First Financial Bankshares
Annual Report 2009

Plain-text annual report

N U M B E R O N E I N T H E N A T I O N in the $3 billion-plus publicly traded category.* Bank Director magazine, in its first-quarter 2010 issue, ranked First Financial Bankshares We’re proud of our company’s 120-year histor y of financial strength and service to our customers and communities in Texas. But First Financial Bankshares isn’t looking back or resting on our past success. Our focus is on the future. Today, we are taking steps we believe are necessary to ensure that our company remains in the forefront of providing the best banking, trust, wealth management and other financial services, while continuing to build deep and enduring relationships with our valued customers. Relationships built on trust, integrity and exceptional customer service have made our company what it is today. For our shareholders, we remain committed to managing First Financial Bankshares in a safe, sound and profitable manner, with a goal of strategically and prudently growing the Company and expanding into new markets. The Letter to Shareholders on pages 2 and 3 of this annual report gives you more insights into how our company performed in 2009 and our plans for 2010. The photo spread and text on pages 4-7 demonstrate how we are working to secure the Company’s future for the benefit of our customers, employees and shareholders – and the Texas communities we serve. For more information, visit our Web site at http://www.ffin.com. * Based on measurement criteria and analysis compiled by Sandler O’Neill + Partners, L.P., a New York-based investment banking firm that specializes in the financial services industry. Published in Bank Director magazine, 1st quarter 2010. First Financial Bank 325-627-7200 First Financial Bank 817-556-5000 First Financial Bank 254-629-6100 First Financial Bank 806-363-8200 ABILENE CLYDE MORAN ALBANY ODESSA CLEBURNE BURLESON ALVARADO MIDLOTHIAN EASTLAND RANGER RISING STAR HEREFORD , TM . A Family of Community Banks SM First Financial Bank STEPHENVILLE First Financial Bank 940-327-5400 First Financial Bank 325-659-5900 First Financial Bank 817-410-2915 940-683-8700 254-965-5036 817-573-6900 First Financial Bank 325-235-6600 First Financial Bank 817-596-0307 MINERAL WELLS SAN ANGELO SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR GRANBURY GLEN ROSE ACTON SWEET WATER ROBY TRENT MERKEL WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH BANKS TRUST OFFICE LOCATIONS D E A R S H A R E H O L D E R S In light of the recession and higher FDIC insurance premiums in 2009, I am very pleased that our company was able to deliver increased earnings for the 23rd consecutive year. While the national recession at first seemed to bypass Texas, it began moving into the state in the second part of 2008, bringing a decline in home sales and general economic activity and an increase in unemployment. These trends continued in 2009. On the plus side, our state continued to fare better than most of the rest of the country, and our geographic footprint—especially in our West Texas markets—remained stable. The stock market fluctuated greatly during the past two years. The NASDAQ Composite Index declined 41 percent in 2008 and then went back up 44 percent in 2009. Our stock went up 47 percent in 2008 and down 2 percent in 2009, closing at $54.23. We are pleased that our stock performed well for our stockholders during these years of economic turmoil. We continue to suspect that a “flight to safety”—favoring companies with strong balance sheets and a long record of conservative lending—may have played a role in our stock’s favorable performance. We are also pleased that in 2009, our company again received high rankings from leading banking publications such as the ABA Banking Journal and U.S. Banker. Additionally, in January of 2010, Bank Director magazine rated us No. 1 in the nation among publicly traded banks with $3 billion or more of assets. Being named No. 1 is like winning an Academy Award. Without question, this accomplishment is due to the direction of our Board, the dedication of our employees and the loyalty of our customers, who have kept us strong for 120 years. We accept this honor with great humility because we know that every day, we face a new set of challenges in the banking industry and must prove ourselves again and again. RESULTS FOR 2009 Net income grew 1.2 percent to $53.8 million from $53.2 million in 2008. Net interest income, the major source of our earnings, rose 4.3 percent to $129.2 million from $123.9 million. Our net interest margin (on a tax-equivalent basis) also increased, to 4.80 percent from 4.67 percent in 2008. The provision for loan losses for 2009 totaled $11.4 million, a 43.5 percent increase from $8.0 million in 2008. The larger provision was due to a higher level of net charge-offs and an increase in the allowance for loan losses. Noninterest income declined 1.7 percent to $48.6 million from $49.5 million. The decline was primarily due to a $692,000 drop in income from student loan sales as the Company exited the student loan program. Lower usage of overdraft privileges also contributed to the decrease in noninterest income. Noninterest expense was $94.0 million in 2009, up 2.6 percent from $91.6 million a year earlier. The largest increase in noninterest expense was in FDIC insurance premiums, which grew by $4.2 million, or 650.4 percent, after the FDIC raised premium rates as of January 1, 2009, and implemented a special assessment in June of that year. Nevertheless, we were able to improve our efficiency ratio, which expresses the share of revenues consumed by operating expenses, to 50.11 percent from 50.76 percent in 2008. Our bank presidents worked hard to maintain their net interest margins and reduce expenses. I could not be more pleased with their accomplishments, especially in light of the significant increase in FDIC insurance premiums. We again outperformed our peer group on several key financial metrics. Our return on average assets was 1.72 percent compared with a negative 0.21 percent for our peer group. Return on average equity was 13.63 percent versus a negative 2.59 percent for our peers. Our net interest margin of 4.80 percent on a tax-equivalent basis compared very favorably to our peer group’s margin of 3.48 percent. We also beat the peer group on the efficiency ratio—ours was 50.11 percent, while theirs was 69.53 percent. We ended the year with a strong balance sheet. Consolidated assets increased 2.1 percent to $3.28 billion from $3.21 billion at the end of 2008. Loans decreased 3.3 percent to $1.51 billion from $1.57 billion, primarily due to our exiting the student loan program. Total deposits grew 3.9 percent to $2.68 billion from $2.58 billion. Shareholders’ equity rose 12.7 percent to $415.7 million from $368.8 million. As the economy softened in Texas, our nonperforming assets increased to 1.46 percent of total loans and foreclosed assets from 0.80 percent at the end of 2008. Even with this increase, our nonperforming percentage was well below our peer group’s 5.07 percent. Net loan charge-offs for the year totaled $5.3 million at year-end 2009 versus $3.9 million at year-end 2008. The 2009 allowance for loan losses amounted to 1.82 percent of total loans. First Financial Trust & Asset Management Company also experienced growth last year. Total assets at year-end had a book value of $1.67 billion, a 2.1 percent increase from 2008, and a market value of $2.10 billion, an 11.7 percent increase. The Trust Company’s fee income, however, declined 3.8 percent to $9.1 million from $9.4 million. This subsidiary manages a large oil and gas portfolio, and the drop in its income was primarily due to a decline in oil and gas prices and in related fees on oil and gas income. The Trust Company opened its sixth office last year, in Odessa, Texas. We are encouraged by the number of clients who have opened trust accounts with us in Odessa and the potential for growth in the Permian Basin market. 2 GROWTH STRATEGIES We actively looked for acquisition opportunities during 2009, but the banks that we considered were overpriced in light of the economy or did not fit our company’s profile. Our plan is to continue pursuing acquisitions diligently. With our capitalization, stock price, cash position and experienced management team, we have what we need to take advantage of acquisition opportunities. In November, we announced plans to open bank branches in our two existing Trust Company offices in Fort Worth and Odessa, to complement trust services and serve customers in those markets. We have had frequent requests from customers for branches in these markets and are interested to see how this private bank branch concept will work. During the year, we achieved a long-term objective of bringing all of our banks under a common name to improve brand identity and marketing efficiencies. Hereford State Bank, San Angelo National Bank and Weatherford National Bank are now called First Financial Bank. All of our banks benefit from sharing the Company’s growing brand identity, and our customers benefit from being able to use our facilities throughout our market areas. However, in no way does the use of a common name change our practice of operating through ten community-based banks that are separately chartered, have their own local boards and management teams, and make decisions locally. We continue to be the “hometown bank” in our markets, with a tradition of playing a vital role in community life. WHAT’S AHEAD Besides looking for acquisitions, we plan to continue growing our mortgage market, trust services and treasury management services. We are encouraged by our recent growth that there will be good opportunities in these areas. Minimizing nonperforming assets will certainly be an objective, as it has been for the last several years. We do know that FDIC insurance premiums will continue to be high and that increased regulation proposed by Congress and various federal agencies will make our jobs more challenging and costly. Our hope is that the banking industry can mitigate much of the pending regulatory legislation by educating Washington that community banks have not caused today’s economic problems and are already over-regulated. We are committed to providing outstanding service to our customers, our communities and our nation by making every good loan we can to help our economy grow and prosper. PERSONNEL CHANGES J. V. Martin retired at the end of the year as CEO of First Financial Bank, Sweetwater. Kirby Andrews, President, assumed the additional role of CEO there. J. V. will continue to serve as the Sweetwater bank’s Chairman of the Board. He will also provide consulting services to the holding company. Additionally, Senior Chairman Kenneth T. Murphy will retire from the First Financial Bankshares Board in conjunction with our Annual Shareholders’ Meeting in April. He has served our company with distinction for 39 years, holding the positions of President, First Financial Bank, Abilene; and Executive Vice President, President, Chief Executive Officer, Chairman and Senior Chairman of First Financial Bankshares, Inc. Through those years, he has also made many civic and professional contributions, including serving on the Board of the Federal Reserve Bank of Dallas and serving as Chairman of the Board of the Texas Bankers Association. When Ken joined the bank in 1971, the Company had total assets of $87.7 million and net income of $806,000. By the end of 2009, we had total assets of $3.28 billion and net earnings of $53.8 million. During Ken’s tenure with the Company, we have experienced great success. Customers, stockholders and communities have certainly benefited from Ken’s leadership and counsel, and we thank him for his fine service. We are pleased that he will continue to maintain an office in the First Financial Bank (Abilene) building and will be available to management for consultation. It is our pleasure to announce that Steven L. Beal, retired President and Chief Operating Officer of Concho Resources Inc., has accepted nomination for election as a Director of the Company at our Annual Shareholders’ Meeting in April. Steve was one of the founders of Concho, an independent oil and natural gas company, and continues to be a Director on its Board. Prior to being at Concho, he was Senior Vice President and Chief Financial Officer of Parker & Parsley Petroleum Company, which is now Pioneer National Resources. Before that, he was an audit professional with the accounting firm of Price Waterhouse Coopers. He is a 1981 graduate of The University of Texas with a degree in accounting. Steve has been involved civically and professionally with the United Way of Midland, Permian Basin Oil & Gas Association, Independent Petroleum Association of America and the New Mexico Oil & Gas Association. He has been on the Board of Directors of Midland Christian School and the Midland/Odessa Symphony. Most recently, he was a partner with the Early School District to build an indoor practice facility for use by the students and teams of Early High School. Steve and his wife, Teresa, live on their ranch in Brownwood, Texas. These are challenging times for the national economy and for the banking business. First Financial has the benefit of a long-term perspective. In our 120-year history, we’ve endured numerous recessions, the Great Depression, the Texas oil bust of the 1980s and other obstacles. We cannot predict the duration of the current economic malaise, but we remain optimistic about the long-term future of our state and nation, and especially our Texas markets. Financially and operationally, we believe our company has never been stronger, and our best days are still ahead of us. With our eyes on the future, we are making a strong investment in the training of all our employees, including our next generation of leaders, to ensure that we continue to provide excellence in banking, trust services, wealth management and customer service. We encourage you to read more about our training and customer service programs in the pages that follow. Banking is our business, but all of us on the management team never lose sight of the fact that we work for you, our shareholders. We will continue to manage the Company for profitability and growth in 2010 and beyond. F. Scott Dueser Chairman, President and CEO , TM . 3 W H A T M A K E S U S F I R S T ? Friendly. Knowledgeable. Helpful. These are words our customers use to describe First Financial Bank’s employees. Well-informed and well-motivated employees are essential to keeping First Financial Bank prepared for the future. Training our employees to provide the finest banking, financial solutions and exceptional customer service begins the day new employees are hired. Every new employee at First Financial Bank goes through a classroom training program. This orientation is designed not only to teach new employees about the bank’s outstanding portfolio of banking products and services, but also introduces them to the Company’s unique culture, which emphasizes putting customers’ needs first and going the extra mile to provide exceptional service and support. New employees learn skills from how to open a new account to the essentials of good business etiquette. New employee orientation is just the start. Our commitment to training and professional development for our employees is ongoing. All employees participate in compliance training, most taking 12 to 24 courses per year in all aspects of banking, customer service and financial services. We offer our employees both online, “desktop” training modules and more traditional classroom training. Regardless of the format, the goal is always the same – to help our employees continue the Company’s proud tradition of being a leading bank in our markets and exceeding our customers’ expectations for the finest in banking products and service. Merrie Spaeth, president of Spaeth Communications, Inc. and a nationally known consultant on organizational communications, leads a management training class for First Financial Bankshares. Christina Randle, author, productivity expert and CEO of The Effective Edge, trains managers at First Financial Bankshares. F F I NF F I N UNIVERSITY UNIVERSITY Developing future leaders is key to our company’s continued success in the years ahead. One way we prepare our future leaders is through FFIN University, which takes a select group of bank officers through a year-long inten- sive training program. First launched in 2008, FFIN University clearly underscores the Company’s commitment to main- taining its tradition of excellence in banking, trust services and customer service. Participants in FFIN University learn from both senior leaders and outstanding guest speakers on topics that range from time management to com- munication skills. Graduates of FFIN University are ready to assume key senior management positions in our company. They will help maintain the Company’s long tradition as a successful, profitable, community- based bank. 5 BACK ROW (L-R): KATHY BUSHNELL (First Technology Services), ISABEL MONTOYA (First Technology Services), IRMA ZIPP (Stephenville), MARY JO SORGE (Abilene), MELANIE BEARD (Granbury), ESTHER BILBY (Bridgeport), SANDRA HOLT (Abilene) FRONT ROW (L - R ): TRISHA HILDEBRAND (San Angelo), MARCELLA JIMENEZ (Mineral Wells), JANET FLYNT ( Weatherford), MELISSA JACQUES (Sweetwater), LEANN BAUGH ( Trust - Stephenville), STEVE GILBERT (Hereford), STEPHANIE LOPEZ (Eastland), LISA ROYE (Cleburne) Banking is all about relationships and working with customers one-on-one. That’s why, at First Financial Bankshares, our Customer Service First program is one of our highest priorities. Our goal is simple – to provide customer service that is second to none. Achieving that goal involves all employees and requires a sharp focus. It begins with our new employee orientation program and continues through our FFIN University for senior leaders. Instilling a culture of exceptional customer service is no accident. We encourage employees through a variety of initiatives, including recognizing employees who go beyond the norm for customers with “WOW” awards and giving Star Cards to employees who are nominated by fellow employees for exceptional customer service. Our top recognition program for employees is the Shining Star Award. Twice each year, managers select employees who have consistently demonstrated superior customer service. Shining Star Award winners and their spouses are hosted at the Company’s headquarters in Abilene for a special recognition ceremony, highlighted by a dinner with our presidents and management. ISABEL MONTOYA, First Technology Services, Abilene, is recognized as a Shining Star by SCOT T DUESER, President & CEO, First Financial Bankshares. 6 First Financial has the technology infrastructure and tools in place to provide first-rate modern banking services today and to meet future customer needs as we continue to grow. The Company’s technology supports our goal of providing exceptional customer service. Our system of customer call centers provides the same level of prompt and courteous service on the phone that customers are accustomed to receiving in our branches. Calls are answered by a person - not by voice mail - and customers immediately get helpful answers to questions about their checking and savings accounts, debit card transactions, business transactions and online banking. We created excitement among our customers in late 2009 by introducing a new custom-designed debit card program. Customers may choose from more than 130 card designs, many of which include logos and colors for local high schools or universities. To date, more than 33,000 custom cards have been printed. In 2010, we plan to go a step further and let customers create personalized debit cards using their own photos. Selected Financial Data IN THOUSANDS (EXCEPT PER SHARE DATA) YEAR-END TOTAL ASSETS EQUITY INCOME PER SHARE PER SHARE AND SPLITS PER SHARE PER SHARE SHAREHOLDERS’ NET EARNINGS DIVIDENDS DIVIDENDS BOOK VALUE MARKET VALUE BASIC CASH STOCK YEAR-END YEAR-END 2009 $3,279,456 $ 415,702 $ 53,797 $2.58 $1.36 – $ 19.96 $ 54.23 2008 3,212,385 368,782 53,164 2.56 1.34 – 17.73 55.21 2007 3,070,309 335,495 49,490 2.38 1.26 – 16.16 37.65 2006 2,850,165 300,901 46,029 2.22 1.18 – 14.51 41.86 2005 2,733,827 276,276 44,023 2.13 1.10 4/3 split 13.34 35.06 2004 2,315,224 265,545 39,171 1.90 1.00 – 12.84 33.61 2003 2,092,571 251,487 35,305 1.71 0.91 5/4 split 12.19 30.84 2002 1,993,183 238,768 33,953 1.65 0.81 – 11.59 22.80 2001 1,929,694 213,654 29,355 1.43 0.70 5/4 split 10.40 18.06 2000 1,753,814 196,121 28,316 1.37 0.62 – 9.56 15.09 GROWTH RATE 6.65% 8.81% 7.67% 7.60% 9.68% – 8.78% 13.90% TEN-YEAR COMPOUND Adjusted for stock dividends and splits. 2009 COMMON STOCK MARKET VALUE 2008 COMMON STOCK MARKET VALUE AND DIVIDEND DATA AND DIVIDEND DATA QUARTER HIGH LOW CLOSE DIVIDENDS QUARTER HIGH LOW CLOSE DIVIDENDS FOURTH $ 55.94 $ 47.86 $ 54.23 $ 0.34 FOURTH $ 56.32 $ 41.30 $ 55.21 $ 0.34 THIRD 54.50 47.95 49.46 0.34 THIRD 67.00 43.01 51.88 0.34 SECOND 51.62 46.51 50.36 0.34 SECOND 47.12 40.43 45.81 0.34 FIRST 55.70 36.49 48.17 0.34 FIRST 42.16 35.49 40.98 0.32 NET INCOME GROWTH (IN THOUSANDS) $3,125,552 $3,064,029 2.01% RETURN ON AVERAGE EQUITY $ 6M 12M 18M 24M 30M 36M 42M 48M 54M $3,279,456 $3,212,385 0% 3% 6% 9% 12% 15% 18% EFFICIENCY RATIO Financial Highlights IN THOUSANDS (EXCEPT PER SHARE DATA) FOR THE YEAR 2009 2008 CHANGES Net Income Basic Earnings per Share Dividends Declared Dividends per Share $53,797 2.58 28,311 1.36 $53,164 2.56 27,861 1.34 1.19% 0.78% 1.62% 1.49% Averages for the Year Shareholders’ Equity Assets Securities Loans Deposits At Year-End Assets Securities Loans Deposits Shareholders’ Equity Book Value per Share 1,308,110 1,494,876 2,513,387 394,812 1,285,377 1,514,369 2,684,757 415,702 19.96 1,185,303 10.36% 1,537,027 2,516,576 (2.74%) (0.13%) 348,271 13.36% 1,318,406 1,566,143 2,582,753 368,782 17.73 2.09% (2.51%) (3.31%) 3.95% 12.72% 12.58% 2.06% Trust Assets 1,664,174 1,630,560 Key Ratios Return on Average Assets Return on Average Equity Equity/Assets at Year-End Efficiency 1.72 % 13.63 % 12.68 % 50.11 % 1.74 % 15.27 % 11.48 % 50.76 % 09 08 07 06 05 1.72% 1.74% 1.72% 1.68% 1.80% 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 $53,797 $53,164 $49,490 $46,029 $44,023 13.63% 15.27% 15.87% 16.20% 16.17% 50.11% 50.76% 52.83% 53.49% 52.48% 4.80% 4.67% 4.43% 4.46% 4.49% RETURN ON AVERAGE ASSETS NET INTEREST MARGIN 0% 10% 20% 30% 40% 50% 60% 0% .25% . 50% .75% 1.00% 1.25% 1.50% 1.75% 2.00% 0% 1% 2% 3% 4% 5% 9 TAYLO R , C A L L A H A N & S H AC K E L F O R D CO U N T I E S D E P O S I T M A R K E T S H A R E 2651 JBS Parkway, Bldg. 4, Suite E Odessa, Texas 79762 ABILENE CLYDE MORAN ALBANY ODESSA M A I N O F F I C E 400 Pine LO C AT I O N S 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 132 Hill Street D I R E C TO R S F. Scott Dueser Chairman of the Board Ron Butler President and Chief Executive Officer Tucker S. Bridwell President Mansefeldt Investment Corp. Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Copeland President Joe Crawford President Abilene Aero, Inc. Mike Denny President ( 3 2 5 ) 6 2 7 - 7 2 0 0 Abilene, Texas 79601 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 Albany, Texas 76430 Murray Edwards Principal, The Edwards Group Allan D. Frizzell Executive Vice President Enrich Oil Corporation Stanley Morris, Jr. Investments Kenneth T. Murphy First Financial Bankshares, Inc. Dian Graves Stai Chair Mansefeldt Investment Corp. Director Leigh Taliaferro, M.D. Physician ADVISORY Steve Suttle J. Michael Alexander President James M. Alexander & Co. Tim Lancaster Chairman, CEO and President Hendrick Health System Shelton Family Foundation Dian Graves Owen Foundation R O N B U T L E R Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Ron Butler President and Chief Executive Officer Tom Boecking Executive Vice President South Branch Ben McAnally Executive Vice President Treasury Management John Prince Executive Vice President Personal Loans James Robinson Executive Vice President Retail Marketing and Business Development Marelyn Shedd Executive Vice President Commercial Loans Charles E. Tennesson Executive Vice President, Chief Financial Officer and Cashier Batjer and Associates McMahon Surovik Suttle, P.C. IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $1,087,452 419,928 879,258 99,941 19,587 1.88% 45.99% DEC. 31, 2008 $1,105,537 458,797 843,375 82,778 17,652 1.76% 46.72% CLEBURNE BURLESON ALVARADO MIDLOTHIAN M A I N O F F I C E ( 8 1 7 ) 5 5 6 - 5 0 0 0 o r ( 8 0 0 ) 2 2 6 - 2 9 4 0 403 N. Main Cleburne, Texas 76033 LO C AT I O N S 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 J O H N S O N CO U N T Y & C I T Y O F M I D LOT H I A N D E P O S I T M A R K E T S H A R E M AT T R E YN O L D S Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Craig Beskow Executive Vice President and Cashier Steve Davis Executive Vice President Brad Evans Executive Vice President Derek Schmidt Executive Vice President Cynthia Allen Senior Vice President Kathy Armstrong Senior Vice President Lisa Roye Senior Vice President Darlene Walker Senior Vice President D I R E C TO R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Albert A. Archer Vice Chairman Walls Industries, Inc. Ray Beavers General Manager & CEO United Cooperative Services Byron Black Investments F. Scott Dueser First Financial Bankshares, Inc. Tim Lyness Lyness Construction, LP George Marti Marti Enterprises Dr. Joe Martin Cleburne Eye Clinic IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 273,598 137,043 247,992 23,697 3,886 1.57% 53.68% DEC. 31, 2008 $ 244,647 138,127 221,629 21,126 4,199 1.74% 53.95% 11 EASTLAND RANGER RISING STAR M A I N O F F I C E 201 E. Main LO C AT I O N S 106 Main 206 West College ( 2 5 4 ) 6 2 9 - 6 1 0 0 Eastland, Texas 76448 Ranger, Texas 76470 Rising Star, Texas 76471 T H O M A S M . O ’ N E I L Pre s i d e n t a n d C E O E A S T L A N D CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer Doug Crawley Rancher 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 M.D. White, Jr. President and Owner Ace Hardware Store, Eastland/Cisco S E N I O R O F F I C E R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer L.V. Coffee Lending Terry Trout Cashier Senior Vice President and Executive Vice President Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,092 63,758 143,956 18,712 2,511 1.79% 49.74% DEC. 31, 2008 $ 153,029 58,201 127,132 17,146 2,412 1.66% 49.59% 4 4 8 10 12 STAFF EDUCATIONMANAGEMENTDEVELOPMENTCUSTOMER SERVICETECHNOLOGY 39% 15% 48% Bank Director magazine, in its first-quarter 2010 issue, ranked First Financial Bankshares N U M B E R O N E I N T H E N A T I O N in the $3 billion-plus publicly traded category.* We’re proud of our company’s 120-year histor y of financial strength and service to our customers and communities in Texas. But First Financial Bankshares isn’t looking back or resting on our past success. Our focus is on the future. Today, we are taking steps we believe are necessary to ensure that our company remains in the forefront of providing the best banking, trust, wealth management and other financial services, to build deep and while continuing enduring relationships with our valued customers. Relationships built on trust, integrity and exceptional customer service have made our company what it is today. For our shareholders, we remain committed to managing First Financial Bankshares in a safe, sound and profitable manner, with a goal of strategically and prudently growing the Company and expanding into new markets. The Letter to Shareholders on pages 2 and 3 of this annual report gives you more insights into how our company performed in 2009 and our plans for 2010. The photo spread and text on pages 4-7 demonstrate the how we are working Company’s future for the benefit of our customers, employees and shareholders – and the Texas communities we serve. For more information, visit our Web site at http://www.ffin.com. secure to * Based on measurement criteria and analysis compiled by Sandler O’Neill + Partners, L.P., a New York-based investment banking firm that specializes in the financial services industry. Published in Bank Director magazine, 1st quarter 2010. First Financial Bank 325-627-7200 First Financial Bank 817-556-5000 First Financial Bank 254-629-6100 First Financial Bank 806-363-8200 ABILENE CLYDE MORAN ALBANY ODESSA CLEBURNE BURLESON ALVARADO MIDLOTHIAN EASTLAND RANGER RISING STAR HEREFORD , TM . A Family of Community Banks SM First Financial Bank STEPHENVILLE First Financial Bank 940-327-5400 First Financial Bank 325-659-5900 First Financial Bank 817-410-2915 940-683-8700 254-965-5036 817-573-6900 First Financial Bank 325-235-6600 First Financial Bank 817-596-0307 MINERAL WELLS SAN ANGELO SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR GRANBURY GLEN ROSE ACTON SWEET WATER ROBY TRENT MERKEL WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH BANKS TRUST OFFICE LOCATIONS D E A R S H A R E H O L D E R S In light of the recession and higher FDIC insurance premiums in 2009, I am very pleased that our company was able to deliver increased earnings for the 23rd consecutive year. While the national recession at first seemed to bypass Texas, it began moving into the state in the second part of 2008, bringing a decline in home sales and general economic activity and an increase in unemployment. These trends continued in 2009. On the plus side, our state continued to fare better than most of the rest of the country, and our geographic footprint—especially in our West Texas markets—remained stable. The stock market fluctuated greatly during the past two years. The NASDAQ Composite Index declined 41 percent in 2008 and then went back up 44 percent in 2009. Our stock went up 47 percent in 2008 and down 2 percent in 2009, closing at $54.23. We are pleased that our stock performed well for our stockholders during these years of economic turmoil. We continue to suspect that a “flight to safety”—favoring companies with strong balance sheets and a long record of conservative lending—may have played a role in our stock’s favorable performance. We are also pleased that in 2009, our company again received high rankings from leading banking publications such as the ABA Banking Journal and U.S. Banker. Additionally, in January of 2010, Bank Director magazine rated us No. 1 in the nation among publicly traded banks with $3 billion or more of assets. Being named No. 1 is like winning an Academy Award. Without question, this accomplishment is due to the direction of our Board, the dedication of our employees and the loyalty of our customers, who have kept us strong for 120 years. We accept this honor with great humility because we know that every day, we face a new set of challenges in the banking industry and must prove ourselves again and again. RESULTS FOR 2009 Net income grew 1.2 percent to $53.8 million from $53.2 million in 2008. Net interest income, the major source of our earnings, rose 4.3 percent to $129.2 million from $123.9 million. Our net interest margin (on a tax-equivalent basis) also increased, to 4.80 percent from 4.67 percent in 2008. The provision for loan losses for 2009 totaled $11.4 million, a 43.5 percent increase from $8.0 million in 2008. The larger provision was due to a higher level of net charge-offs and an increase in the allowance for loan losses. Noninterest income declined 1.7 percent to $48.6 million from $49.5 million. The decline was primarily due to a $692,000 drop in income from student loan sales as the Company exited the student loan program. Lower usage of overdraft privileges also contributed to the decrease in noninterest income. Noninterest expense was $94.0 million in 2009, up 2.6 percent from $91.6 million a year earlier. The largest increase in noninterest expense was in FDIC insurance premiums, which grew by $4.2 million, or 650.4 percent, after the FDIC raised premium rates as of January 1, 2009, and implemented a special assessment in June of that year. Nevertheless, we were able to improve our efficiency ratio, which expresses the share of revenues consumed by operating expenses, to 50.11 percent from 50.76 percent in 2008. Our bank presidents worked hard to maintain their net interest margins and reduce expenses. I could not be more pleased with their accomplishments, especially in light of the significant increase in FDIC insurance premiums. We again outperformed our peer group on several key financial metrics. Our return on average assets was 1.72 percent compared with a negative 0.21 percent for our peer group. Return on average equity was 13.63 percent versus a negative 2.59 percent for our peers. Our net interest margin of 4.80 percent on a tax-equivalent basis compared very favorably to our peer group’s margin of 3.48 percent. We also beat the peer group on the efficiency ratio—ours was 50.11 percent, while theirs was 69.53 percent. We ended the year with a strong balance sheet. Consolidated assets increased 2.1 percent to $3.28 billion from $3.21 billion at the end of 2008. Loans decreased 3.3 percent to $1.51 billion from $1.57 billion, primarily due to our exiting the student loan program. Total deposits grew 3.9 percent to $2.68 billion from $2.58 billion. Shareholders’ equity rose 12.7 percent to $415.7 million from $368.8 million. As the economy softened in Texas, our nonperforming assets increased to 1.46 percent of total loans and foreclosed assets from 0.80 percent at the end of 2008. Even with this increase, our nonperforming percentage was well below our peer group’s 5.07 percent. Net loan charge-offs for the year totaled $5.3 million at year-end 2009 versus $3.9 million at year-end 2008. The 2009 allowance for loan losses amounted to 1.82 percent of total loans. First Financial Trust & Asset Management Company also experienced growth last year. Total assets at year-end had a book value of $1.67 billion, a 2.1 percent increase from 2008, and a market value of $2.10 billion, an 11.7 percent increase. The Trust Company’s fee income, however, declined 3.8 percent to $9.1 million from $9.4 million. This subsidiary manages a large oil and gas portfolio, and the drop in its income was primarily due to a decline in oil and gas prices and in related fees on oil and gas income. The Trust Company opened its sixth office last year, in Odessa, Texas. We are encouraged by the number of clients who have opened trust accounts with us in Odessa and the potential for growth in the Permian Basin market. 2 GROWTH STRATEGIES We actively looked for acquisition opportunities during 2009, but the banks that we considered were overpriced in light of the economy or did not fit our company’s profile. Our plan is to continue pursuing acquisitions diligently. With our capitalization, stock price, cash position and experienced management team, we have what we need to take advantage of acquisition opportunities. In November, we announced plans to open bank branches in our two existing Trust Company offices in Fort Worth and Odessa, to complement trust services and serve customers in those markets. We have had frequent requests from customers for branches in these markets and are interested to see how this private bank branch concept will work. During the year, we achieved a long-term objective of bringing all of our banks under a common name to improve brand identity and marketing efficiencies. Hereford State Bank, San Angelo National Bank and Weatherford National Bank are now called First Financial Bank. All of our banks benefit from sharing the Company’s growing brand identity, and our customers benefit from being able to use our facilities throughout our market areas. However, in no way does the use of a common name change our practice of operating through ten community-based banks that are separately chartered, have their own local boards and management teams, and make decisions locally. We continue to be the “hometown bank” in our markets, with a tradition of playing a vital role in community life. WHAT’S AHEAD Besides looking for acquisitions, we plan to continue growing our mortgage market, trust services and treasury management services. We are encouraged by our recent growth that there will be good opportunities in these areas. Minimizing nonperforming assets will certainly be an objective, as it has been for the last several years. We do know that FDIC insurance premiums will continue to be high and that increased regulation proposed by Congress and various federal agencies will make our jobs more challenging and costly. Our hope is that the banking industry can mitigate much of the pending regulatory legislation by educating Washington that community banks have not caused today’s economic problems and are already over-regulated. We are committed to providing outstanding service to our customers, our communities and our nation by making every good loan we can to help our economy grow and prosper. PERSONNEL CHANGES J. V. Martin retired at the end of the year as CEO of First Financial Bank, Sweetwater. Kirby Andrews, President, assumed the additional role of CEO there. J. V. will continue to serve as the Sweetwater bank’s Chairman of the Board. He will also provide consulting services to the holding company. Additionally, Senior Chairman Kenneth T. Murphy will retire from the First Financial Bankshares Board in conjunction with our Annual Shareholders’ Meeting in April. He has served our company with distinction for 39 years, holding the positions of President, First Financial Bank, Abilene; and Executive Vice President, President, Chief Executive Officer, Chairman and Senior Chairman of First Financial Bankshares, Inc. Through those years, he has also made many civic and professional contributions, including serving on the Board of the Federal Reserve Bank of Dallas and serving as Chairman of the Board of the Texas Bankers Association. When Ken joined the bank in 1971, the Company had total assets of $87.7 million and net income of $806,000. By the end of 2009, we had total assets of $3.28 billion and net earnings of $53.8 million. During Ken’s tenure with the Company, we have experienced great success. Customers, stockholders and communities have certainly benefited from Ken’s leadership and counsel, and we thank him for his fine service. We are pleased that he will continue to maintain an office in the First Financial Bank (Abilene) building and will be available to management for consultation. It is our pleasure to announce that Steven L. Beal, retired President and Chief Operating Officer of Concho Resources Inc., has accepted nomination for election as a Director of the Company at our Annual Shareholders’ Meeting in April. Steve was one of the founders of Concho, an independent oil and natural gas company, and continues to be a Director on its Board. Prior to being at Concho, he was Senior Vice President and Chief Financial Officer of Parker & Parsley Petroleum Company, which is now Pioneer National Resources. Before that, he was an audit professional with the accounting firm of Price Waterhouse Coopers. He is a 1981 graduate of The University of Texas with a degree in accounting. Steve has been involved civically and professionally with the United Way of Midland, Permian Basin Oil & Gas Association, Independent Petroleum Association of America and the New Mexico Oil & Gas Association. He has been on the Board of Directors of Midland Christian School and the Midland/Odessa Symphony. Most recently, he was a partner with the Early School District to build an indoor practice facility for use by the students and teams of Early High School. Steve and his wife, Teresa, live on their ranch in Brownwood, Texas. These are challenging times for the national economy and for the banking business. First Financial has the benefit of a long-term perspective. In our 120-year history, we’ve endured numerous recessions, the Great Depression, the Texas oil bust of the 1980s and other obstacles. We cannot predict the duration of the current economic malaise, but we remain optimistic about the long-term future of our state and nation, and especially our Texas markets. Financially and operationally, we believe our company has never been stronger, and our best days are still ahead of us. With our eyes on the future, we are making a strong investment in the training of all our employees, including our next generation of leaders, to ensure that we continue to provide excellence in banking, trust services, wealth management and customer service. We encourage you to read more about our training and customer service programs in the pages that follow. Banking is our business, but all of us on the management team never lose sight of the fact that we work for you, our shareholders. We will continue to manage the Company for profitability and growth in 2010 and beyond. F. Scott Dueser Chairman, President and CEO , TM . 3 W H A T M A K E S U S F I R S T ? Friendly. Knowledgeable. Helpful. These are words our customers use to describe First Financial Bank’s employees. Well-informed and well-motivated employees are essential to keeping First Financial Bank prepared for the future. Training our employees to provide the finest banking, financial solutions and exceptional customer service begins the day new employees are hired. Every new employee at First Financial Bank goes through a classroom training program. This orientation is designed not only to teach new employees about the bank’s outstanding portfolio of banking products and services, but also introduces them to the Company’s unique culture, which emphasizes putting customers’ needs first and going the extra mile to provide exceptional service and support. New employees learn skills from how to open a new account to the essentials of good business etiquette. New employee orientation is just the start. Our commitment to training and professional development for our employees is ongoing. All employees participate in compliance training, most taking 12 to 24 courses per year in all aspects of banking, customer service and financial services. We offer our employees both online, “desktop” training modules and more traditional classroom training. Regardless of the format, the goal is always the same – to help our employees continue the Company’s proud tradition of being a leading bank in our markets and exceeding our customers’ expectations for the finest in banking products and service. Merrie Spaeth, president of Spaeth Communications, Inc. and a nationally known consultant on organizational communications, leads a management training class for First Financial Bankshares. Christina Randle, author, productivity expert and CEO of The Effective Edge, trains managers at First Financial Bankshares. F F I NF F I N UNIVERSITY UNIVERSITY Developing future leaders is key to our company’s continued success in the years ahead. One way we prepare our future leaders is through FFIN University, which takes a select group of bank officers through a year-long inten- sive training program. First launched in 2008, FFIN University clearly underscores the Company’s commitment to main- taining its tradition of excellence in banking, trust services and customer service. Participants in FFIN University learn from both senior leaders and outstanding guest speakers on topics that range from time management to com- munication skills. Graduates of FFIN University are ready to assume key senior management positions in our company. They will help maintain the Company’s long tradition as a successful, profitable, community- based bank. 5 BACK ROW (L-R): KATHY BUSHNELL (First Technology Services), ISABEL MONTOYA (First Technology Services), IRMA ZIPP (Stephenville), MARY JO SORGE (Abilene), MELANIE BEARD (Granbury), ESTHER BILBY (Bridgeport), SANDRA HOLT (Abilene) FRONT ROW (L - R ): TRISHA HILDEBRAND (San Angelo), MARCELLA JIMENEZ (Mineral Wells), JANET FLYNT ( Weatherford), MELISSA JACQUES (Sweetwater), LEANN BAUGH ( Trust - Stephenville), STEVE GILBERT (Hereford), STEPHANIE LOPEZ (Eastland), LISA ROYE (Cleburne) Banking is all about relationships and working with customers one-on-one. That’s why, at First Financial Bankshares, our Customer Service First program is one of our highest priorities. Our goal is simple – to provide customer service that is second to none. Achieving that goal involves all employees and requires a sharp focus. It begins with our new employee orientation program and continues through our FFIN University for senior leaders. Instilling a culture of exceptional customer service is no accident. We encourage employees through a variety of initiatives, including recognizing employees who go beyond the norm for customers with “WOW” awards and giving Star Cards to employees who are nominated by fellow employees for exceptional customer service. Our top recognition program for employees is the Shining Star Award. Twice each year, managers select employees who have consistently demonstrated superior customer service. Shining Star Award winners and their spouses are hosted at the Company’s headquarters in Abilene for a special recognition ceremony, highlighted by a dinner with our presidents and management. ISABEL MONTOYA, First Technology Services, Abilene, is recognized as a Shining Star by SCOT T DUESER, President & CEO, First Financial Bankshares. 6 First Financial has the technology infrastructure and tools in place to provide first-rate modern banking services today and to meet future customer needs as we continue to grow. The Company’s technology supports our goal of providing exceptional customer service. Our system of customer call centers provides the same level of prompt and courteous service on the phone that customers are accustomed to receiving in our branches. Calls are answered by a person - not by voice mail - and customers immediately get helpful answers to questions about their checking and savings accounts, debit card transactions, business transactions and online banking. We created excitement among our customers in late 2009 by introducing a new custom-designed debit card program. Customers may choose from more than 130 card designs, many of which include logos and colors for local high schools or universities. To date, more than 33,000 custom cards have been printed. In 2010, we plan to go a step further and let customers create personalized debit cards using their own photos. Selected Financial Data IN THOUSANDS (EXCEPT PER SHARE DATA) YEAR-END TOTAL ASSETS EQUITY INCOME PER SHARE PER SHARE AND SPLITS PER SHARE PER SHARE SHAREHOLDERS’ NET EARNINGS DIVIDENDS DIVIDENDS BOOK VALUE MARKET VALUE BASIC CASH STOCK YEAR-END YEAR-END 2009 $3,279,456 $ 415,702 $ 53,797 $2.58 $1.36 – $ 19.96 $ 54.23 2008 3,212,385 368,782 53,164 2.56 1.34 – 17.73 55.21 2007 3,070,309 335,495 49,490 2.38 1.26 – 16.16 37.65 2006 2,850,165 300,901 46,029 2.22 1.18 – 14.51 41.86 2005 2,733,827 276,276 44,023 2.13 1.10 4/3 split 13.34 35.06 2004 2,315,224 265,545 39,171 1.90 1.00 – 12.84 33.61 2003 2,092,571 251,487 35,305 1.71 0.91 5/4 split 12.19 30.84 2002 1,993,183 238,768 33,953 1.65 0.81 – 11.59 22.80 2001 1,929,694 213,654 29,355 1.43 0.70 5/4 split 10.40 18.06 2000 1,753,814 196,121 28,316 1.37 0.62 – 9.56 15.09 GROWTH RATE 6.65% 8.81% 7.67% 7.60% 9.68% – 8.78% 13.90% TEN-YEAR COMPOUND Adjusted for stock dividends and splits. 2009 COMMON STOCK MARKET VALUE 2008 COMMON STOCK MARKET VALUE AND DIVIDEND DATA AND DIVIDEND DATA QUARTER HIGH LOW CLOSE DIVIDENDS QUARTER HIGH LOW CLOSE DIVIDENDS FOURTH $ 55.94 $ 47.86 $ 54.23 $ 0.34 FOURTH $ 56.32 $ 41.30 $ 55.21 $ 0.34 THIRD 54.50 47.95 49.46 0.34 THIRD 67.00 43.01 51.88 0.34 SECOND 51.62 46.51 50.36 0.34 SECOND 47.12 40.43 45.81 0.34 FIRST 55.70 36.49 48.17 0.34 FIRST 42.16 35.49 40.98 0.32 NET INCOME GROWTH (IN THOUSANDS) $3,125,552 $3,064,029 2.01% RETURN ON AVERAGE EQUITY $ 6M 12M 18M 24M 30M 36M 42M 48M 54M $3,279,456 $3,212,385 0% 3% 6% 9% 12% 15% 18% EFFICIENCY RATIO Financial Highlights IN THOUSANDS (EXCEPT PER SHARE DATA) FOR THE YEAR 2009 2008 CHANGES Net Income Basic Earnings per Share Dividends Declared Dividends per Share $53,797 2.58 28,311 1.36 $53,164 2.56 27,861 1.34 1.19% 0.78% 1.62% 1.49% Averages for the Year Shareholders’ Equity Assets Securities Loans Deposits At Year-End Assets Securities Loans Deposits Shareholders’ Equity Book Value per Share 1,308,110 1,494,876 2,513,387 394,812 1,285,377 1,514,369 2,684,757 415,702 19.96 1,185,303 10.36% 1,537,027 2,516,576 (2.74%) (0.13%) 348,271 13.36% 1,318,406 1,566,143 2,582,753 368,782 17.73 2.09% (2.51%) (3.31%) 3.95% 12.72% 12.58% 2.06% Trust Assets 1,664,174 1,630,560 Key Ratios Return on Average Assets Return on Average Equity Equity/Assets at Year-End Efficiency 1.72 % 13.63 % 12.68 % 50.11 % 1.74 % 15.27 % 11.48 % 50.76 % 09 08 07 06 05 1.72% 1.74% 1.72% 1.68% 1.80% 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 $53,797 $53,164 $49,490 $46,029 $44,023 13.63% 15.27% 15.87% 16.20% 16.17% 50.11% 50.76% 52.83% 53.49% 52.48% 4.80% 4.67% 4.43% 4.46% 4.49% RETURN ON AVERAGE ASSETS NET INTEREST MARGIN 0% 10% 20% 30% 40% 50% 60% 0% .25% . 50% .75% 1.00% 1.25% 1.50% 1.75% 2.00% 0% 1% 2% 3% 4% 5% 9 TAYLO R , C A L L A H A N & S H AC K E L F O R D CO U N T I E S D E P O S I T M A R K E T S H A R E 2651 JBS Parkway, Bldg. 4, Suite E Odessa, Texas 79762 ABILENE CLYDE MORAN ALBANY ODESSA M A I N O F F I C E 400 Pine LO C AT I O N S 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 132 Hill Street D I R E C TO R S F. Scott Dueser Chairman of the Board Ron Butler President and Chief Executive Officer Tucker S. Bridwell President Mansefeldt Investment Corp. Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Copeland President Joe Crawford President Abilene Aero, Inc. Mike Denny President ( 3 2 5 ) 6 2 7 - 7 2 0 0 Abilene, Texas 79601 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 Albany, Texas 76430 Murray Edwards Principal, The Edwards Group Allan D. Frizzell Executive Vice President Enrich Oil Corporation Stanley Morris, Jr. Investments Kenneth T. Murphy First Financial Bankshares, Inc. Dian Graves Stai Chair Mansefeldt Investment Corp. Director Leigh Taliaferro, M.D. Physician ADVISORY Steve Suttle J. Michael Alexander President James M. Alexander & Co. Tim Lancaster Chairman, CEO and President Hendrick Health System Shelton Family Foundation Dian Graves Owen Foundation R O N B U T L E R Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Ron Butler President and Chief Executive Officer Tom Boecking Executive Vice President South Branch Ben McAnally Executive Vice President Treasury Management John Prince Executive Vice President Personal Loans James Robinson Executive Vice President Retail Marketing and Business Development Marelyn Shedd Executive Vice President Commercial Loans Charles E. Tennesson Executive Vice President, Chief Financial Officer and Cashier Batjer and Associates McMahon Surovik Suttle, P.C. IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $1,087,452 419,928 879,258 99,941 19,587 1.88% 45.99% DEC. 31, 2008 $1,105,537 458,797 843,375 82,778 17,652 1.76% 46.72% CLEBURNE BURLESON ALVARADO MIDLOTHIAN M A I N O F F I C E ( 8 1 7 ) 5 5 6 - 5 0 0 0 o r ( 8 0 0 ) 2 2 6 - 2 9 4 0 403 N. Main Cleburne, Texas 76033 LO C AT I O N S 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 J O H N S O N CO U N T Y & C I T Y O F M I D LOT H I A N D E P O S I T M A R K E T S H A R E M AT T R E YN O L D S Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Craig Beskow Executive Vice President and Cashier Steve Davis Executive Vice President Brad Evans Executive Vice President Derek Schmidt Executive Vice President Cynthia Allen Senior Vice President Kathy Armstrong Senior Vice President Lisa Roye Senior Vice President Darlene Walker Senior Vice President D I R E C TO R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Albert A. Archer Vice Chairman Walls Industries, Inc. Ray Beavers General Manager & CEO United Cooperative Services Byron Black Investments F. Scott Dueser First Financial Bankshares, Inc. Tim Lyness Lyness Construction, LP George Marti Marti Enterprises Dr. Joe Martin Cleburne Eye Clinic IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 273,598 137,043 247,992 23,697 3,886 1.57% 53.68% DEC. 31, 2008 $ 244,647 138,127 221,629 21,126 4,199 1.74% 53.95% 11 EASTLAND RANGER RISING STAR M A I N O F F I C E 201 E. Main LO C AT I O N S 106 Main 206 West College ( 2 5 4 ) 6 2 9 - 6 1 0 0 Eastland, Texas 76448 Ranger, Texas 76470 Rising Star, Texas 76471 T H O M A S M . O ’ N E I L Pre s i d e n t a n d C E O E A S T L A N D CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer Doug Crawley Rancher 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 M.D. White, Jr. President and Owner Ace Hardware Store, Eastland/Cisco S E N I O R O F F I C E R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer L.V. Coffee Lending Terry Trout Cashier Senior Vice President and Executive Vice President Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,092 63,758 143,956 18,712 2,511 1.79% 49.74% DEC. 31, 2008 $ 153,029 58,201 127,132 17,146 2,412 1.66% 49.59% 4 4 8 10 12 STAFF EDUCATIONMANAGEMENTDEVELOPMENTCUSTOMER SERVICETECHNOLOGY 39% 15% 48% N U M B E R O N E I N T H E N A T I O N in the $3 billion-plus publicly traded category.