Year” in 2006 by the Weatherford Chamber of Commerce and was recently voted “Best Bank” and “Best Customer Service” in the Weatherford Telegram’s Readers’ Choice Awards. 19 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) $2,850,165 $300,901 $46,029 $2.22 $1.18 – $14.51 $41.86 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 2,733,827 2,315,224 2,092,571 1,993,183 1,929,694 1,753,814 1,723,369 1,686,647 1,573,509 276,276 265,545 251,487 238,768 213,654 196,121 178,663 169,449 148,226 44,023 39,171 35,305 33,953 29,355 28,316 25,690 23,254 20,063 2.13 1.90 1.71 1.65 1.43 1.37 1.24 1.13 1.02 1.10 1.00 0.91 0.81 0.70 0.62 0.54 0.48 0.42 4/3 split – 5/4 split – 5/4 split – – 10% dividend 5/4 split 1,262,041 1996 Ten-Year Compound Growth Rate 8.49% 8.66% 9.77% 8.86% 12.00% – 131,161 18,122 0.38 0.95 5/4 split 13.34 12.84 12.19 11.59 10.40 9.56 8.60 8.18 7.48 6.82 35.06 33.61 30.84 22.80 18.06 15.09 14.76 16.80 18.71 13.97 7.84% 11.60% (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. 2006 Common Stock Market Value and Dividend Data 2005 Common Stock Market Value and Dividend Data Quarter High Low Close Dividends Quarter High Low Close Dividends Fourth $43.47 $37.83 $41.86 $0.30 Fourth $38.88 $33.31 $35.06 $0.28 Third Second First 39.98 39.48 38.75 35.62 34.05 34.56 38.15 36.54 38.30 0.30 0.30 0.28 Third Second First 36.22 34.46 34.99 32.20 29.06 32.14 34.83 33.84 33.47 0.28 0.28 0.26 Chairman’s Award: Michele Stevens Senior Vice President of Advertising and Marketing Michele Stevens’ official role with First Financial Bankshares may be as Senior Vice President of Advertising and Marketing, but ask anyone at the Company and they will tell you that her positive impact on First Financial goes well beyond marketing and advertising. Michele has a contagious enthusiasm, a commitment to excellence and a caring concern for each of the Company‘s associates and customers. She has been an inspiration to everyone at First Financial during the past two years as she’s battled cancer while still maintaining a high energy level, a positive attitude and a great sense of humor. “Michele has an unwavering commitment to First Financial and an exceptional drive for success,” said F. Scott Dueser, President and CEO. “In her decade with First Financial, Michele has contributed significantly to the Company’s success and has endeared herself to all of us. We are pleased to honor her with this year’s Chairman’s Award.” First Technology Services Inc. Executive Team (L-R) Michelle McDonald, Senior Vice President Gary Tucker, President and CEO Dennis Steckly, Senior Vice President (standing) Kay Berry, Senior Vice President Larry Williams, Senior Vice President 20 Corporate Information 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, Operations Gary S. Gragg Executive Vice President, Lending Robert S. Patterson Executive Vice President, Trust Michele P. Stevens Senior Vice President, Advertising and Marketing Eric Thompson Vice President, Training and Education Daniel A. Ortiz Vice President, Multicultural Development William A. Rowe Vice President, Investment Services Gaila Kilpatrick Assistant Secretary Bob Goodner Compliance Officer Barbara Wright Compliance Officer William Mills Loan Review Officer First Financial Bankshares Executive Officers L -R: J. Bruce Hildebrand, Robert S. Patterson, Gary S. Gragg, F. Scott Dueser, Michele P. Stevens and Gary L. Webb Annual Meeting Tuesday, April 24, 2007 Abilene Civic Center 1100 N. Sixth Abilene, Texas 79601 Corporate Offices 400 Pine Abilene, Texas 79601 325-627-7155 www.ffin.com Corporate Mailing Address P.O. Box 701 Abilene, Texas 79604 Common Stock Listing The NASDAQ Global Select Market Symbol: FFIN Independent Public Auditors Ernst & Young LLP For Financial and Investor Information, Contact: J. Bruce Hildebrand Executive Vice President & CFO 325-627-7167 David A. Hogan Director, Investor Relations 325-627-7114 investorrelations@ffin.com Transfer Agent The Bank of New York 866-828-8173 Address shareholder inquiries to: The Bank of New York Investor Services Department P.O. Box 11258 New York, NY 10286-1258 E-mail address: shareowners@bankofny.com The Bank of New York Stock Transfer Web site: www.stockbny.com Send Certificates for Transfer and Address Changes to: Receive and Deliver Dept. P.O. Box 11002 New York, NY 10286-1002 TM SM Certain statements contained in this annual report may be considered “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. These statements are based upon the belief of the Company’s management, as well as assumptions made beyond information currently available to the Company’s management, and may be, but not necessarily are, identified by such words as “expect”, “plan”, “anticipate”, “target”, “forecast” and “goal”. Because such “forward-looking statements” are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from the Company’s expectations include competition from other financial institutions and financial holding companies; the effects of and changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board; changes in the demand for loans; fluctuations in value of collateral and loan reserves; inflation, interest rate, market and monetary fluctuations; changes in consumer spending, borrowing and savings habits; and acquisitions and integration of acquired businesses, and similar variables. Other key risks are described in the Company’s reports filed with the Securities and Exchange Commission, which may be obtained under “Investor Relations-Documents/Filings” on the Company’s Web site or by writing or calling the Company at 325.627.7155. Except as otherwise stated in this annual report, the Company does not undertake any obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise. Because ... Community Matters. TM SM 400 Pine • Abilene, Texas 79601 • www.ffin.com
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