* Bank Director magazine, in its first-quarter 2010 issue, ranked First Financial Bankshares We’re proud of our company’s 120-year histor y of financial strength and service to our customers and communities in Texas. But First Financial Bankshares isn’t looking back or resting on our past success. Our focus is on the future. Today, we are taking steps we believe are necessary to ensure that our company remains in the forefront of providing the best banking, trust, wealth management and other financial services, while continuing to build deep and enduring relationships with our valued customers. Relationships built on trust, integrity and exceptional customer service have made our company what it is today. For our shareholders, we remain committed to managing First Financial Bankshares in a safe, sound and profitable manner, with a goal of strategically and prudently growing the Company and expanding into new markets. The Letter to Shareholders on pages 2 and 3 of this annual report gives you more insights into how our company performed in 2009 and our plans for 2010. The photo spread and text on pages 4-7 demonstrate how we are working to secure the Company’s future for the benefit of our customers, employees and shareholders – and the Texas communities we serve. For more information, visit our Web site at http://www.ffin.com. * Based on measurement criteria and analysis compiled by Sandler O’Neill + Partners, L.P., a New York-based investment banking firm that specializes in the financial services industry. Published in Bank Director magazine, 1st quarter 2010. First Financial Bank 325-627-7200 First Financial Bank 817-556-5000 First Financial Bank 254-629-6100 First Financial Bank 806-363-8200 ABILENE CLYDE MORAN ALBANY ODESSA CLEBURNE BURLESON ALVARADO MIDLOTHIAN EASTLAND RANGER RISING STAR HEREFORD , TM . A Family of Community Banks SM First Financial Bank 940-327-5400 First Financial Bank 325-659-5900 First Financial Bank 817-410-2915 940-683-8700 First Financial Bank 254-965-5036 817-573-6900 First Financial Bank 325-235-6600 First Financial Bank 817-596-0307 MINERAL WELLS SAN ANGELO SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR STEPHENVILLE GRANBURY GLEN ROSE ACTON SWEET WATER ROBY TRENT MERKEL WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH BANKS TRUST OFFICE LOCATIONS D E A R S H A R E H O L D E R S In light of the recession and higher FDIC insurance premiums in 2009, I am very pleased that our company was able to deliver increased earnings for the 23rd consecutive year. While the national recession at first seemed to bypass Texas, it began moving into the state in the second part of 2008, bringing a decline in home sales and general economic activity and an increase in unemployment. These trends continued in 2009. On the plus side, our state continued to fare better than most of the rest of the country, and our geographic footprint—especially in our West Texas markets—remained stable. The stock market fluctuated greatly during the past two years. The NASDAQ Composite Index declined 41 percent in 2008 and then went back up 44 percent in 2009. Our stock went up 47 percent in 2008 and down 2 percent in 2009, closing at $54.23. We are pleased that our stock performed well for our stockholders during these years of economic turmoil. We continue to suspect that a “flight to safety”—favoring companies with strong balance sheets and a long record of conservative lending—may have played a role in our stock’s favorable performance. We are also pleased that in 2009, our company again received high rankings from leading banking publications such as the ABA Banking Journal and U.S. Banker. Additionally, in January of 2010, Bank Director magazine rated us No. 1 in the nation among publicly traded banks with $3 billion or more of assets. Being named No. 1 is like winning an Academy Award. Without question, this accomplishment is due to the direction of our Board, the dedication of our employees and the loyalty of our customers, who have kept us strong for 120 years. We accept this honor with great humility because we know that every day, we face a new set of challenges in the banking industry and must prove ourselves again and again. RESULTS FOR 2009 Net income grew 1.2 percent to $53.8 million from $53.2 million in 2008. Net interest income, the major source of our earnings, rose 4.3 percent to $129.2 million from $123.9 million. Our net interest margin (on a tax-equivalent basis) also increased, to 4.80 percent from 4.67 percent in 2008. The provision for loan losses for 2009 totaled $11.4 million, a 43.5 percent increase from $8.0 million in 2008. The larger provision was due to a higher level of net charge-offs and an increase in the allowance for loan losses. Noninterest income declined 1.7 percent to $48.6 million from $49.5 million. The decline was primarily due to a $692,000 drop in income from student loan sales as the Company exited the student loan program. Lower usage of overdraft privileges also contributed to the decrease in noninterest income. Noninterest expense was $94.0 million in 2009, up 2.6 percent from $91.6 million a year earlier. The largest increase in noninterest expense was in FDIC insurance premiums, which grew by $4.2 million, or 650.4 percent, after the FDIC raised premium rates as of January 1, 2009, and implemented a special assessment in June of that year. Nevertheless, we were able to improve our efficiency ratio, which expresses the share of revenues consumed by operating expenses, to 50.11 percent from 50.76 percent in 2008. Our bank presidents worked hard to maintain their net interest margins and reduce expenses. I could not be more pleased with their accomplishments, especially in light of the significant increase in FDIC insurance premiums. We again outperformed our peer group on several key financial metrics. Our return on average assets was 1.72 percent compared with a negative 0.21 percent for our peer group. Return on average equity was 13.63 percent versus a negative 2.59 percent for our peers. Our net interest margin of 4.80 percent on a tax-equivalent basis compared very favorably to our peer group’s margin of 3.48 percent. We also beat the peer group on the efficiency ratio—ours was 50.11 percent, while theirs was 69.53 percent. We ended the year with a strong balance sheet. Consolidated assets increased 2.1 percent to $3.28 billion from $3.21 billion at the end of 2008. Loans decreased 3.3 percent to $1.51 billion from $1.57 billion, primarily due to our exiting the student loan program. Total deposits grew 3.9 percent to $2.68 billion from $2.58 billion. Shareholders’ equity rose 12.7 percent to $415.7 million from $368.8 million. As the economy softened in Texas, our nonperforming assets increased to 1.46 percent of total loans and foreclosed assets from 0.80 percent at the end of 2008. Even with this increase, our nonperforming percentage was well below our peer group’s 5.07 percent. Net loan charge-offs for the year totaled $5.3 million at year-end 2009 versus $3.9 million at year-end 2008. The 2009 allowance for loan losses amounted to 1.82 percent of total loans. First Financial Trust & Asset Management Company also experienced growth last year. Total assets at year-end had a book value of $1.67 billion, a 2.1 percent increase from 2008, and a market value of $2.10 billion, an 11.7 percent increase. The Trust Company’s fee income, however, declined 3.8 percent to $9.1 million from $9.4 million. This subsidiary manages a large oil and gas portfolio, and the drop in its income was primarily due to a decline in oil and gas prices and in related fees on oil and gas income. The Trust Company opened its sixth office last year, in Odessa, Texas. We are encouraged by the number of clients who have opened trust accounts with us in Odessa and the potential for growth in the Permian Basin market. 2 GROWTH STRATEGIES We actively looked for acquisition opportunities during 2009, but the banks that we considered were overpriced in light of the economy or did not fit our company’s profile. Our plan is to continue pursuing acquisitions diligently. With our capitalization, stock price, cash position and experienced management team, we have what we need to take advantage of acquisition opportunities. In November, we announced plans to open bank branches in our two existing Trust Company offices in Fort Worth and Odessa, to complement trust services and serve customers in those markets. We have had frequent requests from customers for branches in these markets and are interested to see how this private bank branch concept will work. During the year, we achieved a long-term objective of bringing all of our banks under a common name to improve brand identity and marketing efficiencies. Hereford State Bank, San Angelo National Bank and Weatherford National Bank are now called First Financial Bank. All of our banks benefit from sharing the Company’s growing brand identity, and our customers benefit from being able to use our facilities throughout our market areas. However, in no way does the use of a common name change our practice of operating through ten community-based banks that are separately chartered, have their own local boards and management teams, and make decisions locally. We continue to be the “hometown bank” in our markets, with a tradition of playing a vital role in community life. WHAT’S AHEAD Besides looking for acquisitions, we plan to continue growing our mortgage market, trust services and treasury management services. We are encouraged by our recent growth that there will be good opportunities in these areas. Minimizing nonperforming assets will certainly be an objective, as it has been for the last several years. We do know that FDIC insurance premiums will continue to be high and that increased regulation proposed by Congress and various federal agencies will make our jobs more challenging and costly. Our hope is that the banking industry can mitigate much of the pending regulatory legislation by educating Washington that community banks have not caused today’s economic problems and are already over-regulated. We are committed to providing outstanding service to our customers, our communities and our nation by making every good loan we can to help our economy grow and prosper. PERSONNEL CHANGES J. V. Martin retired at the end of the year as CEO of First Financial Bank, Sweetwater. Kirby Andrews, President, assumed the additional role of CEO there. J. V. will continue to serve as the Sweetwater bank’s Chairman of the Board. He will also provide consulting services to the holding company. Additionally, Senior Chairman Kenneth T. Murphy will retire from the First Financial Bankshares Board in conjunction with our Annual Shareholders’ Meeting in April. He has served our company with distinction for 39 years, holding the positions of President, First Financial Bank, Abilene; and Executive Vice President, President, Chief Executive Officer, Chairman and Senior Chairman of First Financial Bankshares, Inc. Through those years, he has also made many civic and professional contributions, including serving on the Board of the Federal Reserve Bank of Dallas and serving as Chairman of the Board of the Texas Bankers Association. When Ken joined the bank in 1971, the Company had total assets of $87.7 million and net income of $806,000. By the end of 2009, we had total assets of $3.28 billion and net earnings of $53.8 million. During Ken’s tenure with the Company, we have experienced great success. Customers, stockholders and communities have certainly benefited from Ken’s leadership and counsel, and we thank him for his fine service. We are pleased that he will continue to maintain an office in the First Financial Bank (Abilene) building and will be available to management for consultation. It is our pleasure to announce that Steven L. Beal, retired President and Chief Operating Officer of Concho Resources Inc., has accepted nomination for election as a Director of the Company at our Annual Shareholders’ Meeting in April. Steve was one of the founders of Concho, an independent oil and natural gas company, and continues to be a Director on its Board. Prior to being at Concho, he was Senior Vice President and Chief Financial Officer of Parker & Parsley Petroleum Company, which is now Pioneer National Resources. Before that, he was an audit professional with the accounting firm of Price Waterhouse Coopers. He is a 1981 graduate of The University of Texas with a degree in accounting. Steve has been involved civically and professionally with the United Way of Midland, Permian Basin Oil & Gas Association, Independent Petroleum Association of America and the New Mexico Oil & Gas Association. He has been on the Board of Directors of Midland Christian School and the Midland/Odessa Symphony. Most recently, he was a partner with the Early School District to build an indoor practice facility for use by the students and teams of Early High School. Steve and his wife, Teresa, live on their ranch in Brownwood, Texas. These are challenging times for the national economy and for the banking business. First Financial has the benefit of a long-term perspective. In our 120-year history, we’ve endured numerous recessions, the Great Depression, the Texas oil bust of the 1980s and other obstacles. We cannot predict the duration of the current economic malaise, but we remain optimistic about the long-term future of our state and nation, and especially our Texas markets. Financially and operationally, we believe our company has never been stronger, and our best days are still ahead of us. With our eyes on the future, we are making a strong investment in the training of all our employees, including our next generation of leaders, to ensure that we continue to provide excellence in banking, trust services, wealth management and customer service. We encourage you to read more about our training and customer service programs in the pages that follow. Banking is our business, but all of us on the management team never lose sight of the fact that we work for you, our shareholders. We will continue to manage the Company for profitability and growth in 2010 and beyond. F. Scott Dueser Chairman, President and CEO , TM . 3 W H A T M A K E S U S F I R S T ? Friendly. Knowledgeable. Helpful. These are words our customers use to describe First Financial Bank’s employees. Well-informed and well-motivated employees are essential to keeping First Financial Bank prepared for the future. Training our employees to provide the finest banking, financial solutions and exceptional customer service begins the day new employees are hired. Every new employee at First Financial Bank goes through a classroom training program. This orientation is designed not only to teach new employees about the bank’s outstanding portfolio of banking products and services, but also introduces them to the Company’s unique culture, which emphasizes putting customers’ needs first and going the extra mile to provide exceptional service and support. New employees learn skills from how to open a new account to the essentials of good business etiquette. New employee orientation is just the start. Our commitment to training and professional development for our employees is ongoing. All employees participate in compliance training, most taking 12 to 24 courses per year in all aspects of banking, customer service and financial services. We offer our employees both online, “desktop” training modules and more traditional classroom training. Regardless of the format, the goal is always the same – to help our employees continue the Company’s proud tradition of being a leading bank in our markets and exceeding our customers’ expectations for the finest in banking products and service. Merrie Spaeth, president of Spaeth Communications, Inc. and a nationally known consultant on organizational communications, leads a management training class for First Financial Bankshares. Christina Randle, author, productivity expert and CEO of The Effective Edge, trains managers at First Financial Bankshares. F F I NF F I N UNIVERSITY UNIVERSITY Developing future leaders is key to our company’s continued success in the years ahead. One way we prepare our future leaders is through FFIN University, which takes a select group of bank officers through a year-long inten- sive training program. First launched in 2008, FFIN University clearly underscores the Company’s commitment to main- taining its tradition of excellence in banking, trust services and customer service. Participants in FFIN University learn from both senior leaders and outstanding guest speakers on topics that range from time management to com- munication skills. Graduates of FFIN University are ready to assume key senior management positions in our company. They will help maintain the Company’s long tradition as a successful, profitable, community- based bank. 5 BACK ROW (L-R): KATHY BUSHNELL (First Technology Services), ISABEL MONTOYA (First Technology Services), IRMA ZIPP (Stephenville), MARY JO SORGE (Abilene), MELANIE BEARD (Granbury), ESTHER BILBY (Bridgeport), SANDRA HOLT (Abilene) FRONT ROW (L - R ): TRISHA HILDEBRAND (San Angelo), MARCELLA JIMENEZ (Mineral Wells), JANET FLYNT ( Weatherford), MELISSA JACQUES (Sweetwater), LEANN BAUGH ( Trust - Stephenville), STEVE GILBERT (Hereford), STEPHANIE LOPEZ (Eastland), LISA ROYE (Cleburne) Banking is all about relationships and working with customers one-on-one. That’s why, at First Financial Bankshares, our Customer Service First program is one of our highest priorities. Our goal is simple – to provide customer service that is second to none. Achieving that goal involves all employees and requires a sharp focus. It begins with our new employee orientation program and continues through our FFIN University for senior leaders. Instilling a culture of exceptional customer service is no accident. We encourage employees through a variety of initiatives, including recognizing employees who go beyond the norm for customers with “WOW” awards and giving Star Cards to employees who are nominated by fellow employees for exceptional customer service. Our top recognition program for employees is the Shining Star Award. Twice each year, managers select employees who have consistently demonstrated superior customer service. Shining Star Award winners and their spouses are hosted at the Company’s headquarters in Abilene for a special recognition ceremony, highlighted by a dinner with our presidents and management. ISABEL MONTOYA, First Technology Services, Abilene, is recognized as a Shining Star by SCOT T DUESER, President & CEO, First Financial Bankshares. 6 First Financial has the technology infrastructure and tools in place to provide first-rate modern banking services today and to meet future customer needs as we continue to grow. The Company’s technology supports our goal of providing exceptional customer service. Our system of customer call centers provides the same level of prompt and courteous service on the phone that customers are accustomed to receiving in our branches. Calls are answered by a person - not by voice mail - and customers immediately get helpful answers to questions about their checking and savings accounts, debit card transactions, business transactions and online banking. We created excitement among our customers in late 2009 by introducing a new custom-designed debit card program. Customers may choose from more than 130 card designs, many of which include logos and colors for local high schools or universities. To date, more than 33,000 custom cards have been printed. In 2010, we plan to go a step further and let customers create personalized debit cards using their own photos. Selected Financial Data IN THOUSANDS (EXCEPT PER SHARE DATA) YEAR-END TOTAL ASSETS EQUITY INCOME PER SHARE PER SHARE AND SPLITS PER SHARE PER SHARE SHAREHOLDERS’ NET EARNINGS DIVIDENDS DIVIDENDS BOOK VALUE MARKET VALUE BASIC CASH STOCK YEAR-END YEAR-END 2009 $3,279,456 $ 415,702 $ 53,797 $2.58 $1.36 – $ 19.96 $ 54.23 2008 3,212,385 368,782 53,164 2.56 1.34 – 17.73 55.21 2007 3,070,309 335,495 49,490 2.38 1.26 – 16.16 37.65 2006 2,850,165 300,901 46,029 2.22 1.18 – 14.51 41.86 2005 2,733,827 276,276 44,023 2.13 1.10 4/3 split 13.34 35.06 2004 2,315,224 265,545 39,171 1.90 1.00 – 12.84 33.61 2003 2,092,571 251,487 35,305 1.71 0.91 5/4 split 12.19 30.84 2002 1,993,183 238,768 33,953 1.65 0.81 – 11.59 22.80 2001 1,929,694 213,654 29,355 1.43 0.70 5/4 split 10.40 18.06 2000 1,753,814 196,121 28,316 1.37 0.62 – 9.56 15.09 GROWTH RATE 6.65% 8.81% 7.67% 7.60% 9.68% – 8.78% 13.90% TEN-YEAR COMPOUND Adjusted for stock dividends and splits. 2009 COMMON STOCK MARKET VALUE 2008 COMMON STOCK MARKET VALUE AND DIVIDEND DATA AND DIVIDEND DATA QUARTER HIGH LOW CLOSE DIVIDENDS QUARTER HIGH LOW CLOSE DIVIDENDS FOURTH $ 55.94 $ 47.86 $ 54.23 $ 0.34 FOURTH $ 56.32 $ 41.30 $ 55.21 $ 0.34 THIRD 54.50 47.95 49.46 0.34 THIRD 67.00 43.01 51.88 0.34 SECOND 51.62 46.51 50.36 0.34 SECOND 47.12 40.43 45.81 0.34 FIRST 55.70 36.49 48.17 0.34 FIRST 42.16 35.49 40.98 0.32 NET INCOME GROWTH (IN THOUSANDS) $3,125,552 $3,064,029 2.01% RETURN ON AVERAGE EQUITY $ 6M 12M 18M 24M 30M 36M 42M 48M 54M $3,279,456 $3,212,385 0% 3% 6% 9% 12% 15% 18% EFFICIENCY RATIO Financial Highlights IN THOUSANDS (EXCEPT PER SHARE DATA) FOR THE YEAR 2009 2008 CHANGES Net Income Basic Earnings per Share Dividends Declared Dividends per Share $53,797 2.58 28,311 1.36 $53,164 2.56 27,861 1.34 1.19% 0.78% 1.62% 1.49% Averages for the Year Shareholders’ Equity Assets Securities Loans Deposits At Year-End Assets Securities Loans Deposits Shareholders’ Equity Book Value per Share 1,308,110 1,494,876 2,513,387 394,812 1,285,377 1,514,369 2,684,757 415,702 19.96 1,185,303 10.36% 1,537,027 2,516,576 (2.74%) (0.13%) 348,271 13.36% 1,318,406 1,566,143 2,582,753 368,782 17.73 2.09% (2.51%) (3.31%) 3.95% 12.72% 12.58% 2.06% Trust Assets 1,664,174 1,630,560 Key Ratios Return on Average Assets Return on Average Equity Equity/Assets at Year-End Efficiency 1.72 % 13.63 % 12.68 % 50.11 % 1.74 % 15.27 % 11.48 % 50.76 % 09 08 07 06 05 1.72% 1.74% 1.72% 1.68% 1.80% 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 $53,797 $53,164 $49,490 $46,029 $44,023 13.63% 15.27% 15.87% 16.20% 16.17% 50.11% 50.76% 52.83% 53.49% 52.48% 4.80% 4.67% 4.43% 4.46% 4.49% RETURN ON AVERAGE ASSETS NET INTEREST MARGIN 0% 10% 20% 30% 40% 50% 60% 0% .25% . 50% .75% 1.00% 1.25% 1.50% 1.75% 2.00% 0% 1% 2% 3% 4% 5% 9 TAYLO R , C A L L A H A N & S H AC K E L F O R D CO U N T I E S D E P O S I T M A R K E T S H A R E 2651 JBS Parkway, Bldg. 4, Suite E Odessa, Texas 79762 ABILENE CLYDE MORAN ALBANY ODESSA M A I N O F F I C E 400 Pine LO C AT I O N S 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 132 Hill Street D I R E C TO R S F. Scott Dueser Chairman of the Board Ron Butler President and Chief Executive Officer Tucker S. Bridwell President Mansefeldt Investment Corp. Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Copeland President Joe Crawford President Abilene Aero, Inc. Mike Denny President ( 3 2 5 ) 6 2 7 - 7 2 0 0 Abilene, Texas 79601 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 Albany, Texas 76430 Murray Edwards Principal, The Edwards Group Allan D. Frizzell Executive Vice President Enrich Oil Corporation Stanley Morris, Jr. Investments Kenneth T. Murphy First Financial Bankshares, Inc. Dian Graves Stai Chair Mansefeldt Investment Corp. Director Leigh Taliaferro, M.D. Physician ADVISORY Steve Suttle J. Michael Alexander President James M. Alexander & Co. Tim Lancaster Chairman, CEO and President Hendrick Health System Shelton Family Foundation Dian Graves Owen Foundation R O N B U T L E R Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Ron Butler President and Chief Executive Officer Tom Boecking Executive Vice President South Branch Ben McAnally Executive Vice President Treasury Management John Prince Executive Vice President Personal Loans James Robinson Executive Vice President Retail Marketing and Business Development Marelyn Shedd Executive Vice President Commercial Loans Charles E. Tennesson Executive Vice President, Chief Financial Officer and Cashier Batjer and Associates McMahon Surovik Suttle, P.C. IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $1,087,452 419,928 879,258 99,941 19,587 1.88% 45.99% DEC. 31, 2008 $1,105,537 458,797 843,375 82,778 17,652 1.76% 46.72% CLEBURNE BURLESON ALVARADO MIDLOTHIAN M A I N O F F I C E ( 8 1 7 ) 5 5 6 - 5 0 0 0 o r ( 8 0 0 ) 2 2 6 - 2 9 4 0 403 N. Main Cleburne, Texas 76033 LO C AT I O N S 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 J O H N S O N CO U N T Y & C I T Y O F M I D LOT H I A N D E P O S I T M A R K E T S H A R E M AT T R E YN O L D S Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Craig Beskow Executive Vice President and Cashier Steve Davis Executive Vice President Brad Evans Executive Vice President Derek Schmidt Executive Vice President Cynthia Allen Senior Vice President Kathy Armstrong Senior Vice President Lisa Roye Senior Vice President Darlene Walker Senior Vice President D I R E C TO R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Albert A. Archer Vice Chairman Walls Industries, Inc. Ray Beavers General Manager & CEO United Cooperative Services Byron Black Investments F. Scott Dueser First Financial Bankshares, Inc. Tim Lyness Lyness Construction, LP George Marti Marti Enterprises Dr. Joe Martin Cleburne Eye Clinic IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 273,598 137,043 247,992 23,697 3,886 1.57% 53.68% DEC. 31, 2008 $ 244,647 138,127 221,629 21,126 4,199 1.74% 53.95% 11 EASTLAND RANGER RISING STAR M A I N O F F I C E 201 E. Main LO C AT I O N S 106 Main 206 West College ( 2 5 4 ) 6 2 9 - 6 1 0 0 Eastland, Texas 76448 Ranger, Texas 76470 Rising Star, Texas 76471 T H O M A S M . O ’ N E I L Pre s i d e n t a n d C E O E A S T L A N D CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer Doug Crawley Rancher 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 M.D. White, Jr. President and Owner Ace Hardware Store, Eastland/Cisco S E N I O R O F F I C E R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer L.V. Coffee Lending Terry Trout Cashier Senior Vice President and Executive Vice President Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,092 63,758 143,956 18,712 2,511 1.79% 49.74% DEC. 31, 2008 $ 153,029 58,201 127,132 17,146 2,412 1.66% 49.59% 4 4 8 10 12 STAFF EDUCATIONMANAGEMENTDEVELOPMENTCUSTOMER SERVICETECHNOLOGY 39% 15% 48% N U M B E R O N E I N T H E N A T I O N in the $3 billion-plus publicly traded category.* Bank Director magazine, in its first-quarter 2010 issue, ranked First Financial Bankshares We’re proud of our company’s 120-year histor y of financial strength and service to our customers and communities in Texas. But First Financial Bankshares isn’t looking back or resting on our past success. Our focus is on the future. Today, we are taking steps we believe are necessary to ensure that our company remains in the forefront of providing the best banking, trust, wealth management and other financial services, while continuing to build deep and enduring relationships with our valued customers. Relationships built on trust, integrity and exceptional customer service have made our company what it is today. For our shareholders, we remain committed to managing First Financial Bankshares in a safe, sound and profitable manner, with a goal of strategically and prudently growing the Company and expanding into new markets. The Letter to Shareholders on pages 2 and 3 of this annual report gives you more insights into how our company performed in 2009 and our plans for 2010. The photo spread and text on pages 4-7 demonstrate how we are working to secure the Company’s future for the benefit of our customers, employees and shareholders – and the Texas communities we serve. For more information, visit our Web site at http://www.ffin.com. * Based on measurement criteria and analysis compiled by Sandler O’Neill + Partners, L.P., a New York-based investment banking firm that specializes in the financial services industry. Published in Bank Director magazine, 1st quarter 2010. First Financial Bank 325-627-7200 First Financial Bank 817-556-5000 First Financial Bank 254-629-6100 First Financial Bank 806-363-8200 ABILENE CLYDE MORAN ALBANY ODESSA CLEBURNE BURLESON ALVARADO MIDLOTHIAN EASTLAND RANGER RISING STAR HEREFORD , TM . A Family of Community Banks SM First Financial Bank STEPHENVILLE First Financial Bank 940-327-5400 First Financial Bank 325-659-5900 First Financial Bank 817-410-2915 940-683-8700 254-965-5036 817-573-6900 First Financial Bank 325-235-6600 First Financial Bank 817-596-0307 MINERAL WELLS SAN ANGELO SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR GRANBURY GLEN ROSE ACTON SWEET WATER ROBY TRENT MERKEL WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH BANKS TRUST OFFICE LOCATIONS D E A R S H A R E H O L D E R S In light of the recession and higher FDIC insurance premiums in 2009, I am very pleased that our company was able to deliver increased earnings for the 23rd consecutive year. While the national recession at first seemed to bypass Texas, it began moving into the state in the second part of 2008, bringing a decline in home sales and general economic activity and an increase in unemployment. These trends continued in 2009. On the plus side, our state continued to fare better than most of the rest of the country, and our geographic footprint—especially in our West Texas markets—remained stable. The stock market fluctuated greatly during the past two years. The NASDAQ Composite Index declined 41 percent in 2008 and then went back up 44 percent in 2009. Our stock went up 47 percent in 2008 and down 2 percent in 2009, closing at $54.23. We are pleased that our stock performed well for our stockholders during these years of economic turmoil. We continue to suspect that a “flight to safety”—favoring companies with strong balance sheets and a long record of conservative lending—may have played a role in our stock’s favorable performance. We are also pleased that in 2009, our company again received high rankings from leading banking publications such as the ABA Banking Journal and U.S. Banker. Additionally, in January of 2010, Bank Director magazine rated us No. 1 in the nation among publicly traded banks with $3 billion or more of assets. Being named No. 1 is like winning an Academy Award. Without question, this accomplishment is due to the direction of our Board, the dedication of our employees and the loyalty of our customers, who have kept us strong for 120 years. We accept this honor with great humility because we know that every day, we face a new set of challenges in the banking industry and must prove ourselves again and again. RESULTS FOR 2009 Net income grew 1.2 percent to $53.8 million from $53.2 million in 2008. Net interest income, the major source of our earnings, rose 4.3 percent to $129.2 million from $123.9 million. Our net interest margin (on a tax-equivalent basis) also increased, to 4.80 percent from 4.67 percent in 2008. The provision for loan losses for 2009 totaled $11.4 million, a 43.5 percent increase from $8.0 million in 2008. The larger provision was due to a higher level of net charge-offs and an increase in the allowance for loan losses. Noninterest income declined 1.7 percent to $48.6 million from $49.5 million. The decline was primarily due to a $692,000 drop in income from student loan sales as the Company exited the student loan program. Lower usage of overdraft privileges also contributed to the decrease in noninterest income. Noninterest expense was $94.0 million in 2009, up 2.6 percent from $91.6 million a year earlier. The largest increase in noninterest expense was in FDIC insurance premiums, which grew by $4.2 million, or 650.4 percent, after the FDIC raised premium rates as of January 1, 2009, and implemented a special assessment in June of that year. Nevertheless, we were able to improve our efficiency ratio, which expresses the share of revenues consumed by operating expenses, to 50.11 percent from 50.76 percent in 2008. Our bank presidents worked hard to maintain their net interest margins and reduce expenses. I could not be more pleased with their accomplishments, especially in light of the significant increase in FDIC insurance premiums. We again outperformed our peer group on several key financial metrics. Our return on average assets was 1.72 percent compared with a negative 0.21 percent for our peer group. Return on average equity was 13.63 percent versus a negative 2.59 percent for our peers. Our net interest margin of 4.80 percent on a tax-equivalent basis compared very favorably to our peer group’s margin of 3.48 percent. We also beat the peer group on the efficiency ratio—ours was 50.11 percent, while theirs was 69.53 percent. We ended the year with a strong balance sheet. Consolidated assets increased 2.1 percent to $3.28 billion from $3.21 billion at the end of 2008. Loans decreased 3.3 percent to $1.51 billion from $1.57 billion, primarily due to our exiting the student loan program. Total deposits grew 3.9 percent to $2.68 billion from $2.58 billion. Shareholders’ equity rose 12.7 percent to $415.7 million from $368.8 million. As the economy softened in Texas, our nonperforming assets increased to 1.46 percent of total loans and foreclosed assets from 0.80 percent at the end of 2008. Even with this increase, our nonperforming percentage was well below our peer group’s 5.07 percent. Net loan charge-offs for the year totaled $5.3 million at year-end 2009 versus $3.9 million at year-end 2008. The 2009 allowance for loan losses amounted to 1.82 percent of total loans. First Financial Trust & Asset Management Company also experienced growth last year. Total assets at year-end had a book value of $1.67 billion, a 2.1 percent increase from 2008, and a market value of $2.10 billion, an 11.7 percent increase. The Trust Company’s fee income, however, declined 3.8 percent to $9.1 million from $9.4 million. This subsidiary manages a large oil and gas portfolio, and the drop in its income was primarily due to a decline in oil and gas prices and in related fees on oil and gas income. The Trust Company opened its sixth office last year, in Odessa, Texas. We are encouraged by the number of clients who have opened trust accounts with us in Odessa and the potential for growth in the Permian Basin market. 2 GROWTH STRATEGIES We actively looked for acquisition opportunities during 2009, but the banks that we considered were overpriced in light of the economy or did not fit our company’s profile. Our plan is to continue pursuing acquisitions diligently. With our capitalization, stock price, cash position and experienced management team, we have what we need to take advantage of acquisition opportunities. In November, we announced plans to open bank branches in our two existing Trust Company offices in Fort Worth and Odessa, to complement trust services and serve customers in those markets. We have had frequent requests from customers for branches in these markets and are interested to see how this private bank branch concept will work. During the year, we achieved a long-term objective of bringing all of our banks under a common name to improve brand identity and marketing efficiencies. Hereford State Bank, San Angelo National Bank and Weatherford National Bank are now called First Financial Bank. All of our banks benefit from sharing the Company’s growing brand identity, and our customers benefit from being able to use our facilities throughout our market areas. However, in no way does the use of a common name change our practice of operating through ten community-based banks that are separately chartered, have their own local boards and management teams, and make decisions locally. We continue to be the “hometown bank” in our markets, with a tradition of playing a vital role in community life. WHAT’S AHEAD Besides looking for acquisitions, we plan to continue growing our mortgage market, trust services and treasury management services. We are encouraged by our recent growth that there will be good opportunities in these areas. Minimizing nonperforming assets will certainly be an objective, as it has been for the last several years. We do know that FDIC insurance premiums will continue to be high and that increased regulation proposed by Congress and various federal agencies will make our jobs more challenging and costly. Our hope is that the banking industry can mitigate much of the pending regulatory legislation by educating Washington that community banks have not caused today’s economic problems and are already over-regulated. We are committed to providing outstanding service to our customers, our communities and our nation by making every good loan we can to help our economy grow and prosper. PERSONNEL CHANGES J. V. Martin retired at the end of the year as CEO of First Financial Bank, Sweetwater. Kirby Andrews, President, assumed the additional role of CEO there. J. V. will continue to serve as the Sweetwater bank’s Chairman of the Board. He will also provide consulting services to the holding company. Additionally, Senior Chairman Kenneth T. Murphy will retire from the First Financial Bankshares Board in conjunction with our Annual Shareholders’ Meeting in April. He has served our company with distinction for 39 years, holding the positions of President, First Financial Bank, Abilene; and Executive Vice President, President, Chief Executive Officer, Chairman and Senior Chairman of First Financial Bankshares, Inc. Through those years, he has also made many civic and professional contributions, including serving on the Board of the Federal Reserve Bank of Dallas and serving as Chairman of the Board of the Texas Bankers Association. When Ken joined the bank in 1971, the Company had total assets of $87.7 million and net income of $806,000. By the end of 2009, we had total assets of $3.28 billion and net earnings of $53.8 million. During Ken’s tenure with the Company, we have experienced great success. Customers, stockholders and communities have certainly benefited from Ken’s leadership and counsel, and we thank him for his fine service. We are pleased that he will continue to maintain an office in the First Financial Bank (Abilene) building and will be available to management for consultation. It is our pleasure to announce that Steven L. Beal, retired President and Chief Operating Officer of Concho Resources Inc., has accepted nomination for election as a Director of the Company at our Annual Shareholders’ Meeting in April. Steve was one of the founders of Concho, an independent oil and natural gas company, and continues to be a Director on its Board. Prior to being at Concho, he was Senior Vice President and Chief Financial Officer of Parker & Parsley Petroleum Company, which is now Pioneer National Resources. Before that, he was an audit professional with the accounting firm of Price Waterhouse Coopers. He is a 1981 graduate of The University of Texas with a degree in accounting. Steve has been involved civically and professionally with the United Way of Midland, Permian Basin Oil & Gas Association, Independent Petroleum Association of America and the New Mexico Oil & Gas Association. He has been on the Board of Directors of Midland Christian School and the Midland/Odessa Symphony. Most recently, he was a partner with the Early School District to build an indoor practice facility for use by the students and teams of Early High School. Steve and his wife, Teresa, live on their ranch in Brownwood, Texas. These are challenging times for the national economy and for the banking business. First Financial has the benefit of a long-term perspective. In our 120-year history, we’ve endured numerous recessions, the Great Depression, the Texas oil bust of the 1980s and other obstacles. We cannot predict the duration of the current economic malaise, but we remain optimistic about the long-term future of our state and nation, and especially our Texas markets. Financially and operationally, we believe our company has never been stronger, and our best days are still ahead of us. With our eyes on the future, we are making a strong investment in the training of all our employees, including our next generation of leaders, to ensure that we continue to provide excellence in banking, trust services, wealth management and customer service. We encourage you to read more about our training and customer service programs in the pages that follow. Banking is our business, but all of us on the management team never lose sight of the fact that we work for you, our shareholders. We will continue to manage the Company for profitability and growth in 2010 and beyond. F. Scott Dueser Chairman, President and CEO , TM . 3 W H A T M A K E S U S F I R S T ? Friendly. Knowledgeable. Helpful. These are words our customers use to describe First Financial Bank’s employees. Well-informed and well-motivated employees are essential to keeping First Financial Bank prepared for the future. Training our employees to provide the finest banking, financial solutions and exceptional customer service begins the day new employees are hired. Every new employee at First Financial Bank goes through a classroom training program. This orientation is designed not only to teach new employees about the bank’s outstanding portfolio of banking products and services, but also introduces them to the Company’s unique culture, which emphasizes putting customers’ needs first and going the extra mile to provide exceptional service and support. New employees learn skills from how to open a new account to the essentials of good business etiquette. New employee orientation is just the start. Our commitment to training and professional development for our employees is ongoing. All employees participate in compliance training, most taking 12 to 24 courses per year in all aspects of banking, customer service and financial services. We offer our employees both online, “desktop” training modules and more traditional classroom training. Regardless of the format, the goal is always the same – to help our employees continue the Company’s proud tradition of being a leading bank in our markets and exceeding our customers’ expectations for the finest in banking products and service. Merrie Spaeth, president of Spaeth Communications, Inc. and a nationally known consultant on organizational communications, leads a management training class for First Financial Bankshares. Christina Randle, author, productivity expert and CEO of The Effective Edge, trains managers at First Financial Bankshares. F F I NF F I N UNIVERSITY UNIVERSITY Developing future leaders is key to our company’s continued success in the years ahead. One way we prepare our future leaders is through FFIN University, which takes a select group of bank officers through a year-long inten- sive training program. First launched in 2008, FFIN University clearly underscores the Company’s commitment to main- taining its tradition of excellence in banking, trust services and customer service. Participants in FFIN University learn from both senior leaders and outstanding guest speakers on topics that range from time management to com- munication skills. Graduates of FFIN University are ready to assume key senior management positions in our company. They will help maintain the Company’s long tradition as a successful, profitable, community- based bank. 5 BACK ROW (L-R): KATHY BUSHNELL (First Technology Services), ISABEL MONTOYA (First Technology Services), IRMA ZIPP (Stephenville), MARY JO SORGE (Abilene), MELANIE BEARD (Granbury), ESTHER BILBY (Bridgeport), SANDRA HOLT (Abilene) FRONT ROW (L - R ): TRISHA HILDEBRAND (San Angelo), MARCELLA JIMENEZ (Mineral Wells), JANET FLYNT ( Weatherford), MELISSA JACQUES (Sweetwater), LEANN BAUGH ( Trust - Stephenville), STEVE GILBERT (Hereford), STEPHANIE LOPEZ (Eastland), LISA ROYE (Cleburne) Banking is all about relationships and working with customers one-on-one. That’s why, at First Financial Bankshares, our Customer Service First program is one of our highest priorities. Our goal is simple – to provide customer service that is second to none. Achieving that goal involves all employees and requires a sharp focus. It begins with our new employee orientation program and continues through our FFIN University for senior leaders. Instilling a culture of exceptional customer service is no accident. We encourage employees through a variety of initiatives, including recognizing employees who go beyond the norm for customers with “WOW” awards and giving Star Cards to employees who are nominated by fellow employees for exceptional customer service. Our top recognition program for employees is the Shining Star Award. Twice each year, managers select employees who have consistently demonstrated superior customer service. Shining Star Award winners and their spouses are hosted at the Company’s headquarters in Abilene for a special recognition ceremony, highlighted by a dinner with our presidents and management. ISABEL MONTOYA, First Technology Services, Abilene, is recognized as a Shining Star by SCOT T DUESER, President & CEO, First Financial Bankshares. 6 First Financial has the technology infrastructure and tools in place to provide first-rate modern banking services today and to meet future customer needs as we continue to grow. The Company’s technology supports our goal of providing exceptional customer service. Our system of customer call centers provides the same level of prompt and courteous service on the phone that customers are accustomed to receiving in our branches. Calls are answered by a person - not by voice mail - and customers immediately get helpful answers to questions about their checking and savings accounts, debit card transactions, business transactions and online banking. We created excitement among our customers in late 2009 by introducing a new custom-designed debit card program. Customers may choose from more than 130 card designs, many of which include logos and colors for local high schools or universities. To date, more than 33,000 custom cards have been printed. In 2010, we plan to go a step further and let customers create personalized debit cards using their own photos. Selected Financial Data IN THOUSANDS (EXCEPT PER SHARE DATA) YEAR-END TOTAL ASSETS EQUITY INCOME PER SHARE PER SHARE AND SPLITS PER SHARE PER SHARE SHAREHOLDERS’ NET EARNINGS DIVIDENDS DIVIDENDS BOOK VALUE MARKET VALUE BASIC CASH STOCK YEAR-END YEAR-END 2009 $3,279,456 $ 415,702 $ 53,797 $2.58 $1.36 – $ 19.96 $ 54.23 2008 3,212,385 368,782 53,164 2.56 1.34 – 17.73 55.21 2007 3,070,309 335,495 49,490 2.38 1.26 – 16.16 37.65 2006 2,850,165 300,901 46,029 2.22 1.18 – 14.51 41.86 2005 2,733,827 276,276 44,023 2.13 1.10 4/3 split 13.34 35.06 2004 2,315,224 265,545 39,171 1.90 1.00 – 12.84 33.61 2003 2,092,571 251,487 35,305 1.71 0.91 5/4 split 12.19 30.84 2002 1,993,183 238,768 33,953 1.65 0.81 – 11.59 22.80 2001 1,929,694 213,654 29,355 1.43 0.70 5/4 split 10.40 18.06 2000 1,753,814 196,121 28,316 1.37 0.62 – 9.56 15.09 GROWTH RATE 6.65% 8.81% 7.67% 7.60% 9.68% – 8.78% 13.90% TEN-YEAR COMPOUND Adjusted for stock dividends and splits. 2009 COMMON STOCK MARKET VALUE 2008 COMMON STOCK MARKET VALUE AND DIVIDEND DATA AND DIVIDEND DATA QUARTER HIGH LOW CLOSE DIVIDENDS QUARTER HIGH LOW CLOSE DIVIDENDS FOURTH $ 55.94 $ 47.86 $ 54.23 $ 0.34 FOURTH $ 56.32 $ 41.30 $ 55.21 $ 0.34 THIRD 54.50 47.95 49.46 0.34 THIRD 67.00 43.01 51.88 0.34 SECOND 51.62 46.51 50.36 0.34 SECOND 47.12 40.43 45.81 0.34 FIRST 55.70 36.49 48.17 0.34 FIRST 42.16 35.49 40.98 0.32 NET INCOME GROWTH (IN THOUSANDS) $3,125,552 $3,064,029 2.01% RETURN ON AVERAGE EQUITY $ 6M 12M 18M 24M 30M 36M 42M 48M 54M $3,279,456 $3,212,385 0% 3% 6% 9% 12% 15% 18% EFFICIENCY RATIO Financial Highlights IN THOUSANDS (EXCEPT PER SHARE DATA) FOR THE YEAR 2009 2008 CHANGES Net Income Basic Earnings per Share Dividends Declared Dividends per Share $53,797 2.58 28,311 1.36 $53,164 2.56 27,861 1.34 1.19% 0.78% 1.62% 1.49% Averages for the Year Shareholders’ Equity Assets Securities Loans Deposits At Year-End Assets Securities Loans Deposits Shareholders’ Equity Book Value per Share 1,308,110 1,494,876 2,513,387 394,812 1,285,377 1,514,369 2,684,757 415,702 19.96 1,185,303 10.36% 1,537,027 2,516,576 (2.74%) (0.13%) 348,271 13.36% 1,318,406 1,566,143 2,582,753 368,782 17.73 2.09% (2.51%) (3.31%) 3.95% 12.72% 12.58% 2.06% Trust Assets 1,664,174 1,630,560 Key Ratios Return on Average Assets Return on Average Equity Equity/Assets at Year-End Efficiency 1.72 % 13.63 % 12.68 % 50.11 % 1.74 % 15.27 % 11.48 % 50.76 % 09 08 07 06 05 1.72% 1.74% 1.72% 1.68% 1.80% 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 $53,797 $53,164 $49,490 $46,029 $44,023 13.63% 15.27% 15.87% 16.20% 16.17% 50.11% 50.76% 52.83% 53.49% 52.48% 4.80% 4.67% 4.43% 4.46% 4.49% RETURN ON AVERAGE ASSETS NET INTEREST MARGIN 0% 10% 20% 30% 40% 50% 60% 0% .25% . 50% .75% 1.00% 1.25% 1.50% 1.75% 2.00% 0% 1% 2% 3% 4% 5% 9 TAYLO R , C A L L A H A N & S H AC K E L F O R D CO U N T I E S D E P O S I T M A R K E T S H A R E 2651 JBS Parkway, Bldg. 4, Suite E Odessa, Texas 79762 ABILENE CLYDE MORAN ALBANY ODESSA M A I N O F F I C E 400 Pine LO C AT I O N S 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 132 Hill Street D I R E C TO R S F. Scott Dueser Chairman of the Board Ron Butler President and Chief Executive Officer Tucker S. Bridwell President Mansefeldt Investment Corp. Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Copeland President Joe Crawford President Abilene Aero, Inc. Mike Denny President ( 3 2 5 ) 6 2 7 - 7 2 0 0 Abilene, Texas 79601 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 Albany, Texas 76430 Murray Edwards Principal, The Edwards Group Allan D. Frizzell Executive Vice President Enrich Oil Corporation Stanley Morris, Jr. Investments Kenneth T. Murphy First Financial Bankshares, Inc. Dian Graves Stai Chair Mansefeldt Investment Corp. Director Leigh Taliaferro, M.D. Physician ADVISORY Steve Suttle J. Michael Alexander President James M. Alexander & Co. Tim Lancaster Chairman, CEO and President Hendrick Health System Shelton Family Foundation Dian Graves Owen Foundation R O N B U T L E R Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Ron Butler President and Chief Executive Officer Tom Boecking Executive Vice President South Branch Ben McAnally Executive Vice President Treasury Management John Prince Executive Vice President Personal Loans James Robinson Executive Vice President Retail Marketing and Business Development Marelyn Shedd Executive Vice President Commercial Loans Charles E. Tennesson Executive Vice President, Chief Financial Officer and Cashier Batjer and Associates McMahon Surovik Suttle, P.C. IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $1,087,452 419,928 879,258 99,941 19,587 1.88% 45.99% DEC. 31, 2008 $1,105,537 458,797 843,375 82,778 17,652 1.76% 46.72% CLEBURNE BURLESON ALVARADO MIDLOTHIAN M A I N O F F I C E ( 8 1 7 ) 5 5 6 - 5 0 0 0 o r ( 8 0 0 ) 2 2 6 - 2 9 4 0 403 N. Main Cleburne, Texas 76033 LO C AT I O N S 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 J O H N S O N CO U N T Y & C I T Y O F M I D LOT H I A N D E P O S I T M A R K E T S H A R E M AT T R E YN O L D S Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Craig Beskow Executive Vice President and Cashier Steve Davis Executive Vice President Brad Evans Executive Vice President Derek Schmidt Executive Vice President Cynthia Allen Senior Vice President Kathy Armstrong Senior Vice President Lisa Roye Senior Vice President Darlene Walker Senior Vice President D I R E C TO R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Albert A. Archer Vice Chairman Walls Industries, Inc. Ray Beavers General Manager & CEO United Cooperative Services Byron Black Investments F. Scott Dueser First Financial Bankshares, Inc. Tim Lyness Lyness Construction, LP George Marti Marti Enterprises Dr. Joe Martin Cleburne Eye Clinic IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 273,598 137,043 247,992 23,697 3,886 1.57% 53.68% DEC. 31, 2008 $ 244,647 138,127 221,629 21,126 4,199 1.74% 53.95% 11 EASTLAND RANGER RISING STAR M A I N O F F I C E 201 E. Main LO C AT I O N S 106 Main 206 West College ( 2 5 4 ) 6 2 9 - 6 1 0 0 Eastland, Texas 76448 Ranger, Texas 76470 Rising Star, Texas 76471 T H O M A S M . O ’ N E I L Pre s i d e n t a n d C E O E A S T L A N D CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer Doug Crawley Rancher 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 M.D. White, Jr. President and Owner Ace Hardware Store, Eastland/Cisco S E N I O R O F F I C E R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer L.V. Coffee Lending Terry Trout Cashier Senior Vice President and Executive Vice President Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,092 63,758 143,956 18,712 2,511 1.79% 49.74% DEC. 31, 2008 $ 153,029 58,201 127,132 17,146 2,412 1.66% 49.59% 4 4 8 10 12 STAFF EDUCATIONMANAGEMENTDEVELOPMENTCUSTOMER SERVICETECHNOLOGY 39% 15% 48% N U M B E R O N E I N T H E N A T I O N in the $3 billion-plus publicly traded category.* Bank Director magazine, in its first-quarter 2010 issue, ranked First Financial Bankshares We’re proud of our company’s 120-year histor y of financial strength and service to our customers and communities in Texas. But First Financial Bankshares isn’t looking back or resting on our past success. Our focus is on the future. Today, we are taking steps we believe are necessary to ensure that our company remains in the forefront of providing the best banking, trust, wealth management and other financial services, while continuing to build deep and enduring relationships with our valued customers. Relationships built on trust, integrity and exceptional customer service have made our company what it is today. For our shareholders, we remain committed to managing First Financial Bankshares in a safe, sound and profitable manner, with a goal of strategically and prudently growing the Company and expanding into new markets. The Letter to Shareholders on pages 2 and 3 of this annual report gives you more insights into how our company performed in 2009 and our plans for 2010. The photo spread and text on pages 4-7 demonstrate how we are working to secure the Company’s future for the benefit of our customers, employees and shareholders – and the Texas communities we serve. For more information, visit our Web site at http://www.ffin.com. * Based on measurement criteria and analysis compiled by Sandler O’Neill + Partners, L.P., a New York-based investment banking firm that specializes in the financial services industry. Published in Bank Director magazine, 1st quarter 2010. First Financial Bank 325-627-7200 First Financial Bank 817-556-5000 First Financial Bank 254-629-6100 First Financial Bank 806-363-8200 ABILENE CLYDE MORAN ALBANY ODESSA CLEBURNE BURLESON ALVARADO MIDLOTHIAN EASTLAND RANGER RISING STAR HEREFORD , TM . A Family of Community Banks SM First Financial Bank STEPHENVILLE First Financial Bank 940-327-5400 First Financial Bank 325-659-5900 First Financial Bank 817-410-2915 940-683-8700 254-965-5036 817-573-6900 First Financial Bank 325-235-6600 First Financial Bank 817-596-0307 MINERAL WELLS SAN ANGELO SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR GRANBURY GLEN ROSE ACTON SWEET WATER ROBY TRENT MERKEL WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH BANKS TRUST OFFICE LOCATIONS D E A R S H A R E H O L D E R S In light of the recession and higher FDIC insurance premiums in 2009, I am very pleased that our company was able to deliver increased earnings for the 23rd consecutive year. While the national recession at first seemed to bypass Texas, it began moving into the state in the second part of 2008, bringing a decline in home sales and general economic activity and an increase in unemployment. These trends continued in 2009. On the plus side, our state continued to fare better than most of the rest of the country, and our geographic footprint—especially in our West Texas markets—remained stable. The stock market fluctuated greatly during the past two years. The NASDAQ Composite Index declined 41 percent in 2008 and then went back up 44 percent in 2009. Our stock went up 47 percent in 2008 and down 2 percent in 2009, closing at $54.23. We are pleased that our stock performed well for our stockholders during these years of economic turmoil. We continue to suspect that a “flight to safety”—favoring companies with strong balance sheets and a long record of conservative lending—may have played a role in our stock’s favorable performance. We are also pleased that in 2009, our company again received high rankings from leading banking publications such as the ABA Banking Journal and U.S. Banker. Additionally, in January of 2010, Bank Director magazine rated us No. 1 in the nation among publicly traded banks with $3 billion or more of assets. Being named No. 1 is like winning an Academy Award. Without question, this accomplishment is due to the direction of our Board, the dedication of our employees and the loyalty of our customers, who have kept us strong for 120 years. We accept this honor with great humility because we know that every day, we face a new set of challenges in the banking industry and must prove ourselves again and again. RESULTS FOR 2009 Net income grew 1.2 percent to $53.8 million from $53.2 million in 2008. Net interest income, the major source of our earnings, rose 4.3 percent to $129.2 million from $123.9 million. Our net interest margin (on a tax-equivalent basis) also increased, to 4.80 percent from 4.67 percent in 2008. The provision for loan losses for 2009 totaled $11.4 million, a 43.5 percent increase from $8.0 million in 2008. The larger provision was due to a higher level of net charge-offs and an increase in the allowance for loan losses. Noninterest income declined 1.7 percent to $48.6 million from $49.5 million. The decline was primarily due to a $692,000 drop in income from student loan sales as the Company exited the student loan program. Lower usage of overdraft privileges also contributed to the decrease in noninterest income. Noninterest expense was $94.0 million in 2009, up 2.6 percent from $91.6 million a year earlier. The largest increase in noninterest expense was in FDIC insurance premiums, which grew by $4.2 million, or 650.4 percent, after the FDIC raised premium rates as of January 1, 2009, and implemented a special assessment in June of that year. Nevertheless, we were able to improve our efficiency ratio, which expresses the share of revenues consumed by operating expenses, to 50.11 percent from 50.76 percent in 2008. Our bank presidents worked hard to maintain their net interest margins and reduce expenses. I could not be more pleased with their accomplishments, especially in light of the significant increase in FDIC insurance premiums. We again outperformed our peer group on several key financial metrics. Our return on average assets was 1.72 percent compared with a negative 0.21 percent for our peer group. Return on average equity was 13.63 percent versus a negative 2.59 percent for our peers. Our net interest margin of 4.80 percent on a tax-equivalent basis compared very favorably to our peer group’s margin of 3.48 percent. We also beat the peer group on the efficiency ratio—ours was 50.11 percent, while theirs was 69.53 percent. We ended the year with a strong balance sheet. Consolidated assets increased 2.1 percent to $3.28 billion from $3.21 billion at the end of 2008. Loans decreased 3.3 percent to $1.51 billion from $1.57 billion, primarily due to our exiting the student loan program. Total deposits grew 3.9 percent to $2.68 billion from $2.58 billion. Shareholders’ equity rose 12.7 percent to $415.7 million from $368.8 million. As the economy softened in Texas, our nonperforming assets increased to 1.46 percent of total loans and foreclosed assets from 0.80 percent at the end of 2008. Even with this increase, our nonperforming percentage was well below our peer group’s 5.07 percent. Net loan charge-offs for the year totaled $5.3 million at year-end 2009 versus $3.9 million at year-end 2008. The 2009 allowance for loan losses amounted to 1.82 percent of total loans. First Financial Trust & Asset Management Company also experienced growth last year. Total assets at year-end had a book value of $1.67 billion, a 2.1 percent increase from 2008, and a market value of $2.10 billion, an 11.7 percent increase. The Trust Company’s fee income, however, declined 3.8 percent to $9.1 million from $9.4 million. This subsidiary manages a large oil and gas portfolio, and the drop in its income was primarily due to a decline in oil and gas prices and in related fees on oil and gas income. The Trust Company opened its sixth office last year, in Odessa, Texas. We are encouraged by the number of clients who have opened trust accounts with us in Odessa and the potential for growth in the Permian Basin market. 2 GROWTH STRATEGIES We actively looked for acquisition opportunities during 2009, but the banks that we considered were overpriced in light of the economy or did not fit our company’s profile. Our plan is to continue pursuing acquisitions diligently. With our capitalization, stock price, cash position and experienced management team, we have what we need to take advantage of acquisition opportunities. In November, we announced plans to open bank branches in our two existing Trust Company offices in Fort Worth and Odessa, to complement trust services and serve customers in those markets. We have had frequent requests from customers for branches in these markets and are interested to see how this private bank branch concept will work. During the year, we achieved a long-term objective of bringing all of our banks under a common name to improve brand identity and marketing efficiencies. Hereford State Bank, San Angelo National Bank and Weatherford National Bank are now called First Financial Bank. All of our banks benefit from sharing the Company’s growing brand identity, and our customers benefit from being able to use our facilities throughout our market areas. However, in no way does the use of a common name change our practice of operating through ten community-based banks that are separately chartered, have their own local boards and management teams, and make decisions locally. We continue to be the “hometown bank” in our markets, with a tradition of playing a vital role in community life. WHAT’S AHEAD Besides looking for acquisitions, we plan to continue growing our mortgage market, trust services and treasury management services. We are encouraged by our recent growth that there will be good opportunities in these areas. Minimizing nonperforming assets will certainly be an objective, as it has been for the last several years. We do know that FDIC insurance premiums will continue to be high and that increased regulation proposed by Congress and various federal agencies will make our jobs more challenging and costly. Our hope is that the banking industry can mitigate much of the pending regulatory legislation by educating Washington that community banks have not caused today’s economic problems and are already over-regulated. We are committed to providing outstanding service to our customers, our communities and our nation by making every good loan we can to help our economy grow and prosper. PERSONNEL CHANGES J. V. Martin retired at the end of the year as CEO of First Financial Bank, Sweetwater. Kirby Andrews, President, assumed the additional role of CEO there. J. V. will continue to serve as the Sweetwater bank’s Chairman of the Board. He will also provide consulting services to the holding company. Additionally, Senior Chairman Kenneth T. Murphy will retire from the First Financial Bankshares Board in conjunction with our Annual Shareholders’ Meeting in April. He has served our company with distinction for 39 years, holding the positions of President, First Financial Bank, Abilene; and Executive Vice President, President, Chief Executive Officer, Chairman and Senior Chairman of First Financial Bankshares, Inc. Through those years, he has also made many civic and professional contributions, including serving on the Board of the Federal Reserve Bank of Dallas and serving as Chairman of the Board of the Texas Bankers Association. When Ken joined the bank in 1971, the Company had total assets of $87.7 million and net income of $806,000. By the end of 2009, we had total assets of $3.28 billion and net earnings of $53.8 million. During Ken’s tenure with the Company, we have experienced great success. Customers, stockholders and communities have certainly benefited from Ken’s leadership and counsel, and we thank him for his fine service. We are pleased that he will continue to maintain an office in the First Financial Bank (Abilene) building and will be available to management for consultation. It is our pleasure to announce that Steven L. Beal, retired President and Chief Operating Officer of Concho Resources Inc., has accepted nomination for election as a Director of the Company at our Annual Shareholders’ Meeting in April. Steve was one of the founders of Concho, an independent oil and natural gas company, and continues to be a Director on its Board. Prior to being at Concho, he was Senior Vice President and Chief Financial Officer of Parker & Parsley Petroleum Company, which is now Pioneer National Resources. Before that, he was an audit professional with the accounting firm of Price Waterhouse Coopers. He is a 1981 graduate of The University of Texas with a degree in accounting. Steve has been involved civically and professionally with the United Way of Midland, Permian Basin Oil & Gas Association, Independent Petroleum Association of America and the New Mexico Oil & Gas Association. He has been on the Board of Directors of Midland Christian School and the Midland/Odessa Symphony. Most recently, he was a partner with the Early School District to build an indoor practice facility for use by the students and teams of Early High School. Steve and his wife, Teresa, live on their ranch in Brownwood, Texas. These are challenging times for the national economy and for the banking business. First Financial has the benefit of a long-term perspective. In our 120-year history, we’ve endured numerous recessions, the Great Depression, the Texas oil bust of the 1980s and other obstacles. We cannot predict the duration of the current economic malaise, but we remain optimistic about the long-term future of our state and nation, and especially our Texas markets. Financially and operationally, we believe our company has never been stronger, and our best days are still ahead of us. With our eyes on the future, we are making a strong investment in the training of all our employees, including our next generation of leaders, to ensure that we continue to provide excellence in banking, trust services, wealth management and customer service. We encourage you to read more about our training and customer service programs in the pages that follow. Banking is our business, but all of us on the management team never lose sight of the fact that we work for you, our shareholders. We will continue to manage the Company for profitability and growth in 2010 and beyond. F. Scott Dueser Chairman, President and CEO , TM . 3 W H A T M A K E S U S F I R S T ? Friendly. Knowledgeable. Helpful. These are words our customers use to describe First Financial Bank’s employees. Well-informed and well-motivated employees are essential to keeping First Financial Bank prepared for the future. Training our employees to provide the finest banking, financial solutions and exceptional customer service begins the day new employees are hired. Every new employee at First Financial Bank goes through a classroom training program. This orientation is designed not only to teach new employees about the bank’s outstanding portfolio of banking products and services, but also introduces them to the Company’s unique culture, which emphasizes putting customers’ needs first and going the extra mile to provide exceptional service and support. New employees learn skills from how to open a new account to the essentials of good business etiquette. New employee orientation is just the start. Our commitment to training and professional development for our employees is ongoing. All employees participate in compliance training, most taking 12 to 24 courses per year in all aspects of banking, customer service and financial services. We offer our employees both online, “desktop” training modules and more traditional classroom training. Regardless of the format, the goal is always the same – to help our employees continue the Company’s proud tradition of being a leading bank in our markets and exceeding our customers’ expectations for the finest in banking products and service. Merrie Spaeth, president of Spaeth Communications, Inc. and a nationally known consultant on organizational communications, leads a management training class for First Financial Bankshares. Christina Randle, author, productivity expert and CEO of The Effective Edge, trains managers at First Financial Bankshares. F F I NF F I N UNIVERSITY UNIVERSITY Developing future leaders is key to our company’s continued success in the years ahead. One way we prepare our future leaders is through FFIN University, which takes a select group of bank officers through a year-long inten- sive training program. First launched in 2008, FFIN University clearly underscores the Company’s commitment to main- taining its tradition of excellence in banking, trust services and customer service. Participants in FFIN University learn from both senior leaders and outstanding guest speakers on topics that range from time management to com- munication skills. Graduates of FFIN University are ready to assume key senior management positions in our company. They will help maintain the Company’s long tradition as a successful, profitable, community- based bank. 5 BACK ROW (L-R): KATHY BUSHNELL (First Technology Services), ISABEL MONTOYA (First Technology Services), IRMA ZIPP (Stephenville), MARY JO SORGE (Abilene), MELANIE BEARD (Granbury), ESTHER BILBY (Bridgeport), SANDRA HOLT (Abilene) FRONT ROW (L - R ): TRISHA HILDEBRAND (San Angelo), MARCELLA JIMENEZ (Mineral Wells), JANET FLYNT ( Weatherford), MELISSA JACQUES (Sweetwater), LEANN BAUGH ( Trust - Stephenville), STEVE GILBERT (Hereford), STEPHANIE LOPEZ (Eastland), LISA ROYE (Cleburne) Banking is all about relationships and working with customers one-on-one. That’s why, at First Financial Bankshares, our Customer Service First program is one of our highest priorities. Our goal is simple – to provide customer service that is second to none. Achieving that goal involves all employees and requires a sharp focus. It begins with our new employee orientation program and continues through our FFIN University for senior leaders. Instilling a culture of exceptional customer service is no accident. We encourage employees through a variety of initiatives, including recognizing employees who go beyond the norm for customers with “WOW” awards and giving Star Cards to employees who are nominated by fellow employees for exceptional customer service. Our top recognition program for employees is the Shining Star Award. Twice each year, managers select employees who have consistently demonstrated superior customer service. Shining Star Award winners and their spouses are hosted at the Company’s headquarters in Abilene for a special recognition ceremony, highlighted by a dinner with our presidents and management. ISABEL MONTOYA, First Technology Services, Abilene, is recognized as a Shining Star by SCOT T DUESER, President & CEO, First Financial Bankshares. 6 First Financial has the technology infrastructure and tools in place to provide first-rate modern banking services today and to meet future customer needs as we continue to grow. The Company’s technology supports our goal of providing exceptional customer service. Our system of customer call centers provides the same level of prompt and courteous service on the phone that customers are accustomed to receiving in our branches. Calls are answered by a person - not by voice mail - and customers immediately get helpful answers to questions about their checking and savings accounts, debit card transactions, business transactions and online banking. We created excitement among our customers in late 2009 by introducing a new custom-designed debit card program. Customers may choose from more than 130 card designs, many of which include logos and colors for local high schools or universities. To date, more than 33,000 custom cards have been printed. In 2010, we plan to go a step further and let customers create personalized debit cards using their own photos. Selected Financial Data IN THOUSANDS (EXCEPT PER SHARE DATA) YEAR-END TOTAL ASSETS EQUITY INCOME PER SHARE PER SHARE AND SPLITS PER SHARE PER SHARE SHAREHOLDERS’ NET EARNINGS DIVIDENDS DIVIDENDS BOOK VALUE MARKET VALUE BASIC CASH STOCK YEAR-END YEAR-END 2009 $3,279,456 $ 415,702 $ 53,797 $2.58 $1.36 – $ 19.96 $ 54.23 2008 3,212,385 368,782 53,164 2.56 1.34 – 17.73 55.21 2007 3,070,309 335,495 49,490 2.38 1.26 – 16.16 37.65 2006 2,850,165 300,901 46,029 2.22 1.18 – 14.51 41.86 2005 2,733,827 276,276 44,023 2.13 1.10 4/3 split 13.34 35.06 2004 2,315,224 265,545 39,171 1.90 1.00 – 12.84 33.61 2003 2,092,571 251,487 35,305 1.71 0.91 5/4 split 12.19 30.84 2002 1,993,183 238,768 33,953 1.65 0.81 – 11.59 22.80 2001 1,929,694 213,654 29,355 1.43 0.70 5/4 split 10.40 18.06 2000 1,753,814 196,121 28,316 1.37 0.62 – 9.56 15.09 GROWTH RATE 6.65% 8.81% 7.67% 7.60% 9.68% – 8.78% 13.90% TEN-YEAR COMPOUND Adjusted for stock dividends and splits. 2009 COMMON STOCK MARKET VALUE 2008 COMMON STOCK MARKET VALUE AND DIVIDEND DATA AND DIVIDEND DATA QUARTER HIGH LOW CLOSE DIVIDENDS QUARTER HIGH LOW CLOSE DIVIDENDS FOURTH $ 55.94 $ 47.86 $ 54.23 $ 0.34 FOURTH $ 56.32 $ 41.30 $ 55.21 $ 0.34 THIRD 54.50 47.95 49.46 0.34 THIRD 67.00 43.01 51.88 0.34 SECOND 51.62 46.51 50.36 0.34 SECOND 47.12 40.43 45.81 0.34 FIRST 55.70 36.49 48.17 0.34 FIRST 42.16 35.49 40.98 0.32 NET INCOME GROWTH (IN THOUSANDS) $3,125,552 $3,064,029 2.01% RETURN ON AVERAGE EQUITY $ 6M 12M 18M 24M 30M 36M 42M 48M 54M $3,279,456 $3,212,385 0% 3% 6% 9% 12% 15% 18% EFFICIENCY RATIO Financial Highlights IN THOUSANDS (EXCEPT PER SHARE DATA) FOR THE YEAR 2009 2008 CHANGES Net Income Basic Earnings per Share Dividends Declared Dividends per Share $53,797 2.58 28,311 1.36 $53,164 2.56 27,861 1.34 1.19% 0.78% 1.62% 1.49% Averages for the Year Shareholders’ Equity Assets Securities Loans Deposits At Year-End Assets Securities Loans Deposits Shareholders’ Equity Book Value per Share 1,308,110 1,494,876 2,513,387 394,812 1,285,377 1,514,369 2,684,757 415,702 19.96 1,185,303 10.36% 1,537,027 2,516,576 (2.74%) (0.13%) 348,271 13.36% 1,318,406 1,566,143 2,582,753 368,782 17.73 2.09% (2.51%) (3.31%) 3.95% 12.72% 12.58% 2.06% Trust Assets 1,664,174 1,630,560 Key Ratios Return on Average Assets Return on Average Equity Equity/Assets at Year-End Efficiency 1.72 % 13.63 % 12.68 % 50.11 % 1.74 % 15.27 % 11.48 % 50.76 % 09 08 07 06 05 1.72% 1.74% 1.72% 1.68% 1.80% 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 $53,797 $53,164 $49,490 $46,029 $44,023 13.63% 15.27% 15.87% 16.20% 16.17% 50.11% 50.76% 52.83% 53.49% 52.48% 4.80% 4.67% 4.43% 4.46% 4.49% RETURN ON AVERAGE ASSETS NET INTEREST MARGIN 0% 10% 20% 30% 40% 50% 60% 0% .25% . 50% .75% 1.00% 1.25% 1.50% 1.75% 2.00% 0% 1% 2% 3% 4% 5% 9 TAYLO R , C A L L A H A N & S H AC K E L F O R D CO U N T I E S D E P O S I T M A R K E T S H A R E 2651 JBS Parkway, Bldg. 4, Suite E Odessa, Texas 79762 ABILENE CLYDE MORAN ALBANY ODESSA M A I N O F F I C E 400 Pine LO C AT I O N S 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 132 Hill Street D I R E C TO R S F. Scott Dueser Chairman of the Board Ron Butler President and Chief Executive Officer Tucker S. Bridwell President Mansefeldt Investment Corp. Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Copeland President Joe Crawford President Abilene Aero, Inc. Mike Denny President ( 3 2 5 ) 6 2 7 - 7 2 0 0 Abilene, Texas 79601 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 Albany, Texas 76430 Murray Edwards Principal, The Edwards Group Allan D. Frizzell Executive Vice President Enrich Oil Corporation Stanley Morris, Jr. Investments Kenneth T. Murphy First Financial Bankshares, Inc. Dian Graves Stai Chair Mansefeldt Investment Corp. Director Leigh Taliaferro, M.D. Physician ADVISORY Steve Suttle J. Michael Alexander President James M. Alexander & Co. Tim Lancaster Chairman, CEO and President Hendrick Health System Shelton Family Foundation Dian Graves Owen Foundation R O N B U T L E R Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Ron Butler President and Chief Executive Officer Tom Boecking Executive Vice President South Branch Ben McAnally Executive Vice President Treasury Management John Prince Executive Vice President Personal Loans James Robinson Executive Vice President Retail Marketing and Business Development Marelyn Shedd Executive Vice President Commercial Loans Charles E. Tennesson Executive Vice President, Chief Financial Officer and Cashier Batjer and Associates McMahon Surovik Suttle, P.C. IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $1,087,452 419,928 879,258 99,941 19,587 1.88% 45.99% DEC. 31, 2008 $1,105,537 458,797 843,375 82,778 17,652 1.76% 46.72% CLEBURNE BURLESON ALVARADO MIDLOTHIAN M A I N O F F I C E ( 8 1 7 ) 5 5 6 - 5 0 0 0 o r ( 8 0 0 ) 2 2 6 - 2 9 4 0 403 N. Main Cleburne, Texas 76033 LO C AT I O N S 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 J O H N S O N CO U N T Y & C I T Y O F M I D LOT H I A N D E P O S I T M A R K E T S H A R E M AT T R E YN O L D S Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Craig Beskow Executive Vice President and Cashier Steve Davis Executive Vice President Brad Evans Executive Vice President Derek Schmidt Executive Vice President Cynthia Allen Senior Vice President Kathy Armstrong Senior Vice President Lisa Roye Senior Vice President Darlene Walker Senior Vice President D I R E C TO R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Albert A. Archer Vice Chairman Walls Industries, Inc. Ray Beavers General Manager & CEO United Cooperative Services Byron Black Investments F. Scott Dueser First Financial Bankshares, Inc. Tim Lyness Lyness Construction, LP George Marti Marti Enterprises Dr. Joe Martin Cleburne Eye Clinic IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 273,598 137,043 247,992 23,697 3,886 1.57% 53.68% DEC. 31, 2008 $ 244,647 138,127 221,629 21,126 4,199 1.74% 53.95% 11 EASTLAND RANGER RISING STAR M A I N O F F I C E 201 E. Main LO C AT I O N S 106 Main 206 West College ( 2 5 4 ) 6 2 9 - 6 1 0 0 Eastland, Texas 76448 Ranger, Texas 76470 Rising Star, Texas 76471 T H O M A S M . O ’ N E I L Pre s i d e n t a n d C E O E A S T L A N D CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer Doug Crawley Rancher 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 M.D. White, Jr. President and Owner Ace Hardware Store, Eastland/Cisco S E N I O R O F F I C E R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer L.V. Coffee Lending Terry Trout Cashier Senior Vice President and Executive Vice President Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,092 63,758 143,956 18,712 2,511 1.79% 49.74% DEC. 31, 2008 $ 153,029 58,201 127,132 17,146 2,412 1.66% 49.59% 4 4 8 10 12 STAFF EDUCATIONMANAGEMENTDEVELOPMENTCUSTOMER SERVICETECHNOLOGY 39% 15% 48% N U M B E R O N E I N T H E N A T I O N in the $3 billion-plus publicly traded category.* Bank Director magazine, in its first-quarter 2010 issue, ranked First Financial Bankshares We’re proud of our company’s 120-year histor y of financial strength and service to our customers and communities in Texas. But First Financial Bankshares isn’t looking back or resting on our past success. Our focus is on the future. Today, we are taking steps we believe are necessary to ensure that our company remains in the forefront of providing the best banking, trust, wealth management and other financial services, while continuing to build deep and enduring relationships with our valued customers. Relationships built on trust, integrity and exceptional customer service have made our company what it is today. For our shareholders, we remain committed to managing First Financial Bankshares in a safe, sound and profitable manner, with a goal of strategically and prudently growing the Company and expanding into new markets. The Letter to Shareholders on pages 2 and 3 of this annual report gives you more insights into how our company performed in 2009 and our plans for 2010. The photo spread and text on pages 4-7 demonstrate how we are working to secure the Company’s future for the benefit of our customers, employees and shareholders – and the Texas communities we serve. For more information, visit our Web site at http://www.ffin.com. * Based on measurement criteria and analysis compiled by Sandler O’Neill + Partners, L.P., a New York-based investment banking firm that specializes in the financial services industry. Published in Bank Director magazine, 1st quarter 2010. First Financial Bank 325-627-7200 First Financial Bank 817-556-5000 First Financial Bank 254-629-6100 First Financial Bank 806-363-8200 ABILENE CLYDE MORAN ALBANY ODESSA CLEBURNE BURLESON ALVARADO MIDLOTHIAN EASTLAND RANGER RISING STAR HEREFORD , TM . A Family of Community Banks SM First Financial Bank STEPHENVILLE First Financial Bank 940-327-5400 First Financial Bank 325-659-5900 First Financial Bank 817-410-2915 940-683-8700 254-965-5036 817-573-6900 First Financial Bank 325-235-6600 First Financial Bank 817-596-0307 MINERAL WELLS SAN ANGELO SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR GRANBURY GLEN ROSE ACTON SWEET WATER ROBY TRENT MERKEL WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH BANKS TRUST OFFICE LOCATIONS D E A R S H A R E H O L D E R S In light of the recession and higher FDIC insurance premiums in 2009, I am very pleased that our company was able to deliver increased earnings for the 23rd consecutive year. While the national recession at first seemed to bypass Texas, it began moving into the state in the second part of 2008, bringing a decline in home sales and general economic activity and an increase in unemployment. These trends continued in 2009. On the plus side, our state continued to fare better than most of the rest of the country, and our geographic footprint—especially in our West Texas markets—remained stable. The stock market fluctuated greatly during the past two years. The NASDAQ Composite Index declined 41 percent in 2008 and then went back up 44 percent in 2009. Our stock went up 47 percent in 2008 and down 2 percent in 2009, closing at $54.23. We are pleased that our stock performed well for our stockholders during these years of economic turmoil. We continue to suspect that a “flight to safety”—favoring companies with strong balance sheets and a long record of conservative lending—may have played a role in our stock’s favorable performance. We are also pleased that in 2009, our company again received high rankings from leading banking publications such as the ABA Banking Journal and U.S. Banker. Additionally, in January of 2010, Bank Director magazine rated us No. 1 in the nation among publicly traded banks with $3 billion or more of assets. Being named No. 1 is like winning an Academy Award. Without question, this accomplishment is due to the direction of our Board, the dedication of our employees and the loyalty of our customers, who have kept us strong for 120 years. We accept this honor with great humility because we know that every day, we face a new set of challenges in the banking industry and must prove ourselves again and again. RESULTS FOR 2009 Net income grew 1.2 percent to $53.8 million from $53.2 million in 2008. Net interest income, the major source of our earnings, rose 4.3 percent to $129.2 million from $123.9 million. Our net interest margin (on a tax-equivalent basis) also increased, to 4.80 percent from 4.67 percent in 2008. The provision for loan losses for 2009 totaled $11.4 million, a 43.5 percent increase from $8.0 million in 2008. The larger provision was due to a higher level of net charge-offs and an increase in the allowance for loan losses. Noninterest income declined 1.7 percent to $48.6 million from $49.5 million. The decline was primarily due to a $692,000 drop in income from student loan sales as the Company exited the student loan program. Lower usage of overdraft privileges also contributed to the decrease in noninterest income. Noninterest expense was $94.0 million in 2009, up 2.6 percent from $91.6 million a year earlier. The largest increase in noninterest expense was in FDIC insurance premiums, which grew by $4.2 million, or 650.4 percent, after the FDIC raised premium rates as of January 1, 2009, and implemented a special assessment in June of that year. Nevertheless, we were able to improve our efficiency ratio, which expresses the share of revenues consumed by operating expenses, to 50.11 percent from 50.76 percent in 2008. Our bank presidents worked hard to maintain their net interest margins and reduce expenses. I could not be more pleased with their accomplishments, especially in light of the significant increase in FDIC insurance premiums. We again outperformed our peer group on several key financial metrics. Our return on average assets was 1.72 percent compared with a negative 0.21 percent for our peer group. Return on average equity was 13.63 percent versus a negative 2.59 percent for our peers. Our net interest margin of 4.80 percent on a tax-equivalent basis compared very favorably to our peer group’s margin of 3.48 percent. We also beat the peer group on the efficiency ratio—ours was 50.11 percent, while theirs was 69.53 percent. We ended the year with a strong balance sheet. Consolidated assets increased 2.1 percent to $3.28 billion from $3.21 billion at the end of 2008. Loans decreased 3.3 percent to $1.51 billion from $1.57 billion, primarily due to our exiting the student loan program. Total deposits grew 3.9 percent to $2.68 billion from $2.58 billion. Shareholders’ equity rose 12.7 percent to $415.7 million from $368.8 million. As the economy softened in Texas, our nonperforming assets increased to 1.46 percent of total loans and foreclosed assets from 0.80 percent at the end of 2008. Even with this increase, our nonperforming percentage was well below our peer group’s 5.07 percent. Net loan charge-offs for the year totaled $5.3 million at year-end 2009 versus $3.9 million at year-end 2008. The 2009 allowance for loan losses amounted to 1.82 percent of total loans. First Financial Trust & Asset Management Company also experienced growth last year. Total assets at year-end had a book value of $1.67 billion, a 2.1 percent increase from 2008, and a market value of $2.10 billion, an 11.7 percent increase. The Trust Company’s fee income, however, declined 3.8 percent to $9.1 million from $9.4 million. This subsidiary manages a large oil and gas portfolio, and the drop in its income was primarily due to a decline in oil and gas prices and in related fees on oil and gas income. The Trust Company opened its sixth office last year, in Odessa, Texas. We are encouraged by the number of clients who have opened trust accounts with us in Odessa and the potential for growth in the Permian Basin market. 2 GROWTH STRATEGIES We actively looked for acquisition opportunities during 2009, but the banks that we considered were overpriced in light of the economy or did not fit our company’s profile. Our plan is to continue pursuing acquisitions diligently. With our capitalization, stock price, cash position and experienced management team, we have what we need to take advantage of acquisition opportunities. In November, we announced plans to open bank branches in our two existing Trust Company offices in Fort Worth and Odessa, to complement trust services and serve customers in those markets. We have had frequent requests from customers for branches in these markets and are interested to see how this private bank branch concept will work. During the year, we achieved a long-term objective of bringing all of our banks under a common name to improve brand identity and marketing efficiencies. Hereford State Bank, San Angelo National Bank and Weatherford National Bank are now called First Financial Bank. All of our banks benefit from sharing the Company’s growing brand identity, and our customers benefit from being able to use our facilities throughout our market areas. However, in no way does the use of a common name change our practice of operating through ten community-based banks that are separately chartered, have their own local boards and management teams, and make decisions locally. We continue to be the “hometown bank” in our markets, with a tradition of playing a vital role in community life. WHAT’S AHEAD Besides looking for acquisitions, we plan to continue growing our mortgage market, trust services and treasury management services. We are encouraged by our recent growth that there will be good opportunities in these areas. Minimizing nonperforming assets will certainly be an objective, as it has been for the last several years. We do know that FDIC insurance premiums will continue to be high and that increased regulation proposed by Congress and various federal agencies will make our jobs more challenging and costly. Our hope is that the banking industry can mitigate much of the pending regulatory legislation by educating Washington that community banks have not caused today’s economic problems and are already over-regulated. We are committed to providing outstanding service to our customers, our communities and our nation by making every good loan we can to help our economy grow and prosper. PERSONNEL CHANGES J. V. Martin retired at the end of the year as CEO of First Financial Bank, Sweetwater. Kirby Andrews, President, assumed the additional role of CEO there. J. V. will continue to serve as the Sweetwater bank’s Chairman of the Board. He will also provide consulting services to the holding company. Additionally, Senior Chairman Kenneth T. Murphy will retire from the First Financial Bankshares Board in conjunction with our Annual Shareholders’ Meeting in April. He has served our company with distinction for 39 years, holding the positions of President, First Financial Bank, Abilene; and Executive Vice President, President, Chief Executive Officer, Chairman and Senior Chairman of First Financial Bankshares, Inc. Through those years, he has also made many civic and professional contributions, including serving on the Board of the Federal Reserve Bank of Dallas and serving as Chairman of the Board of the Texas Bankers Association. When Ken joined the bank in 1971, the Company had total assets of $87.7 million and net income of $806,000. By the end of 2009, we had total assets of $3.28 billion and net earnings of $53.8 million. During Ken’s tenure with the Company, we have experienced great success. Customers, stockholders and communities have certainly benefited from Ken’s leadership and counsel, and we thank him for his fine service. We are pleased that he will continue to maintain an office in the First Financial Bank (Abilene) building and will be available to management for consultation. It is our pleasure to announce that Steven L. Beal, retired President and Chief Operating Officer of Concho Resources Inc., has accepted nomination for election as a Director of the Company at our Annual Shareholders’ Meeting in April. Steve was one of the founders of Concho, an independent oil and natural gas company, and continues to be a Director on its Board. Prior to being at Concho, he was Senior Vice President and Chief Financial Officer of Parker & Parsley Petroleum Company, which is now Pioneer National Resources. Before that, he was an audit professional with the accounting firm of Price Waterhouse Coopers. He is a 1981 graduate of The University of Texas with a degree in accounting. Steve has been involved civically and professionally with the United Way of Midland, Permian Basin Oil & Gas Association, Independent Petroleum Association of America and the New Mexico Oil & Gas Association. He has been on the Board of Directors of Midland Christian School and the Midland/Odessa Symphony. Most recently, he was a partner with the Early School District to build an indoor practice facility for use by the students and teams of Early High School. Steve and his wife, Teresa, live on their ranch in Brownwood, Texas. These are challenging times for the national economy and for the banking business. First Financial has the benefit of a long-term perspective. In our 120-year history, we’ve endured numerous recessions, the Great Depression, the Texas oil bust of the 1980s and other obstacles. We cannot predict the duration of the current economic malaise, but we remain optimistic about the long-term future of our state and nation, and especially our Texas markets. Financially and operationally, we believe our company has never been stronger, and our best days are still ahead of us. With our eyes on the future, we are making a strong investment in the training of all our employees, including our next generation of leaders, to ensure that we continue to provide excellence in banking, trust services, wealth management and customer service. We encourage you to read more about our training and customer service programs in the pages that follow. Banking is our business, but all of us on the management team never lose sight of the fact that we work for you, our shareholders. We will continue to manage the Company for profitability and growth in 2010 and beyond. F. Scott Dueser Chairman, President and CEO , TM . 3 W H A T M A K E S U S F I R S T ? Friendly. Knowledgeable. Helpful. These are words our customers use to describe First Financial Bank’s employees. Well-informed and well-motivated employees are essential to keeping First Financial Bank prepared for the future. Training our employees to provide the finest banking, financial solutions and exceptional customer service begins the day new employees are hired. Every new employee at First Financial Bank goes through a classroom training program. This orientation is designed not only to teach new employees about the bank’s outstanding portfolio of banking products and services, but also introduces them to the Company’s unique culture, which emphasizes putting customers’ needs first and going the extra mile to provide exceptional service and support. New employees learn skills from how to open a new account to the essentials of good business etiquette. New employee orientation is just the start. Our commitment to training and professional development for our employees is ongoing. All employees participate in compliance training, most taking 12 to 24 courses per year in all aspects of banking, customer service and financial services. We offer our employees both online, “desktop” training modules and more traditional classroom training. Regardless of the format, the goal is always the same – to help our employees continue the Company’s proud tradition of being a leading bank in our markets and exceeding our customers’ expectations for the finest in banking products and service. Christina Randle, author, productivity expert and CEO of The Effective Edge, trains managers at First Financial Bankshares. Merrie Spaeth, president of Spaeth Communications, Inc. and a nationally known consultant on organizational communications, leads a management training class for First Financial Bankshares. 4 4 8 10 12 F F I NF F I N UNIVERSITY UNIVERSITY Developing future leaders is key to our company’s continued success in the years ahead. One way we prepare our future leaders is through FFIN University, which takes a select group of bank officers through a year-long inten- sive training program. First launched in 2008, FFIN University clearly underscores the Company’s commitment to main- taining its tradition of excellence in banking, trust services and customer service. Participants in FFIN University learn from both senior leaders and outstanding guest speakers on topics that range from time management to com- munication skills. Graduates of FFIN University are ready to assume key senior management positions in our company. They will help maintain the Company’s long tradition as a successful, profitable, community- based bank. 5 BACK ROW (L-R): KATHY BUSHNELL (First Technology Services), ISABEL MONTOYA (First Technology Services), IRMA ZIPP (Stephenville), MARY JO SORGE (Abilene), MELANIE BEARD (Granbury), ESTHER BILBY (Bridgeport), SANDRA HOLT (Abilene) FRONT ROW (L - R ): TRISHA HILDEBRAND (San Angelo), MARCELLA JIMENEZ (Mineral Wells), JANET FLYNT ( Weatherford), MELISSA JACQUES (Sweetwater), LEANN BAUGH ( Trust - Stephenville), STEVE GILBERT (Hereford), STEPHANIE LOPEZ (Eastland), LISA ROYE (Cleburne) Banking is all about relationships and working with customers one-on-one. That’s why, at First Financial Bankshares, our Customer Service First program is one of our highest priorities. Our goal is simple – to provide customer service that is second to none. Achieving that goal involves all employees and requires a sharp focus. It begins with our new employee orientation program and continues through our FFIN University for senior leaders. Instilling a culture of exceptional customer service is no accident. We encourage employees through a variety of initiatives, including recognizing employees who go beyond the norm for customers with “WOW” awards and giving Star Cards to employees who are nominated by fellow employees for exceptional customer service. Our top recognition program for employees is the Shining Star Award. Twice each year, managers select employees who have consistently demonstrated superior customer service. Shining Star Award winners and their spouses are hosted at the Company’s headquarters in Abilene for a special recognition ceremony, highlighted by a dinner with our presidents and management. ISABEL MONTOYA, First Technology Services, Abilene, is recognized as a Shining Star by SCOT T DUESER, President & CEO, First Financial Bankshares. 6 First Financial has the technology infrastructure and tools in place to provide first-rate modern banking services today and to meet future customer needs as we continue to grow. The Company’s technology supports our goal of providing exceptional customer service. Our system of customer call centers provides the same level of prompt and courteous service on the phone that customers are accustomed to receiving in our branches. Calls are answered by a person - not by voice mail - and customers immediately get helpful answers to questions about their checking and savings accounts, debit card transactions, business transactions and online banking. We created excitement among our customers in late 2009 by introducing a new custom-designed debit card program. Customers may choose from more than 130 card designs, many of which include logos and colors for local high schools or universities. To date, more than 33,000 custom cards have been printed. In 2010, we plan to go a step further and let customers create personalized debit cards using their own photos. Selected Financial Data IN THOUSANDS (EXCEPT PER SHARE DATA) YEAR-END TOTAL ASSETS EQUITY INCOME PER SHARE PER SHARE AND SPLITS PER SHARE PER SHARE SHAREHOLDERS’ NET EARNINGS DIVIDENDS DIVIDENDS BOOK VALUE MARKET VALUE BASIC CASH STOCK YEAR-END YEAR-END 2009 $3,279,456 $ 415,702 $ 53,797 $2.58 $1.36 – $ 19.96 $ 54.23 2008 3,212,385 368,782 53,164 2.56 1.34 – 17.73 55.21 2007 3,070,309 335,495 49,490 2.38 1.26 – 16.16 37.65 2006 2,850,165 300,901 46,029 2.22 1.18 – 14.51 41.86 2005 2,733,827 276,276 44,023 2.13 1.10 4/3 split 13.34 35.06 2004 2,315,224 265,545 39,171 1.90 1.00 – 12.84 33.61 2003 2,092,571 251,487 35,305 1.71 0.91 5/4 split 12.19 30.84 2002 1,993,183 238,768 33,953 1.65 0.81 – 11.59 22.80 2001 1,929,694 213,654 29,355 1.43 0.70 5/4 split 10.40 18.06 2000 1,753,814 196,121 28,316 1.37 0.62 – 9.56 15.09 GROWTH RATE 6.65% 8.81% 7.67% 7.60% 9.68% – 8.78% 13.90% TEN-YEAR COMPOUND Adjusted for stock dividends and splits. 2009 COMMON STOCK MARKET VALUE 2008 COMMON STOCK MARKET VALUE AND DIVIDEND DATA AND DIVIDEND DATA QUARTER HIGH LOW CLOSE DIVIDENDS QUARTER HIGH LOW CLOSE DIVIDENDS FOURTH $ 55.94 $ 47.86 $ 54.23 $ 0.34 FOURTH $ 56.32 $ 41.30 $ 55.21 $ 0.34 THIRD 54.50 47.95 49.46 0.34 THIRD 67.00 43.01 51.88 0.34 SECOND 51.62 46.51 50.36 0.34 SECOND 47.12 40.43 45.81 0.34 FIRST 55.70 36.49 48.17 0.34 FIRST 42.16 35.49 40.98 0.32 NET INCOME GROWTH (IN THOUSANDS) $3,125,552 $3,064,029 2.01% RETURN ON AVERAGE EQUITY $ 6M 12M 18M 24M 30M 36M 42M 48M 54M $3,279,456 $3,212,385 0% 3% 6% 9% 12% 15% 18% EFFICIENCY RATIO Financial Highlights IN THOUSANDS (EXCEPT PER SHARE DATA) FOR THE YEAR 2009 2008 CHANGES Net Income Basic Earnings per Share Dividends Declared Dividends per Share $53,797 2.58 28,311 1.36 $53,164 2.56 27,861 1.34 1.19% 0.78% 1.62% 1.49% Averages for the Year Shareholders’ Equity Assets Securities Loans Deposits At Year-End Assets Securities Loans Deposits Shareholders’ Equity Book Value per Share 1,308,110 1,494,876 2,513,387 394,812 1,285,377 1,514,369 2,684,757 415,702 19.96 1,185,303 10.36% 1,537,027 2,516,576 (2.74%) (0.13%) 348,271 13.36% 1,318,406 1,566,143 2,582,753 368,782 17.73 2.09% (2.51%) (3.31%) 3.95% 12.72% 12.58% 2.06% Trust Assets 1,664,174 1,630,560 Key Ratios Return on Average Assets Return on Average Equity Equity/Assets at Year-End Efficiency 1.72 % 13.63 % 12.68 % 50.11 % 1.74 % 15.27 % 11.48 % 50.76 % 09 08 07 06 05 1.72% 1.74% 1.72% 1.68% 1.80% 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 $53,797 $53,164 $49,490 $46,029 $44,023 13.63% 15.27% 15.87% 16.20% 16.17% 50.11% 50.76% 52.83% 53.49% 52.48% 4.80% 4.67% 4.43% 4.46% 4.49% RETURN ON AVERAGE ASSETS NET INTEREST MARGIN 0% 10% 20% 30% 40% 50% 60% 0% .25% . 50% .75% 1.00% 1.25% 1.50% 1.75% 2.00% 0% 1% 2% 3% 4% 5% 9 TAYLO R , C A L L A H A N & S H AC K E L F O R D CO U N T I E S D E P O S I T M A R K E T S H A R E 2651 JBS Parkway, Bldg. 4, Suite E Odessa, Texas 79762 ABILENE CLYDE MORAN ALBANY ODESSA M A I N O F F I C E 400 Pine LO C AT I O N S 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 132 Hill Street D I R E C TO R S F. Scott Dueser Chairman of the Board Ron Butler President and Chief Executive Officer Tucker S. Bridwell President Mansefeldt Investment Corp. Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Copeland President Joe Crawford President Abilene Aero, Inc. Mike Denny President ( 3 2 5 ) 6 2 7 - 7 2 0 0 Abilene, Texas 79601 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 Albany, Texas 76430 Murray Edwards Principal, The Edwards Group Allan D. Frizzell Executive Vice President Enrich Oil Corporation Stanley Morris, Jr. Investments Kenneth T. Murphy First Financial Bankshares, Inc. Dian Graves Stai Chair Mansefeldt Investment Corp. Director Leigh Taliaferro, M.D. Physician ADVISORY Steve Suttle J. Michael Alexander President James M. Alexander & Co. Tim Lancaster Chairman, CEO and President Hendrick Health System Shelton Family Foundation Dian Graves Owen Foundation R O N B U T L E R Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Ron Butler President and Chief Executive Officer Tom Boecking Executive Vice President South Branch Ben McAnally Executive Vice President Treasury Management John Prince Executive Vice President Personal Loans James Robinson Executive Vice President Retail Marketing and Business Development Marelyn Shedd Executive Vice President Commercial Loans Charles E. Tennesson Executive Vice President, Chief Financial Officer and Cashier Batjer and Associates McMahon Surovik Suttle, P.C. IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $1,087,452 419,928 879,258 99,941 19,587 1.88% 45.99% DEC. 31, 2008 $1,105,537 458,797 843,375 82,778 17,652 1.76% 46.72% CLEBURNE BURLESON ALVARADO MIDLOTHIAN M A I N O F F I C E ( 8 1 7 ) 5 5 6 - 5 0 0 0 o r ( 8 0 0 ) 2 2 6 - 2 9 4 0 403 N. Main Cleburne, Texas 76033 LO C AT I O N S 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 J O H N S O N CO U N T Y & C I T Y O F M I D LOT H I A N D E P O S I T M A R K E T S H A R E M AT T R E YN O L D S Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Craig Beskow Executive Vice President and Cashier Steve Davis Executive Vice President Brad Evans Executive Vice President Derek Schmidt Executive Vice President Cynthia Allen Senior Vice President Kathy Armstrong Senior Vice President Lisa Roye Senior Vice President Darlene Walker Senior Vice President D I R E C TO R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Albert A. Archer Vice Chairman Walls Industries, Inc. Ray Beavers General Manager & CEO United Cooperative Services Byron Black Investments F. Scott Dueser First Financial Bankshares, Inc. Tim Lyness Lyness Construction, LP George Marti Marti Enterprises Dr. Joe Martin Cleburne Eye Clinic IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 273,598 137,043 247,992 23,697 3,886 1.57% 53.68% DEC. 31, 2008 $ 244,647 138,127 221,629 21,126 4,199 1.74% 53.95% 11 EASTLAND RANGER RISING STAR M A I N O F F I C E 201 E. Main LO C AT I O N S 106 Main 206 West College ( 2 5 4 ) 6 2 9 - 6 1 0 0 Eastland, Texas 76448 Ranger, Texas 76470 Rising Star, Texas 76471 T H O M A S M . O ’ N E I L Pre s i d e n t a n d C E O E A S T L A N D CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer Doug Crawley Rancher 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 M.D. White, Jr. President and Owner Ace Hardware Store, Eastland/Cisco S E N I O R O F F I C E R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer L.V. Coffee Lending Terry Trout Cashier Senior Vice President and Executive Vice President Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,092 63,758 143,956 18,712 2,511 1.79% 49.74% DEC. 31, 2008 $ 153,029 58,201 127,132 17,146 2,412 1.66% 49.59% STAFF EDUCATIONMANAGEMENTDEVELOPMENTCUSTOMER SERVICETECHNOLOGY 39% 15% 48% N U M B E R O N E I N T H E N A T I O N in the $3 billion-plus publicly traded category.* Bank Director magazine, in its first-quarter 2010 issue, ranked First Financial Bankshares We’re proud of our company’s 120-year histor y of financial strength and service to our customers and communities in Texas. But First Financial Bankshares isn’t looking back or resting on our past success. Our focus is on the future. Today, we are taking steps we believe are necessary to ensure that our company remains in the forefront of providing the best banking, trust, wealth management and other financial services, while continuing to build deep and enduring relationships with our valued customers. Relationships built on trust, integrity and exceptional customer service have made our company what it is today. For our shareholders, we remain committed to managing First Financial Bankshares in a safe, sound and profitable manner, with a goal of strategically and prudently growing the Company and expanding into new markets. The Letter to Shareholders on pages 2 and 3 of this annual report gives you more insights into how our company performed in 2009 and our plans for 2010. The photo spread and text on pages 4-7 demonstrate how we are working to secure the Company’s future for the benefit of our customers, employees and shareholders – and the Texas communities we serve. For more information, visit our Web site at http://www.ffin.com. * Based on measurement criteria and analysis compiled by Sandler O’Neill + Partners, L.P., a New York-based investment banking firm that specializes in the financial services industry. Published in Bank Director magazine, 1st quarter 2010. First Financial Bank 325-627-7200 First Financial Bank 817-556-5000 First Financial Bank 254-629-6100 First Financial Bank 806-363-8200 ABILENE CLYDE MORAN ALBANY ODESSA CLEBURNE BURLESON ALVARADO MIDLOTHIAN EASTLAND RANGER RISING STAR HEREFORD , TM . A Family of Community Banks SM First Financial Bank STEPHENVILLE First Financial Bank 940-327-5400 First Financial Bank 325-659-5900 First Financial Bank 817-410-2915 940-683-8700 254-965-5036 817-573-6900 First Financial Bank 325-235-6600 First Financial Bank 817-596-0307 MINERAL WELLS SAN ANGELO SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR GRANBURY GLEN ROSE ACTON SWEET WATER ROBY TRENT MERKEL WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH BANKS TRUST OFFICE LOCATIONS D E A R S H A R E H O L D E R S In light of the recession and higher FDIC insurance premiums in 2009, I am very pleased that our company was able to deliver increased earnings for the 23rd consecutive year. While the national recession at first seemed to bypass Texas, it began moving into the state in the second part of 2008, bringing a decline in home sales and general economic activity and an increase in unemployment. These trends continued in 2009. On the plus side, our state continued to fare better than most of the rest of the country, and our geographic footprint—especially in our West Texas markets—remained stable. The stock market fluctuated greatly during the past two years. The NASDAQ Composite Index declined 41 percent in 2008 and then went back up 44 percent in 2009. Our stock went up 47 percent in 2008 and down 2 percent in 2009, closing at $54.23. We are pleased that our stock performed well for our stockholders during these years of economic turmoil. We continue to suspect that a “flight to safety”—favoring companies with strong balance sheets and a long record of conservative lending—may have played a role in our stock’s favorable performance. We are also pleased that in 2009, our company again received high rankings from leading banking publications such as the ABA Banking Journal and U.S. Banker. Additionally, in January of 2010, Bank Director magazine rated us No. 1 in the nation among publicly traded banks with $3 billion or more of assets. Being named No. 1 is like winning an Academy Award. Without question, this accomplishment is due to the direction of our Board, the dedication of our employees and the loyalty of our customers, who have kept us strong for 120 years. We accept this honor with great humility because we know that every day, we face a new set of challenges in the banking industry and must prove ourselves again and again. RESULTS FOR 2009 Net income grew 1.2 percent to $53.8 million from $53.2 million in 2008. Net interest income, the major source of our earnings, rose 4.3 percent to $129.2 million from $123.9 million. Our net interest margin (on a tax-equivalent basis) also increased, to 4.80 percent from 4.67 percent in 2008. The provision for loan losses for 2009 totaled $11.4 million, a 43.5 percent increase from $8.0 million in 2008. The larger provision was due to a higher level of net charge-offs and an increase in the allowance for loan losses. Noninterest income declined 1.7 percent to $48.6 million from $49.5 million. The decline was primarily due to a $692,000 drop in income from student loan sales as the Company exited the student loan program. Lower usage of overdraft privileges also contributed to the decrease in noninterest income. Noninterest expense was $94.0 million in 2009, up 2.6 percent from $91.6 million a year earlier. The largest increase in noninterest expense was in FDIC insurance premiums, which grew by $4.2 million, or 650.4 percent, after the FDIC raised premium rates as of January 1, 2009, and implemented a special assessment in June of that year. Nevertheless, we were able to improve our efficiency ratio, which expresses the share of revenues consumed by operating expenses, to 50.11 percent from 50.76 percent in 2008. Our bank presidents worked hard to maintain their net interest margins and reduce expenses. I could not be more pleased with their accomplishments, especially in light of the significant increase in FDIC insurance premiums. We again outperformed our peer group on several key financial metrics. Our return on average assets was 1.72 percent compared with a negative 0.21 percent for our peer group. Return on average equity was 13.63 percent versus a negative 2.59 percent for our peers. Our net interest margin of 4.80 percent on a tax-equivalent basis compared very favorably to our peer group’s margin of 3.48 percent. We also beat the peer group on the efficiency ratio—ours was 50.11 percent, while theirs was 69.53 percent. We ended the year with a strong balance sheet. Consolidated assets increased 2.1 percent to $3.28 billion from $3.21 billion at the end of 2008. Loans decreased 3.3 percent to $1.51 billion from $1.57 billion, primarily due to our exiting the student loan program. Total deposits grew 3.9 percent to $2.68 billion from $2.58 billion. Shareholders’ equity rose 12.7 percent to $415.7 million from $368.8 million. As the economy softened in Texas, our nonperforming assets increased to 1.46 percent of total loans and foreclosed assets from 0.80 percent at the end of 2008. Even with this increase, our nonperforming percentage was well below our peer group’s 5.07 percent. Net loan charge-offs for the year totaled $5.3 million at year-end 2009 versus $3.9 million at year-end 2008. The 2009 allowance for loan losses amounted to 1.82 percent of total loans. First Financial Trust & Asset Management Company also experienced growth last year. Total assets at year-end had a book value of $1.67 billion, a 2.1 percent increase from 2008, and a market value of $2.10 billion, an 11.7 percent increase. The Trust Company’s fee income, however, declined 3.8 percent to $9.1 million from $9.4 million. This subsidiary manages a large oil and gas portfolio, and the drop in its income was primarily due to a decline in oil and gas prices and in related fees on oil and gas income. The Trust Company opened its sixth office last year, in Odessa, Texas. We are encouraged by the number of clients who have opened trust accounts with us in Odessa and the potential for growth in the Permian Basin market. 2 GROWTH STRATEGIES We actively looked for acquisition opportunities during 2009, but the banks that we considered were overpriced in light of the economy or did not fit our company’s profile. Our plan is to continue pursuing acquisitions diligently. With our capitalization, stock price, cash position and experienced management team, we have what we need to take advantage of acquisition opportunities. In November, we announced plans to open bank branches in our two existing Trust Company offices in Fort Worth and Odessa, to complement trust services and serve customers in those markets. We have had frequent requests from customers for branches in these markets and are interested to see how this private bank branch concept will work. During the year, we achieved a long-term objective of bringing all of our banks under a common name to improve brand identity and marketing efficiencies. Hereford State Bank, San Angelo National Bank and Weatherford National Bank are now called First Financial Bank. All of our banks benefit from sharing the Company’s growing brand identity, and our customers benefit from being able to use our facilities throughout our market areas. However, in no way does the use of a common name change our practice of operating through ten community-based banks that are separately chartered, have their own local boards and management teams, and make decisions locally. We continue to be the “hometown bank” in our markets, with a tradition of playing a vital role in community life. WHAT’S AHEAD Besides looking for acquisitions, we plan to continue growing our mortgage market, trust services and treasury management services. We are encouraged by our recent growth that there will be good opportunities in these areas. Minimizing nonperforming assets will certainly be an objective, as it has been for the last several years. We do know that FDIC insurance premiums will continue to be high and that increased regulation proposed by Congress and various federal agencies will make our jobs more challenging and costly. Our hope is that the banking industry can mitigate much of the pending regulatory legislation by educating Washington that community banks have not caused today’s economic problems and are already over-regulated. We are committed to providing outstanding service to our customers, our communities and our nation by making every good loan we can to help our economy grow and prosper. PERSONNEL CHANGES J. V. Martin retired at the end of the year as CEO of First Financial Bank, Sweetwater. Kirby Andrews, President, assumed the additional role of CEO there. J. V. will continue to serve as the Sweetwater bank’s Chairman of the Board. He will also provide consulting services to the holding company. Additionally, Senior Chairman Kenneth T. Murphy will retire from the First Financial Bankshares Board in conjunction with our Annual Shareholders’ Meeting in April. He has served our company with distinction for 39 years, holding the positions of President, First Financial Bank, Abilene; and Executive Vice President, President, Chief Executive Officer, Chairman and Senior Chairman of First Financial Bankshares, Inc. Through those years, he has also made many civic and professional contributions, including serving on the Board of the Federal Reserve Bank of Dallas and serving as Chairman of the Board of the Texas Bankers Association. When Ken joined the bank in 1971, the Company had total assets of $87.7 million and net income of $806,000. By the end of 2009, we had total assets of $3.28 billion and net earnings of $53.8 million. During Ken’s tenure with the Company, we have experienced great success. Customers, stockholders and communities have certainly benefited from Ken’s leadership and counsel, and we thank him for his fine service. We are pleased that he will continue to maintain an office in the First Financial Bank (Abilene) building and will be available to management for consultation. It is our pleasure to announce that Steven L. Beal, retired President and Chief Operating Officer of Concho Resources Inc., has accepted nomination for election as a Director of the Company at our Annual Shareholders’ Meeting in April. Steve was one of the founders of Concho, an independent oil and natural gas company, and continues to be a Director on its Board. Prior to being at Concho, he was Senior Vice President and Chief Financial Officer of Parker & Parsley Petroleum Company, which is now Pioneer National Resources. Before that, he was an audit professional with the accounting firm of Price Waterhouse Coopers. He is a 1981 graduate of The University of Texas with a degree in accounting. Steve has been involved civically and professionally with the United Way of Midland, Permian Basin Oil & Gas Association, Independent Petroleum Association of America and the New Mexico Oil & Gas Association. He has been on the Board of Directors of Midland Christian School and the Midland/Odessa Symphony. Most recently, he was a partner with the Early School District to build an indoor practice facility for use by the students and teams of Early High School. Steve and his wife, Teresa, live on their ranch in Brownwood, Texas. These are challenging times for the national economy and for the banking business. First Financial has the benefit of a long-term perspective. In our 120-year history, we’ve endured numerous recessions, the Great Depression, the Texas oil bust of the 1980s and other obstacles. We cannot predict the duration of the current economic malaise, but we remain optimistic about the long-term future of our state and nation, and especially our Texas markets. Financially and operationally, we believe our company has never been stronger, and our best days are still ahead of us. With our eyes on the future, we are making a strong investment in the training of all our employees, including our next generation of leaders, to ensure that we continue to provide excellence in banking, trust services, wealth management and customer service. We encourage you to read more about our training and customer service programs in the pages that follow. Banking is our business, but all of us on the management team never lose sight of the fact that we work for you, our shareholders. We will continue to manage the Company for profitability and growth in 2010 and beyond. F. Scott Dueser Chairman, President and CEO , TM . 3 W H A T M A K E S U S F I R S T ? Friendly. Knowledgeable. Helpful. These are words our customers use to describe First Financial Bank’s employees. Well-informed and well-motivated employees are essential to keeping First Financial Bank prepared for the future. Training our employees to provide the finest banking, financial solutions and exceptional customer service begins the day new employees are hired. Every new employee at First Financial Bank goes through a classroom training program. This orientation is designed not only to teach new employees about the bank’s outstanding portfolio of banking products and services, but also introduces them to the Company’s unique culture, which emphasizes putting customers’ needs first and going the extra mile to provide exceptional service and support. New employees learn skills from how to open a new account to the essentials of good business etiquette. New employee orientation is just the start. Our commitment to training and professional development for our employees is ongoing. All employees participate in compliance training, most taking 12 to 24 courses per year in all aspects of banking, customer service and financial services. We offer our employees both online, “desktop” training modules and more traditional classroom training. Regardless of the format, the goal is always the same – to help our employees continue the Company’s proud tradition of being a leading bank in our markets and exceeding our customers’ expectations for the finest in banking products and service. Merrie Spaeth, president of Spaeth Communications, Inc. and a nationally known consultant on organizational communications, leads a management training class for First Financial Bankshares. Christina Randle, author, productivity expert and CEO of The Effective Edge, trains managers at First Financial Bankshares. F F I NF F I N UNIVERSITY UNIVERSITY Developing future leaders is key to our company’s continued success in the years ahead. One way we prepare our future leaders is through FFIN University, which takes a select group of bank officers through a year-long inten- sive training program. launched in 2008, FFIN First University clearly underscores the Company’s commitment to main- taining its tradition of excellence in banking, trust services and customer service. Participants in FFIN University learn from both leaders and outstanding senior guest speakers on topics that range from time management to com- munication skills. Graduates of to FFIN University are ready assume key senior management positions in our company. They will help maintain the Company’s long tradition as a successful, profitable, community- based bank. 5 4 4 8 10 12 BACK ROW (L-R): KATHY BUSHNELL (First Technology Services), ISABEL MONTOYA (First Technology Services), IRMA ZIPP (Stephenville), MARY JO SORGE (Abilene), MELANIE BEARD (Granbury), ESTHER BILBY (Bridgeport), SANDRA HOLT (Abilene) FRONT ROW (L - R ): TRISHA HILDEBRAND (San Angelo), MARCELLA JIMENEZ (Mineral Wells), JANET FLYNT ( Weatherford), MELISSA JACQUES (Sweetwater), LEANN BAUGH ( Trust - Stephenville), STEVE GILBERT (Hereford), STEPHANIE LOPEZ (Eastland), LISA ROYE (Cleburne) Banking is all about relationships and working with customers one-on-one. That’s why, at First Financial Bankshares, our Customer Service First program is one of our highest priorities. Our goal is simple – to provide customer service that is second to none. Achieving that goal involves all employees and requires a sharp focus. It begins with our new employee orientation program and continues through our FFIN University for senior leaders. Instilling a culture of exceptional customer service is no accident. We encourage employees through a variety of initiatives, including recognizing employees who go beyond the norm for customers with “WOW” awards and giving Star Cards to employees who are nominated by fellow employees for exceptional customer service. Our top recognition program for employees is the Shining Star Award. Twice each year, managers select employees who have consistently demonstrated superior customer service. Shining Star Award winners and their spouses are hosted at the Company’s headquarters in Abilene for a special recognition ceremony, highlighted by a dinner with our presidents and management. ISABEL MONTOYA, First Technology Services, Abilene, is recognized as a Shining Star by SCOT T DUESER, President & CEO, First Financial Bankshares. 6 First Financial has the technology infrastructure and tools in place to provide first-rate modern banking services today and to meet future customer needs as we continue to grow. The Company’s technology supports our goal of providing exceptional customer service. Our system of customer call centers provides the same level of prompt and courteous service on the phone that customers are accustomed to receiving in our branches. Calls are answered by a person - not by voice mail - and customers immediately get helpful answers to questions about their checking and savings accounts, debit card transactions, business transactions and online banking. We created excitement among our customers in late 2009 by introducing a new custom-designed debit card program. Customers may choose from more than 130 card designs, many of which include logos and colors for local high schools or universities. To date, more than 33,000 custom cards have been printed. In 2010, we plan to go a step further and let customers create personalized debit cards using their own photos. Selected Financial Data IN THOUSANDS (EXCEPT PER SHARE DATA) YEAR-END TOTAL ASSETS EQUITY INCOME PER SHARE PER SHARE AND SPLITS PER SHARE PER SHARE SHAREHOLDERS’ NET EARNINGS DIVIDENDS DIVIDENDS BOOK VALUE MARKET VALUE BASIC CASH STOCK YEAR-END YEAR-END 2009 $3,279,456 $ 415,702 $ 53,797 $2.58 $1.36 – $ 19.96 $ 54.23 2008 3,212,385 368,782 53,164 2.56 1.34 – 17.73 55.21 2007 3,070,309 335,495 49,490 2.38 1.26 – 16.16 37.65 2006 2,850,165 300,901 46,029 2.22 1.18 – 14.51 41.86 2005 2,733,827 276,276 44,023 2.13 1.10 4/3 split 13.34 35.06 2004 2,315,224 265,545 39,171 1.90 1.00 – 12.84 33.61 2003 2,092,571 251,487 35,305 1.71 0.91 5/4 split 12.19 30.84 2002 1,993,183 238,768 33,953 1.65 0.81 – 11.59 22.80 2001 1,929,694 213,654 29,355 1.43 0.70 5/4 split 10.40 18.06 2000 1,753,814 196,121 28,316 1.37 0.62 – 9.56 15.09 GROWTH RATE 6.65% 8.81% 7.67% 7.60% 9.68% – 8.78% 13.90% TEN-YEAR COMPOUND Adjusted for stock dividends and splits. 2009 COMMON STOCK MARKET VALUE 2008 COMMON STOCK MARKET VALUE AND DIVIDEND DATA AND DIVIDEND DATA QUARTER HIGH LOW CLOSE DIVIDENDS QUARTER HIGH LOW CLOSE DIVIDENDS FOURTH $ 55.94 $ 47.86 $ 54.23 $ 0.34 FOURTH $ 56.32 $ 41.30 $ 55.21 $ 0.34 THIRD 54.50 47.95 49.46 0.34 THIRD 67.00 43.01 51.88 0.34 SECOND 51.62 46.51 50.36 0.34 SECOND 47.12 40.43 45.81 0.34 FIRST 55.70 36.49 48.17 0.34 FIRST 42.16 35.49 40.98 0.32 NET INCOME GROWTH (IN THOUSANDS) $3,125,552 $3,064,029 2.01% RETURN ON AVERAGE EQUITY $ 6M 12M 18M 24M 30M 36M 42M 48M 54M $3,279,456 $3,212,385 0% 3% 6% 9% 12% 15% 18% EFFICIENCY RATIO Financial Highlights IN THOUSANDS (EXCEPT PER SHARE DATA) FOR THE YEAR 2009 2008 CHANGES Net Income Basic Earnings per Share Dividends Declared Dividends per Share $53,797 2.58 28,311 1.36 $53,164 2.56 27,861 1.34 1.19% 0.78% 1.62% 1.49% Averages for the Year Shareholders’ Equity Assets Securities Loans Deposits At Year-End Assets Securities Loans Deposits Shareholders’ Equity Book Value per Share 1,308,110 1,494,876 2,513,387 394,812 1,285,377 1,514,369 2,684,757 415,702 19.96 1,185,303 10.36% 1,537,027 2,516,576 (2.74%) (0.13%) 348,271 13.36% 1,318,406 1,566,143 2,582,753 368,782 17.73 2.09% (2.51%) (3.31%) 3.95% 12.72% 12.58% 2.06% Trust Assets 1,664,174 1,630,560 Key Ratios Return on Average Assets Return on Average Equity Equity/Assets at Year-End Efficiency 1.72 % 13.63 % 12.68 % 50.11 % 1.74 % 15.27 % 11.48 % 50.76 % 09 08 07 06 05 1.72% 1.74% 1.72% 1.68% 1.80% 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 $53,797 $53,164 $49,490 $46,029 $44,023 13.63% 15.27% 15.87% 16.20% 16.17% 50.11% 50.76% 52.83% 53.49% 52.48% 4.80% 4.67% 4.43% 4.46% 4.49% RETURN ON AVERAGE ASSETS NET INTEREST MARGIN 0% 10% 20% 30% 40% 50% 60% 0% .25% . 50% .75% 1.00% 1.25% 1.50% 1.75% 2.00% 0% 1% 2% 3% 4% 5% 9 TAYLO R , C A L L A H A N & S H AC K E L F O R D CO U N T I E S D E P O S I T M A R K E T S H A R E 2651 JBS Parkway, Bldg. 4, Suite E Odessa, Texas 79762 ABILENE CLYDE MORAN ALBANY ODESSA M A I N O F F I C E 400 Pine LO C AT I O N S 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 132 Hill Street D I R E C TO R S F. Scott Dueser Chairman of the Board Ron Butler President and Chief Executive Officer Tucker S. Bridwell President Mansefeldt Investment Corp. Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Copeland President Joe Crawford President Abilene Aero, Inc. Mike Denny President ( 3 2 5 ) 6 2 7 - 7 2 0 0 Abilene, Texas 79601 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 Albany, Texas 76430 Murray Edwards Principal, The Edwards Group Allan D. Frizzell Executive Vice President Enrich Oil Corporation Stanley Morris, Jr. Investments Kenneth T. Murphy First Financial Bankshares, Inc. Dian Graves Stai Chair Mansefeldt Investment Corp. Director Leigh Taliaferro, M.D. Physician ADVISORY Steve Suttle J. Michael Alexander President James M. Alexander & Co. Tim Lancaster Chairman, CEO and President Hendrick Health System Shelton Family Foundation Dian Graves Owen Foundation R O N B U T L E R Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Ron Butler President and Chief Executive Officer Tom Boecking Executive Vice President South Branch Ben McAnally Executive Vice President Treasury Management John Prince Executive Vice President Personal Loans James Robinson Executive Vice President Retail Marketing and Business Development Marelyn Shedd Executive Vice President Commercial Loans Charles E. Tennesson Executive Vice President, Chief Financial Officer and Cashier Batjer and Associates McMahon Surovik Suttle, P.C. IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $1,087,452 419,928 879,258 99,941 19,587 1.88% 45.99% DEC. 31, 2008 $1,105,537 458,797 843,375 82,778 17,652 1.76% 46.72% CLEBURNE BURLESON ALVARADO MIDLOTHIAN M A I N O F F I C E ( 8 1 7 ) 5 5 6 - 5 0 0 0 o r ( 8 0 0 ) 2 2 6 - 2 9 4 0 403 N. Main Cleburne, Texas 76033 LO C AT I O N S 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 J O H N S O N CO U N T Y & C I T Y O F M I D LOT H I A N D E P O S I T M A R K E T S H A R E M AT T R E YN O L D S Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Craig Beskow Executive Vice President and Cashier Steve Davis Executive Vice President Brad Evans Executive Vice President Derek Schmidt Executive Vice President Cynthia Allen Senior Vice President Kathy Armstrong Senior Vice President Lisa Roye Senior Vice President Darlene Walker Senior Vice President D I R E C TO R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Albert A. Archer Vice Chairman Walls Industries, Inc. Ray Beavers General Manager & CEO United Cooperative Services Byron Black Investments F. Scott Dueser First Financial Bankshares, Inc. Tim Lyness Lyness Construction, LP George Marti Marti Enterprises Dr. Joe Martin Cleburne Eye Clinic IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 273,598 137,043 247,992 23,697 3,886 1.57% 53.68% DEC. 31, 2008 $ 244,647 138,127 221,629 21,126 4,199 1.74% 53.95% 11 EASTLAND RANGER RISING STAR M A I N O F F I C E 201 E. Main LO C AT I O N S 106 Main 206 West College ( 2 5 4 ) 6 2 9 - 6 1 0 0 Eastland, Texas 76448 Ranger, Texas 76470 Rising Star, Texas 76471 T H O M A S M . O ’ N E I L Pre s i d e n t a n d C E O E A S T L A N D CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer Doug Crawley Rancher 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 M.D. White, Jr. President and Owner Ace Hardware Store, Eastland/Cisco S E N I O R O F F I C E R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer L.V. Coffee Lending Terry Trout Cashier Senior Vice President and Executive Vice President Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,092 63,758 143,956 18,712 2,511 1.79% 49.74% DEC. 31, 2008 $ 153,029 58,201 127,132 17,146 2,412 1.66% 49.59% STAFF EDUCATIONMANAGEMENTDEVELOPMENTCUSTOMER SERVICETECHNOLOGY 39% 15% 48% N U M B E R O N E I N T H E N A T I O N in the $3 billion-plus publicly traded category.* Bank Director magazine, in its first-quarter 2010 issue, ranked First Financial Bankshares We’re proud of our company’s 120-year histor y of financial strength and service to our customers and communities in Texas. But First Financial Bankshares isn’t looking back or resting on our past success. Our focus is on the future. Today, we are taking steps we believe are necessary to ensure that our company remains in the forefront of providing the best banking, trust, wealth management and other financial services, while continuing to build deep and enduring relationships with our valued customers. Relationships built on trust, integrity and exceptional customer service have made our company what it is today. For our shareholders, we remain committed to managing First Financial Bankshares in a safe, sound and profitable manner, with a goal of strategically and prudently growing the Company and expanding into new markets. The Letter to Shareholders on pages 2 and 3 of this annual report gives you more insights into how our company performed in 2009 and our plans for 2010. The photo spread and text on pages 4-7 demonstrate how we are working to secure the Company’s future for the benefit of our customers, employees and shareholders – and the Texas communities we serve. For more information, visit our Web site at http://www.ffin.com. * Based on measurement criteria and analysis compiled by Sandler O’Neill + Partners, L.P., a New York-based investment banking firm that specializes in the financial services industry. Published in Bank Director magazine, 1st quarter 2010. First Financial Bank 325-627-7200 First Financial Bank 817-556-5000 First Financial Bank 254-629-6100 First Financial Bank 806-363-8200 ABILENE CLYDE MORAN ALBANY ODESSA CLEBURNE BURLESON ALVARADO MIDLOTHIAN EASTLAND RANGER RISING STAR HEREFORD , TM . A Family of Community Banks SM First Financial Bank STEPHENVILLE First Financial Bank 940-327-5400 First Financial Bank 325-659-5900 First Financial Bank 817-410-2915 940-683-8700 254-965-5036 817-573-6900 First Financial Bank 325-235-6600 First Financial Bank 817-596-0307 MINERAL WELLS SAN ANGELO SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR GRANBURY GLEN ROSE ACTON SWEET WATER ROBY TRENT MERKEL WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH BANKS TRUST OFFICE LOCATIONS D E A R S H A R E H O L D E R S In light of the recession and higher FDIC insurance premiums in 2009, I am very pleased that our company was able to deliver increased earnings for the 23rd consecutive year. While the national recession at first seemed to bypass Texas, it began moving into the state in the second part of 2008, bringing a decline in home sales and general economic activity and an increase in unemployment. These trends continued in 2009. On the plus side, our state continued to fare better than most of the rest of the country, and our geographic footprint—especially in our West Texas markets—remained stable. The stock market fluctuated greatly during the past two years. The NASDAQ Composite Index declined 41 percent in 2008 and then went back up 44 percent in 2009. Our stock went up 47 percent in 2008 and down 2 percent in 2009, closing at $54.23. We are pleased that our stock performed well for our stockholders during these years of economic turmoil. We continue to suspect that a “flight to safety”—favoring companies with strong balance sheets and a long record of conservative lending—may have played a role in our stock’s favorable performance. We are also pleased that in 2009, our company again received high rankings from leading banking publications such as the ABA Banking Journal and U.S. Banker. Additionally, in January of 2010, Bank Director magazine rated us No. 1 in the nation among publicly traded banks with $3 billion or more of assets. Being named No. 1 is like winning an Academy Award. Without question, this accomplishment is due to the direction of our Board, the dedication of our employees and the loyalty of our customers, who have kept us strong for 120 years. We accept this honor with great humility because we know that every day, we face a new set of challenges in the banking industry and must prove ourselves again and again. RESULTS FOR 2009 Net income grew 1.2 percent to $53.8 million from $53.2 million in 2008. Net interest income, the major source of our earnings, rose 4.3 percent to $129.2 million from $123.9 million. Our net interest margin (on a tax-equivalent basis) also increased, to 4.80 percent from 4.67 percent in 2008. The provision for loan losses for 2009 totaled $11.4 million, a 43.5 percent increase from $8.0 million in 2008. The larger provision was due to a higher level of net charge-offs and an increase in the allowance for loan losses. Noninterest income declined 1.7 percent to $48.6 million from $49.5 million. The decline was primarily due to a $692,000 drop in income from student loan sales as the Company exited the student loan program. Lower usage of overdraft privileges also contributed to the decrease in noninterest income. Noninterest expense was $94.0 million in 2009, up 2.6 percent from $91.6 million a year earlier. The largest increase in noninterest expense was in FDIC insurance premiums, which grew by $4.2 million, or 650.4 percent, after the FDIC raised premium rates as of January 1, 2009, and implemented a special assessment in June of that year. Nevertheless, we were able to improve our efficiency ratio, which expresses the share of revenues consumed by operating expenses, to 50.11 percent from 50.76 percent in 2008. Our bank presidents worked hard to maintain their net interest margins and reduce expenses. I could not be more pleased with their accomplishments, especially in light of the significant increase in FDIC insurance premiums. We again outperformed our peer group on several key financial metrics. Our return on average assets was 1.72 percent compared with a negative 0.21 percent for our peer group. Return on average equity was 13.63 percent versus a negative 2.59 percent for our peers. Our net interest margin of 4.80 percent on a tax-equivalent basis compared very favorably to our peer group’s margin of 3.48 percent. We also beat the peer group on the efficiency ratio—ours was 50.11 percent, while theirs was 69.53 percent. We ended the year with a strong balance sheet. Consolidated assets increased 2.1 percent to $3.28 billion from $3.21 billion at the end of 2008. Loans decreased 3.3 percent to $1.51 billion from $1.57 billion, primarily due to our exiting the student loan program. Total deposits grew 3.9 percent to $2.68 billion from $2.58 billion. Shareholders’ equity rose 12.7 percent to $415.7 million from $368.8 million. As the economy softened in Texas, our nonperforming assets increased to 1.46 percent of total loans and foreclosed assets from 0.80 percent at the end of 2008. Even with this increase, our nonperforming percentage was well below our peer group’s 5.07 percent. Net loan charge-offs for the year totaled $5.3 million at year-end 2009 versus $3.9 million at year-end 2008. The 2009 allowance for loan losses amounted to 1.82 percent of total loans. First Financial Trust & Asset Management Company also experienced growth last year. Total assets at year-end had a book value of $1.67 billion, a 2.1 percent increase from 2008, and a market value of $2.10 billion, an 11.7 percent increase. The Trust Company’s fee income, however, declined 3.8 percent to $9.1 million from $9.4 million. This subsidiary manages a large oil and gas portfolio, and the drop in its income was primarily due to a decline in oil and gas prices and in related fees on oil and gas income. The Trust Company opened its sixth office last year, in Odessa, Texas. We are encouraged by the number of clients who have opened trust accounts with us in Odessa and the potential for growth in the Permian Basin market. 2 GROWTH STRATEGIES We actively looked for acquisition opportunities during 2009, but the banks that we considered were overpriced in light of the economy or did not fit our company’s profile. Our plan is to continue pursuing acquisitions diligently. With our capitalization, stock price, cash position and experienced management team, we have what we need to take advantage of acquisition opportunities. In November, we announced plans to open bank branches in our two existing Trust Company offices in Fort Worth and Odessa, to complement trust services and serve customers in those markets. We have had frequent requests from customers for branches in these markets and are interested to see how this private bank branch concept will work. During the year, we achieved a long-term objective of bringing all of our banks under a common name to improve brand identity and marketing efficiencies. Hereford State Bank, San Angelo National Bank and Weatherford National Bank are now called First Financial Bank. All of our banks benefit from sharing the Company’s growing brand identity, and our customers benefit from being able to use our facilities throughout our market areas. However, in no way does the use of a common name change our practice of operating through ten community-based banks that are separately chartered, have their own local boards and management teams, and make decisions locally. We continue to be the “hometown bank” in our markets, with a tradition of playing a vital role in community life. WHAT’S AHEAD Besides looking for acquisitions, we plan to continue growing our mortgage market, trust services and treasury management services. We are encouraged by our recent growth that there will be good opportunities in these areas. Minimizing nonperforming assets will certainly be an objective, as it has been for the last several years. We do know that FDIC insurance premiums will continue to be high and that increased regulation proposed by Congress and various federal agencies will make our jobs more challenging and costly. Our hope is that the banking industry can mitigate much of the pending regulatory legislation by educating Washington that community banks have not caused today’s economic problems and are already over-regulated. We are committed to providing outstanding service to our customers, our communities and our nation by making every good loan we can to help our economy grow and prosper. PERSONNEL CHANGES J. V. Martin retired at the end of the year as CEO of First Financial Bank, Sweetwater. Kirby Andrews, President, assumed the additional role of CEO there. J. V. will continue to serve as the Sweetwater bank’s Chairman of the Board. He will also provide consulting services to the holding company. Additionally, Senior Chairman Kenneth T. Murphy will retire from the First Financial Bankshares Board in conjunction with our Annual Shareholders’ Meeting in April. He has served our company with distinction for 39 years, holding the positions of President, First Financial Bank, Abilene; and Executive Vice President, President, Chief Executive Officer, Chairman and Senior Chairman of First Financial Bankshares, Inc. Through those years, he has also made many civic and professional contributions, including serving on the Board of the Federal Reserve Bank of Dallas and serving as Chairman of the Board of the Texas Bankers Association. When Ken joined the bank in 1971, the Company had total assets of $87.7 million and net income of $806,000. By the end of 2009, we had total assets of $3.28 billion and net earnings of $53.8 million. During Ken’s tenure with the Company, we have experienced great success. Customers, stockholders and communities have certainly benefited from Ken’s leadership and counsel, and we thank him for his fine service. We are pleased that he will continue to maintain an office in the First Financial Bank (Abilene) building and will be available to management for consultation. It is our pleasure to announce that Steven L. Beal, retired President and Chief Operating Officer of Concho Resources Inc., has accepted nomination for election as a Director of the Company at our Annual Shareholders’ Meeting in April. Steve was one of the founders of Concho, an independent oil and natural gas company, and continues to be a Director on its Board. Prior to being at Concho, he was Senior Vice President and Chief Financial Officer of Parker & Parsley Petroleum Company, which is now Pioneer National Resources. Before that, he was an audit professional with the accounting firm of Price Waterhouse Coopers. He is a 1981 graduate of The University of Texas with a degree in accounting. Steve has been involved civically and professionally with the United Way of Midland, Permian Basin Oil & Gas Association, Independent Petroleum Association of America and the New Mexico Oil & Gas Association. He has been on the Board of Directors of Midland Christian School and the Midland/Odessa Symphony. Most recently, he was a partner with the Early School District to build an indoor practice facility for use by the students and teams of Early High School. Steve and his wife, Teresa, live on their ranch in Brownwood, Texas. These are challenging times for the national economy and for the banking business. First Financial has the benefit of a long-term perspective. In our 120-year history, we’ve endured numerous recessions, the Great Depression, the Texas oil bust of the 1980s and other obstacles. We cannot predict the duration of the current economic malaise, but we remain optimistic about the long-term future of our state and nation, and especially our Texas markets. Financially and operationally, we believe our company has never been stronger, and our best days are still ahead of us. With our eyes on the future, we are making a strong investment in the training of all our employees, including our next generation of leaders, to ensure that we continue to provide excellence in banking, trust services, wealth management and customer service. We encourage you to read more about our training and customer service programs in the pages that follow. Banking is our business, but all of us on the management team never lose sight of the fact that we work for you, our shareholders. We will continue to manage the Company for profitability and growth in 2010 and beyond. F. Scott Dueser Chairman, President and CEO , TM . 3 W H A T M A K E S U S F I R S T ? Friendly. Knowledgeable. Helpful. These are words our customers use to describe First Financial Bank’s employees. Well-informed and well-motivated employees are essential to keeping First Financial Bank prepared for the future. Training our employees to provide the finest banking, financial solutions and exceptional customer service begins the day new employees are hired. Every new employee at First Financial Bank goes through a classroom training program. This orientation is designed not only to teach new employees about the bank’s outstanding portfolio of banking products and services, but also introduces them to the Company’s unique culture, which emphasizes putting customers’ needs first and going the extra mile to provide exceptional service and support. New employees learn skills from how to open a new account to the essentials of good business etiquette. New employee orientation is just the start. Our commitment to training and professional development for our employees is ongoing. All employees participate in compliance training, most taking 12 to 24 courses per year in all aspects of banking, customer service and financial services. We offer our employees both online, “desktop” training modules and more traditional classroom training. Regardless of the format, the goal is always the same – to help our employees continue the Company’s proud tradition of being a leading bank in our markets and exceeding our customers’ expectations for the finest in banking products and service. Merrie Spaeth, president of Spaeth Communications, Inc. and a nationally known consultant on organizational communications, leads a management training class for First Financial Bankshares. Christina Randle, author, productivity expert and CEO of The Effective Edge, trains managers at First Financial Bankshares. 4 4 F F I NF F I N UNIVERSITY UNIVERSITY Developing future leaders is key to our company’s continued success in the years ahead. One way we prepare our future leaders is through FFIN University, which takes a select group of bank officers through a year-long inten- sive training program. First launched in 2008, FFIN University clearly underscores the Company’s commitment to main- taining its tradition of excellence in banking, trust services and customer service. Participants in FFIN University learn from both senior leaders and outstanding guest speakers on topics that range from time management to com- munication skills. Graduates of FFIN University are ready to assume key senior management positions in our company. They will help maintain the Company’s long tradition as a successful, profitable, community- based bank. 5 BACK ROW (L-R): KATHY BUSHNELL (First Technology Services), ISABEL MONTOYA (First Technology Services), IRMA ZIPP (Stephenville), MARY JO SORGE (Abilene), MELANIE BEARD (Granbury), ESTHER BILBY (Bridgeport), SANDRA HOLT (Abilene) FRONT ROW (L - R ): TRISHA HILDEBRAND (San Angelo), MARCELLA JIMENEZ (Mineral Wells), JANET FLYNT ( Weatherford), MELISSA JACQUES (Sweetwater), LEANN BAUGH ( Trust - Stephenville), STEVE GILBERT (Hereford), STEPHANIE LOPEZ (Eastland), LISA ROYE (Cleburne) Banking is all about relationships and working with customers one-on-one. That’s why, at First Financial Bankshares, our Customer Service First program is one of our highest priorities. Our goal is simple – to provide customer service that is second to none. Achieving that goal involves all employees and requires a sharp focus. It begins with our new employee orientation program and continues through our FFIN University for senior leaders. Instilling a culture of exceptional customer service is no accident. We encourage employees through a variety of initiatives, including recognizing employees who go beyond the norm for customers with “WOW” awards and giving Star Cards to employees who are nominated by fellow employees for exceptional customer service. Our top recognition program for employees is the Shining Star Award. Twice each year, managers select employees who have consistently demonstrated superior customer service. Shining Star Award winners and their spouses are hosted at the Company’s headquarters in Abilene for a special recognition ceremony, highlighted by a dinner with our presidents and management. ISABEL MONTOYA, First Technology Services, Abilene, is recognized as a Shining Star by SCOT T DUESER, President & CEO, First Financial Bankshares. 6 First Financial has the technology infrastructure and tools in place to provide first-rate modern banking services today and to meet future customer needs as we continue to grow. The Company’s technology supports our goal of providing exceptional customer service. Our system of customer call centers provides the same level of prompt and courteous service on the phone that customers are accustomed to receiving in our branches. Calls are answered by a person - not by voice mail - and customers immediately get helpful answers to questions about their checking and savings accounts, debit card transactions, business transactions and online banking. We created excitement among our customers in late 2009 by introducing a new custom-designed debit card program. Customers may choose from more than 130 card designs, many of which include logos and colors for local high schools or universities. To date, more than 33,000 custom cards have been printed. In 2010, we plan to go a step further and let customers create personalized debit cards using their own photos. Selected Financial Data IN THOUSANDS (EXCEPT PER SHARE DATA) YEAR-END TOTAL ASSETS EQUITY INCOME PER SHARE PER SHARE AND SPLITS PER SHARE PER SHARE SHAREHOLDERS’ NET EARNINGS DIVIDENDS DIVIDENDS BOOK VALUE MARKET VALUE BASIC CASH STOCK YEAR-END YEAR-END 2009 $3,279,456 $ 415,702 $ 53,797 $2.58 $1.36 – $ 19.96 $ 54.23 2008 3,212,385 368,782 53,164 2.56 1.34 – 17.73 55.21 2007 3,070,309 335,495 49,490 2.38 1.26 – 16.16 37.65 2006 2,850,165 300,901 46,029 2.22 1.18 – 14.51 41.86 2005 2,733,827 276,276 44,023 2.13 1.10 4/3 split 13.34 35.06 2004 2,315,224 265,545 39,171 1.90 1.00 – 12.84 33.61 2003 2,092,571 251,487 35,305 1.71 0.91 5/4 split 12.19 30.84 2002 1,993,183 238,768 33,953 1.65 0.81 – 11.59 22.80 2001 1,929,694 213,654 29,355 1.43 0.70 5/4 split 10.40 18.06 2000 1,753,814 196,121 28,316 1.37 0.62 – 9.56 15.09 GROWTH RATE 6.65% 8.81% 7.67% 7.60% 9.68% – 8.78% 13.90% TEN-YEAR COMPOUND Adjusted for stock dividends and splits. 2009 COMMON STOCK MARKET VALUE 2008 COMMON STOCK MARKET VALUE AND DIVIDEND DATA AND DIVIDEND DATA QUARTER HIGH LOW CLOSE DIVIDENDS QUARTER HIGH LOW CLOSE DIVIDENDS FOURTH $ 55.94 $ 47.86 $ 54.23 $ 0.34 FOURTH $ 56.32 $ 41.30 $ 55.21 $ 0.34 THIRD 54.50 47.95 49.46 0.34 THIRD 67.00 43.01 51.88 0.34 SECOND 51.62 46.51 50.36 0.34 SECOND 47.12 40.43 45.81 0.34 FIRST 55.70 36.49 48.17 0.34 FIRST 42.16 35.49 40.98 0.32 8 10 12 NET INCOME GROWTH (IN THOUSANDS) $3,125,552 $3,064,029 2.01% RETURN ON AVERAGE EQUITY $ 6M 12M 18M 24M 30M 36M 42M 48M 54M $3,279,456 $3,212,385 0% 3% 6% 9% 12% 15% 18% EFFICIENCY RATIO Financial Highlights IN THOUSANDS (EXCEPT PER SHARE DATA) FOR THE YEAR 2009 2008 CHANGES Net Income Basic Earnings per Share Dividends Declared Dividends per Share $53,797 2.58 28,311 1.36 $53,164 2.56 27,861 1.34 1.19% 0.78% 1.62% 1.49% Averages for the Year Shareholders’ Equity Assets Securities Loans Deposits At Year-End Assets Securities Loans Deposits Shareholders’ Equity Book Value per Share 1,308,110 1,494,876 2,513,387 394,812 1,285,377 1,514,369 2,684,757 415,702 19.96 1,185,303 10.36% 1,537,027 2,516,576 (2.74%) (0.13%) 348,271 13.36% 1,318,406 1,566,143 2,582,753 368,782 17.73 2.09% (2.51%) (3.31%) 3.95% 12.72% 12.58% 2.06% Trust Assets 1,664,174 1,630,560 Key Ratios Return on Average Assets Return on Average Equity Equity/Assets at Year-End Efficiency 1.72 % 13.63 % 12.68 % 50.11 % 1.74 % 15.27 % 11.48 % 50.76 % 09 08 07 06 05 1.72% 1.74% 1.72% 1.68% 1.80% 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 $53,797 $53,164 $49,490 $46,029 $44,023 13.63% 15.27% 15.87% 16.20% 16.17% 50.11% 50.76% 52.83% 53.49% 52.48% 4.80% 4.67% 4.43% 4.46% 4.49% RETURN ON AVERAGE ASSETS NET INTEREST MARGIN 0% 10% 20% 30% 40% 50% 60% 0% .25% . 50% .75% 1.00% 1.25% 1.50% 1.75% 2.00% 0% 1% 2% 3% 4% 5% 9 TAYLO R , C A L L A H A N & S H AC K E L F O R D CO U N T I E S D E P O S I T M A R K E T S H A R E 2651 JBS Parkway, Bldg. 4, Suite E Odessa, Texas 79762 ABILENE CLYDE MORAN ALBANY ODESSA M A I N O F F I C E 400 Pine LO C AT I O N S 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 132 Hill Street D I R E C TO R S F. Scott Dueser Chairman of the Board Ron Butler President and Chief Executive Officer Tucker S. Bridwell President Mansefeldt Investment Corp. Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Copeland President Joe Crawford President Abilene Aero, Inc. Mike Denny President ( 3 2 5 ) 6 2 7 - 7 2 0 0 Abilene, Texas 79601 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 Albany, Texas 76430 Murray Edwards Principal, The Edwards Group Allan D. Frizzell Executive Vice President Enrich Oil Corporation Stanley Morris, Jr. Investments Kenneth T. Murphy First Financial Bankshares, Inc. Dian Graves Stai Chair Mansefeldt Investment Corp. Director Leigh Taliaferro, M.D. Physician ADVISORY Steve Suttle J. Michael Alexander President James M. Alexander & Co. Tim Lancaster Chairman, CEO and President Hendrick Health System Shelton Family Foundation Dian Graves Owen Foundation R O N B U T L E R Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Ron Butler President and Chief Executive Officer Tom Boecking Executive Vice President South Branch Ben McAnally Executive Vice President Treasury Management John Prince Executive Vice President Personal Loans James Robinson Executive Vice President Retail Marketing and Business Development Marelyn Shedd Executive Vice President Commercial Loans Charles E. Tennesson Executive Vice President, Chief Financial Officer and Cashier Batjer and Associates McMahon Surovik Suttle, P.C. IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $1,087,452 419,928 879,258 99,941 19,587 1.88% 45.99% DEC. 31, 2008 $1,105,537 458,797 843,375 82,778 17,652 1.76% 46.72% CLEBURNE BURLESON ALVARADO MIDLOTHIAN M A I N O F F I C E ( 8 1 7 ) 5 5 6 - 5 0 0 0 o r ( 8 0 0 ) 2 2 6 - 2 9 4 0 403 N. Main Cleburne, Texas 76033 LO C AT I O N S 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 J O H N S O N CO U N T Y & C I T Y O F M I D LOT H I A N D E P O S I T M A R K E T S H A R E M AT T R E YN O L D S Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Craig Beskow Executive Vice President and Cashier Steve Davis Executive Vice President Brad Evans Executive Vice President Derek Schmidt Executive Vice President Cynthia Allen Senior Vice President Kathy Armstrong Senior Vice President Lisa Roye Senior Vice President Darlene Walker Senior Vice President D I R E C TO R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Albert A. Archer Vice Chairman Walls Industries, Inc. Ray Beavers General Manager & CEO United Cooperative Services Byron Black Investments F. Scott Dueser First Financial Bankshares, Inc. Tim Lyness Lyness Construction, LP George Marti Marti Enterprises Dr. Joe Martin Cleburne Eye Clinic IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 273,598 137,043 247,992 23,697 3,886 1.57% 53.68% DEC. 31, 2008 $ 244,647 138,127 221,629 21,126 4,199 1.74% 53.95% 11 EASTLAND RANGER RISING STAR M A I N O F F I C E 201 E. Main LO C AT I O N S 106 Main 206 West College ( 2 5 4 ) 6 2 9 - 6 1 0 0 Eastland, Texas 76448 Ranger, Texas 76470 Rising Star, Texas 76471 T H O M A S M . O ’ N E I L Pre s i d e n t a n d C E O E A S T L A N D CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer Doug Crawley Rancher 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 M.D. White, Jr. President and Owner Ace Hardware Store, Eastland/Cisco S E N I O R O F F I C E R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer L.V. Coffee Lending Terry Trout Cashier Senior Vice President and Executive Vice President Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,092 63,758 143,956 18,712 2,511 1.79% 49.74% DEC. 31, 2008 $ 153,029 58,201 127,132 17,146 2,412 1.66% 49.59% STAFF EDUCATIONMANAGEMENTDEVELOPMENTCUSTOMER SERVICETECHNOLOGY 39% 15% 48% N U M B E R O N E I N T H E N A T I O N in the $3 billion-plus publicly traded category.* Bank Director magazine, in its first-quarter 2010 issue, ranked First Financial Bankshares We’re proud of our company’s 120-year histor y of financial strength and service to our customers and communities in Texas. But First Financial Bankshares isn’t looking back or resting on our past success. Our focus is on the future. Today, we are taking steps we believe are necessary to ensure that our company remains in the forefront of providing the best banking, trust, wealth management and other financial services, while continuing to build deep and enduring relationships with our valued customers. Relationships built on trust, integrity and exceptional customer service have made our company what it is today. For our shareholders, we remain committed to managing First Financial Bankshares in a safe, sound and profitable manner, with a goal of strategically and prudently growing the Company and expanding into new markets. The Letter to Shareholders on pages 2 and 3 of this annual report gives you more insights into how our company performed in 2009 and our plans for 2010. The photo spread and text on pages 4-7 demonstrate how we are working to secure the Company’s future for the benefit of our customers, employees and shareholders – and the Texas communities we serve. For more information, visit our Web site at http://www.ffin.com. * Based on measurement criteria and analysis compiled by Sandler O’Neill + Partners, L.P., a New York-based investment banking firm that specializes in the financial services industry. Published in Bank Director magazine, 1st quarter 2010. First Financial Bank 325-627-7200 First Financial Bank 817-556-5000 First Financial Bank 254-629-6100 First Financial Bank 806-363-8200 ABILENE CLYDE MORAN ALBANY ODESSA CLEBURNE BURLESON ALVARADO MIDLOTHIAN EASTLAND RANGER RISING STAR HEREFORD , TM . A Family of Community Banks SM First Financial Bank STEPHENVILLE First Financial Bank 940-327-5400 First Financial Bank 325-659-5900 First Financial Bank 817-410-2915 940-683-8700 254-965-5036 817-573-6900 First Financial Bank 325-235-6600 First Financial Bank 817-596-0307 MINERAL WELLS SAN ANGELO SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR GRANBURY GLEN ROSE ACTON SWEET WATER ROBY TRENT MERKEL WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH BANKS TRUST OFFICE LOCATIONS D E A R S H A R E H O L D E R S In light of the recession and higher FDIC insurance premiums in 2009, I am very pleased that our company was able to deliver increased earnings for the 23rd consecutive year. While the national recession at first seemed to bypass Texas, it began moving into the state in the second part of 2008, bringing a decline in home sales and general economic activity and an increase in unemployment. These trends continued in 2009. On the plus side, our state continued to fare better than most of the rest of the country, and our geographic footprint—especially in our West Texas markets—remained stable. The stock market fluctuated greatly during the past two years. The NASDAQ Composite Index declined 41 percent in 2008 and then went back up 44 percent in 2009. Our stock went up 47 percent in 2008 and down 2 percent in 2009, closing at $54.23. We are pleased that our stock performed well for our stockholders during these years of economic turmoil. We continue to suspect that a “flight to safety”—favoring companies with strong balance sheets and a long record of conservative lending—may have played a role in our stock’s favorable performance. We are also pleased that in 2009, our company again received high rankings from leading banking publications such as the ABA Banking Journal and U.S. Banker. Additionally, in January of 2010, Bank Director magazine rated us No. 1 in the nation among publicly traded banks with $3 billion or more of assets. Being named No. 1 is like winning an Academy Award. Without question, this accomplishment is due to the direction of our Board, the dedication of our employees and the loyalty of our customers, who have kept us strong for 120 years. We accept this honor with great humility because we know that every day, we face a new set of challenges in the banking industry and must prove ourselves again and again. RESULTS FOR 2009 Net income grew 1.2 percent to $53.8 million from $53.2 million in 2008. Net interest income, the major source of our earnings, rose 4.3 percent to $129.2 million from $123.9 million. Our net interest margin (on a tax-equivalent basis) also increased, to 4.80 percent from 4.67 percent in 2008. The provision for loan losses for 2009 totaled $11.4 million, a 43.5 percent increase from $8.0 million in 2008. The larger provision was due to a higher level of net charge-offs and an increase in the allowance for loan losses. Noninterest income declined 1.7 percent to $48.6 million from $49.5 million. The decline was primarily due to a $692,000 drop in income from student loan sales as the Company exited the student loan program. Lower usage of overdraft privileges also contributed to the decrease in noninterest income. Noninterest expense was $94.0 million in 2009, up 2.6 percent from $91.6 million a year earlier. The largest increase in noninterest expense was in FDIC insurance premiums, which grew by $4.2 million, or 650.4 percent, after the FDIC raised premium rates as of January 1, 2009, and implemented a special assessment in June of that year. Nevertheless, we were able to improve our efficiency ratio, which expresses the share of revenues consumed by operating expenses, to 50.11 percent from 50.76 percent in 2008. Our bank presidents worked hard to maintain their net interest margins and reduce expenses. I could not be more pleased with their accomplishments, especially in light of the significant increase in FDIC insurance premiums. We again outperformed our peer group on several key financial metrics. Our return on average assets was 1.72 percent compared with a negative 0.21 percent for our peer group. Return on average equity was 13.63 percent versus a negative 2.59 percent for our peers. Our net interest margin of 4.80 percent on a tax-equivalent basis compared very favorably to our peer group’s margin of 3.48 percent. We also beat the peer group on the efficiency ratio—ours was 50.11 percent, while theirs was 69.53 percent. We ended the year with a strong balance sheet. Consolidated assets increased 2.1 percent to $3.28 billion from $3.21 billion at the end of 2008. Loans decreased 3.3 percent to $1.51 billion from $1.57 billion, primarily due to our exiting the student loan program. Total deposits grew 3.9 percent to $2.68 billion from $2.58 billion. Shareholders’ equity rose 12.7 percent to $415.7 million from $368.8 million. As the economy softened in Texas, our nonperforming assets increased to 1.46 percent of total loans and foreclosed assets from 0.80 percent at the end of 2008. Even with this increase, our nonperforming percentage was well below our peer group’s 5.07 percent. Net loan charge-offs for the year totaled $5.3 million at year-end 2009 versus $3.9 million at year-end 2008. The 2009 allowance for loan losses amounted to 1.82 percent of total loans. First Financial Trust & Asset Management Company also experienced growth last year. Total assets at year-end had a book value of $1.67 billion, a 2.1 percent increase from 2008, and a market value of $2.10 billion, an 11.7 percent increase. The Trust Company’s fee income, however, declined 3.8 percent to $9.1 million from $9.4 million. This subsidiary manages a large oil and gas portfolio, and the drop in its income was primarily due to a decline in oil and gas prices and in related fees on oil and gas income. The Trust Company opened its sixth office last year, in Odessa, Texas. We are encouraged by the number of clients who have opened trust accounts with us in Odessa and the potential for growth in the Permian Basin market. 2 GROWTH STRATEGIES We actively looked for acquisition opportunities during 2009, but the banks that we considered were overpriced in light of the economy or did not fit our company’s profile. Our plan is to continue pursuing acquisitions diligently. With our capitalization, stock price, cash position and experienced management team, we have what we need to take advantage of acquisition opportunities. In November, we announced plans to open bank branches in our two existing Trust Company offices in Fort Worth and Odessa, to complement trust services and serve customers in those markets. We have had frequent requests from customers for branches in these markets and are interested to see how this private bank branch concept will work. During the year, we achieved a long-term objective of bringing all of our banks under a common name to improve brand identity and marketing efficiencies. Hereford State Bank, San Angelo National Bank and Weatherford National Bank are now called First Financial Bank. All of our banks benefit from sharing the Company’s growing brand identity, and our customers benefit from being able to use our facilities throughout our market areas. However, in no way does the use of a common name change our practice of operating through ten community-based banks that are separately chartered, have their own local boards and management teams, and make decisions locally. We continue to be the “hometown bank” in our markets, with a tradition of playing a vital role in community life. WHAT’S AHEAD Besides looking for acquisitions, we plan to continue growing our mortgage market, trust services and treasury management services. We are encouraged by our recent growth that there will be good opportunities in these areas. Minimizing nonperforming assets will certainly be an objective, as it has been for the last several years. We do know that FDIC insurance premiums will continue to be high and that increased regulation proposed by Congress and various federal agencies will make our jobs more challenging and costly. Our hope is that the banking industry can mitigate much of the pending regulatory legislation by educating Washington that community banks have not caused today’s economic problems and are already over-regulated. We are committed to providing outstanding service to our customers, our communities and our nation by making every good loan we can to help our economy grow and prosper. PERSONNEL CHANGES J. V. Martin retired at the end of the year as CEO of First Financial Bank, Sweetwater. Kirby Andrews, President, assumed the additional role of CEO there. J. V. will continue to serve as the Sweetwater bank’s Chairman of the Board. He will also provide consulting services to the holding company. Additionally, Senior Chairman Kenneth T. Murphy will retire from the First Financial Bankshares Board in conjunction with our Annual Shareholders’ Meeting in April. He has served our company with distinction for 39 years, holding the positions of President, First Financial Bank, Abilene; and Executive Vice President, President, Chief Executive Officer, Chairman and Senior Chairman of First Financial Bankshares, Inc. Through those years, he has also made many civic and professional contributions, including serving on the Board of the Federal Reserve Bank of Dallas and serving as Chairman of the Board of the Texas Bankers Association. When Ken joined the bank in 1971, the Company had total assets of $87.7 million and net income of $806,000. By the end of 2009, we had total assets of $3.28 billion and net earnings of $53.8 million. During Ken’s tenure with the Company, we have experienced great success. Customers, stockholders and communities have certainly benefited from Ken’s leadership and counsel, and we thank him for his fine service. We are pleased that he will continue to maintain an office in the First Financial Bank (Abilene) building and will be available to management for consultation. It is our pleasure to announce that Steven L. Beal, retired President and Chief Operating Officer of Concho Resources Inc., has accepted nomination for election as a Director of the Company at our Annual Shareholders’ Meeting in April. Steve was one of the founders of Concho, an independent oil and natural gas company, and continues to be a Director on its Board. Prior to being at Concho, he was Senior Vice President and Chief Financial Officer of Parker & Parsley Petroleum Company, which is now Pioneer National Resources. Before that, he was an audit professional with the accounting firm of Price Waterhouse Coopers. He is a 1981 graduate of The University of Texas with a degree in accounting. Steve has been involved civically and professionally with the United Way of Midland, Permian Basin Oil & Gas Association, Independent Petroleum Association of America and the New Mexico Oil & Gas Association. He has been on the Board of Directors of Midland Christian School and the Midland/Odessa Symphony. Most recently, he was a partner with the Early School District to build an indoor practice facility for use by the students and teams of Early High School. Steve and his wife, Teresa, live on their ranch in Brownwood, Texas. These are challenging times for the national economy and for the banking business. First Financial has the benefit of a long-term perspective. In our 120-year history, we’ve endured numerous recessions, the Great Depression, the Texas oil bust of the 1980s and other obstacles. We cannot predict the duration of the current economic malaise, but we remain optimistic about the long-term future of our state and nation, and especially our Texas markets. Financially and operationally, we believe our company has never been stronger, and our best days are still ahead of us. With our eyes on the future, we are making a strong investment in the training of all our employees, including our next generation of leaders, to ensure that we continue to provide excellence in banking, trust services, wealth management and customer service. We encourage you to read more about our training and customer service programs in the pages that follow. Banking is our business, but all of us on the management team never lose sight of the fact that we work for you, our shareholders. We will continue to manage the Company for profitability and growth in 2010 and beyond. F. Scott Dueser Chairman, President and CEO , TM . 3 W H A T M A K E S U S F I R S T ? Friendly. Knowledgeable. Helpful. These are words our customers use to describe First Financial Bank’s employees. Well-informed and well-motivated employees are essential to keeping First Financial Bank prepared for the future. Training our employees to provide the finest banking, financial solutions and exceptional customer service begins the day new employees are hired. Every new employee at First Financial Bank goes through a classroom training program. This orientation is designed not only to teach new employees about the bank’s outstanding portfolio of banking products and services, but also introduces them to the Company’s unique culture, which emphasizes putting customers’ needs first and going the extra mile to provide exceptional service and support. New employees learn skills from how to open a new account to the essentials of good business etiquette. New employee orientation is just the start. Our commitment to training and professional development for our employees is ongoing. All employees participate in compliance training, most taking 12 to 24 courses per year in all aspects of banking, customer service and financial services. We offer our employees both online, “desktop” training modules and more traditional classroom training. Regardless of the format, the goal is always the same – to help our employees continue the Company’s proud tradition of being a leading bank in our markets and exceeding our customers’ expectations for the finest in banking products and service. Merrie Spaeth, president of Spaeth Communications, Inc. and a nationally known consultant on organizational communications, leads a management training class for First Financial Bankshares. Christina Randle, author, productivity expert and CEO of The Effective Edge, trains managers at First Financial Bankshares. F F I NF F I N UNIVERSITY UNIVERSITY Developing future leaders is key to our company’s continued success in the years ahead. One way we prepare our future leaders is through FFIN University, which takes a select group of bank officers through a year-long inten- sive training program. First launched in 2008, FFIN University clearly underscores the Company’s commitment to main- taining its tradition of excellence in banking, trust services and customer service. Participants in FFIN University learn from both senior leaders and outstanding guest speakers on topics that range from time management to com- munication skills. Graduates of FFIN University are ready to assume key senior management positions in our company. They will help maintain the Company’s long tradition as a successful, profitable, community- based bank. 5 BACK ROW (L-R): KATHY BUSHNELL (First Technology Services), ISABEL MONTOYA (First Technology Services), IRMA ZIPP (Stephenville), MARY JO SORGE (Abilene), MELANIE BEARD (Granbury), ESTHER BILBY (Bridgeport), SANDRA HOLT (Abilene) FRONT ROW (L - R ): TRISHA HILDEBRAND (San Angelo), MARCELLA JIMENEZ (Mineral Wells), JANET FLYNT ( Weatherford), MELISSA JACQUES (Sweetwater), LEANN BAUGH ( Trust - Stephenville), STEVE GILBERT (Hereford), STEPHANIE LOPEZ (Eastland), LISA ROYE (Cleburne) Banking is all about relationships and working with customers one-on-one. That’s why, at First Financial Bankshares, our Customer Service First program is one of our highest priorities. Our goal is simple – to provide customer service that is second to none. Achieving that goal involves all employees and requires a sharp focus. It begins with our new employee orientation program and continues through our FFIN University for senior leaders. Instilling a culture of exceptional customer service is no accident. We encourage employees through a variety of initiatives, including recognizing employees who go beyond the norm for customers with “WOW” awards and giving Star Cards to employees who are nominated by fellow employees for exceptional customer service. Our top recognition program for employees is the Shining Star Award. Twice each year, managers select employees who have consistently demonstrated superior customer service. Shining Star Award winners and their spouses are hosted at the Company’s headquarters in Abilene for a special recognition ceremony, highlighted by a dinner with our presidents and management. ISABEL MONTOYA, First Technology Services, Abilene, is recognized as a Shining Star by SCOT T DUESER, President & CEO, First Financial Bankshares. 6 4 4 8 10 12 First Financial has the technology infrastructure and tools in place to provide first-rate modern banking services today and to meet future customer needs as we continue to grow. The Company’s technology supports our goal of providing exceptional customer service. Our system of customer call centers provides the same level of prompt and courteous service on the phone that customers are accustomed to receiving in our branches. Calls are answered by a person - not by voice mail - and customers immediately get helpful their answers checking and savings accounts, debit card transactions, business transactions and online banking. to questions about We created excitement among our customers in late 2009 by introducing a new custom-designed debit card program. Customers may choose from more than 130 card designs, many of which include logos and colors for local high schools or universities. To date, more than 33,000 custom cards have been printed. In 2010, we plan to go a step further and let customers create personalized debit cards using their own photos. Selected Financial Data IN THOUSANDS (EXCEPT PER SHARE DATA) YEAR-END TOTAL ASSETS EQUITY INCOME PER SHARE PER SHARE AND SPLITS PER SHARE PER SHARE SHAREHOLDERS’ NET EARNINGS DIVIDENDS DIVIDENDS BOOK VALUE MARKET VALUE BASIC CASH STOCK YEAR-END YEAR-END 2009 $3,279,456 $ 415,702 $ 53,797 $2.58 $1.36 – $ 19.96 $ 54.23 2008 3,212,385 368,782 53,164 2.56 1.34 – 17.73 55.21 2007 3,070,309 335,495 49,490 2.38 1.26 – 16.16 37.65 2006 2,850,165 300,901 46,029 2.22 1.18 – 14.51 41.86 2005 2,733,827 276,276 44,023 2.13 1.10 4/3 split 13.34 35.06 2004 2,315,224 265,545 39,171 1.90 1.00 – 12.84 33.61 2003 2,092,571 251,487 35,305 1.71 0.91 5/4 split 12.19 30.84 2002 1,993,183 238,768 33,953 1.65 0.81 – 11.59 22.80 2001 1,929,694 213,654 29,355 1.43 0.70 5/4 split 10.40 18.06 2000 1,753,814 196,121 28,316 1.37 0.62 – 9.56 15.09 GROWTH RATE 6.65% 8.81% 7.67% 7.60% 9.68% – 8.78% 13.90% TEN-YEAR COMPOUND Adjusted for stock dividends and splits. 2009 COMMON STOCK MARKET VALUE 2008 COMMON STOCK MARKET VALUE AND DIVIDEND DATA AND DIVIDEND DATA QUARTER HIGH LOW CLOSE DIVIDENDS QUARTER HIGH LOW CLOSE DIVIDENDS FOURTH $ 55.94 $ 47.86 $ 54.23 $ 0.34 FOURTH $ 56.32 $ 41.30 $ 55.21 $ 0.34 THIRD 54.50 47.95 49.46 0.34 THIRD 67.00 43.01 51.88 0.34 SECOND 51.62 46.51 50.36 0.34 SECOND 47.12 40.43 45.81 0.34 FIRST 55.70 36.49 48.17 0.34 FIRST 42.16 35.49 40.98 0.32 NET INCOME GROWTH (IN THOUSANDS) $3,125,552 $3,064,029 2.01% RETURN ON AVERAGE EQUITY $ 6M 12M 18M 24M 30M 36M 42M 48M 54M $3,279,456 $3,212,385 0% 3% 6% 9% 12% 15% 18% EFFICIENCY RATIO Financial Highlights IN THOUSANDS (EXCEPT PER SHARE DATA) FOR THE YEAR 2009 2008 CHANGES Net Income Basic Earnings per Share Dividends Declared Dividends per Share $53,797 2.58 28,311 1.36 $53,164 2.56 27,861 1.34 1.19% 0.78% 1.62% 1.49% Averages for the Year Shareholders’ Equity Assets Securities Loans Deposits At Year-End Assets Securities Loans Deposits Shareholders’ Equity Book Value per Share 1,308,110 1,494,876 2,513,387 394,812 1,285,377 1,514,369 2,684,757 415,702 19.96 1,185,303 10.36% 1,537,027 2,516,576 (2.74%) (0.13%) 348,271 13.36% 1,318,406 1,566,143 2,582,753 368,782 17.73 2.09% (2.51%) (3.31%) 3.95% 12.72% 12.58% 2.06% Trust Assets 1,664,174 1,630,560 Key Ratios Return on Average Assets Return on Average Equity Equity/Assets at Year-End Efficiency 1.72 % 13.63 % 12.68 % 50.11 % 1.74 % 15.27 % 11.48 % 50.76 % 09 08 07 06 05 1.72% 1.74% 1.72% 1.68% 1.80% 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 $53,797 $53,164 $49,490 $46,029 $44,023 13.63% 15.27% 15.87% 16.20% 16.17% 50.11% 50.76% 52.83% 53.49% 52.48% 4.80% 4.67% 4.43% 4.46% 4.49% RETURN ON AVERAGE ASSETS NET INTEREST MARGIN 0% 10% 20% 30% 40% 50% 60% 0% .25% . 50% .75% 1.00% 1.25% 1.50% 1.75% 2.00% 0% 1% 2% 3% 4% 5% 9 TAYLO R , C A L L A H A N & S H AC K E L F O R D CO U N T I E S D E P O S I T M A R K E T S H A R E 2651 JBS Parkway, Bldg. 4, Suite E Odessa, Texas 79762 ABILENE CLYDE MORAN ALBANY ODESSA M A I N O F F I C E 400 Pine LO C AT I O N S 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 132 Hill Street D I R E C TO R S F. Scott Dueser Chairman of the Board Ron Butler President and Chief Executive Officer Tucker S. Bridwell President Mansefeldt Investment Corp. Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Copeland President Joe Crawford President Abilene Aero, Inc. Mike Denny President ( 3 2 5 ) 6 2 7 - 7 2 0 0 Abilene, Texas 79601 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 Albany, Texas 76430 Murray Edwards Principal, The Edwards Group Allan D. Frizzell Executive Vice President Enrich Oil Corporation Stanley Morris, Jr. Investments Kenneth T. Murphy First Financial Bankshares, Inc. Dian Graves Stai Chair Mansefeldt Investment Corp. Director Leigh Taliaferro, M.D. Physician ADVISORY Steve Suttle J. Michael Alexander President James M. Alexander & Co. Tim Lancaster Chairman, CEO and President Hendrick Health System Shelton Family Foundation Dian Graves Owen Foundation R O N B U T L E R Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Ron Butler President and Chief Executive Officer Tom Boecking Executive Vice President South Branch Ben McAnally Executive Vice President Treasury Management John Prince Executive Vice President Personal Loans James Robinson Executive Vice President Retail Marketing and Business Development Marelyn Shedd Executive Vice President Commercial Loans Charles E. Tennesson Executive Vice President, Chief Financial Officer and Cashier Batjer and Associates McMahon Surovik Suttle, P.C. IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $1,087,452 419,928 879,258 99,941 19,587 1.88% 45.99% DEC. 31, 2008 $1,105,537 458,797 843,375 82,778 17,652 1.76% 46.72% CLEBURNE BURLESON ALVARADO MIDLOTHIAN M A I N O F F I C E ( 8 1 7 ) 5 5 6 - 5 0 0 0 o r ( 8 0 0 ) 2 2 6 - 2 9 4 0 403 N. Main Cleburne, Texas 76033 LO C AT I O N S 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 J O H N S O N CO U N T Y & C I T Y O F M I D LOT H I A N D E P O S I T M A R K E T S H A R E M AT T R E YN O L D S Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Craig Beskow Executive Vice President and Cashier Steve Davis Executive Vice President Brad Evans Executive Vice President Derek Schmidt Executive Vice President Cynthia Allen Senior Vice President Kathy Armstrong Senior Vice President Lisa Roye Senior Vice President Darlene Walker Senior Vice President D I R E C TO R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Albert A. Archer Vice Chairman Walls Industries, Inc. Ray Beavers General Manager & CEO United Cooperative Services Byron Black Investments F. Scott Dueser First Financial Bankshares, Inc. Tim Lyness Lyness Construction, LP George Marti Marti Enterprises Dr. Joe Martin Cleburne Eye Clinic IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 273,598 137,043 247,992 23,697 3,886 1.57% 53.68% DEC. 31, 2008 $ 244,647 138,127 221,629 21,126 4,199 1.74% 53.95% 11 EASTLAND RANGER RISING STAR M A I N O F F I C E 201 E. Main LO C AT I O N S 106 Main 206 West College ( 2 5 4 ) 6 2 9 - 6 1 0 0 Eastland, Texas 76448 Ranger, Texas 76470 Rising Star, Texas 76471 T H O M A S M . O ’ N E I L Pre s i d e n t a n d C E O E A S T L A N D CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer Doug Crawley Rancher 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 M.D. White, Jr. President and Owner Ace Hardware Store, Eastland/Cisco S E N I O R O F F I C E R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer L.V. Coffee Lending Terry Trout Cashier Senior Vice President and Executive Vice President Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,092 63,758 143,956 18,712 2,511 1.79% 49.74% DEC. 31, 2008 $ 153,029 58,201 127,132 17,146 2,412 1.66% 49.59% STAFF EDUCATIONMANAGEMENTDEVELOPMENTCUSTOMER SERVICETECHNOLOGY 39% 15% 48% N U M B E R O N E I N T H E N A T I O N in the $3 billion-plus publicly traded category.* Bank Director magazine, in its first-quarter 2010 issue, ranked First Financial Bankshares We’re proud of our company’s 120-year histor y of financial strength and service to our customers and communities in Texas. But First Financial Bankshares isn’t looking back or resting on our past success. Our focus is on the future. Today, we are taking steps we believe are necessary to ensure that our company remains in the forefront of providing the best banking, trust, wealth management and other financial services, while continuing to build deep and enduring relationships with our valued customers. Relationships built on trust, integrity and exceptional customer service have made our company what it is today. For our shareholders, we remain committed to managing First Financial Bankshares in a safe, sound and profitable manner, with a goal of strategically and prudently growing the Company and expanding into new markets. The Letter to Shareholders on pages 2 and 3 of this annual report gives you more insights into how our company performed in 2009 and our plans for 2010. The photo spread and text on pages 4-7 demonstrate how we are working to secure the Company’s future for the benefit of our customers, employees and shareholders – and the Texas communities we serve. For more information, visit our Web site at http://www.ffin.com. * Based on measurement criteria and analysis compiled by Sandler O’Neill + Partners, L.P., a New York-based investment banking firm that specializes in the financial services industry. Published in Bank Director magazine, 1st quarter 2010. First Financial Bank 325-627-7200 First Financial Bank 817-556-5000 First Financial Bank 254-629-6100 First Financial Bank 806-363-8200 ABILENE CLYDE MORAN ALBANY ODESSA CLEBURNE BURLESON ALVARADO MIDLOTHIAN EASTLAND RANGER RISING STAR HEREFORD , TM . A Family of Community Banks SM First Financial Bank STEPHENVILLE First Financial Bank 940-327-5400 First Financial Bank 325-659-5900 First Financial Bank 817-410-2915 940-683-8700 254-965-5036 817-573-6900 First Financial Bank 325-235-6600 First Financial Bank 817-596-0307 MINERAL WELLS SAN ANGELO SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR GRANBURY GLEN ROSE ACTON SWEET WATER ROBY TRENT MERKEL WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH BANKS TRUST OFFICE LOCATIONS D E A R S H A R E H O L D E R S In light of the recession and higher FDIC insurance premiums in 2009, I am very pleased that our company was able to deliver increased earnings for the 23rd consecutive year. While the national recession at first seemed to bypass Texas, it began moving into the state in the second part of 2008, bringing a decline in home sales and general economic activity and an increase in unemployment. These trends continued in 2009. On the plus side, our state continued to fare better than most of the rest of the country, and our geographic footprint—especially in our West Texas markets—remained stable. The stock market fluctuated greatly during the past two years. The NASDAQ Composite Index declined 41 percent in 2008 and then went back up 44 percent in 2009. Our stock went up 47 percent in 2008 and down 2 percent in 2009, closing at $54.23. We are pleased that our stock performed well for our stockholders during these years of economic turmoil. We continue to suspect that a “flight to safety”—favoring companies with strong balance sheets and a long record of conservative lending—may have played a role in our stock’s favorable performance. We are also pleased that in 2009, our company again received high rankings from leading banking publications such as the ABA Banking Journal and U.S. Banker. Additionally, in January of 2010, Bank Director magazine rated us No. 1 in the nation among publicly traded banks with $3 billion or more of assets. Being named No. 1 is like winning an Academy Award. Without question, this accomplishment is due to the direction of our Board, the dedication of our employees and the loyalty of our customers, who have kept us strong for 120 years. We accept this honor with great humility because we know that every day, we face a new set of challenges in the banking industry and must prove ourselves again and again. RESULTS FOR 2009 Net income grew 1.2 percent to $53.8 million from $53.2 million in 2008. Net interest income, the major source of our earnings, rose 4.3 percent to $129.2 million from $123.9 million. Our net interest margin (on a tax-equivalent basis) also increased, to 4.80 percent from 4.67 percent in 2008. The provision for loan losses for 2009 totaled $11.4 million, a 43.5 percent increase from $8.0 million in 2008. The larger provision was due to a higher level of net charge-offs and an increase in the allowance for loan losses. Noninterest income declined 1.7 percent to $48.6 million from $49.5 million. The decline was primarily due to a $692,000 drop in income from student loan sales as the Company exited the student loan program. Lower usage of overdraft privileges also contributed to the decrease in noninterest income. Noninterest expense was $94.0 million in 2009, up 2.6 percent from $91.6 million a year earlier. The largest increase in noninterest expense was in FDIC insurance premiums, which grew by $4.2 million, or 650.4 percent, after the FDIC raised premium rates as of January 1, 2009, and implemented a special assessment in June of that year. Nevertheless, we were able to improve our efficiency ratio, which expresses the share of revenues consumed by operating expenses, to 50.11 percent from 50.76 percent in 2008. Our bank presidents worked hard to maintain their net interest margins and reduce expenses. I could not be more pleased with their accomplishments, especially in light of the significant increase in FDIC insurance premiums. We again outperformed our peer group on several key financial metrics. Our return on average assets was 1.72 percent compared with a negative 0.21 percent for our peer group. Return on average equity was 13.63 percent versus a negative 2.59 percent for our peers. Our net interest margin of 4.80 percent on a tax-equivalent basis compared very favorably to our peer group’s margin of 3.48 percent. We also beat the peer group on the efficiency ratio—ours was 50.11 percent, while theirs was 69.53 percent. We ended the year with a strong balance sheet. Consolidated assets increased 2.1 percent to $3.28 billion from $3.21 billion at the end of 2008. Loans decreased 3.3 percent to $1.51 billion from $1.57 billion, primarily due to our exiting the student loan program. Total deposits grew 3.9 percent to $2.68 billion from $2.58 billion. Shareholders’ equity rose 12.7 percent to $415.7 million from $368.8 million. As the economy softened in Texas, our nonperforming assets increased to 1.46 percent of total loans and foreclosed assets from 0.80 percent at the end of 2008. Even with this increase, our nonperforming percentage was well below our peer group’s 5.07 percent. Net loan charge-offs for the year totaled $5.3 million at year-end 2009 versus $3.9 million at year-end 2008. The 2009 allowance for loan losses amounted to 1.82 percent of total loans. First Financial Trust & Asset Management Company also experienced growth last year. Total assets at year-end had a book value of $1.67 billion, a 2.1 percent increase from 2008, and a market value of $2.10 billion, an 11.7 percent increase. The Trust Company’s fee income, however, declined 3.8 percent to $9.1 million from $9.4 million. This subsidiary manages a large oil and gas portfolio, and the drop in its income was primarily due to a decline in oil and gas prices and in related fees on oil and gas income. The Trust Company opened its sixth office last year, in Odessa, Texas. We are encouraged by the number of clients who have opened trust accounts with us in Odessa and the potential for growth in the Permian Basin market. 2 GROWTH STRATEGIES We actively looked for acquisition opportunities during 2009, but the banks that we considered were overpriced in light of the economy or did not fit our company’s profile. Our plan is to continue pursuing acquisitions diligently. With our capitalization, stock price, cash position and experienced management team, we have what we need to take advantage of acquisition opportunities. In November, we announced plans to open bank branches in our two existing Trust Company offices in Fort Worth and Odessa, to complement trust services and serve customers in those markets. We have had frequent requests from customers for branches in these markets and are interested to see how this private bank branch concept will work. During the year, we achieved a long-term objective of bringing all of our banks under a common name to improve brand identity and marketing efficiencies. Hereford State Bank, San Angelo National Bank and Weatherford National Bank are now called First Financial Bank. All of our banks benefit from sharing the Company’s growing brand identity, and our customers benefit from being able to use our facilities throughout our market areas. However, in no way does the use of a common name change our practice of operating through ten community-based banks that are separately chartered, have their own local boards and management teams, and make decisions locally. We continue to be the “hometown bank” in our markets, with a tradition of playing a vital role in community life. WHAT’S AHEAD Besides looking for acquisitions, we plan to continue growing our mortgage market, trust services and treasury management services. We are encouraged by our recent growth that there will be good opportunities in these areas. Minimizing nonperforming assets will certainly be an objective, as it has been for the last several years. We do know that FDIC insurance premiums will continue to be high and that increased regulation proposed by Congress and various federal agencies will make our jobs more challenging and costly. Our hope is that the banking industry can mitigate much of the pending regulatory legislation by educating Washington that community banks have not caused today’s economic problems and are already over-regulated. We are committed to providing outstanding service to our customers, our communities and our nation by making every good loan we can to help our economy grow and prosper. PERSONNEL CHANGES J. V. Martin retired at the end of the year as CEO of First Financial Bank, Sweetwater. Kirby Andrews, President, assumed the additional role of CEO there. J. V. will continue to serve as the Sweetwater bank’s Chairman of the Board. He will also provide consulting services to the holding company. Additionally, Senior Chairman Kenneth T. Murphy will retire from the First Financial Bankshares Board in conjunction with our Annual Shareholders’ Meeting in April. He has served our company with distinction for 39 years, holding the positions of President, First Financial Bank, Abilene; and Executive Vice President, President, Chief Executive Officer, Chairman and Senior Chairman of First Financial Bankshares, Inc. Through those years, he has also made many civic and professional contributions, including serving on the Board of the Federal Reserve Bank of Dallas and serving as Chairman of the Board of the Texas Bankers Association. When Ken joined the bank in 1971, the Company had total assets of $87.7 million and net income of $806,000. By the end of 2009, we had total assets of $3.28 billion and net earnings of $53.8 million. During Ken’s tenure with the Company, we have experienced great success. Customers, stockholders and communities have certainly benefited from Ken’s leadership and counsel, and we thank him for his fine service. We are pleased that he will continue to maintain an office in the First Financial Bank (Abilene) building and will be available to management for consultation. It is our pleasure to announce that Steven L. Beal, retired President and Chief Operating Officer of Concho Resources Inc., has accepted nomination for election as a Director of the Company at our Annual Shareholders’ Meeting in April. Steve was one of the founders of Concho, an independent oil and natural gas company, and continues to be a Director on its Board. Prior to being at Concho, he was Senior Vice President and Chief Financial Officer of Parker & Parsley Petroleum Company, which is now Pioneer National Resources. Before that, he was an audit professional with the accounting firm of Price Waterhouse Coopers. He is a 1981 graduate of The University of Texas with a degree in accounting. Steve has been involved civically and professionally with the United Way of Midland, Permian Basin Oil & Gas Association, Independent Petroleum Association of America and the New Mexico Oil & Gas Association. He has been on the Board of Directors of Midland Christian School and the Midland/Odessa Symphony. Most recently, he was a partner with the Early School District to build an indoor practice facility for use by the students and teams of Early High School. Steve and his wife, Teresa, live on their ranch in Brownwood, Texas. These are challenging times for the national economy and for the banking business. First Financial has the benefit of a long-term perspective. In our 120-year history, we’ve endured numerous recessions, the Great Depression, the Texas oil bust of the 1980s and other obstacles. We cannot predict the duration of the current economic malaise, but we remain optimistic about the long-term future of our state and nation, and especially our Texas markets. Financially and operationally, we believe our company has never been stronger, and our best days are still ahead of us. With our eyes on the future, we are making a strong investment in the training of all our employees, including our next generation of leaders, to ensure that we continue to provide excellence in banking, trust services, wealth management and customer service. We encourage you to read more about our training and customer service programs in the pages that follow. Banking is our business, but all of us on the management team never lose sight of the fact that we work for you, our shareholders. We will continue to manage the Company for profitability and growth in 2010 and beyond. F. Scott Dueser Chairman, President and CEO , TM . 3 W H A T M A K E S U S F I R S T ? Friendly. Knowledgeable. Helpful. These are words our customers use to describe First Financial Bank’s employees. Well-informed and well-motivated employees are essential to keeping First Financial Bank prepared for the future. Training our employees to provide the finest banking, financial solutions and exceptional customer service begins the day new employees are hired. Every new employee at First Financial Bank goes through a classroom training program. This orientation is designed not only to teach new employees about the bank’s outstanding portfolio of banking products and services, but also introduces them to the Company’s unique culture, which emphasizes putting customers’ needs first and going the extra mile to provide exceptional service and support. New employees learn skills from how to open a new account to the essentials of good business etiquette. New employee orientation is just the start. Our commitment to training and professional development for our employees is ongoing. All employees participate in compliance training, most taking 12 to 24 courses per year in all aspects of banking, customer service and financial services. We offer our employees both online, “desktop” training modules and more traditional classroom training. Regardless of the format, the goal is always the same – to help our employees continue the Company’s proud tradition of being a leading bank in our markets and exceeding our customers’ expectations for the finest in banking products and service. Merrie Spaeth, president of Spaeth Communications, Inc. and a nationally known consultant on organizational communications, leads a management training class for First Financial Bankshares. Christina Randle, author, productivity expert and CEO of The Effective Edge, trains managers at First Financial Bankshares. F F I NF F I N UNIVERSITY UNIVERSITY Developing future leaders is key to our company’s continued success in the years ahead. One way we prepare our future leaders is through FFIN University, which takes a select group of bank officers through a year-long inten- sive training program. First launched in 2008, FFIN University clearly underscores the Company’s commitment to main- taining its tradition of excellence in banking, trust services and customer service. Participants in FFIN University learn from both senior leaders and outstanding guest speakers on topics that range from time management to com- munication skills. Graduates of FFIN University are ready to assume key senior management positions in our company. They will help maintain the Company’s long tradition as a successful, profitable, community- based bank. 5 BACK ROW (L-R): KATHY BUSHNELL (First Technology Services), ISABEL MONTOYA (First Technology Services), IRMA ZIPP (Stephenville), MARY JO SORGE (Abilene), MELANIE BEARD (Granbury), ESTHER BILBY (Bridgeport), SANDRA HOLT (Abilene) FRONT ROW (L - R ): TRISHA HILDEBRAND (San Angelo), MARCELLA JIMENEZ (Mineral Wells), JANET FLYNT ( Weatherford), MELISSA JACQUES (Sweetwater), LEANN BAUGH ( Trust - Stephenville), STEVE GILBERT (Hereford), STEPHANIE LOPEZ (Eastland), LISA ROYE (Cleburne) Banking is all about relationships and working with customers one-on-one. That’s why, at First Financial Bankshares, our Customer Service First program is one of our highest priorities. Our goal is simple – to provide customer service that is second to none. Achieving that goal involves all employees and requires a sharp focus. It begins with our new employee orientation program and continues through our FFIN University for senior leaders. Instilling a culture of exceptional customer service is no accident. We encourage employees through a variety of initiatives, including recognizing employees who go beyond the norm for customers with “WOW” awards and giving Star Cards to employees who are nominated by fellow employees for exceptional customer service. Our top recognition program for employees is the Shining Star Award. Twice each year, managers select employees who have consistently demonstrated superior customer service. Shining Star Award winners and their spouses are hosted at the Company’s headquarters in Abilene for a special recognition ceremony, highlighted by a dinner with our presidents and management. ISABEL MONTOYA, First Technology Services, Abilene, is recognized as a Shining Star by SCOT T DUESER, President & CEO, First Financial Bankshares. 6 First Financial has the technology infrastructure and tools in place to provide first-rate modern banking services today and to meet future customer needs as we continue to grow. The Company’s technology supports our goal of providing exceptional customer service. Our system of customer call centers provides the same level of prompt and courteous service on the phone that customers are accustomed to receiving in our branches. Calls are answered by a person - not by voice mail - and customers immediately get helpful answers to questions about their checking and savings accounts, debit card transactions, business transactions and online banking. We created excitement among our customers in late 2009 by introducing a new custom-designed debit card program. Customers may choose from more than 130 card designs, many of which include logos and colors for local high schools or universities. To date, more than 33,000 custom cards have been printed. In 2010, we plan to go a step further and let customers create personalized debit cards using their own photos. 4 4 8 10 12 Selected Financial Data IN THOUSANDS (EXCEPT PER SHARE DATA) YEAR-END TOTAL ASSETS SHAREHOLDERS’ EQUITY NET INCOME BASIC EARNINGS PER SHARE CASH DIVIDENDS PER SHARE STOCK DIVIDENDS AND SPLITS YEAR-END BOOK VALUE PER SHARE YEAR-END MARKET VALUE PER SHARE 2009 $3,279,456 $ 415,702 $ 53,797 $2.58 $1.36 – $ 19.96 $ 54.23 2008 3,212,385 368,782 53,164 2.56 1.34 – 17.73 55.21 2007 3,070,309 335,495 49,490 2.38 1.26 – 16.16 37.65 2006 2,850,165 300,901 46,029 2.22 1.18 – 14.51 41.86 2005 2,733,827 276,276 44,023 2.13 1.10 4/3 split 13.34 35.06 2004 2,315,224 265,545 39,171 1.90 1.00 – 12.84 33.61 2003 2,092,571 251,487 35,305 1.71 0.91 5/4 split 12.19 30.84 2002 1,993,183 238,768 33,953 1.65 0.81 – 11.59 22.80 2001 1,929,694 213,654 29,355 1.43 0.70 5/4 split 10.40 18.06 2000 1,753,814 196,121 28,316 1.37 0.62 – 9.56 15.09 TEN-YEAR COMPOUND GROWTH RATE 6.65% 8.81% 7.67% 7.60% 9.68% – 8.78% 13.90% Adjusted for stock dividends and splits. 2009 COMMON STOCK MARKET VALUE AND DIVIDEND DATA 2008 COMMON STOCK MARKET VALUE AND DIVIDEND DATA QUARTER HIGH LOW CLOSE DIVIDENDS QUARTER HIGH LOW CLOSE DIVIDENDS FOURTH $ 55.94 $ 47.86 $ 54.23 $ 0.34 FOURTH $ 56.32 $ 41.30 $ 55.21 $ 0.34 THIRD 54.50 47.95 49.46 0.34 THIRD 67.00 43.01 51.88 0.34 SECOND 51.62 46.51 50.36 0.34 SECOND 47.12 40.43 45.81 0.34 FIRST 55.70 36.49 48.17 0.34 FIRST 42.16 35.49 40.98 0.32 NET INCOME GROWTH (IN THOUSANDS) $3,125,552 $3,064,029 2.01% RETURN ON AVERAGE EQUITY $ 6M 12M 18M 24M 30M 36M 42M 48M 54M $3,279,456 $3,212,385 0% 3% 6% 9% 12% 15% 18% EFFICIENCY RATIO Financial Highlights IN THOUSANDS (EXCEPT PER SHARE DATA) FOR THE YEAR 2009 2008 CHANGES Net Income Basic Earnings per Share Dividends Declared Dividends per Share $53,797 2.58 28,311 1.36 $53,164 2.56 27,861 1.34 1.19% 0.78% 1.62% 1.49% Averages for the Year Shareholders’ Equity Assets Securities Loans Deposits At Year-End Assets Securities Loans Deposits Shareholders’ Equity Book Value per Share 1,308,110 1,494,876 2,513,387 394,812 1,285,377 1,514,369 2,684,757 415,702 19.96 1,185,303 10.36% 1,537,027 2,516,576 (2.74%) (0.13%) 348,271 13.36% 1,318,406 1,566,143 2,582,753 368,782 17.73 2.09% (2.51%) (3.31%) 3.95% 12.72% 12.58% 2.06% Trust Assets 1,664,174 1,630,560 Key Ratios Return on Average Assets Return on Average Equity Equity/Assets at Year-End Efficiency 1.72 % 13.63 % 12.68 % 50.11 % 1.74 % 15.27 % 11.48 % 50.76 % 09 08 07 06 05 1.72% 1.74% 1.72% 1.68% 1.80% 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 $53,797 $53,164 $49,490 $46,029 $44,023 13.63% 15.27% 15.87% 16.20% 16.17% 50.11% 50.76% 52.83% 53.49% 52.48% 4.80% 4.67% 4.43% 4.46% 4.49% RETURN ON AVERAGE ASSETS NET INTEREST MARGIN 0% 10% 20% 30% 40% 50% 60% 0% .25% . 50% .75% 1.00% 1.25% 1.50% 1.75% 2.00% 0% 1% 2% 3% 4% 5% 9 TAYLO R , C A L L A H A N & S H AC K E L F O R D CO U N T I E S D E P O S I T M A R K E T S H A R E 2651 JBS Parkway, Bldg. 4, Suite E Odessa, Texas 79762 ABILENE CLYDE MORAN ALBANY ODESSA M A I N O F F I C E 400 Pine LO C AT I O N S 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 132 Hill Street D I R E C TO R S F. Scott Dueser Chairman of the Board Ron Butler President and Chief Executive Officer Tucker S. Bridwell President Mansefeldt Investment Corp. Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Copeland President Joe Crawford President Abilene Aero, Inc. Mike Denny President ( 3 2 5 ) 6 2 7 - 7 2 0 0 Abilene, Texas 79601 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 Albany, Texas 76430 Murray Edwards Principal, The Edwards Group Allan D. Frizzell Executive Vice President Enrich Oil Corporation Stanley Morris, Jr. Investments Kenneth T. Murphy First Financial Bankshares, Inc. Dian Graves Stai Chair Mansefeldt Investment Corp. Director Leigh Taliaferro, M.D. Physician ADVISORY Steve Suttle J. Michael Alexander President James M. Alexander & Co. Tim Lancaster Chairman, CEO and President Hendrick Health System Shelton Family Foundation Dian Graves Owen Foundation R O N B U T L E R Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Ron Butler President and Chief Executive Officer Tom Boecking Executive Vice President South Branch Ben McAnally Executive Vice President Treasury Management John Prince Executive Vice President Personal Loans James Robinson Executive Vice President Retail Marketing and Business Development Marelyn Shedd Executive Vice President Commercial Loans Charles E. Tennesson Executive Vice President, Chief Financial Officer and Cashier Batjer and Associates McMahon Surovik Suttle, P.C. IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $1,087,452 419,928 879,258 99,941 19,587 1.88% 45.99% DEC. 31, 2008 $1,105,537 458,797 843,375 82,778 17,652 1.76% 46.72% CLEBURNE BURLESON ALVARADO MIDLOTHIAN M A I N O F F I C E ( 8 1 7 ) 5 5 6 - 5 0 0 0 o r ( 8 0 0 ) 2 2 6 - 2 9 4 0 403 N. Main Cleburne, Texas 76033 LO C AT I O N S 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 J O H N S O N CO U N T Y & C I T Y O F M I D LOT H I A N D E P O S I T M A R K E T S H A R E M AT T R E YN O L D S Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Craig Beskow Executive Vice President and Cashier Steve Davis Executive Vice President Brad Evans Executive Vice President Derek Schmidt Executive Vice President Cynthia Allen Senior Vice President Kathy Armstrong Senior Vice President Lisa Roye Senior Vice President Darlene Walker Senior Vice President D I R E C TO R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Albert A. Archer Vice Chairman Walls Industries, Inc. Ray Beavers General Manager & CEO United Cooperative Services Byron Black Investments F. Scott Dueser First Financial Bankshares, Inc. Tim Lyness Lyness Construction, LP George Marti Marti Enterprises Dr. Joe Martin Cleburne Eye Clinic IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 273,598 137,043 247,992 23,697 3,886 1.57% 53.68% DEC. 31, 2008 $ 244,647 138,127 221,629 21,126 4,199 1.74% 53.95% 11 EASTLAND RANGER RISING STAR M A I N O F F I C E 201 E. Main LO C AT I O N S 106 Main 206 West College ( 2 5 4 ) 6 2 9 - 6 1 0 0 Eastland, Texas 76448 Ranger, Texas 76470 Rising Star, Texas 76471 T H O M A S M . O ’ N E I L Pre s i d e n t a n d C E O E A S T L A N D CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer Doug Crawley Rancher 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 M.D. White, Jr. President and Owner Ace Hardware Store, Eastland/Cisco S E N I O R O F F I C E R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer L.V. Coffee Lending Terry Trout Cashier Senior Vice President and Executive Vice President Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,092 63,758 143,956 18,712 2,511 1.79% 49.74% DEC. 31, 2008 $ 153,029 58,201 127,132 17,146 2,412 1.66% 49.59% STAFF EDUCATIONMANAGEMENTDEVELOPMENTCUSTOMER SERVICETECHNOLOGY 39% 15% 48% N U M B E R O N E I N T H E N A T I O N in the $3 billion-plus publicly traded category.* Bank Director magazine, in its first-quarter 2010 issue, ranked First Financial Bankshares We’re proud of our company’s 120-year histor y of financial strength and service to our customers and communities in Texas. But First Financial Bankshares isn’t looking back or resting on our past success. Our focus is on the future. Today, we are taking steps we believe are necessary to ensure that our company remains in the forefront of providing the best banking, trust, wealth management and other financial services, while continuing to build deep and enduring relationships with our valued customers. Relationships built on trust, integrity and exceptional customer service have made our company what it is today. For our shareholders, we remain committed to managing First Financial Bankshares in a safe, sound and profitable manner, with a goal of strategically and prudently growing the Company and expanding into new markets. The Letter to Shareholders on pages 2 and 3 of this annual report gives you more insights into how our company performed in 2009 and our plans for 2010. The photo spread and text on pages 4-7 demonstrate how we are working to secure the Company’s future for the benefit of our customers, employees and shareholders – and the Texas communities we serve. For more information, visit our Web site at http://www.ffin.com. * Based on measurement criteria and analysis compiled by Sandler O’Neill + Partners, L.P., a New York-based investment banking firm that specializes in the financial services industry. Published in Bank Director magazine, 1st quarter 2010. First Financial Bank 325-627-7200 First Financial Bank 817-556-5000 First Financial Bank 254-629-6100 First Financial Bank 806-363-8200 ABILENE CLYDE MORAN ALBANY ODESSA CLEBURNE BURLESON ALVARADO MIDLOTHIAN EASTLAND RANGER RISING STAR HEREFORD , TM . A Family of Community Banks SM First Financial Bank STEPHENVILLE First Financial Bank 940-327-5400 First Financial Bank 325-659-5900 First Financial Bank 817-410-2915 940-683-8700 254-965-5036 817-573-6900 First Financial Bank 325-235-6600 First Financial Bank 817-596-0307 MINERAL WELLS SAN ANGELO SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR GRANBURY GLEN ROSE ACTON SWEET WATER ROBY TRENT MERKEL WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH BANKS TRUST OFFICE LOCATIONS D E A R S H A R E H O L D E R S In light of the recession and higher FDIC insurance premiums in 2009, I am very pleased that our company was able to deliver increased earnings for the 23rd consecutive year. While the national recession at first seemed to bypass Texas, it began moving into the state in the second part of 2008, bringing a decline in home sales and general economic activity and an increase in unemployment. These trends continued in 2009. On the plus side, our state continued to fare better than most of the rest of the country, and our geographic footprint—especially in our West Texas markets—remained stable. The stock market fluctuated greatly during the past two years. The NASDAQ Composite Index declined 41 percent in 2008 and then went back up 44 percent in 2009. Our stock went up 47 percent in 2008 and down 2 percent in 2009, closing at $54.23. We are pleased that our stock performed well for our stockholders during these years of economic turmoil. We continue to suspect that a “flight to safety”—favoring companies with strong balance sheets and a long record of conservative lending—may have played a role in our stock’s favorable performance. We are also pleased that in 2009, our company again received high rankings from leading banking publications such as the ABA Banking Journal and U.S. Banker. Additionally, in January of 2010, Bank Director magazine rated us No. 1 in the nation among publicly traded banks with $3 billion or more of assets. Being named No. 1 is like winning an Academy Award. Without question, this accomplishment is due to the direction of our Board, the dedication of our employees and the loyalty of our customers, who have kept us strong for 120 years. We accept this honor with great humility because we know that every day, we face a new set of challenges in the banking industry and must prove ourselves again and again. RESULTS FOR 2009 Net income grew 1.2 percent to $53.8 million from $53.2 million in 2008. Net interest income, the major source of our earnings, rose 4.3 percent to $129.2 million from $123.9 million. Our net interest margin (on a tax-equivalent basis) also increased, to 4.80 percent from 4.67 percent in 2008. The provision for loan losses for 2009 totaled $11.4 million, a 43.5 percent increase from $8.0 million in 2008. The larger provision was due to a higher level of net charge-offs and an increase in the allowance for loan losses. Noninterest income declined 1.7 percent to $48.6 million from $49.5 million. The decline was primarily due to a $692,000 drop in income from student loan sales as the Company exited the student loan program. Lower usage of overdraft privileges also contributed to the decrease in noninterest income. Noninterest expense was $94.0 million in 2009, up 2.6 percent from $91.6 million a year earlier. The largest increase in noninterest expense was in FDIC insurance premiums, which grew by $4.2 million, or 650.4 percent, after the FDIC raised premium rates as of January 1, 2009, and implemented a special assessment in June of that year. Nevertheless, we were able to improve our efficiency ratio, which expresses the share of revenues consumed by operating expenses, to 50.11 percent from 50.76 percent in 2008. Our bank presidents worked hard to maintain their net interest margins and reduce expenses. I could not be more pleased with their accomplishments, especially in light of the significant increase in FDIC insurance premiums. We again outperformed our peer group on several key financial metrics. Our return on average assets was 1.72 percent compared with a negative 0.21 percent for our peer group. Return on average equity was 13.63 percent versus a negative 2.59 percent for our peers. Our net interest margin of 4.80 percent on a tax-equivalent basis compared very favorably to our peer group’s margin of 3.48 percent. We also beat the peer group on the efficiency ratio—ours was 50.11 percent, while theirs was 69.53 percent. We ended the year with a strong balance sheet. Consolidated assets increased 2.1 percent to $3.28 billion from $3.21 billion at the end of 2008. Loans decreased 3.3 percent to $1.51 billion from $1.57 billion, primarily due to our exiting the student loan program. Total deposits grew 3.9 percent to $2.68 billion from $2.58 billion. Shareholders’ equity rose 12.7 percent to $415.7 million from $368.8 million. As the economy softened in Texas, our nonperforming assets increased to 1.46 percent of total loans and foreclosed assets from 0.80 percent at the end of 2008. Even with this increase, our nonperforming percentage was well below our peer group’s 5.07 percent. Net loan charge-offs for the year totaled $5.3 million at year-end 2009 versus $3.9 million at year-end 2008. The 2009 allowance for loan losses amounted to 1.82 percent of total loans. First Financial Trust & Asset Management Company also experienced growth last year. Total assets at year-end had a book value of $1.67 billion, a 2.1 percent increase from 2008, and a market value of $2.10 billion, an 11.7 percent increase. The Trust Company’s fee income, however, declined 3.8 percent to $9.1 million from $9.4 million. This subsidiary manages a large oil and gas portfolio, and the drop in its income was primarily due to a decline in oil and gas prices and in related fees on oil and gas income. The Trust Company opened its sixth office last year, in Odessa, Texas. We are encouraged by the number of clients who have opened trust accounts with us in Odessa and the potential for growth in the Permian Basin market. 2 GROWTH STRATEGIES We actively looked for acquisition opportunities during 2009, but the banks that we considered were overpriced in light of the economy or did not fit our company’s profile. Our plan is to continue pursuing acquisitions diligently. With our capitalization, stock price, cash position and experienced management team, we have what we need to take advantage of acquisition opportunities. In November, we announced plans to open bank branches in our two existing Trust Company offices in Fort Worth and Odessa, to complement trust services and serve customers in those markets. We have had frequent requests from customers for branches in these markets and are interested to see how this private bank branch concept will work. During the year, we achieved a long-term objective of bringing all of our banks under a common name to improve brand identity and marketing efficiencies. Hereford State Bank, San Angelo National Bank and Weatherford National Bank are now called First Financial Bank. All of our banks benefit from sharing the Company’s growing brand identity, and our customers benefit from being able to use our facilities throughout our market areas. However, in no way does the use of a common name change our practice of operating through ten community-based banks that are separately chartered, have their own local boards and management teams, and make decisions locally. We continue to be the “hometown bank” in our markets, with a tradition of playing a vital role in community life. WHAT’S AHEAD Besides looking for acquisitions, we plan to continue growing our mortgage market, trust services and treasury management services. We are encouraged by our recent growth that there will be good opportunities in these areas. Minimizing nonperforming assets will certainly be an objective, as it has been for the last several years. We do know that FDIC insurance premiums will continue to be high and that increased regulation proposed by Congress and various federal agencies will make our jobs more challenging and costly. Our hope is that the banking industry can mitigate much of the pending regulatory legislation by educating Washington that community banks have not caused today’s economic problems and are already over-regulated. We are committed to providing outstanding service to our customers, our communities and our nation by making every good loan we can to help our economy grow and prosper. PERSONNEL CHANGES J. V. Martin retired at the end of the year as CEO of First Financial Bank, Sweetwater. Kirby Andrews, President, assumed the additional role of CEO there. J. V. will continue to serve as the Sweetwater bank’s Chairman of the Board. He will also provide consulting services to the holding company. Additionally, Senior Chairman Kenneth T. Murphy will retire from the First Financial Bankshares Board in conjunction with our Annual Shareholders’ Meeting in April. He has served our company with distinction for 39 years, holding the positions of President, First Financial Bank, Abilene; and Executive Vice President, President, Chief Executive Officer, Chairman and Senior Chairman of First Financial Bankshares, Inc. Through those years, he has also made many civic and professional contributions, including serving on the Board of the Federal Reserve Bank of Dallas and serving as Chairman of the Board of the Texas Bankers Association. When Ken joined the bank in 1971, the Company had total assets of $87.7 million and net income of $806,000. By the end of 2009, we had total assets of $3.28 billion and net earnings of $53.8 million. During Ken’s tenure with the Company, we have experienced great success. Customers, stockholders and communities have certainly benefited from Ken’s leadership and counsel, and we thank him for his fine service. We are pleased that he will continue to maintain an office in the First Financial Bank (Abilene) building and will be available to management for consultation. It is our pleasure to announce that Steven L. Beal, retired President and Chief Operating Officer of Concho Resources Inc., has accepted nomination for election as a Director of the Company at our Annual Shareholders’ Meeting in April. Steve was one of the founders of Concho, an independent oil and natural gas company, and continues to be a Director on its Board. Prior to being at Concho, he was Senior Vice President and Chief Financial Officer of Parker & Parsley Petroleum Company, which is now Pioneer National Resources. Before that, he was an audit professional with the accounting firm of Price Waterhouse Coopers. He is a 1981 graduate of The University of Texas with a degree in accounting. Steve has been involved civically and professionally with the United Way of Midland, Permian Basin Oil & Gas Association, Independent Petroleum Association of America and the New Mexico Oil & Gas Association. He has been on the Board of Directors of Midland Christian School and the Midland/Odessa Symphony. Most recently, he was a partner with the Early School District to build an indoor practice facility for use by the students and teams of Early High School. Steve and his wife, Teresa, live on their ranch in Brownwood, Texas. These are challenging times for the national economy and for the banking business. First Financial has the benefit of a long-term perspective. In our 120-year history, we’ve endured numerous recessions, the Great Depression, the Texas oil bust of the 1980s and other obstacles. We cannot predict the duration of the current economic malaise, but we remain optimistic about the long-term future of our state and nation, and especially our Texas markets. Financially and operationally, we believe our company has never been stronger, and our best days are still ahead of us. With our eyes on the future, we are making a strong investment in the training of all our employees, including our next generation of leaders, to ensure that we continue to provide excellence in banking, trust services, wealth management and customer service. We encourage you to read more about our training and customer service programs in the pages that follow. Banking is our business, but all of us on the management team never lose sight of the fact that we work for you, our shareholders. We will continue to manage the Company for profitability and growth in 2010 and beyond. F. Scott Dueser Chairman, President and CEO , TM . 3 W H A T M A K E S U S F I R S T ? Friendly. Knowledgeable. Helpful. These are words our customers use to describe First Financial Bank’s employees. Well-informed and well-motivated employees are essential to keeping First Financial Bank prepared for the future. Training our employees to provide the finest banking, financial solutions and exceptional customer service begins the day new employees are hired. Every new employee at First Financial Bank goes through a classroom training program. This orientation is designed not only to teach new employees about the bank’s outstanding portfolio of banking products and services, but also introduces them to the Company’s unique culture, which emphasizes putting customers’ needs first and going the extra mile to provide exceptional service and support. New employees learn skills from how to open a new account to the essentials of good business etiquette. New employee orientation is just the start. Our commitment to training and professional development for our employees is ongoing. All employees participate in compliance training, most taking 12 to 24 courses per year in all aspects of banking, customer service and financial services. We offer our employees both online, “desktop” training modules and more traditional classroom training. Regardless of the format, the goal is always the same – to help our employees continue the Company’s proud tradition of being a leading bank in our markets and exceeding our customers’ expectations for the finest in banking products and service. Merrie Spaeth, president of Spaeth Communications, Inc. and a nationally known consultant on organizational communications, leads a management training class for First Financial Bankshares. Christina Randle, author, productivity expert and CEO of The Effective Edge, trains managers at First Financial Bankshares. F F I NF F I N UNIVERSITY UNIVERSITY Developing future leaders is key to our company’s continued success in the years ahead. One way we prepare our future leaders is through FFIN University, which takes a select group of bank officers through a year-long inten- sive training program. First launched in 2008, FFIN University clearly underscores the Company’s commitment to main- taining its tradition of excellence in banking, trust services and customer service. Participants in FFIN University learn from both senior leaders and outstanding guest speakers on topics that range from time management to com- munication skills. Graduates of FFIN University are ready to assume key senior management positions in our company. They will help maintain the Company’s long tradition as a successful, profitable, community- based bank. 5 BACK ROW (L-R): KATHY BUSHNELL (First Technology Services), ISABEL MONTOYA (First Technology Services), IRMA ZIPP (Stephenville), MARY JO SORGE (Abilene), MELANIE BEARD (Granbury), ESTHER BILBY (Bridgeport), SANDRA HOLT (Abilene) FRONT ROW (L - R ): TRISHA HILDEBRAND (San Angelo), MARCELLA JIMENEZ (Mineral Wells), JANET FLYNT ( Weatherford), MELISSA JACQUES (Sweetwater), LEANN BAUGH ( Trust - Stephenville), STEVE GILBERT (Hereford), STEPHANIE LOPEZ (Eastland), LISA ROYE (Cleburne) Banking is all about relationships and working with customers one-on-one. That’s why, at First Financial Bankshares, our Customer Service First program is one of our highest priorities. Our goal is simple – to provide customer service that is second to none. Achieving that goal involves all employees and requires a sharp focus. It begins with our new employee orientation program and continues through our FFIN University for senior leaders. Instilling a culture of exceptional customer service is no accident. We encourage employees through a variety of initiatives, including recognizing employees who go beyond the norm for customers with “WOW” awards and giving Star Cards to employees who are nominated by fellow employees for exceptional customer service. Our top recognition program for employees is the Shining Star Award. Twice each year, managers select employees who have consistently demonstrated superior customer service. Shining Star Award winners and their spouses are hosted at the Company’s headquarters in Abilene for a special recognition ceremony, highlighted by a dinner with our presidents and management. ISABEL MONTOYA, First Technology Services, Abilene, is recognized as a Shining Star by SCOT T DUESER, President & CEO, First Financial Bankshares. 6 First Financial has the technology infrastructure and tools in place to provide first-rate modern banking services today and to meet future customer needs as we continue to grow. The Company’s technology supports our goal of providing exceptional customer service. Our system of customer call centers provides the same level of prompt and courteous service on the phone that customers are accustomed to receiving in our branches. Calls are answered by a person - not by voice mail - and customers immediately get helpful answers to questions about their checking and savings accounts, debit card transactions, business transactions and online banking. We created excitement among our customers in late 2009 by introducing a new custom-designed debit card program. Customers may choose from more than 130 card designs, many of which include logos and colors for local high schools or universities. To date, more than 33,000 custom cards have been printed. In 2010, we plan to go a step further and let customers create personalized debit cards using their own photos. Selected Financial Data IN THOUSANDS (EXCEPT PER SHARE DATA) YEAR-END TOTAL ASSETS EQUITY INCOME PER SHARE PER SHARE AND SPLITS PER SHARE PER SHARE SHAREHOLDERS’ NET EARNINGS DIVIDENDS DIVIDENDS BOOK VALUE MARKET VALUE BASIC CASH STOCK YEAR-END YEAR-END 2009 $3,279,456 $ 415,702 $ 53,797 $2.58 $1.36 – $ 19.96 $ 54.23 2008 3,212,385 368,782 53,164 2.56 1.34 – 17.73 55.21 2007 3,070,309 335,495 49,490 2.38 1.26 – 16.16 37.65 2006 2,850,165 300,901 46,029 2.22 1.18 – 14.51 41.86 2005 2,733,827 276,276 44,023 2.13 1.10 4/3 split 13.34 35.06 2004 2,315,224 265,545 39,171 1.90 1.00 – 12.84 33.61 2003 2,092,571 251,487 35,305 1.71 0.91 5/4 split 12.19 30.84 2002 1,993,183 238,768 33,953 1.65 0.81 – 11.59 22.80 2001 1,929,694 213,654 29,355 1.43 0.70 5/4 split 10.40 18.06 2000 1,753,814 196,121 28,316 1.37 0.62 – 9.56 15.09 GROWTH RATE 6.65% 8.81% 7.67% 7.60% 9.68% – 8.78% 13.90% TEN-YEAR COMPOUND Adjusted for stock dividends and splits. 2009 COMMON STOCK MARKET VALUE 2008 COMMON STOCK MARKET VALUE AND DIVIDEND DATA AND DIVIDEND DATA QUARTER HIGH LOW CLOSE DIVIDENDS QUARTER HIGH LOW CLOSE DIVIDENDS FOURTH $ 55.94 $ 47.86 $ 54.23 $ 0.34 FOURTH $ 56.32 $ 41.30 $ 55.21 $ 0.34 THIRD 54.50 47.95 49.46 0.34 THIRD 67.00 43.01 51.88 0.34 SECOND 51.62 46.51 50.36 0.34 SECOND 47.12 40.43 45.81 0.34 FIRST 55.70 36.49 48.17 0.34 FIRST 42.16 35.49 40.98 0.32 4 4 8 10 12 Financial Highlights IN THOUSANDS (EXCEPT PER SHARE DATA) FOR THE YEAR 2009 2008 CHANGES Net Income Basic Earnings per Share Dividends Declared Dividends per Share $53,797 2.58 28,311 1.36 $53,164 2.56 27,861 1.34 1.19% 0.78% 1.62% 1.49% Averages for the Year Assets Securities Loans Deposits Shareholders’ Equity At Year-End Assets Securities Loans Deposits Shareholders’ Equity Book Value per Share $3,125,552 $3,064,029 2.01% 1,308,110 1,494,876 2,513,387 394,812 1,185,303 10.36% 1,537,027 2,516,576 (2.74%) (0.13%) 348,271 13.36% $3,279,456 $3,212,385 1,285,377 1,514,369 2,684,757 415,702 19.96 1,318,406 1,566,143 2,582,753 368,782 17.73 2.09% (2.51%) (3.31%) 3.95% 12.72% 12.58% 2.06% Trust Assets 1,664,174 1,630,560 Key Ratios Return on Average Assets Return on Average Equity Equity/Assets at Year-End Efficiency 1.72 % 13.63 % 12.68 % 50.11 % 1.74 % 15.27 % 11.48 % 50.76 % RETURN ON AVERAGE ASSETS 09 08 07 06 05 1.72% 1.74% 1.72% 1.68% 1.80% NET INCOME GROWTH (IN THOUSANDS) $53,797 $53,164 $49,490 $46,029 $44,023 $ 6M 12M 18M 24M 30M 36M 42M 48M 54M RETURN ON AVERAGE EQUITY 13.63% 15.27% 15.87% 16.20% 16.17% 0% 3% 6% 9% 12% 15% 18% EFFICIENCY RATIO 50.11% 50.76% 52.83% 53.49% 52.48% 0% 10% 20% 30% 40% 50% 60% NET INTEREST MARGIN 4.80% 4.67% 4.43% 4.46% 4.49% 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 0% .25% . 50% .75% 1.00% 1.25% 1.50% 1.75% 2.00% 0% 1% 2% 3% 4% 5% 9 TAYLO R , C A L L A H A N & S H AC K E L F O R D CO U N T I E S D E P O S I T M A R K E T S H A R E 2651 JBS Parkway, Bldg. 4, Suite E Odessa, Texas 79762 ABILENE CLYDE MORAN ALBANY ODESSA M A I N O F F I C E 400 Pine LO C AT I O N S 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 132 Hill Street D I R E C TO R S F. Scott Dueser Chairman of the Board Ron Butler President and Chief Executive Officer Tucker S. Bridwell President Mansefeldt Investment Corp. Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Copeland President Joe Crawford President Abilene Aero, Inc. Mike Denny President ( 3 2 5 ) 6 2 7 - 7 2 0 0 Abilene, Texas 79601 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 Albany, Texas 76430 Murray Edwards Principal, The Edwards Group Allan D. Frizzell Executive Vice President Enrich Oil Corporation Stanley Morris, Jr. Investments Kenneth T. Murphy First Financial Bankshares, Inc. Dian Graves Stai Chair Mansefeldt Investment Corp. Director Leigh Taliaferro, M.D. Physician ADVISORY Steve Suttle J. Michael Alexander President James M. Alexander & Co. Tim Lancaster Chairman, CEO and President Hendrick Health System Shelton Family Foundation Dian Graves Owen Foundation R O N B U T L E R Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Ron Butler President and Chief Executive Officer Tom Boecking Executive Vice President South Branch Ben McAnally Executive Vice President Treasury Management John Prince Executive Vice President Personal Loans James Robinson Executive Vice President Retail Marketing and Business Development Marelyn Shedd Executive Vice President Commercial Loans Charles E. Tennesson Executive Vice President, Chief Financial Officer and Cashier Batjer and Associates McMahon Surovik Suttle, P.C. IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $1,087,452 419,928 879,258 99,941 19,587 1.88% 45.99% DEC. 31, 2008 $1,105,537 458,797 843,375 82,778 17,652 1.76% 46.72% CLEBURNE BURLESON ALVARADO MIDLOTHIAN M A I N O F F I C E ( 8 1 7 ) 5 5 6 - 5 0 0 0 o r ( 8 0 0 ) 2 2 6 - 2 9 4 0 403 N. Main Cleburne, Texas 76033 LO C AT I O N S 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 J O H N S O N CO U N T Y & C I T Y O F M I D LOT H I A N D E P O S I T M A R K E T S H A R E M AT T R E YN O L D S Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Craig Beskow Executive Vice President and Cashier Steve Davis Executive Vice President Brad Evans Executive Vice President Derek Schmidt Executive Vice President Cynthia Allen Senior Vice President Kathy Armstrong Senior Vice President Lisa Roye Senior Vice President Darlene Walker Senior Vice President D I R E C TO R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Albert A. Archer Vice Chairman Walls Industries, Inc. Ray Beavers General Manager & CEO United Cooperative Services Byron Black Investments F. Scott Dueser First Financial Bankshares, Inc. Tim Lyness Lyness Construction, LP George Marti Marti Enterprises Dr. Joe Martin Cleburne Eye Clinic IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 273,598 137,043 247,992 23,697 3,886 1.57% 53.68% DEC. 31, 2008 $ 244,647 138,127 221,629 21,126 4,199 1.74% 53.95% 11 EASTLAND RANGER RISING STAR M A I N O F F I C E 201 E. Main LO C AT I O N S 106 Main 206 West College ( 2 5 4 ) 6 2 9 - 6 1 0 0 Eastland, Texas 76448 Ranger, Texas 76470 Rising Star, Texas 76471 T H O M A S M . O ’ N E I L Pre s i d e n t a n d C E O E A S T L A N D CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer Doug Crawley Rancher 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 M.D. White, Jr. President and Owner Ace Hardware Store, Eastland/Cisco S E N I O R O F F I C E R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer L.V. Coffee Lending Terry Trout Cashier Senior Vice President and Executive Vice President Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,092 63,758 143,956 18,712 2,511 1.79% 49.74% DEC. 31, 2008 $ 153,029 58,201 127,132 17,146 2,412 1.66% 49.59% STAFF EDUCATIONMANAGEMENTDEVELOPMENTCUSTOMER SERVICETECHNOLOGY 39% 15% 48% N U M B E R O N E I N T H E N A T I O N in the $3 billion-plus publicly traded category.* Bank Director magazine, in its first-quarter 2010 issue, ranked First Financial Bankshares We’re proud of our company’s 120-year histor y of financial strength and service to our customers and communities in Texas. But First Financial Bankshares isn’t looking back or resting on our past success. Our focus is on the future. Today, we are taking steps we believe are necessary to ensure that our company remains in the forefront of providing the best banking, trust, wealth management and other financial services, while continuing to build deep and enduring relationships with our valued customers. Relationships built on trust, integrity and exceptional customer service have made our company what it is today. For our shareholders, we remain committed to managing First Financial Bankshares in a safe, sound and profitable manner, with a goal of strategically and prudently growing the Company and expanding into new markets. The Letter to Shareholders on pages 2 and 3 of this annual report gives you more insights into how our company performed in 2009 and our plans for 2010. The photo spread and text on pages 4-7 demonstrate how we are working to secure the Company’s future for the benefit of our customers, employees and shareholders – and the Texas communities we serve. For more information, visit our Web site at http://www.ffin.com. * Based on measurement criteria and analysis compiled by Sandler O’Neill + Partners, L.P., a New York-based investment banking firm that specializes in the financial services industry. Published in Bank Director magazine, 1st quarter 2010. First Financial Bank 325-627-7200 First Financial Bank 817-556-5000 First Financial Bank 254-629-6100 First Financial Bank 806-363-8200 ABILENE CLYDE MORAN ALBANY ODESSA CLEBURNE BURLESON ALVARADO MIDLOTHIAN EASTLAND RANGER RISING STAR HEREFORD , TM . A Family of Community Banks SM First Financial Bank STEPHENVILLE First Financial Bank 940-327-5400 First Financial Bank 325-659-5900 First Financial Bank 817-410-2915 940-683-8700 254-965-5036 817-573-6900 First Financial Bank 325-235-6600 First Financial Bank 817-596-0307 MINERAL WELLS SAN ANGELO SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR GRANBURY GLEN ROSE ACTON SWEET WATER ROBY TRENT MERKEL WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH BANKS TRUST OFFICE LOCATIONS D E A R S H A R E H O L D E R S In light of the recession and higher FDIC insurance premiums in 2009, I am very pleased that our company was able to deliver increased earnings for the 23rd consecutive year. While the national recession at first seemed to bypass Texas, it began moving into the state in the second part of 2008, bringing a decline in home sales and general economic activity and an increase in unemployment. These trends continued in 2009. On the plus side, our state continued to fare better than most of the rest of the country, and our geographic footprint—especially in our West Texas markets—remained stable. The stock market fluctuated greatly during the past two years. The NASDAQ Composite Index declined 41 percent in 2008 and then went back up 44 percent in 2009. Our stock went up 47 percent in 2008 and down 2 percent in 2009, closing at $54.23. We are pleased that our stock performed well for our stockholders during these years of economic turmoil. We continue to suspect that a “flight to safety”—favoring companies with strong balance sheets and a long record of conservative lending—may have played a role in our stock’s favorable performance. We are also pleased that in 2009, our company again received high rankings from leading banking publications such as the ABA Banking Journal and U.S. Banker. Additionally, in January of 2010, Bank Director magazine rated us No. 1 in the nation among publicly traded banks with $3 billion or more of assets. Being named No. 1 is like winning an Academy Award. Without question, this accomplishment is due to the direction of our Board, the dedication of our employees and the loyalty of our customers, who have kept us strong for 120 years. We accept this honor with great humility because we know that every day, we face a new set of challenges in the banking industry and must prove ourselves again and again. RESULTS FOR 2009 Net income grew 1.2 percent to $53.8 million from $53.2 million in 2008. Net interest income, the major source of our earnings, rose 4.3 percent to $129.2 million from $123.9 million. Our net interest margin (on a tax-equivalent basis) also increased, to 4.80 percent from 4.67 percent in 2008. The provision for loan losses for 2009 totaled $11.4 million, a 43.5 percent increase from $8.0 million in 2008. The larger provision was due to a higher level of net charge-offs and an increase in the allowance for loan losses. Noninterest income declined 1.7 percent to $48.6 million from $49.5 million. The decline was primarily due to a $692,000 drop in income from student loan sales as the Company exited the student loan program. Lower usage of overdraft privileges also contributed to the decrease in noninterest income. Noninterest expense was $94.0 million in 2009, up 2.6 percent from $91.6 million a year earlier. The largest increase in noninterest expense was in FDIC insurance premiums, which grew by $4.2 million, or 650.4 percent, after the FDIC raised premium rates as of January 1, 2009, and implemented a special assessment in June of that year. Nevertheless, we were able to improve our efficiency ratio, which expresses the share of revenues consumed by operating expenses, to 50.11 percent from 50.76 percent in 2008. Our bank presidents worked hard to maintain their net interest margins and reduce expenses. I could not be more pleased with their accomplishments, especially in light of the significant increase in FDIC insurance premiums. We again outperformed our peer group on several key financial metrics. Our return on average assets was 1.72 percent compared with a negative 0.21 percent for our peer group. Return on average equity was 13.63 percent versus a negative 2.59 percent for our peers. Our net interest margin of 4.80 percent on a tax-equivalent basis compared very favorably to our peer group’s margin of 3.48 percent. We also beat the peer group on the efficiency ratio—ours was 50.11 percent, while theirs was 69.53 percent. We ended the year with a strong balance sheet. Consolidated assets increased 2.1 percent to $3.28 billion from $3.21 billion at the end of 2008. Loans decreased 3.3 percent to $1.51 billion from $1.57 billion, primarily due to our exiting the student loan program. Total deposits grew 3.9 percent to $2.68 billion from $2.58 billion. Shareholders’ equity rose 12.7 percent to $415.7 million from $368.8 million. As the economy softened in Texas, our nonperforming assets increased to 1.46 percent of total loans and foreclosed assets from 0.80 percent at the end of 2008. Even with this increase, our nonperforming percentage was well below our peer group’s 5.07 percent. Net loan charge-offs for the year totaled $5.3 million at year-end 2009 versus $3.9 million at year-end 2008. The 2009 allowance for loan losses amounted to 1.82 percent of total loans. First Financial Trust & Asset Management Company also experienced growth last year. Total assets at year-end had a book value of $1.67 billion, a 2.1 percent increase from 2008, and a market value of $2.10 billion, an 11.7 percent increase. The Trust Company’s fee income, however, declined 3.8 percent to $9.1 million from $9.4 million. This subsidiary manages a large oil and gas portfolio, and the drop in its income was primarily due to a decline in oil and gas prices and in related fees on oil and gas income. The Trust Company opened its sixth office last year, in Odessa, Texas. We are encouraged by the number of clients who have opened trust accounts with us in Odessa and the potential for growth in the Permian Basin market. 2 GROWTH STRATEGIES We actively looked for acquisition opportunities during 2009, but the banks that we considered were overpriced in light of the economy or did not fit our company’s profile. Our plan is to continue pursuing acquisitions diligently. With our capitalization, stock price, cash position and experienced management team, we have what we need to take advantage of acquisition opportunities. In November, we announced plans to open bank branches in our two existing Trust Company offices in Fort Worth and Odessa, to complement trust services and serve customers in those markets. We have had frequent requests from customers for branches in these markets and are interested to see how this private bank branch concept will work. During the year, we achieved a long-term objective of bringing all of our banks under a common name to improve brand identity and marketing efficiencies. Hereford State Bank, San Angelo National Bank and Weatherford National Bank are now called First Financial Bank. All of our banks benefit from sharing the Company’s growing brand identity, and our customers benefit from being able to use our facilities throughout our market areas. However, in no way does the use of a common name change our practice of operating through ten community-based banks that are separately chartered, have their own local boards and management teams, and make decisions locally. We continue to be the “hometown bank” in our markets, with a tradition of playing a vital role in community life. WHAT’S AHEAD Besides looking for acquisitions, we plan to continue growing our mortgage market, trust services and treasury management services. We are encouraged by our recent growth that there will be good opportunities in these areas. Minimizing nonperforming assets will certainly be an objective, as it has been for the last several years. We do know that FDIC insurance premiums will continue to be high and that increased regulation proposed by Congress and various federal agencies will make our jobs more challenging and costly. Our hope is that the banking industry can mitigate much of the pending regulatory legislation by educating Washington that community banks have not caused today’s economic problems and are already over-regulated. We are committed to providing outstanding service to our customers, our communities and our nation by making every good loan we can to help our economy grow and prosper. PERSONNEL CHANGES J. V. Martin retired at the end of the year as CEO of First Financial Bank, Sweetwater. Kirby Andrews, President, assumed the additional role of CEO there. J. V. will continue to serve as the Sweetwater bank’s Chairman of the Board. He will also provide consulting services to the holding company. Additionally, Senior Chairman Kenneth T. Murphy will retire from the First Financial Bankshares Board in conjunction with our Annual Shareholders’ Meeting in April. He has served our company with distinction for 39 years, holding the positions of President, First Financial Bank, Abilene; and Executive Vice President, President, Chief Executive Officer, Chairman and Senior Chairman of First Financial Bankshares, Inc. Through those years, he has also made many civic and professional contributions, including serving on the Board of the Federal Reserve Bank of Dallas and serving as Chairman of the Board of the Texas Bankers Association. When Ken joined the bank in 1971, the Company had total assets of $87.7 million and net income of $806,000. By the end of 2009, we had total assets of $3.28 billion and net earnings of $53.8 million. During Ken’s tenure with the Company, we have experienced great success. Customers, stockholders and communities have certainly benefited from Ken’s leadership and counsel, and we thank him for his fine service. We are pleased that he will continue to maintain an office in the First Financial Bank (Abilene) building and will be available to management for consultation. It is our pleasure to announce that Steven L. Beal, retired President and Chief Operating Officer of Concho Resources Inc., has accepted nomination for election as a Director of the Company at our Annual Shareholders’ Meeting in April. Steve was one of the founders of Concho, an independent oil and natural gas company, and continues to be a Director on its Board. Prior to being at Concho, he was Senior Vice President and Chief Financial Officer of Parker & Parsley Petroleum Company, which is now Pioneer National Resources. Before that, he was an audit professional with the accounting firm of Price Waterhouse Coopers. He is a 1981 graduate of The University of Texas with a degree in accounting. Steve has been involved civically and professionally with the United Way of Midland, Permian Basin Oil & Gas Association, Independent Petroleum Association of America and the New Mexico Oil & Gas Association. He has been on the Board of Directors of Midland Christian School and the Midland/Odessa Symphony. Most recently, he was a partner with the Early School District to build an indoor practice facility for use by the students and teams of Early High School. Steve and his wife, Teresa, live on their ranch in Brownwood, Texas. These are challenging times for the national economy and for the banking business. First Financial has the benefit of a long-term perspective. In our 120-year history, we’ve endured numerous recessions, the Great Depression, the Texas oil bust of the 1980s and other obstacles. We cannot predict the duration of the current economic malaise, but we remain optimistic about the long-term future of our state and nation, and especially our Texas markets. Financially and operationally, we believe our company has never been stronger, and our best days are still ahead of us. With our eyes on the future, we are making a strong investment in the training of all our employees, including our next generation of leaders, to ensure that we continue to provide excellence in banking, trust services, wealth management and customer service. We encourage you to read more about our training and customer service programs in the pages that follow. Banking is our business, but all of us on the management team never lose sight of the fact that we work for you, our shareholders. We will continue to manage the Company for profitability and growth in 2010 and beyond. F. Scott Dueser Chairman, President and CEO , TM . 3 W H A T M A K E S U S F I R S T ? Friendly. Knowledgeable. Helpful. These are words our customers use to describe First Financial Bank’s employees. Well-informed and well-motivated employees are essential to keeping First Financial Bank prepared for the future. Training our employees to provide the finest banking, financial solutions and exceptional customer service begins the day new employees are hired. Every new employee at First Financial Bank goes through a classroom training program. This orientation is designed not only to teach new employees about the bank’s outstanding portfolio of banking products and services, but also introduces them to the Company’s unique culture, which emphasizes putting customers’ needs first and going the extra mile to provide exceptional service and support. New employees learn skills from how to open a new account to the essentials of good business etiquette. New employee orientation is just the start. Our commitment to training and professional development for our employees is ongoing. All employees participate in compliance training, most taking 12 to 24 courses per year in all aspects of banking, customer service and financial services. We offer our employees both online, “desktop” training modules and more traditional classroom training. Regardless of the format, the goal is always the same – to help our employees continue the Company’s proud tradition of being a leading bank in our markets and exceeding our customers’ expectations for the finest in banking products and service. Merrie Spaeth, president of Spaeth Communications, Inc. and a nationally known consultant on organizational communications, leads a management training class for First Financial Bankshares. Christina Randle, author, productivity expert and CEO of The Effective Edge, trains managers at First Financial Bankshares. F F I NF F I N UNIVERSITY UNIVERSITY Developing future leaders is key to our company’s continued success in the years ahead. One way we prepare our future leaders is through FFIN University, which takes a select group of bank officers through a year-long inten- sive training program. First launched in 2008, FFIN University clearly underscores the Company’s commitment to main- taining its tradition of excellence in banking, trust services and customer service. Participants in FFIN University learn from both senior leaders and outstanding guest speakers on topics that range from time management to com- munication skills. Graduates of FFIN University are ready to assume key senior management positions in our company. They will help maintain the Company’s long tradition as a successful, profitable, community- based bank. 5 BACK ROW (L-R): KATHY BUSHNELL (First Technology Services), ISABEL MONTOYA (First Technology Services), IRMA ZIPP (Stephenville), MARY JO SORGE (Abilene), MELANIE BEARD (Granbury), ESTHER BILBY (Bridgeport), SANDRA HOLT (Abilene) FRONT ROW (L - R ): TRISHA HILDEBRAND (San Angelo), MARCELLA JIMENEZ (Mineral Wells), JANET FLYNT ( Weatherford), MELISSA JACQUES (Sweetwater), LEANN BAUGH ( Trust - Stephenville), STEVE GILBERT (Hereford), STEPHANIE LOPEZ (Eastland), LISA ROYE (Cleburne) Banking is all about relationships and working with customers one-on-one. That’s why, at First Financial Bankshares, our Customer Service First program is one of our highest priorities. Our goal is simple – to provide customer service that is second to none. Achieving that goal involves all employees and requires a sharp focus. It begins with our new employee orientation program and continues through our FFIN University for senior leaders. Instilling a culture of exceptional customer service is no accident. We encourage employees through a variety of initiatives, including recognizing employees who go beyond the norm for customers with “WOW” awards and giving Star Cards to employees who are nominated by fellow employees for exceptional customer service. Our top recognition program for employees is the Shining Star Award. Twice each year, managers select employees who have consistently demonstrated superior customer service. Shining Star Award winners and their spouses are hosted at the Company’s headquarters in Abilene for a special recognition ceremony, highlighted by a dinner with our presidents and management. ISABEL MONTOYA, First Technology Services, Abilene, is recognized as a Shining Star by SCOT T DUESER, President & CEO, First Financial Bankshares. 6 First Financial has the technology infrastructure and tools in place to provide first-rate modern banking services today and to meet future customer needs as we continue to grow. The Company’s technology supports our goal of providing exceptional customer service. Our system of customer call centers provides the same level of prompt and courteous service on the phone that customers are accustomed to receiving in our branches. Calls are answered by a person - not by voice mail - and customers immediately get helpful answers to questions about their checking and savings accounts, debit card transactions, business transactions and online banking. We created excitement among our customers in late 2009 by introducing a new custom-designed debit card program. Customers may choose from more than 130 card designs, many of which include logos and colors for local high schools or universities. To date, more than 33,000 custom cards have been printed. In 2010, we plan to go a step further and let customers create personalized debit cards using their own photos. 4 4 8 10 12 Selected Financial Data IN THOUSANDS (EXCEPT PER SHARE DATA) YEAR-END TOTAL ASSETS EQUITY INCOME PER SHARE PER SHARE AND SPLITS PER SHARE PER SHARE SHAREHOLDERS’ NET EARNINGS DIVIDENDS DIVIDENDS BOOK VALUE MARKET VALUE BASIC CASH STOCK YEAR-END YEAR-END 2009 $3,279,456 $ 415,702 $ 53,797 $2.58 $1.36 – $ 19.96 $ 54.23 2008 3,212,385 368,782 53,164 2.56 1.34 – 17.73 55.21 2007 3,070,309 335,495 49,490 2.38 1.26 – 16.16 37.65 2006 2,850,165 300,901 46,029 2.22 1.18 – 14.51 41.86 2005 2,733,827 276,276 44,023 2.13 1.10 4/3 split 13.34 35.06 2004 2,315,224 265,545 39,171 1.90 1.00 – 12.84 33.61 2003 2,092,571 251,487 35,305 1.71 0.91 5/4 split 12.19 30.84 2002 1,993,183 238,768 33,953 1.65 0.81 – 11.59 22.80 2001 1,929,694 213,654 29,355 1.43 0.70 5/4 split 10.40 18.06 2000 1,753,814 196,121 28,316 1.37 0.62 – 9.56 15.09 GROWTH RATE 6.65% 8.81% 7.67% 7.60% 9.68% – 8.78% 13.90% TEN-YEAR COMPOUND Adjusted for stock dividends and splits. 2009 COMMON STOCK MARKET VALUE 2008 COMMON STOCK MARKET VALUE AND DIVIDEND DATA AND DIVIDEND DATA QUARTER HIGH LOW CLOSE DIVIDENDS QUARTER HIGH LOW CLOSE DIVIDENDS FOURTH $ 55.94 $ 47.86 $ 54.23 $ 0.34 FOURTH $ 56.32 $ 41.30 $ 55.21 $ 0.34 THIRD 54.50 47.95 49.46 0.34 THIRD 67.00 43.01 51.88 0.34 SECOND 51.62 46.51 50.36 0.34 SECOND 47.12 40.43 45.81 0.34 FIRST 55.70 36.49 48.17 0.34 FIRST 42.16 35.49 40.98 0.32 NET INCOME GROWTH (IN THOUSANDS) $3,125,552 $3,064,029 2.01% RETURN ON AVERAGE EQUITY $ 6M 12M 18M 24M 30M 36M 42M 48M 54M $3,279,456 $3,212,385 0% 3% 6% 9% 12% 15% 18% EFFICIENCY RATIO Financial Highlights IN THOUSANDS (EXCEPT PER SHARE DATA) FOR THE YEAR 2009 2008 CHANGES Net Income Basic Earnings per Share Dividends Declared Dividends per Share $53,797 2.58 28,311 1.36 $53,164 2.56 27,861 1.34 1.19% 0.78% 1.62% 1.49% Averages for the Year Shareholders’ Equity Assets Securities Loans Deposits At Year-End Assets Securities Loans Deposits Shareholders’ Equity Book Value per Share 1,308,110 1,494,876 2,513,387 394,812 1,285,377 1,514,369 2,684,757 415,702 19.96 1,185,303 10.36% 1,537,027 2,516,576 (2.74%) (0.13%) 348,271 13.36% 1,318,406 1,566,143 2,582,753 368,782 17.73 2.09% (2.51%) (3.31%) 3.95% 12.72% 12.58% 2.06% Trust Assets 1,664,174 1,630,560 Key Ratios Return on Average Assets Return on Average Equity Equity/Assets at Year-End Efficiency 1.72 % 13.63 % 12.68 % 50.11 % 1.74 % 15.27 % 11.48 % 50.76 % 09 08 07 06 05 1.72% 1.74% 1.72% 1.68% 1.80% 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 $53,797 $53,164 $49,490 $46,029 $44,023 13.63% 15.27% 15.87% 16.20% 16.17% 50.11% 50.76% 52.83% 53.49% 52.48% 4.80% 4.67% 4.43% 4.46% 4.49% RETURN ON AVERAGE ASSETS NET INTEREST MARGIN 0% 10% 20% 30% 40% 50% 60% 0% .25% . 50% .75% 1.00% 1.25% 1.50% 1.75% 2.00% 0% 1% 2% 3% 4% 5% 9 ABILENE CLYDE MORAN ALBANY ODESSA M A I N O F F I C E 400 Pine LO C AT I O N S 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 132 Hill Street ( 3 2 5 ) 6 2 7 - 7 2 0 0 Abilene, Texas 79601 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 Albany, Texas 76430 2651 JBS Parkway, Bldg. 4, Suite E Odessa, Texas 79762 D I R E C TO R S F. Scott Dueser Chairman of the Board Ron Butler President and Chief Executive Officer Murray Edwards Principal, The Edwards Group Allan D. Frizzell Executive Vice President Enrich Oil Corporation J. Michael Alexander President James M. Alexander & Co. Tim Lancaster Chairman, CEO and President Hendrick Health System Tucker S. Bridwell President Mansefeldt Investment Corp. Stanley Morris, Jr. Investments Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Copeland President Shelton Family Foundation Joe Crawford President Abilene Aero, Inc. Mike Denny President Batjer and Associates Kenneth T. Murphy First Financial Bankshares, Inc. Dian Graves Stai Chair Mansefeldt Investment Corp. Director Dian Graves Owen Foundation Leigh Taliaferro, M.D. Physician ADVISORY Steve Suttle McMahon Surovik Suttle, P.C. R O N B U T L E R Pre s i d e n t a n d C E O TAYLO R , C A L L A H A N & S H AC K E L F O R D CO U N T I E S D E P O S I T M A R K E T S H A R E S E N I O R O F F I C E R S Ron Butler President and Chief Executive Officer Tom Boecking Executive Vice President South Branch Ben McAnally Executive Vice President Treasury Management John Prince Executive Vice President Personal Loans James Robinson Executive Vice President Retail Marketing and Business Development Marelyn Shedd Executive Vice President Commercial Loans Charles E. Tennesson Executive Vice President, Chief Financial Officer and Cashier IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $1,087,452 419,928 879,258 99,941 19,587 1.88% 45.99% DEC. 31, 2008 $1,105,537 458,797 843,375 82,778 17,652 1.76% 46.72% CLEBURNE BURLESON ALVARADO MIDLOTHIAN M A I N O F F I C E ( 8 1 7 ) 5 5 6 - 5 0 0 0 o r ( 8 0 0 ) 2 2 6 - 2 9 4 0 403 N. Main Cleburne, Texas 76033 LO C AT I O N S 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 J O H N S O N CO U N T Y & C I T Y O F M I D LOT H I A N D E P O S I T M A R K E T S H A R E M AT T R E YN O L D S Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Craig Beskow Executive Vice President and Cashier Steve Davis Executive Vice President Brad Evans Executive Vice President Derek Schmidt Executive Vice President Cynthia Allen Senior Vice President Kathy Armstrong Senior Vice President Lisa Roye Senior Vice President Darlene Walker Senior Vice President D I R E C TO R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Albert A. Archer Vice Chairman Walls Industries, Inc. Ray Beavers General Manager & CEO United Cooperative Services Byron Black Investments F. Scott Dueser First Financial Bankshares, Inc. Tim Lyness Lyness Construction, LP George Marti Marti Enterprises Dr. Joe Martin Cleburne Eye Clinic IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 273,598 137,043 247,992 23,697 3,886 1.57% 53.68% DEC. 31, 2008 $ 244,647 138,127 221,629 21,126 4,199 1.74% 53.95% 11 EASTLAND RANGER RISING STAR M A I N O F F I C E 201 E. Main LO C AT I O N S 106 Main 206 West College ( 2 5 4 ) 6 2 9 - 6 1 0 0 Eastland, Texas 76448 Ranger, Texas 76470 Rising Star, Texas 76471 T H O M A S M . O ’ N E I L Pre s i d e n t a n d C E O E A S T L A N D CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer Doug Crawley Rancher 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 M.D. White, Jr. President and Owner Ace Hardware Store, Eastland/Cisco S E N I O R O F F I C E R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer L.V. Coffee Lending Terry Trout Cashier Senior Vice President and Executive Vice President Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,092 63,758 143,956 18,712 2,511 1.79% 49.74% DEC. 31, 2008 $ 153,029 58,201 127,132 17,146 2,412 1.66% 49.59% STAFF EDUCATIONMANAGEMENTDEVELOPMENTCUSTOMER SERVICETECHNOLOGY 39% 15% 48% N U M B E R O N E I N T H E N A T I O N in the $3 billion-plus publicly traded category.* Bank Director magazine, in its first-quarter 2010 issue, ranked First Financial Bankshares We’re proud of our company’s 120-year histor y of financial strength and service to our customers and communities in Texas. But First Financial Bankshares isn’t looking back or resting on our past success. Our focus is on the future. Today, we are taking steps we believe are necessary to ensure that our company remains in the forefront of providing the best banking, trust, wealth management and other financial services, while continuing to build deep and enduring relationships with our valued customers. Relationships built on trust, integrity and exceptional customer service have made our company what it is today. For our shareholders, we remain committed to managing First Financial Bankshares in a safe, sound and profitable manner, with a goal of strategically and prudently growing the Company and expanding into new markets. The Letter to Shareholders on pages 2 and 3 of this annual report gives you more insights into how our company performed in 2009 and our plans for 2010. The photo spread and text on pages 4-7 demonstrate how we are working to secure the Company’s future for the benefit of our customers, employees and shareholders – and the Texas communities we serve. For more information, visit our Web site at http://www.ffin.com. * Based on measurement criteria and analysis compiled by Sandler O’Neill + Partners, L.P., a New York-based investment banking firm that specializes in the financial services industry. Published in Bank Director magazine, 1st quarter 2010. First Financial Bank 325-627-7200 First Financial Bank 817-556-5000 First Financial Bank 254-629-6100 First Financial Bank 806-363-8200 ABILENE CLYDE MORAN ALBANY ODESSA CLEBURNE BURLESON ALVARADO MIDLOTHIAN EASTLAND RANGER RISING STAR HEREFORD , TM . A Family of Community Banks SM First Financial Bank STEPHENVILLE First Financial Bank 940-327-5400 First Financial Bank 325-659-5900 First Financial Bank 817-410-2915 940-683-8700 254-965-5036 817-573-6900 First Financial Bank 325-235-6600 First Financial Bank 817-596-0307 MINERAL WELLS SAN ANGELO SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR GRANBURY GLEN ROSE ACTON SWEET WATER ROBY TRENT MERKEL WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH BANKS TRUST OFFICE LOCATIONS D E A R S H A R E H O L D E R S In light of the recession and higher FDIC insurance premiums in 2009, I am very pleased that our company was able to deliver increased earnings for the 23rd consecutive year. While the national recession at first seemed to bypass Texas, it began moving into the state in the second part of 2008, bringing a decline in home sales and general economic activity and an increase in unemployment. These trends continued in 2009. On the plus side, our state continued to fare better than most of the rest of the country, and our geographic footprint—especially in our West Texas markets—remained stable. The stock market fluctuated greatly during the past two years. The NASDAQ Composite Index declined 41 percent in 2008 and then went back up 44 percent in 2009. Our stock went up 47 percent in 2008 and down 2 percent in 2009, closing at $54.23. We are pleased that our stock performed well for our stockholders during these years of economic turmoil. We continue to suspect that a “flight to safety”—favoring companies with strong balance sheets and a long record of conservative lending—may have played a role in our stock’s favorable performance. We are also pleased that in 2009, our company again received high rankings from leading banking publications such as the ABA Banking Journal and U.S. Banker. Additionally, in January of 2010, Bank Director magazine rated us No. 1 in the nation among publicly traded banks with $3 billion or more of assets. Being named No. 1 is like winning an Academy Award. Without question, this accomplishment is due to the direction of our Board, the dedication of our employees and the loyalty of our customers, who have kept us strong for 120 years. We accept this honor with great humility because we know that every day, we face a new set of challenges in the banking industry and must prove ourselves again and again. RESULTS FOR 2009 Net income grew 1.2 percent to $53.8 million from $53.2 million in 2008. Net interest income, the major source of our earnings, rose 4.3 percent to $129.2 million from $123.9 million. Our net interest margin (on a tax-equivalent basis) also increased, to 4.80 percent from 4.67 percent in 2008. The provision for loan losses for 2009 totaled $11.4 million, a 43.5 percent increase from $8.0 million in 2008. The larger provision was due to a higher level of net charge-offs and an increase in the allowance for loan losses. Noninterest income declined 1.7 percent to $48.6 million from $49.5 million. The decline was primarily due to a $692,000 drop in income from student loan sales as the Company exited the student loan program. Lower usage of overdraft privileges also contributed to the decrease in noninterest income. Noninterest expense was $94.0 million in 2009, up 2.6 percent from $91.6 million a year earlier. The largest increase in noninterest expense was in FDIC insurance premiums, which grew by $4.2 million, or 650.4 percent, after the FDIC raised premium rates as of January 1, 2009, and implemented a special assessment in June of that year. Nevertheless, we were able to improve our efficiency ratio, which expresses the share of revenues consumed by operating expenses, to 50.11 percent from 50.76 percent in 2008. Our bank presidents worked hard to maintain their net interest margins and reduce expenses. I could not be more pleased with their accomplishments, especially in light of the significant increase in FDIC insurance premiums. We again outperformed our peer group on several key financial metrics. Our return on average assets was 1.72 percent compared with a negative 0.21 percent for our peer group. Return on average equity was 13.63 percent versus a negative 2.59 percent for our peers. Our net interest margin of 4.80 percent on a tax-equivalent basis compared very favorably to our peer group’s margin of 3.48 percent. We also beat the peer group on the efficiency ratio—ours was 50.11 percent, while theirs was 69.53 percent. We ended the year with a strong balance sheet. Consolidated assets increased 2.1 percent to $3.28 billion from $3.21 billion at the end of 2008. Loans decreased 3.3 percent to $1.51 billion from $1.57 billion, primarily due to our exiting the student loan program. Total deposits grew 3.9 percent to $2.68 billion from $2.58 billion. Shareholders’ equity rose 12.7 percent to $415.7 million from $368.8 million. As the economy softened in Texas, our nonperforming assets increased to 1.46 percent of total loans and foreclosed assets from 0.80 percent at the end of 2008. Even with this increase, our nonperforming percentage was well below our peer group’s 5.07 percent. Net loan charge-offs for the year totaled $5.3 million at year-end 2009 versus $3.9 million at year-end 2008. The 2009 allowance for loan losses amounted to 1.82 percent of total loans. First Financial Trust & Asset Management Company also experienced growth last year. Total assets at year-end had a book value of $1.67 billion, a 2.1 percent increase from 2008, and a market value of $2.10 billion, an 11.7 percent increase. The Trust Company’s fee income, however, declined 3.8 percent to $9.1 million from $9.4 million. This subsidiary manages a large oil and gas portfolio, and the drop in its income was primarily due to a decline in oil and gas prices and in related fees on oil and gas income. The Trust Company opened its sixth office last year, in Odessa, Texas. We are encouraged by the number of clients who have opened trust accounts with us in Odessa and the potential for growth in the Permian Basin market. 2 GROWTH STRATEGIES We actively looked for acquisition opportunities during 2009, but the banks that we considered were overpriced in light of the economy or did not fit our company’s profile. Our plan is to continue pursuing acquisitions diligently. With our capitalization, stock price, cash position and experienced management team, we have what we need to take advantage of acquisition opportunities. In November, we announced plans to open bank branches in our two existing Trust Company offices in Fort Worth and Odessa, to complement trust services and serve customers in those markets. We have had frequent requests from customers for branches in these markets and are interested to see how this private bank branch concept will work. During the year, we achieved a long-term objective of bringing all of our banks under a common name to improve brand identity and marketing efficiencies. Hereford State Bank, San Angelo National Bank and Weatherford National Bank are now called First Financial Bank. All of our banks benefit from sharing the Company’s growing brand identity, and our customers benefit from being able to use our facilities throughout our market areas. However, in no way does the use of a common name change our practice of operating through ten community-based banks that are separately chartered, have their own local boards and management teams, and make decisions locally. We continue to be the “hometown bank” in our markets, with a tradition of playing a vital role in community life. WHAT’S AHEAD Besides looking for acquisitions, we plan to continue growing our mortgage market, trust services and treasury management services. We are encouraged by our recent growth that there will be good opportunities in these areas. Minimizing nonperforming assets will certainly be an objective, as it has been for the last several years. We do know that FDIC insurance premiums will continue to be high and that increased regulation proposed by Congress and various federal agencies will make our jobs more challenging and costly. Our hope is that the banking industry can mitigate much of the pending regulatory legislation by educating Washington that community banks have not caused today’s economic problems and are already over-regulated. We are committed to providing outstanding service to our customers, our communities and our nation by making every good loan we can to help our economy grow and prosper. PERSONNEL CHANGES J. V. Martin retired at the end of the year as CEO of First Financial Bank, Sweetwater. Kirby Andrews, President, assumed the additional role of CEO there. J. V. will continue to serve as the Sweetwater bank’s Chairman of the Board. He will also provide consulting services to the holding company. Additionally, Senior Chairman Kenneth T. Murphy will retire from the First Financial Bankshares Board in conjunction with our Annual Shareholders’ Meeting in April. He has served our company with distinction for 39 years, holding the positions of President, First Financial Bank, Abilene; and Executive Vice President, President, Chief Executive Officer, Chairman and Senior Chairman of First Financial Bankshares, Inc. Through those years, he has also made many civic and professional contributions, including serving on the Board of the Federal Reserve Bank of Dallas and serving as Chairman of the Board of the Texas Bankers Association. When Ken joined the bank in 1971, the Company had total assets of $87.7 million and net income of $806,000. By the end of 2009, we had total assets of $3.28 billion and net earnings of $53.8 million. During Ken’s tenure with the Company, we have experienced great success. Customers, stockholders and communities have certainly benefited from Ken’s leadership and counsel, and we thank him for his fine service. We are pleased that he will continue to maintain an office in the First Financial Bank (Abilene) building and will be available to management for consultation. It is our pleasure to announce that Steven L. Beal, retired President and Chief Operating Officer of Concho Resources Inc., has accepted nomination for election as a Director of the Company at our Annual Shareholders’ Meeting in April. Steve was one of the founders of Concho, an independent oil and natural gas company, and continues to be a Director on its Board. Prior to being at Concho, he was Senior Vice President and Chief Financial Officer of Parker & Parsley Petroleum Company, which is now Pioneer National Resources. Before that, he was an audit professional with the accounting firm of Price Waterhouse Coopers. He is a 1981 graduate of The University of Texas with a degree in accounting. Steve has been involved civically and professionally with the United Way of Midland, Permian Basin Oil & Gas Association, Independent Petroleum Association of America and the New Mexico Oil & Gas Association. He has been on the Board of Directors of Midland Christian School and the Midland/Odessa Symphony. Most recently, he was a partner with the Early School District to build an indoor practice facility for use by the students and teams of Early High School. Steve and his wife, Teresa, live on their ranch in Brownwood, Texas. These are challenging times for the national economy and for the banking business. First Financial has the benefit of a long-term perspective. In our 120-year history, we’ve endured numerous recessions, the Great Depression, the Texas oil bust of the 1980s and other obstacles. We cannot predict the duration of the current economic malaise, but we remain optimistic about the long-term future of our state and nation, and especially our Texas markets. Financially and operationally, we believe our company has never been stronger, and our best days are still ahead of us. With our eyes on the future, we are making a strong investment in the training of all our employees, including our next generation of leaders, to ensure that we continue to provide excellence in banking, trust services, wealth management and customer service. We encourage you to read more about our training and customer service programs in the pages that follow. Banking is our business, but all of us on the management team never lose sight of the fact that we work for you, our shareholders. We will continue to manage the Company for profitability and growth in 2010 and beyond. F. Scott Dueser Chairman, President and CEO , TM . 3 W H A T M A K E S U S F I R S T ? Friendly. Knowledgeable. Helpful. These are words our customers use to describe First Financial Bank’s employees. Well-informed and well-motivated employees are essential to keeping First Financial Bank prepared for the future. Training our employees to provide the finest banking, financial solutions and exceptional customer service begins the day new employees are hired. Every new employee at First Financial Bank goes through a classroom training program. This orientation is designed not only to teach new employees about the bank’s outstanding portfolio of banking products and services, but also introduces them to the Company’s unique culture, which emphasizes putting customers’ needs first and going the extra mile to provide exceptional service and support. New employees learn skills from how to open a new account to the essentials of good business etiquette. New employee orientation is just the start. Our commitment to training and professional development for our employees is ongoing. All employees participate in compliance training, most taking 12 to 24 courses per year in all aspects of banking, customer service and financial services. We offer our employees both online, “desktop” training modules and more traditional classroom training. Regardless of the format, the goal is always the same – to help our employees continue the Company’s proud tradition of being a leading bank in our markets and exceeding our customers’ expectations for the finest in banking products and service. Merrie Spaeth, president of Spaeth Communications, Inc. and a nationally known consultant on organizational communications, leads a management training class for First Financial Bankshares. Christina Randle, author, productivity expert and CEO of The Effective Edge, trains managers at First Financial Bankshares. F F I NF F I N UNIVERSITY UNIVERSITY Developing future leaders is key to our company’s continued success in the years ahead. One way we prepare our future leaders is through FFIN University, which takes a select group of bank officers through a year-long inten- sive training program. First launched in 2008, FFIN University clearly underscores the Company’s commitment to main- taining its tradition of excellence in banking, trust services and customer service. Participants in FFIN University learn from both senior leaders and outstanding guest speakers on topics that range from time management to com- munication skills. Graduates of FFIN University are ready to assume key senior management positions in our company. They will help maintain the Company’s long tradition as a successful, profitable, community- based bank. 5 BACK ROW (L-R): KATHY BUSHNELL (First Technology Services), ISABEL MONTOYA (First Technology Services), IRMA ZIPP (Stephenville), MARY JO SORGE (Abilene), MELANIE BEARD (Granbury), ESTHER BILBY (Bridgeport), SANDRA HOLT (Abilene) FRONT ROW (L - R ): TRISHA HILDEBRAND (San Angelo), MARCELLA JIMENEZ (Mineral Wells), JANET FLYNT ( Weatherford), MELISSA JACQUES (Sweetwater), LEANN BAUGH ( Trust - Stephenville), STEVE GILBERT (Hereford), STEPHANIE LOPEZ (Eastland), LISA ROYE (Cleburne) Banking is all about relationships and working with customers one-on-one. That’s why, at First Financial Bankshares, our Customer Service First program is one of our highest priorities. Our goal is simple – to provide customer service that is second to none. Achieving that goal involves all employees and requires a sharp focus. It begins with our new employee orientation program and continues through our FFIN University for senior leaders. Instilling a culture of exceptional customer service is no accident. We encourage employees through a variety of initiatives, including recognizing employees who go beyond the norm for customers with “WOW” awards and giving Star Cards to employees who are nominated by fellow employees for exceptional customer service. Our top recognition program for employees is the Shining Star Award. Twice each year, managers select employees who have consistently demonstrated superior customer service. Shining Star Award winners and their spouses are hosted at the Company’s headquarters in Abilene for a special recognition ceremony, highlighted by a dinner with our presidents and management. ISABEL MONTOYA, First Technology Services, Abilene, is recognized as a Shining Star by SCOT T DUESER, President & CEO, First Financial Bankshares. 6 First Financial has the technology infrastructure and tools in place to provide first-rate modern banking services today and to meet future customer needs as we continue to grow. The Company’s technology supports our goal of providing exceptional customer service. Our system of customer call centers provides the same level of prompt and courteous service on the phone that customers are accustomed to receiving in our branches. Calls are answered by a person - not by voice mail - and customers immediately get helpful answers to questions about their checking and savings accounts, debit card transactions, business transactions and online banking. We created excitement among our customers in late 2009 by introducing a new custom-designed debit card program. Customers may choose from more than 130 card designs, many of which include logos and colors for local high schools or universities. To date, more than 33,000 custom cards have been printed. In 2010, we plan to go a step further and let customers create personalized debit cards using their own photos. 4 4 8 10 12 Selected Financial Data IN THOUSANDS (EXCEPT PER SHARE DATA) YEAR-END TOTAL ASSETS EQUITY INCOME PER SHARE PER SHARE AND SPLITS PER SHARE PER SHARE SHAREHOLDERS’ NET EARNINGS DIVIDENDS DIVIDENDS BOOK VALUE MARKET VALUE BASIC CASH STOCK YEAR-END YEAR-END 2009 $3,279,456 $ 415,702 $ 53,797 $2.58 $1.36 – $ 19.96 $ 54.23 2008 3,212,385 368,782 53,164 2.56 1.34 – 17.73 55.21 2007 3,070,309 335,495 49,490 2.38 1.26 – 16.16 37.65 2006 2,850,165 300,901 46,029 2.22 1.18 – 14.51 41.86 2005 2,733,827 276,276 44,023 2.13 1.10 4/3 split 13.34 35.06 2004 2,315,224 265,545 39,171 1.90 1.00 – 12.84 33.61 2003 2,092,571 251,487 35,305 1.71 0.91 5/4 split 12.19 30.84 2002 1,993,183 238,768 33,953 1.65 0.81 – 11.59 22.80 2001 1,929,694 213,654 29,355 1.43 0.70 5/4 split 10.40 18.06 2000 1,753,814 196,121 28,316 1.37 0.62 – 9.56 15.09 GROWTH RATE 6.65% 8.81% 7.67% 7.60% 9.68% – 8.78% 13.90% TEN-YEAR COMPOUND Adjusted for stock dividends and splits. 2009 COMMON STOCK MARKET VALUE 2008 COMMON STOCK MARKET VALUE AND DIVIDEND DATA AND DIVIDEND DATA QUARTER HIGH LOW CLOSE DIVIDENDS QUARTER HIGH LOW CLOSE DIVIDENDS FOURTH $ 55.94 $ 47.86 $ 54.23 $ 0.34 FOURTH $ 56.32 $ 41.30 $ 55.21 $ 0.34 THIRD 54.50 47.95 49.46 0.34 THIRD 67.00 43.01 51.88 0.34 SECOND 51.62 46.51 50.36 0.34 SECOND 47.12 40.43 45.81 0.34 FIRST 55.70 36.49 48.17 0.34 FIRST 42.16 35.49 40.98 0.32 NET INCOME GROWTH (IN THOUSANDS) $3,125,552 $3,064,029 2.01% RETURN ON AVERAGE EQUITY $ 6M 12M 18M 24M 30M 36M 42M 48M 54M $3,279,456 $3,212,385 0% 3% 6% 9% 12% 15% 18% EFFICIENCY RATIO Financial Highlights IN THOUSANDS (EXCEPT PER SHARE DATA) FOR THE YEAR 2009 2008 CHANGES Net Income Basic Earnings per Share Dividends Declared Dividends per Share $53,797 2.58 28,311 1.36 $53,164 2.56 27,861 1.34 1.19% 0.78% 1.62% 1.49% Averages for the Year Shareholders’ Equity Assets Securities Loans Deposits At Year-End Assets Securities Loans Deposits Shareholders’ Equity Book Value per Share 1,308,110 1,494,876 2,513,387 394,812 1,285,377 1,514,369 2,684,757 415,702 19.96 1,185,303 10.36% 1,537,027 2,516,576 (2.74%) (0.13%) 348,271 13.36% 1,318,406 1,566,143 2,582,753 368,782 17.73 2.09% (2.51%) (3.31%) 3.95% 12.72% 12.58% 2.06% Trust Assets 1,664,174 1,630,560 Key Ratios Return on Average Assets Return on Average Equity Equity/Assets at Year-End Efficiency 1.72 % 13.63 % 12.68 % 50.11 % 1.74 % 15.27 % 11.48 % 50.76 % 09 08 07 06 05 1.72% 1.74% 1.72% 1.68% 1.80% 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 $53,797 $53,164 $49,490 $46,029 $44,023 13.63% 15.27% 15.87% 16.20% 16.17% 50.11% 50.76% 52.83% 53.49% 52.48% 4.80% 4.67% 4.43% 4.46% 4.49% RETURN ON AVERAGE ASSETS NET INTEREST MARGIN 0% 10% 20% 30% 40% 50% 60% 0% .25% . 50% .75% 1.00% 1.25% 1.50% 1.75% 2.00% 0% 1% 2% 3% 4% 5% 9 TAYLO R , C A L L A H A N & S H AC K E L F O R D CO U N T I E S D E P O S I T M A R K E T S H A R E 2651 JBS Parkway, Bldg. 4, Suite E Odessa, Texas 79762 ABILENE CLYDE MORAN ALBANY ODESSA M A I N O F F I C E 400 Pine LO C AT I O N S 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 132 Hill Street D I R E C TO R S F. Scott Dueser Chairman of the Board Ron Butler President and Chief Executive Officer Tucker S. Bridwell President Mansefeldt Investment Corp. Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Copeland President Joe Crawford President Abilene Aero, Inc. Mike Denny President ( 3 2 5 ) 6 2 7 - 7 2 0 0 Abilene, Texas 79601 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 Albany, Texas 76430 Murray Edwards Principal, The Edwards Group Allan D. Frizzell Executive Vice President Enrich Oil Corporation Stanley Morris, Jr. Investments Kenneth T. Murphy First Financial Bankshares, Inc. Dian Graves Stai Chair Mansefeldt Investment Corp. Director Leigh Taliaferro, M.D. Physician ADVISORY Steve Suttle J. Michael Alexander President James M. Alexander & Co. Tim Lancaster Chairman, CEO and President Hendrick Health System Shelton Family Foundation Dian Graves Owen Foundation R O N B U T L E R Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Ron Butler President and Chief Executive Officer Tom Boecking Executive Vice President South Branch Ben McAnally Executive Vice President Treasury Management John Prince Executive Vice President Personal Loans James Robinson Executive Vice President Retail Marketing and Business Development Marelyn Shedd Executive Vice President Commercial Loans Charles E. Tennesson Executive Vice President, Chief Financial Officer and Cashier Batjer and Associates McMahon Surovik Suttle, P.C. IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $1,087,452 419,928 879,258 99,941 19,587 1.88% 45.99% DEC. 31, 2008 $1,105,537 458,797 843,375 82,778 17,652 1.76% 46.72% CLEBURNE BURLESON ALVARADO MIDLOTHIAN M A I N O F F I C E ( 8 1 7 ) 5 5 6 - 5 0 0 0 o r ( 8 0 0 ) 2 2 6 - 2 9 4 0 403 N. Main Cleburne, Texas 76033 LO C AT I O N S 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 M AT T R E YN O L D S Pre s i d e n t a n d C E O J O H N S O N CO U N T Y & C I T Y O F M I D LOT H I A N D E P O S I T M A R K E T S H A R E D I R E C TO R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Albert A. Archer Vice Chairman Walls Industries, Inc. Ray Beavers General Manager & CEO United Cooperative Services Byron Black Investments F. Scott Dueser First Financial Bankshares, Inc. Tim Lyness Lyness Construction, LP George Marti Marti Enterprises Dr. Joe Martin Cleburne Eye Clinic S E N I O R O F F I C E R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Craig Beskow Executive Vice President and Cashier Steve Davis Executive Vice President Brad Evans Executive Vice President Derek Schmidt Executive Vice President Cynthia Allen Senior Vice President Kathy Armstrong Senior Vice President Lisa Roye Senior Vice President Darlene Walker Senior Vice President IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 273,598 137,043 247,992 23,697 3,886 1.57% 53.68% DEC. 31, 2008 $ 244,647 138,127 221,629 21,126 4,199 1.74% 53.95% 11 EASTLAND RANGER RISING STAR M A I N O F F I C E 201 E. Main LO C AT I O N S 106 Main 206 West College ( 2 5 4 ) 6 2 9 - 6 1 0 0 Eastland, Texas 76448 Ranger, Texas 76470 Rising Star, Texas 76471 T H O M A S M . O ’ N E I L Pre s i d e n t a n d C E O E A S T L A N D CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer Doug Crawley Rancher 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 M.D. White, Jr. President and Owner Ace Hardware Store, Eastland/Cisco S E N I O R O F F I C E R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer L.V. Coffee Lending Terry Trout Cashier Senior Vice President and Executive Vice President Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,092 63,758 143,956 18,712 2,511 1.79% 49.74% DEC. 31, 2008 $ 153,029 58,201 127,132 17,146 2,412 1.66% 49.59% STAFF EDUCATIONMANAGEMENTDEVELOPMENTCUSTOMER SERVICETECHNOLOGY 39% 15% 48% N U M B E R O N E I N T H E N A T I O N in the $3 billion-plus publicly traded category.* Bank Director magazine, in its first-quarter 2010 issue, ranked First Financial Bankshares We’re proud of our company’s 120-year histor y of financial strength and service to our customers and communities in Texas. But First Financial Bankshares isn’t looking back or resting on our past success. Our focus is on the future. Today, we are taking steps we believe are necessary to ensure that our company remains in the forefront of providing the best banking, trust, wealth management and other financial services, while continuing to build deep and enduring relationships with our valued customers. Relationships built on trust, integrity and exceptional customer service have made our company what it is today. For our shareholders, we remain committed to managing First Financial Bankshares in a safe, sound and profitable manner, with a goal of strategically and prudently growing the Company and expanding into new markets. The Letter to Shareholders on pages 2 and 3 of this annual report gives you more insights into how our company performed in 2009 and our plans for 2010. The photo spread and text on pages 4-7 demonstrate how we are working to secure the Company’s future for the benefit of our customers, employees and shareholders – and the Texas communities we serve. For more information, visit our Web site at http://www.ffin.com. * Based on measurement criteria and analysis compiled by Sandler O’Neill + Partners, L.P., a New York-based investment banking firm that specializes in the financial services industry. Published in Bank Director magazine, 1st quarter 2010. First Financial Bank 325-627-7200 First Financial Bank 817-556-5000 First Financial Bank 254-629-6100 First Financial Bank 806-363-8200 ABILENE CLYDE MORAN ALBANY ODESSA CLEBURNE BURLESON ALVARADO MIDLOTHIAN EASTLAND RANGER RISING STAR HEREFORD , TM . A Family of Community Banks SM First Financial Bank STEPHENVILLE First Financial Bank 940-327-5400 First Financial Bank 325-659-5900 First Financial Bank 817-410-2915 940-683-8700 254-965-5036 817-573-6900 First Financial Bank 325-235-6600 First Financial Bank 817-596-0307 MINERAL WELLS SAN ANGELO SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR GRANBURY GLEN ROSE ACTON SWEET WATER ROBY TRENT MERKEL WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH BANKS TRUST OFFICE LOCATIONS D E A R S H A R E H O L D E R S In light of the recession and higher FDIC insurance premiums in 2009, I am very pleased that our company was able to deliver increased earnings for the 23rd consecutive year. While the national recession at first seemed to bypass Texas, it began moving into the state in the second part of 2008, bringing a decline in home sales and general economic activity and an increase in unemployment. These trends continued in 2009. On the plus side, our state continued to fare better than most of the rest of the country, and our geographic footprint—especially in our West Texas markets—remained stable. The stock market fluctuated greatly during the past two years. The NASDAQ Composite Index declined 41 percent in 2008 and then went back up 44 percent in 2009. Our stock went up 47 percent in 2008 and down 2 percent in 2009, closing at $54.23. We are pleased that our stock performed well for our stockholders during these years of economic turmoil. We continue to suspect that a “flight to safety”—favoring companies with strong balance sheets and a long record of conservative lending—may have played a role in our stock’s favorable performance. We are also pleased that in 2009, our company again received high rankings from leading banking publications such as the ABA Banking Journal and U.S. Banker. Additionally, in January of 2010, Bank Director magazine rated us No. 1 in the nation among publicly traded banks with $3 billion or more of assets. Being named No. 1 is like winning an Academy Award. Without question, this accomplishment is due to the direction of our Board, the dedication of our employees and the loyalty of our customers, who have kept us strong for 120 years. We accept this honor with great humility because we know that every day, we face a new set of challenges in the banking industry and must prove ourselves again and again. RESULTS FOR 2009 Net income grew 1.2 percent to $53.8 million from $53.2 million in 2008. Net interest income, the major source of our earnings, rose 4.3 percent to $129.2 million from $123.9 million. Our net interest margin (on a tax-equivalent basis) also increased, to 4.80 percent from 4.67 percent in 2008. The provision for loan losses for 2009 totaled $11.4 million, a 43.5 percent increase from $8.0 million in 2008. The larger provision was due to a higher level of net charge-offs and an increase in the allowance for loan losses. Noninterest income declined 1.7 percent to $48.6 million from $49.5 million. The decline was primarily due to a $692,000 drop in income from student loan sales as the Company exited the student loan program. Lower usage of overdraft privileges also contributed to the decrease in noninterest income. Noninterest expense was $94.0 million in 2009, up 2.6 percent from $91.6 million a year earlier. The largest increase in noninterest expense was in FDIC insurance premiums, which grew by $4.2 million, or 650.4 percent, after the FDIC raised premium rates as of January 1, 2009, and implemented a special assessment in June of that year. Nevertheless, we were able to improve our efficiency ratio, which expresses the share of revenues consumed by operating expenses, to 50.11 percent from 50.76 percent in 2008. Our bank presidents worked hard to maintain their net interest margins and reduce expenses. I could not be more pleased with their accomplishments, especially in light of the significant increase in FDIC insurance premiums. We again outperformed our peer group on several key financial metrics. Our return on average assets was 1.72 percent compared with a negative 0.21 percent for our peer group. Return on average equity was 13.63 percent versus a negative 2.59 percent for our peers. Our net interest margin of 4.80 percent on a tax-equivalent basis compared very favorably to our peer group’s margin of 3.48 percent. We also beat the peer group on the efficiency ratio—ours was 50.11 percent, while theirs was 69.53 percent. We ended the year with a strong balance sheet. Consolidated assets increased 2.1 percent to $3.28 billion from $3.21 billion at the end of 2008. Loans decreased 3.3 percent to $1.51 billion from $1.57 billion, primarily due to our exiting the student loan program. Total deposits grew 3.9 percent to $2.68 billion from $2.58 billion. Shareholders’ equity rose 12.7 percent to $415.7 million from $368.8 million. As the economy softened in Texas, our nonperforming assets increased to 1.46 percent of total loans and foreclosed assets from 0.80 percent at the end of 2008. Even with this increase, our nonperforming percentage was well below our peer group’s 5.07 percent. Net loan charge-offs for the year totaled $5.3 million at year-end 2009 versus $3.9 million at year-end 2008. The 2009 allowance for loan losses amounted to 1.82 percent of total loans. First Financial Trust & Asset Management Company also experienced growth last year. Total assets at year-end had a book value of $1.67 billion, a 2.1 percent increase from 2008, and a market value of $2.10 billion, an 11.7 percent increase. The Trust Company’s fee income, however, declined 3.8 percent to $9.1 million from $9.4 million. This subsidiary manages a large oil and gas portfolio, and the drop in its income was primarily due to a decline in oil and gas prices and in related fees on oil and gas income. The Trust Company opened its sixth office last year, in Odessa, Texas. We are encouraged by the number of clients who have opened trust accounts with us in Odessa and the potential for growth in the Permian Basin market. 2 GROWTH STRATEGIES We actively looked for acquisition opportunities during 2009, but the banks that we considered were overpriced in light of the economy or did not fit our company’s profile. Our plan is to continue pursuing acquisitions diligently. With our capitalization, stock price, cash position and experienced management team, we have what we need to take advantage of acquisition opportunities. In November, we announced plans to open bank branches in our two existing Trust Company offices in Fort Worth and Odessa, to complement trust services and serve customers in those markets. We have had frequent requests from customers for branches in these markets and are interested to see how this private bank branch concept will work. During the year, we achieved a long-term objective of bringing all of our banks under a common name to improve brand identity and marketing efficiencies. Hereford State Bank, San Angelo National Bank and Weatherford National Bank are now called First Financial Bank. All of our banks benefit from sharing the Company’s growing brand identity, and our customers benefit from being able to use our facilities throughout our market areas. However, in no way does the use of a common name change our practice of operating through ten community-based banks that are separately chartered, have their own local boards and management teams, and make decisions locally. We continue to be the “hometown bank” in our markets, with a tradition of playing a vital role in community life. WHAT’S AHEAD Besides looking for acquisitions, we plan to continue growing our mortgage market, trust services and treasury management services. We are encouraged by our recent growth that there will be good opportunities in these areas. Minimizing nonperforming assets will certainly be an objective, as it has been for the last several years. We do know that FDIC insurance premiums will continue to be high and that increased regulation proposed by Congress and various federal agencies will make our jobs more challenging and costly. Our hope is that the banking industry can mitigate much of the pending regulatory legislation by educating Washington that community banks have not caused today’s economic problems and are already over-regulated. We are committed to providing outstanding service to our customers, our communities and our nation by making every good loan we can to help our economy grow and prosper. PERSONNEL CHANGES J. V. Martin retired at the end of the year as CEO of First Financial Bank, Sweetwater. Kirby Andrews, President, assumed the additional role of CEO there. J. V. will continue to serve as the Sweetwater bank’s Chairman of the Board. He will also provide consulting services to the holding company. Additionally, Senior Chairman Kenneth T. Murphy will retire from the First Financial Bankshares Board in conjunction with our Annual Shareholders’ Meeting in April. He has served our company with distinction for 39 years, holding the positions of President, First Financial Bank, Abilene; and Executive Vice President, President, Chief Executive Officer, Chairman and Senior Chairman of First Financial Bankshares, Inc. Through those years, he has also made many civic and professional contributions, including serving on the Board of the Federal Reserve Bank of Dallas and serving as Chairman of the Board of the Texas Bankers Association. When Ken joined the bank in 1971, the Company had total assets of $87.7 million and net income of $806,000. By the end of 2009, we had total assets of $3.28 billion and net earnings of $53.8 million. During Ken’s tenure with the Company, we have experienced great success. Customers, stockholders and communities have certainly benefited from Ken’s leadership and counsel, and we thank him for his fine service. We are pleased that he will continue to maintain an office in the First Financial Bank (Abilene) building and will be available to management for consultation. It is our pleasure to announce that Steven L. Beal, retired President and Chief Operating Officer of Concho Resources Inc., has accepted nomination for election as a Director of the Company at our Annual Shareholders’ Meeting in April. Steve was one of the founders of Concho, an independent oil and natural gas company, and continues to be a Director on its Board. Prior to being at Concho, he was Senior Vice President and Chief Financial Officer of Parker & Parsley Petroleum Company, which is now Pioneer National Resources. Before that, he was an audit professional with the accounting firm of Price Waterhouse Coopers. He is a 1981 graduate of The University of Texas with a degree in accounting. Steve has been involved civically and professionally with the United Way of Midland, Permian Basin Oil & Gas Association, Independent Petroleum Association of America and the New Mexico Oil & Gas Association. He has been on the Board of Directors of Midland Christian School and the Midland/Odessa Symphony. Most recently, he was a partner with the Early School District to build an indoor practice facility for use by the students and teams of Early High School. Steve and his wife, Teresa, live on their ranch in Brownwood, Texas. These are challenging times for the national economy and for the banking business. First Financial has the benefit of a long-term perspective. In our 120-year history, we’ve endured numerous recessions, the Great Depression, the Texas oil bust of the 1980s and other obstacles. We cannot predict the duration of the current economic malaise, but we remain optimistic about the long-term future of our state and nation, and especially our Texas markets. Financially and operationally, we believe our company has never been stronger, and our best days are still ahead of us. With our eyes on the future, we are making a strong investment in the training of all our employees, including our next generation of leaders, to ensure that we continue to provide excellence in banking, trust services, wealth management and customer service. We encourage you to read more about our training and customer service programs in the pages that follow. Banking is our business, but all of us on the management team never lose sight of the fact that we work for you, our shareholders. We will continue to manage the Company for profitability and growth in 2010 and beyond. F. Scott Dueser Chairman, President and CEO , TM . 3 W H A T M A K E S U S F I R S T ? Friendly. Knowledgeable. Helpful. These are words our customers use to describe First Financial Bank’s employees. Well-informed and well-motivated employees are essential to keeping First Financial Bank prepared for the future. Training our employees to provide the finest banking, financial solutions and exceptional customer service begins the day new employees are hired. Every new employee at First Financial Bank goes through a classroom training program. This orientation is designed not only to teach new employees about the bank’s outstanding portfolio of banking products and services, but also introduces them to the Company’s unique culture, which emphasizes putting customers’ needs first and going the extra mile to provide exceptional service and support. New employees learn skills from how to open a new account to the essentials of good business etiquette. New employee orientation is just the start. Our commitment to training and professional development for our employees is ongoing. All employees participate in compliance training, most taking 12 to 24 courses per year in all aspects of banking, customer service and financial services. We offer our employees both online, “desktop” training modules and more traditional classroom training. Regardless of the format, the goal is always the same – to help our employees continue the Company’s proud tradition of being a leading bank in our markets and exceeding our customers’ expectations for the finest in banking products and service. Merrie Spaeth, president of Spaeth Communications, Inc. and a nationally known consultant on organizational communications, leads a management training class for First Financial Bankshares. Christina Randle, author, productivity expert and CEO of The Effective Edge, trains managers at First Financial Bankshares. F F I NF F I N UNIVERSITY UNIVERSITY Developing future leaders is key to our company’s continued success in the years ahead. One way we prepare our future leaders is through FFIN University, which takes a select group of bank officers through a year-long inten- sive training program. First launched in 2008, FFIN University clearly underscores the Company’s commitment to main- taining its tradition of excellence in banking, trust services and customer service. Participants in FFIN University learn from both senior leaders and outstanding guest speakers on topics that range from time management to com- munication skills. Graduates of FFIN University are ready to assume key senior management positions in our company. They will help maintain the Company’s long tradition as a successful, profitable, community- based bank. 5 BACK ROW (L-R): KATHY BUSHNELL (First Technology Services), ISABEL MONTOYA (First Technology Services), IRMA ZIPP (Stephenville), MARY JO SORGE (Abilene), MELANIE BEARD (Granbury), ESTHER BILBY (Bridgeport), SANDRA HOLT (Abilene) FRONT ROW (L - R ): TRISHA HILDEBRAND (San Angelo), MARCELLA JIMENEZ (Mineral Wells), JANET FLYNT ( Weatherford), MELISSA JACQUES (Sweetwater), LEANN BAUGH ( Trust - Stephenville), STEVE GILBERT (Hereford), STEPHANIE LOPEZ (Eastland), LISA ROYE (Cleburne) Banking is all about relationships and working with customers one-on-one. That’s why, at First Financial Bankshares, our Customer Service First program is one of our highest priorities. Our goal is simple – to provide customer service that is second to none. Achieving that goal involves all employees and requires a sharp focus. It begins with our new employee orientation program and continues through our FFIN University for senior leaders. Instilling a culture of exceptional customer service is no accident. We encourage employees through a variety of initiatives, including recognizing employees who go beyond the norm for customers with “WOW” awards and giving Star Cards to employees who are nominated by fellow employees for exceptional customer service. Our top recognition program for employees is the Shining Star Award. Twice each year, managers select employees who have consistently demonstrated superior customer service. Shining Star Award winners and their spouses are hosted at the Company’s headquarters in Abilene for a special recognition ceremony, highlighted by a dinner with our presidents and management. ISABEL MONTOYA, First Technology Services, Abilene, is recognized as a Shining Star by SCOT T DUESER, President & CEO, First Financial Bankshares. 6 First Financial has the technology infrastructure and tools in place to provide first-rate modern banking services today and to meet future customer needs as we continue to grow. The Company’s technology supports our goal of providing exceptional customer service. Our system of customer call centers provides the same level of prompt and courteous service on the phone that customers are accustomed to receiving in our branches. Calls are answered by a person - not by voice mail - and customers immediately get helpful answers to questions about their checking and savings accounts, debit card transactions, business transactions and online banking. We created excitement among our customers in late 2009 by introducing a new custom-designed debit card program. Customers may choose from more than 130 card designs, many of which include logos and colors for local high schools or universities. To date, more than 33,000 custom cards have been printed. In 2010, we plan to go a step further and let customers create personalized debit cards using their own photos. 4 4 8 10 12 Selected Financial Data IN THOUSANDS (EXCEPT PER SHARE DATA) YEAR-END TOTAL ASSETS EQUITY INCOME PER SHARE PER SHARE AND SPLITS PER SHARE PER SHARE SHAREHOLDERS’ NET EARNINGS DIVIDENDS DIVIDENDS BOOK VALUE MARKET VALUE BASIC CASH STOCK YEAR-END YEAR-END 2009 $3,279,456 $ 415,702 $ 53,797 $2.58 $1.36 – $ 19.96 $ 54.23 2008 3,212,385 368,782 53,164 2.56 1.34 – 17.73 55.21 2007 3,070,309 335,495 49,490 2.38 1.26 – 16.16 37.65 2006 2,850,165 300,901 46,029 2.22 1.18 – 14.51 41.86 2005 2,733,827 276,276 44,023 2.13 1.10 4/3 split 13.34 35.06 2004 2,315,224 265,545 39,171 1.90 1.00 – 12.84 33.61 2003 2,092,571 251,487 35,305 1.71 0.91 5/4 split 12.19 30.84 2002 1,993,183 238,768 33,953 1.65 0.81 – 11.59 22.80 2001 1,929,694 213,654 29,355 1.43 0.70 5/4 split 10.40 18.06 2000 1,753,814 196,121 28,316 1.37 0.62 – 9.56 15.09 GROWTH RATE 6.65% 8.81% 7.67% 7.60% 9.68% – 8.78% 13.90% TEN-YEAR COMPOUND Adjusted for stock dividends and splits. 2009 COMMON STOCK MARKET VALUE 2008 COMMON STOCK MARKET VALUE AND DIVIDEND DATA AND DIVIDEND DATA QUARTER HIGH LOW CLOSE DIVIDENDS QUARTER HIGH LOW CLOSE DIVIDENDS FOURTH $ 55.94 $ 47.86 $ 54.23 $ 0.34 FOURTH $ 56.32 $ 41.30 $ 55.21 $ 0.34 THIRD 54.50 47.95 49.46 0.34 THIRD 67.00 43.01 51.88 0.34 SECOND 51.62 46.51 50.36 0.34 SECOND 47.12 40.43 45.81 0.34 FIRST 55.70 36.49 48.17 0.34 FIRST 42.16 35.49 40.98 0.32 NET INCOME GROWTH (IN THOUSANDS) $3,125,552 $3,064,029 2.01% RETURN ON AVERAGE EQUITY $ 6M 12M 18M 24M 30M 36M 42M 48M 54M $3,279,456 $3,212,385 0% 3% 6% 9% 12% 15% 18% EFFICIENCY RATIO Financial Highlights IN THOUSANDS (EXCEPT PER SHARE DATA) FOR THE YEAR 2009 2008 CHANGES Net Income Basic Earnings per Share Dividends Declared Dividends per Share $53,797 2.58 28,311 1.36 $53,164 2.56 27,861 1.34 1.19% 0.78% 1.62% 1.49% Averages for the Year Shareholders’ Equity Assets Securities Loans Deposits At Year-End Assets Securities Loans Deposits Shareholders’ Equity Book Value per Share 1,308,110 1,494,876 2,513,387 394,812 1,285,377 1,514,369 2,684,757 415,702 19.96 1,185,303 10.36% 1,537,027 2,516,576 (2.74%) (0.13%) 348,271 13.36% 1,318,406 1,566,143 2,582,753 368,782 17.73 2.09% (2.51%) (3.31%) 3.95% 12.72% 12.58% 2.06% Trust Assets 1,664,174 1,630,560 Key Ratios Return on Average Assets Return on Average Equity Equity/Assets at Year-End Efficiency 1.72 % 13.63 % 12.68 % 50.11 % 1.74 % 15.27 % 11.48 % 50.76 % 09 08 07 06 05 1.72% 1.74% 1.72% 1.68% 1.80% 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 $53,797 $53,164 $49,490 $46,029 $44,023 13.63% 15.27% 15.87% 16.20% 16.17% 50.11% 50.76% 52.83% 53.49% 52.48% 4.80% 4.67% 4.43% 4.46% 4.49% RETURN ON AVERAGE ASSETS NET INTEREST MARGIN 0% 10% 20% 30% 40% 50% 60% 0% .25% . 50% .75% 1.00% 1.25% 1.50% 1.75% 2.00% 0% 1% 2% 3% 4% 5% 9 TAYLO R , C A L L A H A N & S H AC K E L F O R D CO U N T I E S D E P O S I T M A R K E T S H A R E 2651 JBS Parkway, Bldg. 4, Suite E Odessa, Texas 79762 ABILENE CLYDE MORAN ALBANY ODESSA M A I N O F F I C E 400 Pine LO C AT I O N S 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 132 Hill Street D I R E C TO R S F. Scott Dueser Chairman of the Board Ron Butler President and Chief Executive Officer Tucker S. Bridwell President Mansefeldt Investment Corp. Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Copeland President Joe Crawford President Abilene Aero, Inc. Mike Denny President ( 3 2 5 ) 6 2 7 - 7 2 0 0 Abilene, Texas 79601 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 Albany, Texas 76430 Murray Edwards Principal, The Edwards Group Allan D. Frizzell Executive Vice President Enrich Oil Corporation Stanley Morris, Jr. Investments Kenneth T. Murphy First Financial Bankshares, Inc. Dian Graves Stai Chair Mansefeldt Investment Corp. Director Leigh Taliaferro, M.D. Physician ADVISORY Steve Suttle J. Michael Alexander President James M. Alexander & Co. Tim Lancaster Chairman, CEO and President Hendrick Health System Shelton Family Foundation Dian Graves Owen Foundation R O N B U T L E R Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Ron Butler President and Chief Executive Officer Tom Boecking Executive Vice President South Branch Ben McAnally Executive Vice President Treasury Management John Prince Executive Vice President Personal Loans James Robinson Executive Vice President Retail Marketing and Business Development Marelyn Shedd Executive Vice President Commercial Loans Charles E. Tennesson Executive Vice President, Chief Financial Officer and Cashier Batjer and Associates McMahon Surovik Suttle, P.C. IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $1,087,452 419,928 879,258 99,941 19,587 1.88% 45.99% DEC. 31, 2008 $1,105,537 458,797 843,375 82,778 17,652 1.76% 46.72% CLEBURNE BURLESON ALVARADO MIDLOTHIAN M A I N O F F I C E ( 8 1 7 ) 5 5 6 - 5 0 0 0 o r ( 8 0 0 ) 2 2 6 - 2 9 4 0 403 N. Main Cleburne, Texas 76033 LO C AT I O N S 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 J O H N S O N CO U N T Y & C I T Y O F M I D LOT H I A N D E P O S I T M A R K E T S H A R E M AT T R E YN O L D S Pre s i d e n t a n d C E O S E N I O R O F F I C E R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Craig Beskow Executive Vice President and Cashier Steve Davis Executive Vice President Brad Evans Executive Vice President Derek Schmidt Executive Vice President Cynthia Allen Senior Vice President Kathy Armstrong Senior Vice President Lisa Roye Senior Vice President Darlene Walker Senior Vice President D I R E C TO R S Matt Reynolds Chairman of the Board, President and Chief Executive Officer Albert A. Archer Vice Chairman Walls Industries, Inc. Ray Beavers General Manager & CEO United Cooperative Services Byron Black Investments F. Scott Dueser First Financial Bankshares, Inc. Tim Lyness Lyness Construction, LP George Marti Marti Enterprises Dr. Joe Martin Cleburne Eye Clinic IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 273,598 137,043 247,992 23,697 3,886 1.57% 53.68% DEC. 31, 2008 $ 244,647 138,127 221,629 21,126 4,199 1.74% 53.95% 11 EASTLAND RANGER RISING STAR M A I N O F F I C E 201 E. Main LO C AT I O N S 106 Main 206 West College ( 2 5 4 ) 6 2 9 - 6 1 0 0 Eastland, Texas 76448 Ranger, Texas 76470 Rising Star, Texas 76471 T H O M A S M . O ’ N E I L Pre s i d e n t a n d C E O E A S T L A N D CO U N T Y D E P O S I T M A R K E T S H A R E S E N I O R O F F I C E R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer L.V. Coffee Executive Vice President Lending Terry Trout Senior Vice President and Cashier D I R E C TO R S Thomas M. O’Neil Chairman of the Board, President and Chief Executive Officer Doug Crawley Rancher 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 IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,092 63,758 143,956 18,712 2,511 1.79% 49.74% DEC. 31, 2008 $ 153,029 58,201 127,132 17,146 2,412 1.66% 49.59% STAFF EDUCATIONMANAGEMENTDEVELOPMENTCUSTOMER SERVICETECHNOLOGY 39% 15% 48% HEREFORD M A I N O F F I C E 212 E. Third ( 8 0 6 ) 3 6 3 - 8 2 0 0 Hereford, Texas 79045 M I K E M AU L D I N Pre s i d e n t a n d C E O D I R E C TO R S D E A F S M I T H CO U N T Y D E P O S I T M A R K E T S H A R E S E N I O R O F F I C E R S Mike Mauldin Chairman of the Board, President and Chief Executive Officer Steve Gilbert Executive Vice President and Cashier Kent Jackson Executive Vice President and Chief Credit Officer 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 Pet Care, Inc. Allen Parson Restaurateur and Investments Craig Smith Rancher and Retired Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 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 IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 147,652 96,028 130,728 12,284 2,121 1.56% 47.16% DEC. 31, 2008 $ 149,264 94,426 118,656 10,728 2,104 1.54% 44.71% MINERAL WELLS M A I N O F F I C E 1900 E. Hubbard ( 9 4 0 ) 3 2 7 - 5 4 0 0 Mineral Wells, Texas 76067 K E N N E T H W I L L I A M S O N Pre s i d e n t a n d C E O PA LO P I N TO CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Spencer Baum, D.D.S. Baum Dental Clinic F. Scott Dueser First Financial Bankshares, Inc. George Gault Attorney Gault & Gault Terry L. Murphy President and Chief Executive Officer Murphy and Murphy, Inc. David Ramsey, M.D. Family Practice Center Albert Rincon Vice President of Operations Texas Packaging Company, Inc. Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Paul McGettes Chief Financial Officer Upham Oil & Gas Company, L.P. S E N I O R O F F I C E R S Brad Seay Lending Executive Vice President Eddie Gregory Senior Vice President and Cashier Mike Mearse Senior Vice President Lending IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,259 101,050 132,997 22,436 3,542 2.10% 39.01% DEC. 31, 2008 $ 173,565 99,555 138,325 20,276 3,147 1.93% 43.43% SAN ANGELO M A I N O F F I C E 301 W. Beauregard LO C AT I O N S www.historicmuralsofsanangelo.org ( 3 2 5 ) 6 5 9 - 5 9 0 0 San Angelo, Texas 76903 3471 Knickerbocker San Angelo, Texas 76904 M I C H A E L L . B OYD Pre s i d e n t a n d C E O TO M G R E E N CO U N T Y D E P O S I T M A R K E T S H A R E Michael L. Boyd Ron Giddiens Chairman of the Board, President Investments/Business and Chief Executive Officer Consulting D I R E C TO R S Hon. Marilyn Aboussie Chief Justice, Retired W. Dan Cravy, M.D. Physician Pat Crump President and CEO Former President - Bank of the West, San Angelo Joey Henderson President Porter Henderson Implement Company, Inc. J. Bruce Hildebrand Baptist Memorials Services First Financial Bankshares, Inc. Rick DeHoyos Attorney Robert D. Housley President and Owner F. Scott Dueser First Financial Bankshares, Inc. Doug Eakman Owner Pecos Street Pharmacy Steve Eustis Commercial Real Estate David F. Lupton President Angelo Glass & Mirror Company, Inc. John E. Schwartz, Sr. Farmer/Rancher Mary Jane Steadman Attorney Real Estate Investment Management S E N I O R O F F I C E R S Michael L. Boyd Wes Masters Chairman of the Board, Senior Vice President President Robert Pate Jim Davidson and Cashier Senior Vice President Executive Vice President Chuck Shore Senior Vice President Executive Vice President Ruth Wheeler Senior Vice President Cindy George Senior Vice President Bill Wiedenfeld Senior Vice President Carrol E. Hill Senior Vice President and Chief Executive Officer Reba Priddy Glasheen, Valles & DeHoyos, LLP Housley Communications IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 349,676 139,847 290,797 48,441 6,250 1.82% 45.54% DEC. 31, 2008 $ 333,330 135,618 276,803 45,757 6,157 1.86% 44.64% SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR M A I N O F F I C E ( 8 1 7 ) 4 1 0 - 2 9 1 5 3205 E. Highway 114 Southlake, Texas 76092 LO C AT I O N S 95 Trophy Club Drive 891 E. Keller Parkway 909 Stevens 609 Rock Island Avenue 608 W. Hale Avenue Trophy Club, Texas 76262 Keller, Texas 76248 Bridgeport, Texas 76426 Boyd, Texas 76023 Decatur, Texas 76234 M A R K L . J O N E S Pre s i d e n t a n d C E O C I T I E S O F S O U T H L A K E, T R O P HY C LU B & K E L L E R D E P O S I T M A R K E T S H A R E W I S E CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer William Ray Cook, Jr., CPA Cook McDonald & Co. Jack Dortch Jack Dortch Farmers Insurance Agency F. Scott Dueser First Financial Bankshares, Inc. J. Bruce Hildebrand First Financial Bankshares, Inc. Derrell E. Johnson Former President and CEO Rady Associates Consulting Engineers K. Wayne Lee President, DDFW Properties Ralph Manoushagian Land Manager Approach Resources, Inc. Oil & Gas Exploration Jim Ridenour President Sunbelt Station Service S E N I O R O F F I C E R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer F. Mills Shallene Wise County Market President Henson Dunn Senior Vice President Les Mariotti Senior Vice President and Chief Financial Officer J. Sean Shope Senior Vice President Steve Sims Senior Vice President Trent Swearengin Senior Vice President IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 264,306 157,919 210,764 39,084 2,515 0.94% 62.24% DEC. 31, 2008 $ 272,185 163,936 217,818 37,664 2,793 0.99% 61.32% STEPHENVILLE GRANBURY GLEN ROSE ACTON M A I N O F F I C E ( 2 5 4 ) 9 6 5 - 5 0 3 6 2201 W. South Loop Stephenville, Texas 76401 LO C AT I O N S 1875 Lingleville Road 199 N. Columbia 400 Big Bend Trail 2007 East Highway 377 1600 S. Morgan Stephenville, Texas 76401 Stephenville, Texas 76401 Glen Rose, Texas 76043 Granbury, Texas 76049 Granbury, Texas 76048 2915 Fall Creek Highway Acton, Texas 76049 R O N N . M U L L I N S Pre s i d e n t a n d C E O E R AT H , H O O D & S O M E R V E L L CO U N T I E S D E P O S I T M A R K E T S H A R E D I R E C TO R S Ron N. Mullins Chairman of the Board, President and Chief Executive Officer Jerry Parham Investments S E N I O R O F F I C E R S President John Power Bart Rodgers Ron N. Mullins Angie Dusek Chairman of the Board, Senior Vice President and Chief Executive Officer Donna Feller Senior Vice President Keith Brown Prime Building Components, LLC F. Scott Dueser First Financial Bankshares, Inc. Glen Rose Market President Connie Frank J. Bruce Hildebrand Senior Vice President First Financial Bankshares, Inc. Julie Graham Frank Terrell, M.D. Ophthalmologist John Terrill Attorney ADVISORY DIRECTORS SPEC Management Co. Ron Hance Hance Financial Services Granbury Market President Mike Gandy Dereece Howell Executive Vice President Vickie Pettit and Cashier Senior Vice President Senior Vice President Monty Bedwell Robert Reeves Executive Vice President Senior Vice President Robert Lemons Larry Upshaw Executive Vice President Senior Vice President Bill Hooks Autos - Real Estate John Moore Craft Associates, Inc. Ron Pack RP’s Western Wear, Inc. Bill Parham Parham & Parham, CPAs IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 350,059 181,726 298,355 44,383 4,267 1.31% 48.89% DEC. 31, 2008 $ 330,942 192,202 279,209 42,033 5,107 1.56% 48.29% SWEETWATER ROBY TRENT MERKEL J . V. M A R T I N Chairman of the Board K I R BY N . A N D R E WS President and CEO NOLAN & FISHER COUNTIES D E P O S I T M A R K E T S H A R E M A I N O F F I C E 201 Elm LO C AT I O N S 123 N. Concho 117 N. Main 301 Edwards Street ( 3 2 5 ) 2 3 5 - 6 6 0 0 Sweetwater, Texas 79556 Roby, Texas 79543 Trent, Texas 79561 Merkel, Texas 79536 S E N I O R O F F I C E R S D I R E C TO R S J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Donnie Ruppert Executive Vice President and Cashier/Controller Rodney Foster Senior Vice President Lending J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Jeff Branson General Partner Williamson-Branson Real Estate Louis Brooks, Jr. Rancher Ronnie Cox Owner Cox Jewelry J. Bruce Hildebrand First Financial Bankshares, Inc. Jay Lawrence President MAL Enterprises, Inc. Thomas L. Rees, Sr. Rees and Rees, Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 133,322 67,463 119,011 13,248 2,420 1.81% 51.54% DEC. 31, 2008 $ 130,078 68,665 117,320 11,833 2,168 1.66% 51.87% WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH D OYL E L E E Chairman of the Board and Chief Executive O fficer M A I N O F F I C E 101 N. Main LO C AT I O N S 101 College Park Drive 1214 N. Main 210 N. Main 505 FM 1187 N. 4100 E. I-20 1100 FM 1189 ( 8 1 7 ) 5 9 6 - 0 3 0 7 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Aledo, Texas 76008 Willow Park, Texas 76087 Brock, Texas 76066 550 Bailey Avenue Suite 300 Fort Worth, Texas 76107 S E N I O R O F F I C E R S D I R E C TO R S Doyle Lee Chairman of the Board and Chief Executive Officer Doyle Lee Chairman of the Board and Chief Executive Officer Bob Bradberry Executive Vice President Larry Mangrem Executive Vice President and Cashier Mike Carter Senior Vice President Lori Hill Senior Vice President Justin Hooper Senior Vice President Kent Hudson Senior Vice President Jimmie Sue Lawson Senior Vice President Greg L. Barron President G.L. Barron Company, Inc. Stephen G. Brogdon, D.D.S. General and Cosmetic Dentistry Mac A. Coalson Owner Mac A. Coalson Real Estate F. Scott Dueser First Financial Bankshares, Inc. Clay Hicks Oil and Gas Investments Nan Kingsley President Bluestem Studios, Inc. Mike White, O.D. Therapeutic Optometrist J AY G I B B S President Jay Gibbs President Jay Gibbs President PARKER COUNTY D E P O S I T M A R K E T S H A R E IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 355,621 149,607 309,465 33,608 5,124 1.49% 49.92% DEC. 31, 2008 $ 375,424 156,616 331,288 29,326 5,830 1.71% 50.52% First Financial Trust & Asset Management Co., N.A. Abilene Office 400 Pine St. LO C AT I O N S Fort Worth Office 550 Bailey Ave., Suite 300 Odessa Office 2651 JBS Parkway Bldg. 4, Suite E San Angelo Office 301 W. Beauregard Stephenville Office 2201 W. South Loop Sweetwater Office 201 Elm ( 3 2 5 ) 6 2 7 - 7 1 0 0 ( 8 1 7 ) 4 1 0 - 4 9 7 0 ( 4 3 2 ) 3 6 7 - 8 9 0 0 ( 3 2 5 ) 6 5 9 - 5 9 8 7 ( 2 5 4 ) 9 1 8 - 6 2 6 2 ( 3 2 5 ) 2 3 5 - 6 6 4 0 performed well in 2009 considering the challenging economic environment it confronted. Total assets continued to grow, and our equity and fixed-income investments all outperformed their respective bench- marks. We also opened an office in a new market. Assets at year-end totaled $1.67 billion in book value and $2.10 billion in market value. These levels rep- resented increases of 2.1 percent and 11.7 percent, respectively, from 2008. Earnings for 2009 were down from 2008, reflecting the low levels of the stock market that prevailed in the first half of the year. Also contributing to the earnings reduction were significantly lower oil and gas prices, which negatively affected the large oil and gas portfolio that we manage. Net income decreased $179,000, or 6.4 percent, to $2.6 million from $2.8 million in 2008. Trust fee revenue, the main source of our net income, decreased $358,000, or 3.8 percent, to $9.1 million from $9.4 million. Although the markets were extremely volatile throughout the year, our investment team produced outstanding results. All of our equity and fixed-income investments exceeded their respective benchmarks. A highlight of the year was our opening in June of an office in Odessa, which is a new market for us. Barbara Hill manages this office. We are very pleased with the results she has achieved thus far and are excited about the prospects for our growth in the Permian Basin. Our Fort Worth office also achieved excellent results in 2009. Fee revenue for the office increased $123,000, or 41.4 percent, and the number of accounts increased by 34.5 percent. To accommodate the expansion of our business, we moved into a larger office suite during the year. Our experienced team of trust professionals remains committed to providing quality customer service and superior investment results. 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 TRUST ASSETS (IN MILLIONS) $1,664 $1,631 $1,428 $1,300 $1,150 $ 400 600 800 1,000 1,200 1,400 1,600 1,800 TRUST FEES (IN MILLIONS) $9.08 $9.44 $8.75 $7.66 $7.07 $2.631 $2.810 $2.549 $ 1 2 3 4 5 6 7 8 9 10 TRUST NET INCOME (IN MILLIONS) $2.076 $1.909 $ 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 (L-R - Back Row) DAVID W. CASTLEBERRY (Stephenville), RICHARD YOUNG (Abilene), MICHAEL SHEEHAN (Sweetwater), KIRK THAXTON (Abilene), DAVID BYRD (San Angelo) and JOE AYRES (Stephenville) (L-R - seated) BARBARA HILL (Odessa) and KONRAD HALBERT (Fort Worth) O F F I C E R S Kirk W. Thaxton Chairman of the Board, President, and Chief Executive Officer David Castleberry Senior Vice President Manager, Stephenville D I R E C TO R S Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Byrd Executive Vice President Manager, San Angelo Konrad S. Halbert Executive Vice President Manager, Fort Worth Michael D. Sheehan Executive Vice President Manager, Sweetwater Richard Young Executive Vice President Manager, Abilene Shelton Family Foundation Chairman of the Board, President Robert S. Patterson Former President & CEO First Financial Trust & Asset Management Company, N.A. Kirk W. Thaxton and Chief Executive Officer First Financial Trust & Asset Management Company, N.A. ADVISORY DIRECTORS Beckham Rector & Eagle Paul L. Cannon First Financial Bankshares, Inc. John L. Beckham Angelo Glass & Mirror McMahon Surovik Suttle, P.C. Barbara Hill Senior Vice President Manager, Odessa Larry Cleveland Senior Vice President Manager, Operations Ralph Gibson Senior Vice President Manager, Investments David B. Pitzer Senior Vice President Manager, Real Property Randy Spiva Senior Vice President Manager, Oil & Gas David Copeland President Ronnie Cox Owner Cox Jewelry F. Scott Dueser David F. Lupton President Company, Inc. Bill Parham Parham & Parham, CPAs (L - R ): CLAY TRUMBLE, KAY BERRY, GARY TUCKER, DENNIS STECKLY, MICHELLE McDONALD AND LARRY WILLIAMS First Technology Services, Inc. (FTS) is the shared services company for First Financial Bankshares, Inc. (FFIN) Our mission is to maximize efficiencies and control costs for common functions within FFIN while providing the best possible customer service to our internal and external customers. FTS plays a key role in customer service functions within FFIN through its customer call center and innovative technology for online banking, auto- matic bill pay services, backroom operations and other technology-based banking services. FTS also supports employees with classroom and online technology training and a responsive technology help desk. FTS provides more than 100 technology applications to FFIN and its family of 10 banks and the Trust Company. Services include check processing, account services, a help desk, desktop support, network services, server support, software support, information security, computer operations, business continuity planning, loan and credit operations, loan document preparation and the corporate call center. M A I N O F F I C E 400 Pine Abilene, Texas 79601 ( 3 2 5 ) 6 2 7 - 7 1 9 5 S E N I O R O F F I C E R S Gary D. Tucker President and Chief Executive Officer Kay Berry Senior Vice President Deposit Operations Michelle McDonald Senior Vice President Customer Service D I R E C TO R S Clay Trumble Senior Vice President Credit Administration Dennis Steckly Senior Vice President Production Services Larry Williams Senior Vice President Infrastructure Services Gary L. Webb Chairman of the Board Ron Butler President and First Technology Services, Inc. Chief Executive Officer Executive Vice President, First Financial Bank Abilene Operations First Financial Bankshares, Inc. Gary D. Tucker President and Chief Executive Officer First Technology Services, Inc. F. Scott Dueser Chairman, President and Chief Executive Officer Jay Gibbs President First Financial Bank Weatherford Derrell E. Johnson Former President and Chief Executive Officer Rady and Associates Consulting Engineers First Financial Bankshares, Inc. Les Mariotti J. Bruce Hildebrand Chief Financial Officer Executive Vice President and First Financial Bank Southlake Senior Vice President and Chief Financial Officer First Financial Bankshares, Inc. Mike Mauldin Michael L. Boyd Chairman, President and Chief Executive Officer First Financial Bank San Angelo Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 2 0 0 9 W A L T E R J O H N S O N A W A R D K E N N E T H T . M U R P H Y Through the 120 years of First Financial Bankshares’ history, there have been many people who have contributed greatly to the success of this company, and Ken Murphy has to be at the top of that list with Walter Johnson and the James family. Therefore, it is extremely appropriate that we honor Ken for his outstanding leadership during the past 39 years with the Walter Johnson Award, as well as dedicating this Annual Report to him. Ken was hired by Walter Johnson in 1971 and has held the following positions: First Financial Bank, N.A., Abilene (formerly First National Bank of Abilene) Executive Vice President President President and Chief Executive Officer Chairman of the Board and Chief Executive Officer 1993–2000 Chairman of the Board First Financial Bankshares, Inc. Executive Vice President President and Chief Executive Officer Chairman, President and Chief Executive Officer Chairman of the Board Senior Chairman of the Board 1971-1975 1975-1981 1981-1984 1984-1993 1973-1985 1985-1986 1986-2000 2001-2007 2008-2009 When Ken joined the bank in 1971, the Company had total assets of $87 million and net income of $806,000. This past year we finished the year with total assets of $3.3 billion and net earnings of $53.8 million. During Ken’s tenure with this company, we have experienced great success. While he was President and CEO of First Financial Bankshares, he purchased 11 banks and added numerous locations to the Company. During his tenure, he held many civic, cultural and professional leadership positions with the most notable positions being: President, Abilene Chamber of Commerce; Chairman, United Way Campaign in Abilene; Chairman, West Texas Rehabilitation Center; Chairman and Trustee, Alliance for Women and Children; Director, Hendrick Medical Center; Director, West Central Texas Municipal Water District; Director, Hardin-Simmons University Board of Development; Director, The Grace Museum of Abilene; Director, Treasurer and Chairman, Texas Bankers Association; and Class A Director, Federal Reserve Bank of Dallas. In 2003, Ken was honored as Outstanding Citizen of the Year by the Abilene Chamber of Commerce. As he retires from the First Financial Bankshares Board after 37 years, he leaves us with a great legacy and many Murphy stories, reports and sayings, but, most of all, his knowledge of how to manage outstanding banks. For me personally, Ken has been a mentor, confidant and boss for 33 years. I have learned so much from him. Although he is retiring from the Board, I know we will continue to have his advice and counsel, as well as his ever-present support and encouragement. It is our pleasure to honor Ken Murphy with the Walter Johnson Award for what he has contributed in going beyond the call of duty for our company and, especially, for our customers, stockholders and employees. Sincerely, F. Scott Dueser 13 15 17 19 21 23 14 16 18 20 22 BACK ROW (L-R): JOSEPH CANON, DAVID COPELAND, KADE MATTHEWS, RON GIDDIENS, MURRAY EDWARDS, TUCKER BRIDWELL, JOHNNY TROTTER FRONT ROW (L - R): KENNETH MURPHY, DERRELL JOHNSON, DIAN STAI, MAC COALSON, F. SCOTT DUESER BOARD MEMBER YEAR ELECTED BOARD MEMBER YEAR ELECTED COMMITTEE APPOINTMENT COMMITTEE APPOINTMENT Tucker S. Bridwell, CPA 2007 2, 4 Board of Directors F. Scott Dueser Chairman of the Board, President and CEO President Mansefeldt Investment Corporation Joseph E. Canon, J.D. Executive Director Dodge Jones Foundation Mac A. Coalson Mac A. Coalson Real Estate David Copeland, CPA President, SIPCO, Inc. and Shelton Family Foundation Murray Edwards Principal, The Edwards Group Ron Giddiens Investments/Business Consulting Former President - Bank of the West, San Angelo 1991 1996 1996 1998 2006 2009 1 3 2 2 1, 3, 4 1, 2, 4 2000 1998 1971 1993 Derrell E. Johnson Former President and CEO Rady and Associates Consulting Engineers Kade Matthews Ranching and Investments Kenneth T. Murphy Senior Chairman of the Board Dian Graves Stai Chair, Mansefeldt Investment Corp. Director, Dian Graves Owen Foundation Johnny E. Trotter President and CEO 2 3 1, 4 1, 3, 4 Livestock Investors, Ltd. 2003 1, 3, 4 * CO M M I T T E E S 1 Executive Committee – F. Scott Dueser, Chairman 2 Audit Committee – David Copeland, Chairman 3 Compensation Committee – Dian Graves Stai, Chairman 4 Nominating/Corporate Governance Committee – Mac A. Coalson, Chairman 24 Corporate Information OFFICERS F. Scott Dueser Chairman, President and Chief Executive Officer J. Bruce Hildebrand Executive Vice President and Chief Financial Officer Gary S. Gragg Executive Vice President, Lending Gary L. Webb Executive Vice President, Operations Tommy J. Barrow Senior Vice President, Lending Courtney Jordan Senior Vice President, Training and Education Michele P. Stevens Senior Vice President, Advertising and Marketing William A. Rowe Vice President, Investment Services Gaila Kilpatrick Assistant Secretary Bob Goodner Compliance Officer Michelle Fagan Compliance Officer A N N UA L M E E T I N G Tuesday, April 27, 2010 10:30 a.m. Abilene Civic Center 1100 N. Sixth Abilene, Texas 79601 CORPORATE OFFICES 400 Pine Abilene, Texas 79601 325-627-7155 • 800-588-7000 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 T R A N S F E R AG E N T Registrar and Transfer Company 800-368-5948 ADDRESS SHAREHOLDER INQUIRIES TO: Registrar and Transfer Company Investor Relations Department 10 Commerce Drive Cranford, NJ 07016 E-MAIL ADDRESS: info@rtco.com REGISTRAR AND TRANSFER COMPANY WEB SITE www.rtco.com S E N D C E R T I F I C AT E S F O R T R A N S F E R & A D D R E S S C H A N G E S TO : Registrar & Transfer Company 10 Commerce Drive Cranford, NJ 07016-3572 4 0 0 P i n e • A b i l e n e , Te x a s 7 9 6 0 1 www.f f in.com 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. Note: Market share data is calculated from June 30, 2009, deposit information compiled by the Federal Deposit Insurance Corporation. FIRST FINANCIAL BANKSHARES EXECUTIVE OFFICERS (L - R ): J. BRUCE HILDEBRAND, MICHELE P. STEVENS, GARY S. GRAGG, F. SCOTT DUESER, GARY L. WEBB, KIRK W. THAXTON AND TOMMY J. BARROW SM A F a m i l y o f C o m m u n i t y B a n k s S M 4 0 0 Pi n e • Abi l e n e , Te x a s 7 9 6 0 1 • w w w. f f i n . c om 21% 47% 30% 7% 15% 20% 37% 26% 13 15 17 19 21 23 HEREFORD M A I N O F F I C E 212 E. Third ( 8 0 6 ) 3 6 3 - 8 2 0 0 Hereford, Texas 79045 M I K E M AU L D I N Pre s i d e n t a n d C E O D I R E C TO R S D E A F S M I T H CO U N T Y D E P O S I T M A R K E T S H A R E 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 Pet Care, Inc. Allen Parson Restaurateur and Investments Craig Smith Rancher and Retired Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 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 S E N I O R O F F I C E R S Mike Mauldin Chairman of the Board, President and Chief Executive Officer Steve Gilbert Executive Vice President and Cashier Kent Jackson Executive Vice President and Chief Credit Officer IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 147,652 96,028 130,728 12,284 2,121 1.56% 47.16% DEC. 31, 2008 $ 149,264 94,426 118,656 10,728 2,104 1.54% 44.71% MINERAL WELLS M A I N O F F I C E 1900 E. Hubbard ( 9 4 0 ) 3 2 7 - 5 4 0 0 Mineral Wells, Texas 76067 K E N N E T H W I L L I A M S O N Pre s i d e n t a n d C E O PA LO P I N TO CO U N T Y D E P O S I T M A R K E T S H A R E S E N I O R O F F I C E R S D I R E C TO R S Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Spencer Baum, D.D.S. Baum Dental Clinic F. Scott Dueser First Financial Bankshares, Inc. George Gault Attorney Gault & Gault Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Paul McGettes Chief Financial Officer Upham Oil & Gas Company, L.P. Brad Seay Executive Vice President Lending Eddie Gregory Senior Vice President and Cashier Mike Mearse Senior Vice President Lending Terry L. Murphy President and Chief Executive Officer Murphy and Murphy, Inc. David Ramsey, M.D. Family Practice Center Albert Rincon Vice President of Operations Texas Packaging Company, Inc. IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio 14 16 18 20 22 DEC. 31, 2009 $ 167,259 101,050 132,997 22,436 3,542 2.10% 39.01% DEC. 31, 2008 $ 173,565 99,555 138,325 20,276 3,147 1.93% 43.43% SAN ANGELO M A I N O F F I C E 301 W. Beauregard LO C AT I O N S www.historicmuralsofsanangelo.org ( 3 2 5 ) 6 5 9 - 5 9 0 0 San Angelo, Texas 76903 3471 Knickerbocker San Angelo, Texas 76904 M I C H A E L L . B OYD Pre s i d e n t a n d C E O TO M G R E E N CO U N T Y D E P O S I T M A R K E T S H A R E Michael L. Boyd Ron Giddiens Chairman of the Board, President Investments/Business and Chief Executive Officer Consulting D I R E C TO R S Hon. Marilyn Aboussie Chief Justice, Retired W. Dan Cravy, M.D. Physician Pat Crump President and CEO Former President - Bank of the West, San Angelo Joey Henderson President Porter Henderson Implement Company, Inc. J. Bruce Hildebrand Baptist Memorials Services First Financial Bankshares, Inc. Rick DeHoyos Attorney Robert D. Housley President and Owner F. Scott Dueser First Financial Bankshares, Inc. Doug Eakman Owner Pecos Street Pharmacy Steve Eustis Commercial Real Estate David F. Lupton President Angelo Glass & Mirror Company, Inc. John E. Schwartz, Sr. Farmer/Rancher Mary Jane Steadman Attorney Real Estate Investment Management S E N I O R O F F I C E R S Michael L. Boyd Wes Masters Chairman of the Board, Senior Vice President President Robert Pate Jim Davidson and Cashier Senior Vice President Executive Vice President Chuck Shore Senior Vice President Executive Vice President Ruth Wheeler Senior Vice President Cindy George Senior Vice President Bill Wiedenfeld Senior Vice President Carrol E. Hill Senior Vice President and Chief Executive Officer Reba Priddy Glasheen, Valles & DeHoyos, LLP Housley Communications IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 349,676 139,847 290,797 48,441 6,250 1.82% 45.54% DEC. 31, 2008 $ 333,330 135,618 276,803 45,757 6,157 1.86% 44.64% SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR M A I N O F F I C E ( 8 1 7 ) 4 1 0 - 2 9 1 5 3205 E. Highway 114 Southlake, Texas 76092 LO C AT I O N S 95 Trophy Club Drive 891 E. Keller Parkway 909 Stevens 609 Rock Island Avenue 608 W. Hale Avenue Trophy Club, Texas 76262 Keller, Texas 76248 Bridgeport, Texas 76426 Boyd, Texas 76023 Decatur, Texas 76234 M A R K L . J O N E S Pre s i d e n t a n d C E O C I T I E S O F S O U T H L A K E, T R O P HY C LU B & K E L L E R D E P O S I T M A R K E T S H A R E W I S E CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer William Ray Cook, Jr., CPA Cook McDonald & Co. Jack Dortch Jack Dortch Farmers Insurance Agency F. Scott Dueser First Financial Bankshares, Inc. J. Bruce Hildebrand First Financial Bankshares, Inc. Derrell E. Johnson Former President and CEO Rady Associates Consulting Engineers K. Wayne Lee President, DDFW Properties Ralph Manoushagian Land Manager Approach Resources, Inc. Oil & Gas Exploration Jim Ridenour President Sunbelt Station Service S E N I O R O F F I C E R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer F. Mills Shallene Wise County Market President Henson Dunn Senior Vice President Les Mariotti Senior Vice President and Chief Financial Officer J. Sean Shope Senior Vice President Steve Sims Senior Vice President Trent Swearengin Senior Vice President IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 264,306 157,919 210,764 39,084 2,515 0.94% 62.24% DEC. 31, 2008 $ 272,185 163,936 217,818 37,664 2,793 0.99% 61.32% STEPHENVILLE GRANBURY GLEN ROSE ACTON M A I N O F F I C E ( 2 5 4 ) 9 6 5 - 5 0 3 6 2201 W. South Loop Stephenville, Texas 76401 LO C AT I O N S 1875 Lingleville Road 199 N. Columbia 400 Big Bend Trail 2007 East Highway 377 1600 S. Morgan Stephenville, Texas 76401 Stephenville, Texas 76401 Glen Rose, Texas 76043 Granbury, Texas 76049 Granbury, Texas 76048 2915 Fall Creek Highway Acton, Texas 76049 R O N N . M U L L I N S Pre s i d e n t a n d C E O E R AT H , H O O D & S O M E R V E L L CO U N T I E S D E P O S I T M A R K E T S H A R E D I R E C TO R S Ron N. Mullins Chairman of the Board, President and Chief Executive Officer Jerry Parham Investments S E N I O R O F F I C E R S President John Power Bart Rodgers Ron N. Mullins Angie Dusek Chairman of the Board, Senior Vice President and Chief Executive Officer Donna Feller Senior Vice President Keith Brown Prime Building Components, LLC F. Scott Dueser First Financial Bankshares, Inc. Glen Rose Market President Connie Frank J. Bruce Hildebrand Senior Vice President First Financial Bankshares, Inc. Julie Graham Frank Terrell, M.D. Ophthalmologist John Terrill Attorney ADVISORY DIRECTORS SPEC Management Co. Ron Hance Hance Financial Services Granbury Market President Mike Gandy Dereece Howell Executive Vice President Vickie Pettit and Cashier Senior Vice President Senior Vice President Monty Bedwell Robert Reeves Executive Vice President Senior Vice President Robert Lemons Larry Upshaw Executive Vice President Senior Vice President Bill Hooks Autos - Real Estate John Moore Craft Associates, Inc. Ron Pack RP’s Western Wear, Inc. Bill Parham Parham & Parham, CPAs IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 350,059 181,726 298,355 44,383 4,267 1.31% 48.89% DEC. 31, 2008 $ 330,942 192,202 279,209 42,033 5,107 1.56% 48.29% SWEETWATER ROBY TRENT MERKEL J . V. M A R T I N Chairman of the Board K I R BY N . A N D R E WS President and CEO NOLAN & FISHER COUNTIES D E P O S I T M A R K E T S H A R E M A I N O F F I C E 201 Elm LO C AT I O N S 123 N. Concho 117 N. Main 301 Edwards Street ( 3 2 5 ) 2 3 5 - 6 6 0 0 Sweetwater, Texas 79556 Roby, Texas 79543 Trent, Texas 79561 Merkel, Texas 79536 S E N I O R O F F I C E R S D I R E C TO R S J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Donnie Ruppert Executive Vice President and Cashier/Controller Rodney Foster Senior Vice President Lending J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Jeff Branson General Partner Williamson-Branson Real Estate Louis Brooks, Jr. Rancher Ronnie Cox Owner Cox Jewelry J. Bruce Hildebrand First Financial Bankshares, Inc. Jay Lawrence President MAL Enterprises, Inc. Thomas L. Rees, Sr. Rees and Rees, Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 133,322 67,463 119,011 13,248 2,420 1.81% 51.54% DEC. 31, 2008 $ 130,078 68,665 117,320 11,833 2,168 1.66% 51.87% WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH D OYL E L E E Chairman of the Board and Chief Executive O fficer M A I N O F F I C E 101 N. Main LO C AT I O N S 101 College Park Drive 1214 N. Main 210 N. Main 505 FM 1187 N. 4100 E. I-20 1100 FM 1189 ( 8 1 7 ) 5 9 6 - 0 3 0 7 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Aledo, Texas 76008 Willow Park, Texas 76087 Brock, Texas 76066 550 Bailey Avenue Suite 300 Fort Worth, Texas 76107 S E N I O R O F F I C E R S D I R E C TO R S Doyle Lee Chairman of the Board and Chief Executive Officer Doyle Lee Chairman of the Board and Chief Executive Officer Bob Bradberry Executive Vice President Larry Mangrem Executive Vice President and Cashier Mike Carter Senior Vice President Lori Hill Senior Vice President Justin Hooper Senior Vice President Kent Hudson Senior Vice President Jimmie Sue Lawson Senior Vice President Greg L. Barron President G.L. Barron Company, Inc. Stephen G. Brogdon, D.D.S. General and Cosmetic Dentistry Mac A. Coalson Owner Mac A. Coalson Real Estate F. Scott Dueser First Financial Bankshares, Inc. Clay Hicks Oil and Gas Investments Nan Kingsley President Bluestem Studios, Inc. Mike White, O.D. Therapeutic Optometrist J AY G I B B S President Jay Gibbs President Jay Gibbs President PARKER COUNTY D E P O S I T M A R K E T S H A R E IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 355,621 149,607 309,465 33,608 5,124 1.49% 49.92% DEC. 31, 2008 $ 375,424 156,616 331,288 29,326 5,830 1.71% 50.52% First Financial Trust & Asset Management Co., N.A. Abilene Office 400 Pine St. LO C AT I O N S Fort Worth Office 550 Bailey Ave., Suite 300 Odessa Office 2651 JBS Parkway Bldg. 4, Suite E San Angelo Office 301 W. Beauregard Stephenville Office 2201 W. South Loop Sweetwater Office 201 Elm ( 3 2 5 ) 6 2 7 - 7 1 0 0 ( 8 1 7 ) 4 1 0 - 4 9 7 0 ( 4 3 2 ) 3 6 7 - 8 9 0 0 ( 3 2 5 ) 6 5 9 - 5 9 8 7 ( 2 5 4 ) 9 1 8 - 6 2 6 2 ( 3 2 5 ) 2 3 5 - 6 6 4 0 performed well in 2009 considering the challenging economic environment it confronted. Total assets continued to grow, and our equity and fixed-income investments all outperformed their respective bench- marks. We also opened an office in a new market. Assets at year-end totaled $1.67 billion in book value and $2.10 billion in market value. These levels rep- resented increases of 2.1 percent and 11.7 percent, respectively, from 2008. Earnings for 2009 were down from 2008, reflecting the low levels of the stock market that prevailed in the first half of the year. Also contributing to the earnings reduction were significantly lower oil and gas prices, which negatively affected the large oil and gas portfolio that we manage. Net income decreased $179,000, or 6.4 percent, to $2.6 million from $2.8 million in 2008. Trust fee revenue, the main source of our net income, decreased $358,000, or 3.8 percent, to $9.1 million from $9.4 million. Although the markets were extremely volatile throughout the year, our investment team produced outstanding results. All of our equity and fixed-income investments exceeded their respective benchmarks. A highlight of the year was our opening in June of an office in Odessa, which is a new market for us. Barbara Hill manages this office. We are very pleased with the results she has achieved thus far and are excited about the prospects for our growth in the Permian Basin. Our Fort Worth office also achieved excellent results in 2009. Fee revenue for the office increased $123,000, or 41.4 percent, and the number of accounts increased by 34.5 percent. To accommodate the expansion of our business, we moved into a larger office suite during the year. Our experienced team of trust professionals remains committed to providing quality customer service and superior investment results. 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 TRUST ASSETS (IN MILLIONS) $1,664 $1,631 $1,428 $1,300 $1,150 $ 400 600 800 1,000 1,200 1,400 1,600 1,800 TRUST FEES (IN MILLIONS) $9.08 $9.44 $8.75 $7.66 $7.07 $2.631 $2.810 $2.549 $ 1 2 3 4 5 6 7 8 9 10 TRUST NET INCOME (IN MILLIONS) $2.076 $1.909 $ 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 (L-R - Back Row) DAVID W. CASTLEBERRY (Stephenville), RICHARD YOUNG (Abilene), MICHAEL SHEEHAN (Sweetwater), KIRK THAXTON (Abilene), DAVID BYRD (San Angelo) and JOE AYRES (Stephenville) (L-R - seated) BARBARA HILL (Odessa) and KONRAD HALBERT (Fort Worth) O F F I C E R S Kirk W. Thaxton Chairman of the Board, President, and Chief Executive Officer David Castleberry Senior Vice President Manager, Stephenville D I R E C TO R S Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Byrd Executive Vice President Manager, San Angelo Konrad S. Halbert Executive Vice President Manager, Fort Worth Michael D. Sheehan Executive Vice President Manager, Sweetwater Richard Young Executive Vice President Manager, Abilene Shelton Family Foundation Chairman of the Board, President Robert S. Patterson Former President & CEO First Financial Trust & Asset Management Company, N.A. Kirk W. Thaxton and Chief Executive Officer First Financial Trust & Asset Management Company, N.A. ADVISORY DIRECTORS Beckham Rector & Eagle Paul L. Cannon First Financial Bankshares, Inc. John L. Beckham Angelo Glass & Mirror McMahon Surovik Suttle, P.C. Barbara Hill Senior Vice President Manager, Odessa Larry Cleveland Senior Vice President Manager, Operations Ralph Gibson Senior Vice President Manager, Investments David B. Pitzer Senior Vice President Manager, Real Property Randy Spiva Senior Vice President Manager, Oil & Gas David Copeland President Ronnie Cox Owner Cox Jewelry F. Scott Dueser David F. Lupton President Company, Inc. Bill Parham Parham & Parham, CPAs (L - R ): CLAY TRUMBLE, KAY BERRY, GARY TUCKER, DENNIS STECKLY, MICHELLE McDONALD AND LARRY WILLIAMS First Technology Services, Inc. (FTS) is the shared services company for First Financial Bankshares, Inc. (FFIN) Our mission is to maximize efficiencies and control costs for common functions within FFIN while providing the best possible customer service to our internal and external customers. FTS plays a key role in customer service functions within FFIN through its customer call center and innovative technology for online banking, auto- matic bill pay services, backroom operations and other technology-based banking services. FTS also supports employees with classroom and online technology training and a responsive technology help desk. FTS provides more than 100 technology applications to FFIN and its family of 10 banks and the Trust Company. Services include check processing, account services, a help desk, desktop support, network services, server support, software support, information security, computer operations, business continuity planning, loan and credit operations, loan document preparation and the corporate call center. M A I N O F F I C E 400 Pine Abilene, Texas 79601 ( 3 2 5 ) 6 2 7 - 7 1 9 5 S E N I O R O F F I C E R S Gary D. Tucker President and Chief Executive Officer Kay Berry Senior Vice President Deposit Operations Michelle McDonald Senior Vice President Customer Service D I R E C TO R S Clay Trumble Senior Vice President Credit Administration Dennis Steckly Senior Vice President Production Services Larry Williams Senior Vice President Infrastructure Services Gary L. Webb Chairman of the Board Ron Butler President and First Technology Services, Inc. Chief Executive Officer Executive Vice President, First Financial Bank Abilene Operations First Financial Bankshares, Inc. Gary D. Tucker President and Chief Executive Officer First Technology Services, Inc. F. Scott Dueser Chairman, President and Chief Executive Officer Jay Gibbs President First Financial Bank Weatherford Derrell E. Johnson Former President and Chief Executive Officer Rady and Associates Consulting Engineers First Financial Bankshares, Inc. Les Mariotti J. Bruce Hildebrand Chief Financial Officer Executive Vice President and First Financial Bank Southlake Senior Vice President and Chief Financial Officer First Financial Bankshares, Inc. Mike Mauldin Michael L. Boyd Chairman, President and Chief Executive Officer First Financial Bank San Angelo Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 2 0 0 9 W A L T E R J O H N S O N A W A R D K E N N E T H T . M U R P H Y Through the 120 years of First Financial Bankshares’ history, there have been many people who have contributed greatly to the success of this company, and Ken Murphy has to be at the top of that list with Walter Johnson and the James family. Therefore, it is extremely appropriate that we honor Ken for his outstanding leadership during the past 39 years with the Walter Johnson Award, as well as dedicating this Annual Report to him. Ken was hired by Walter Johnson in 1971 and has held the following positions: First Financial Bank, N.A., Abilene (formerly First National Bank of Abilene) Executive Vice President President President and Chief Executive Officer Chairman of the Board and Chief Executive Officer 1993–2000 Chairman of the Board First Financial Bankshares, Inc. Executive Vice President President and Chief Executive Officer Chairman, President and Chief Executive Officer Chairman of the Board Senior Chairman of the Board 1971-1975 1975-1981 1981-1984 1984-1993 1973-1985 1985-1986 1986-2000 2001-2007 2008-2009 When Ken joined the bank in 1971, the Company had total assets of $87 million and net income of $806,000. This past year we finished the year with total assets of $3.3 billion and net earnings of $53.8 million. During Ken’s tenure with this company, we have experienced great success. While he was President and CEO of First Financial Bankshares, he purchased 11 banks and added numerous locations to the Company. During his tenure, he held many civic, cultural and professional leadership positions with the most notable positions being: President, Abilene Chamber of Commerce; Chairman, United Way Campaign in Abilene; Chairman, West Texas Rehabilitation Center; Chairman and Trustee, Alliance for Women and Children; Director, Hendrick Medical Center; Director, West Central Texas Municipal Water District; Director, Hardin-Simmons University Board of Development; Director, The Grace Museum of Abilene; Director, Treasurer and Chairman, Texas Bankers Association; and Class A Director, Federal Reserve Bank of Dallas. In 2003, Ken was honored as Outstanding Citizen of the Year by the Abilene Chamber of Commerce. As he retires from the First Financial Bankshares Board after 37 years, he leaves us with a great legacy and many Murphy stories, reports and sayings, but, most of all, his knowledge of how to manage outstanding banks. For me personally, Ken has been a mentor, confidant and boss for 33 years. I have learned so much from him. Although he is retiring from the Board, I know we will continue to have his advice and counsel, as well as his ever-present support and encouragement. It is our pleasure to honor Ken Murphy with the Walter Johnson Award for what he has contributed in going beyond the call of duty for our company and, especially, for our customers, stockholders and employees. Sincerely, F. Scott Dueser BACK ROW (L-R): JOSEPH CANON, DAVID COPELAND, KADE MATTHEWS, RON GIDDIENS, MURRAY EDWARDS, TUCKER BRIDWELL, JOHNNY TROTTER FRONT ROW (L - R): KENNETH MURPHY, DERRELL JOHNSON, DIAN STAI, MAC COALSON, F. SCOTT DUESER BOARD MEMBER YEAR ELECTED BOARD MEMBER YEAR ELECTED COMMITTEE APPOINTMENT COMMITTEE APPOINTMENT Tucker S. Bridwell, CPA 2007 2, 4 Board of Directors F. Scott Dueser Chairman of the Board, President and CEO President Mansefeldt Investment Corporation Joseph E. Canon, J.D. Executive Director Dodge Jones Foundation Mac A. Coalson Mac A. Coalson Real Estate David Copeland, CPA President, SIPCO, Inc. and Shelton Family Foundation Murray Edwards Principal, The Edwards Group Ron Giddiens Investments/Business Consulting Former President - Bank of the West, San Angelo 1991 1996 1996 1998 2006 2009 1 3 2 2 1, 3, 4 1, 2, 4 2000 1998 1971 1993 Derrell E. Johnson Former President and CEO Rady and Associates Consulting Engineers Kade Matthews Ranching and Investments Kenneth T. Murphy Senior Chairman of the Board Dian Graves Stai Chair, Mansefeldt Investment Corp. Director, Dian Graves Owen Foundation Johnny E. Trotter President and CEO 2 3 1, 4 1, 3, 4 Livestock Investors, Ltd. 2003 1, 3, 4 * CO M M I T T E E S 1 Executive Committee – F. Scott Dueser, Chairman 2 Audit Committee – David Copeland, Chairman 3 Compensation Committee – Dian Graves Stai, Chairman 4 Nominating/Corporate Governance Committee – Mac A. Coalson, Chairman 24 Corporate Information OFFICERS F. Scott Dueser Chairman, President and Chief Executive Officer J. Bruce Hildebrand Executive Vice President and Chief Financial Officer Gary S. Gragg Executive Vice President, Lending Gary L. Webb Executive Vice President, Operations Tommy J. Barrow Senior Vice President, Lending Courtney Jordan Senior Vice President, Training and Education Michele P. Stevens Senior Vice President, Advertising and Marketing William A. Rowe Vice President, Investment Services Gaila Kilpatrick Assistant Secretary Bob Goodner Compliance Officer Michelle Fagan Compliance Officer A N N UA L M E E T I N G Tuesday, April 27, 2010 10:30 a.m. Abilene Civic Center 1100 N. Sixth Abilene, Texas 79601 CORPORATE OFFICES 400 Pine Abilene, Texas 79601 325-627-7155 • 800-588-7000 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 T R A N S F E R AG E N T Registrar and Transfer Company 800-368-5948 ADDRESS SHAREHOLDER INQUIRIES TO: Registrar and Transfer Company Investor Relations Department 10 Commerce Drive Cranford, NJ 07016 E-MAIL ADDRESS: info@rtco.com REGISTRAR AND TRANSFER COMPANY WEB SITE www.rtco.com S E N D C E R T I F I C AT E S F O R T R A N S F E R & A D D R E S S C H A N G E S TO : Registrar & Transfer Company 10 Commerce Drive Cranford, NJ 07016-3572 4 0 0 P i n e • A b i l e n e , Te x a s 7 9 6 0 1 www.f f in.com 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. Note: Market share data is calculated from June 30, 2009, deposit information compiled by the Federal Deposit Insurance Corporation. FIRST FINANCIAL BANKSHARES EXECUTIVE OFFICERS (L - R ): J. BRUCE HILDEBRAND, MICHELE P. STEVENS, GARY S. GRAGG, F. SCOTT DUESER, GARY L. WEBB, KIRK W. THAXTON AND TOMMY J. BARROW SM A F a m i l y o f C o m m u n i t y B a n k s S M 4 0 0 Pi n e • Abi l e n e , Te x a s 7 9 6 0 1 • w w w. f f i n . c om 21% 47% 30% 7% 15% 20% 37% 26% HEREFORD M A I N O F F I C E 212 E. Third ( 8 0 6 ) 3 6 3 - 8 2 0 0 Hereford, Texas 79045 M I K E M AU L D I N Pre s i d e n t a n d C E O D I R E C TO R S D E A F S M I T H CO U N T Y D E P O S I T M A R K E T S H A R E 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 Pet Care, Inc. Allen Parson Restaurateur and Investments Craig Smith Rancher and Retired Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 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 S E N I O R O F F I C E R S Mike Mauldin Chairman of the Board, President and Chief Executive Officer Steve Gilbert Executive Vice President and Cashier Kent Jackson Executive Vice President and Chief Credit Officer IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 147,652 96,028 130,728 12,284 2,121 1.56% 47.16% DEC. 31, 2008 $ 149,264 94,426 118,656 10,728 2,104 1.54% 44.71% MINERAL WELLS M A I N O F F I C E 1900 E. Hubbard ( 9 4 0 ) 3 2 7 - 5 4 0 0 Mineral Wells, Texas 76067 K E N N E T H W I L L I A M S O N Pre s i d e n t a n d C E O PA LO P I N TO CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Spencer Baum, D.D.S. Baum Dental Clinic F. Scott Dueser First Financial Bankshares, Inc. George Gault Attorney Gault & Gault Terry L. Murphy President and Chief Executive Officer Murphy and Murphy, Inc. David Ramsey, M.D. Family Practice Center Albert Rincon Vice President of Operations Texas Packaging Company, Inc. Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Paul McGettes Chief Financial Officer Upham Oil & Gas Company, L.P. S E N I O R O F F I C E R S Brad Seay Lending Executive Vice President Eddie Gregory Senior Vice President and Cashier Mike Mearse Senior Vice President Lending IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,259 101,050 132,997 22,436 3,542 2.10% 39.01% DEC. 31, 2008 $ 173,565 99,555 138,325 20,276 3,147 1.93% 43.43% SAN ANGELO M A I N O F F I C E 301 W. Beauregard LO C AT I O N S www.historicmuralsofsanangelo.org ( 3 2 5 ) 6 5 9 - 5 9 0 0 San Angelo, Texas 76903 3471 Knickerbocker San Angelo, Texas 76904 M I C H A E L L . B OYD Pre s i d e n t a n d C E O TO M G R E E N CO U N T Y D E P O S I T M A R K E T S H A R E S E N I O R O F F I C E R S Michael L. Boyd Chairman of the Board, President and Chief Executive Officer Robert Pate Executive Vice President Jim Davidson Executive Vice President and Cashier Wes Masters Senior Vice President Reba Priddy Senior Vice President Chuck Shore Senior Vice President Ruth Wheeler Senior Vice President Cindy George Senior Vice President Bill Wiedenfeld Senior Vice President Carrol E. Hill Senior Vice President D I R E C TO R S Michael L. Boyd Chairman of the Board, President and Chief Executive Officer Hon. Marilyn Aboussie Chief Justice, Retired W. Dan Cravy, M.D. Physician Pat Crump President and CEO Baptist Memorials Services Ron Giddiens Investments/Business Consulting Former President - Bank of the West, San Angelo Joey Henderson President Porter Henderson Implement Company, Inc. J. Bruce Hildebrand First Financial Bankshares, Inc. Rick DeHoyos Attorney Glasheen, Valles & DeHoyos, LLP Robert D. Housley President and Owner Housley Communications F. Scott Dueser First Financial Bankshares, Inc. Doug Eakman Owner Pecos Street Pharmacy Steve Eustis Commercial Real Estate David F. Lupton President Angelo Glass & Mirror Company, Inc. John E. Schwartz, Sr. Farmer/Rancher Mary Jane Steadman Attorney Real Estate Investment Management IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 349,676 139,847 290,797 48,441 6,250 1.82% 45.54% DEC. 31, 2008 $ 333,330 135,618 276,803 45,757 6,157 1.86% 44.64% SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR M A I N O F F I C E ( 8 1 7 ) 4 1 0 - 2 9 1 5 3205 E. Highway 114 Southlake, Texas 76092 LO C AT I O N S 95 Trophy Club Drive 891 E. Keller Parkway 909 Stevens 609 Rock Island Avenue 608 W. Hale Avenue Trophy Club, Texas 76262 Keller, Texas 76248 Bridgeport, Texas 76426 Boyd, Texas 76023 Decatur, Texas 76234 M A R K L . J O N E S Pre s i d e n t a n d C E O C I T I E S O F S O U T H L A K E, T R O P HY C LU B & K E L L E R D E P O S I T M A R K E T S H A R E W I S E CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer William Ray Cook, Jr., CPA Cook McDonald & Co. Jack Dortch Jack Dortch Farmers Insurance Agency F. Scott Dueser First Financial Bankshares, Inc. J. Bruce Hildebrand First Financial Bankshares, Inc. Derrell E. Johnson Former President and CEO Rady Associates Consulting Engineers K. Wayne Lee President, DDFW Properties Ralph Manoushagian Land Manager Approach Resources, Inc. Oil & Gas Exploration Jim Ridenour President Sunbelt Station Service S E N I O R O F F I C E R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer F. Mills Shallene Wise County Market President Henson Dunn Senior Vice President Les Mariotti Senior Vice President and Chief Financial Officer J. Sean Shope Senior Vice President Steve Sims Senior Vice President Trent Swearengin Senior Vice President IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 264,306 157,919 210,764 39,084 2,515 0.94% 62.24% DEC. 31, 2008 $ 272,185 163,936 217,818 37,664 2,793 0.99% 61.32% STEPHENVILLE GRANBURY GLEN ROSE ACTON M A I N O F F I C E ( 2 5 4 ) 9 6 5 - 5 0 3 6 2201 W. South Loop Stephenville, Texas 76401 LO C AT I O N S 1875 Lingleville Road 199 N. Columbia 400 Big Bend Trail 2007 East Highway 377 1600 S. Morgan Stephenville, Texas 76401 Stephenville, Texas 76401 Glen Rose, Texas 76043 Granbury, Texas 76049 Granbury, Texas 76048 2915 Fall Creek Highway Acton, Texas 76049 R O N N . M U L L I N S Pre s i d e n t a n d C E O E R AT H , H O O D & S O M E R V E L L CO U N T I E S D E P O S I T M A R K E T S H A R E D I R E C TO R S Ron N. Mullins Chairman of the Board, President and Chief Executive Officer Jerry Parham Investments S E N I O R O F F I C E R S President John Power Bart Rodgers Ron N. Mullins Angie Dusek Chairman of the Board, Senior Vice President and Chief Executive Officer Donna Feller Senior Vice President Keith Brown Prime Building Components, LLC F. Scott Dueser First Financial Bankshares, Inc. Glen Rose Market President Connie Frank J. Bruce Hildebrand Senior Vice President First Financial Bankshares, Inc. Julie Graham Frank Terrell, M.D. Ophthalmologist John Terrill Attorney ADVISORY DIRECTORS SPEC Management Co. Ron Hance Hance Financial Services Granbury Market President Mike Gandy Dereece Howell Executive Vice President Vickie Pettit and Cashier Senior Vice President Senior Vice President Monty Bedwell Robert Reeves Executive Vice President Senior Vice President Robert Lemons Larry Upshaw Executive Vice President Senior Vice President Bill Hooks Autos - Real Estate John Moore Craft Associates, Inc. Ron Pack RP’s Western Wear, Inc. Bill Parham Parham & Parham, CPAs IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 350,059 181,726 298,355 44,383 4,267 1.31% 48.89% DEC. 31, 2008 $ 330,942 192,202 279,209 42,033 5,107 1.56% 48.29% SWEETWATER ROBY TRENT MERKEL J . V. M A R T I N Chairman of the Board K I R BY N . A N D R E WS President and CEO NOLAN & FISHER COUNTIES D E P O S I T M A R K E T S H A R E M A I N O F F I C E 201 Elm LO C AT I O N S 123 N. Concho 117 N. Main 301 Edwards Street ( 3 2 5 ) 2 3 5 - 6 6 0 0 Sweetwater, Texas 79556 Roby, Texas 79543 Trent, Texas 79561 Merkel, Texas 79536 S E N I O R O F F I C E R S D I R E C TO R S J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Donnie Ruppert Executive Vice President and Cashier/Controller Rodney Foster Senior Vice President Lending J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Jeff Branson General Partner Williamson-Branson Real Estate Louis Brooks, Jr. Rancher Ronnie Cox Owner Cox Jewelry J. Bruce Hildebrand First Financial Bankshares, Inc. Jay Lawrence President MAL Enterprises, Inc. Thomas L. Rees, Sr. Rees and Rees, Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 133,322 67,463 119,011 13,248 2,420 1.81% 51.54% DEC. 31, 2008 $ 130,078 68,665 117,320 11,833 2,168 1.66% 51.87% WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH D OYL E L E E Chairman of the Board and Chief Executive O fficer M A I N O F F I C E 101 N. Main LO C AT I O N S 101 College Park Drive 1214 N. Main 210 N. Main 505 FM 1187 N. 4100 E. I-20 1100 FM 1189 ( 8 1 7 ) 5 9 6 - 0 3 0 7 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Aledo, Texas 76008 Willow Park, Texas 76087 Brock, Texas 76066 550 Bailey Avenue Suite 300 Fort Worth, Texas 76107 S E N I O R O F F I C E R S D I R E C TO R S Doyle Lee Chairman of the Board and Chief Executive Officer Doyle Lee Chairman of the Board and Chief Executive Officer Bob Bradberry Executive Vice President Larry Mangrem Executive Vice President and Cashier Mike Carter Senior Vice President Lori Hill Senior Vice President Justin Hooper Senior Vice President Kent Hudson Senior Vice President Jimmie Sue Lawson Senior Vice President Greg L. Barron President G.L. Barron Company, Inc. Stephen G. Brogdon, D.D.S. General and Cosmetic Dentistry Mac A. Coalson Owner Mac A. Coalson Real Estate F. Scott Dueser First Financial Bankshares, Inc. Clay Hicks Oil and Gas Investments Nan Kingsley President Bluestem Studios, Inc. Mike White, O.D. Therapeutic Optometrist J AY G I B B S President Jay Gibbs President Jay Gibbs President PARKER COUNTY D E P O S I T M A R K E T S H A R E IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 355,621 149,607 309,465 33,608 5,124 1.49% 49.92% DEC. 31, 2008 $ 375,424 156,616 331,288 29,326 5,830 1.71% 50.52% First Financial Trust & Asset Management Co., N.A. Abilene Office 400 Pine St. LO C AT I O N S Fort Worth Office 550 Bailey Ave., Suite 300 Odessa Office 2651 JBS Parkway Bldg. 4, Suite E San Angelo Office 301 W. Beauregard Stephenville Office 2201 W. South Loop Sweetwater Office 201 Elm ( 3 2 5 ) 6 2 7 - 7 1 0 0 ( 8 1 7 ) 4 1 0 - 4 9 7 0 ( 4 3 2 ) 3 6 7 - 8 9 0 0 ( 3 2 5 ) 6 5 9 - 5 9 8 7 ( 2 5 4 ) 9 1 8 - 6 2 6 2 ( 3 2 5 ) 2 3 5 - 6 6 4 0 performed well in 2009 considering the challenging economic environment it confronted. Total assets continued to grow, and our equity and fixed-income investments all outperformed their respective bench- marks. We also opened an office in a new market. Assets at year-end totaled $1.67 billion in book value and $2.10 billion in market value. These levels rep- resented increases of 2.1 percent and 11.7 percent, respectively, from 2008. Earnings for 2009 were down from 2008, reflecting the low levels of the stock market that prevailed in the first half of the year. Also contributing to the earnings reduction were significantly lower oil and gas prices, which negatively affected the large oil and gas portfolio that we manage. Net income decreased $179,000, or 6.4 percent, to $2.6 million from $2.8 million in 2008. Trust fee revenue, the main source of our net income, decreased $358,000, or 3.8 percent, to $9.1 million from $9.4 million. Although the markets were extremely volatile throughout the year, our investment team produced outstanding results. All of our equity and fixed-income investments exceeded their respective benchmarks. A highlight of the year was our opening in June of an office in Odessa, which is a new market for us. Barbara Hill manages this office. We are very pleased with the results she has achieved thus far and are excited about the prospects for our growth in the Permian Basin. Our Fort Worth office also achieved excellent results in 2009. Fee revenue for the office increased $123,000, or 41.4 percent, and the number of accounts increased by 34.5 percent. To accommodate the expansion of our business, we moved into a larger office suite during the year. Our experienced team of trust professionals remains committed to providing quality customer service and superior investment results. 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 TRUST ASSETS (IN MILLIONS) $1,664 $1,631 $1,428 $1,300 $1,150 $ 400 600 800 1,000 1,200 1,400 1,600 1,800 TRUST FEES (IN MILLIONS) $9.08 $9.44 $8.75 $7.66 $7.07 $2.631 $2.810 $2.549 $ 1 2 3 4 5 6 7 8 9 10 TRUST NET INCOME (IN MILLIONS) $2.076 $1.909 $ 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 (L-R - Back Row) DAVID W. CASTLEBERRY (Stephenville), RICHARD YOUNG (Abilene), MICHAEL SHEEHAN (Sweetwater), KIRK THAXTON (Abilene), DAVID BYRD (San Angelo) and JOE AYRES (Stephenville) (L-R - seated) BARBARA HILL (Odessa) and KONRAD HALBERT (Fort Worth) O F F I C E R S Kirk W. Thaxton Chairman of the Board, President, and Chief Executive Officer David Castleberry Senior Vice President Manager, Stephenville D I R E C TO R S Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Byrd Executive Vice President Manager, San Angelo Konrad S. Halbert Executive Vice President Manager, Fort Worth Michael D. Sheehan Executive Vice President Manager, Sweetwater Richard Young Executive Vice President Manager, Abilene Shelton Family Foundation Chairman of the Board, President Robert S. Patterson Former President & CEO First Financial Trust & Asset Management Company, N.A. Kirk W. Thaxton and Chief Executive Officer First Financial Trust & Asset Management Company, N.A. ADVISORY DIRECTORS Beckham Rector & Eagle Paul L. Cannon First Financial Bankshares, Inc. John L. Beckham Angelo Glass & Mirror McMahon Surovik Suttle, P.C. Barbara Hill Senior Vice President Manager, Odessa Larry Cleveland Senior Vice President Manager, Operations Ralph Gibson Senior Vice President Manager, Investments David B. Pitzer Senior Vice President Manager, Real Property Randy Spiva Senior Vice President Manager, Oil & Gas David Copeland President Ronnie Cox Owner Cox Jewelry F. Scott Dueser David F. Lupton President Company, Inc. Bill Parham Parham & Parham, CPAs (L - R ): CLAY TRUMBLE, KAY BERRY, GARY TUCKER, DENNIS STECKLY, MICHELLE McDONALD AND LARRY WILLIAMS First Technology Services, Inc. (FTS) is the shared services company for First Financial Bankshares, Inc. (FFIN) Our mission is to maximize efficiencies and control costs for common functions within FFIN while providing the best possible customer service to our internal and external customers. FTS plays a key role in customer service functions within FFIN through its customer call center and innovative technology for online banking, auto- matic bill pay services, backroom operations and other technology-based banking services. FTS also supports employees with classroom and online technology training and a responsive technology help desk. FTS provides more than 100 technology applications to FFIN and its family of 10 banks and the Trust Company. Services include check processing, account services, a help desk, desktop support, network services, server support, software support, information security, computer operations, business continuity planning, loan and credit operations, loan document preparation and the corporate call center. M A I N O F F I C E 400 Pine Abilene, Texas 79601 ( 3 2 5 ) 6 2 7 - 7 1 9 5 S E N I O R O F F I C E R S Gary D. Tucker President and Chief Executive Officer Kay Berry Senior Vice President Deposit Operations Michelle McDonald Senior Vice President Customer Service D I R E C TO R S Clay Trumble Senior Vice President Credit Administration Dennis Steckly Senior Vice President Production Services Larry Williams Senior Vice President Infrastructure Services Gary L. Webb Chairman of the Board Ron Butler President and First Technology Services, Inc. Chief Executive Officer Executive Vice President, First Financial Bank Abilene Operations First Financial Bankshares, Inc. Gary D. Tucker President and Chief Executive Officer First Technology Services, Inc. F. Scott Dueser Chairman, President and Chief Executive Officer Jay Gibbs President First Financial Bank Weatherford Derrell E. Johnson Former President and Chief Executive Officer Rady and Associates Consulting Engineers First Financial Bankshares, Inc. Les Mariotti J. Bruce Hildebrand Chief Financial Officer Executive Vice President and First Financial Bank Southlake Senior Vice President and Chief Financial Officer First Financial Bankshares, Inc. Mike Mauldin Michael L. Boyd Chairman, President and Chief Executive Officer First Financial Bank San Angelo Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 2 0 0 9 W A L T E R J O H N S O N A W A R D K E N N E T H T . M U R P H Y Through the 120 years of First Financial Bankshares’ history, there have been many people who have contributed greatly to the success of this company, and Ken Murphy has to be at the top of that list with Walter Johnson and the James family. Therefore, it is extremely appropriate that we honor Ken for his outstanding leadership during the past 39 years with the Walter Johnson Award, as well as dedicating this Annual Report to him. Ken was hired by Walter Johnson in 1971 and has held the following positions: First Financial Bank, N.A., Abilene (formerly First National Bank of Abilene) Executive Vice President President President and Chief Executive Officer Chairman of the Board and Chief Executive Officer 1993–2000 Chairman of the Board First Financial Bankshares, Inc. Executive Vice President President and Chief Executive Officer Chairman, President and Chief Executive Officer Chairman of the Board Senior Chairman of the Board 1971-1975 1975-1981 1981-1984 1984-1993 1973-1985 1985-1986 1986-2000 2001-2007 2008-2009 When Ken joined the bank in 1971, the Company had total assets of $87 million and net income of $806,000. This past year we finished the year with total assets of $3.3 billion and net earnings of $53.8 million. During Ken’s tenure with this company, we have experienced great success. While he was President and CEO of First Financial Bankshares, he purchased 11 banks and added numerous locations to the Company. During his tenure, he held many civic, cultural and professional leadership positions with the most notable positions being: President, Abilene Chamber of Commerce; Chairman, United Way Campaign in Abilene; Chairman, West Texas Rehabilitation Center; Chairman and Trustee, Alliance for Women and Children; Director, Hendrick Medical Center; Director, West Central Texas Municipal Water District; Director, Hardin-Simmons University Board of Development; Director, The Grace Museum of Abilene; Director, Treasurer and Chairman, Texas Bankers Association; and Class A Director, Federal Reserve Bank of Dallas. In 2003, Ken was honored as Outstanding Citizen of the Year by the Abilene Chamber of Commerce. As he retires from the First Financial Bankshares Board after 37 years, he leaves us with a great legacy and many Murphy stories, reports and sayings, but, most of all, his knowledge of how to manage outstanding banks. For me personally, Ken has been a mentor, confidant and boss for 33 years. I have learned so much from him. Although he is retiring from the Board, I know we will continue to have his advice and counsel, as well as his ever-present support and encouragement. It is our pleasure to honor Ken Murphy with the Walter Johnson Award for what he has contributed in going beyond the call of duty for our company and, especially, for our customers, stockholders and employees. Sincerely, F. Scott Dueser 13 15 17 19 21 23 14 16 18 20 22 BACK ROW (L-R): JOSEPH CANON, DAVID COPELAND, KADE MATTHEWS, RON GIDDIENS, MURRAY EDWARDS, TUCKER BRIDWELL, JOHNNY TROTTER FRONT ROW (L - R): KENNETH MURPHY, DERRELL JOHNSON, DIAN STAI, MAC COALSON, F. SCOTT DUESER BOARD MEMBER YEAR ELECTED BOARD MEMBER YEAR ELECTED COMMITTEE APPOINTMENT COMMITTEE APPOINTMENT Tucker S. Bridwell, CPA 2007 2, 4 Board of Directors F. Scott Dueser Chairman of the Board, President and CEO President Mansefeldt Investment Corporation Joseph E. Canon, J.D. Executive Director Dodge Jones Foundation Mac A. Coalson Mac A. Coalson Real Estate David Copeland, CPA President, SIPCO, Inc. and Shelton Family Foundation Murray Edwards Principal, The Edwards Group Ron Giddiens Investments/Business Consulting Former President - Bank of the West, San Angelo 1991 1996 1996 1998 2006 2009 1 3 2 2 1, 3, 4 1, 2, 4 2000 1998 1971 1993 Derrell E. Johnson Former President and CEO Rady and Associates Consulting Engineers Kade Matthews Ranching and Investments Kenneth T. Murphy Senior Chairman of the Board Dian Graves Stai Chair, Mansefeldt Investment Corp. Director, Dian Graves Owen Foundation Johnny E. Trotter President and CEO 2 3 1, 4 1, 3, 4 Livestock Investors, Ltd. 2003 1, 3, 4 * CO M M I T T E E S 1 Executive Committee – F. Scott Dueser, Chairman 2 Audit Committee – David Copeland, Chairman 3 Compensation Committee – Dian Graves Stai, Chairman 4 Nominating/Corporate Governance Committee – Mac A. Coalson, Chairman 24 Corporate Information OFFICERS F. Scott Dueser Chairman, President and Chief Executive Officer J. Bruce Hildebrand Executive Vice President and Chief Financial Officer Gary S. Gragg Executive Vice President, Lending Gary L. Webb Executive Vice President, Operations Tommy J. Barrow Senior Vice President, Lending Courtney Jordan Senior Vice President, Training and Education Michele P. Stevens Senior Vice President, Advertising and Marketing William A. Rowe Vice President, Investment Services Gaila Kilpatrick Assistant Secretary Bob Goodner Compliance Officer Michelle Fagan Compliance Officer A N N UA L M E E T I N G Tuesday, April 27, 2010 10:30 a.m. Abilene Civic Center 1100 N. Sixth Abilene, Texas 79601 CORPORATE OFFICES 400 Pine Abilene, Texas 79601 325-627-7155 • 800-588-7000 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 T R A N S F E R AG E N T Registrar and Transfer Company 800-368-5948 ADDRESS SHAREHOLDER INQUIRIES TO: Registrar and Transfer Company Investor Relations Department 10 Commerce Drive Cranford, NJ 07016 E-MAIL ADDRESS: info@rtco.com REGISTRAR AND TRANSFER COMPANY WEB SITE www.rtco.com S E N D C E R T I F I C AT E S F O R T R A N S F E R & A D D R E S S C H A N G E S TO : Registrar & Transfer Company 10 Commerce Drive Cranford, NJ 07016-3572 4 0 0 P i n e • A b i l e n e , Te x a s 7 9 6 0 1 www.f f in.com 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. Note: Market share data is calculated from June 30, 2009, deposit information compiled by the Federal Deposit Insurance Corporation. FIRST FINANCIAL BANKSHARES EXECUTIVE OFFICERS (L - R ): J. BRUCE HILDEBRAND, MICHELE P. STEVENS, GARY S. GRAGG, F. SCOTT DUESER, GARY L. WEBB, KIRK W. THAXTON AND TOMMY J. BARROW SM A F a m i l y o f C o m m u n i t y B a n k s S M 4 0 0 Pi n e • Abi l e n e , Te x a s 7 9 6 0 1 • w w w. f f i n . c om 21% 47% 30% 7% 15% 20% 37% 26% HEREFORD M A I N O F F I C E 212 E. Third ( 8 0 6 ) 3 6 3 - 8 2 0 0 Hereford, Texas 79045 M I K E M AU L D I N Pre s i d e n t a n d C E O D I R E C TO R S D E A F S M I T H CO U N T Y D E P O S I T M A R K E T S H A R E 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 Pet Care, Inc. Allen Parson Restaurateur and Investments Craig Smith Rancher and Retired Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 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 S E N I O R O F F I C E R S Mike Mauldin Chairman of the Board, President and Chief Executive Officer Steve Gilbert Executive Vice President and Cashier Kent Jackson Executive Vice President and Chief Credit Officer IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 147,652 96,028 130,728 12,284 2,121 1.56% 47.16% DEC. 31, 2008 $ 149,264 94,426 118,656 10,728 2,104 1.54% 44.71% MINERAL WELLS M A I N O F F I C E 1900 E. Hubbard ( 9 4 0 ) 3 2 7 - 5 4 0 0 Mineral Wells, Texas 76067 K E N N E T H W I L L I A M S O N Pre s i d e n t a n d C E O PA LO P I N TO CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Spencer Baum, D.D.S. Baum Dental Clinic F. Scott Dueser First Financial Bankshares, Inc. George Gault Attorney Gault & Gault Terry L. Murphy President and Chief Executive Officer Murphy and Murphy, Inc. David Ramsey, M.D. Family Practice Center Albert Rincon Vice President of Operations Texas Packaging Company, Inc. Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Paul McGettes Chief Financial Officer Upham Oil & Gas Company, L.P. S E N I O R O F F I C E R S Brad Seay Lending Executive Vice President Eddie Gregory Senior Vice President and Cashier Mike Mearse Senior Vice President Lending IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,259 101,050 132,997 22,436 3,542 2.10% 39.01% DEC. 31, 2008 $ 173,565 99,555 138,325 20,276 3,147 1.93% 43.43% SAN ANGELO M A I N O F F I C E 301 W. Beauregard LO C AT I O N S www.historicmuralsofsanangelo.org ( 3 2 5 ) 6 5 9 - 5 9 0 0 San Angelo, Texas 76903 3471 Knickerbocker San Angelo, Texas 76904 M I C H A E L L . B OYD Pre s i d e n t a n d C E O TO M G R E E N CO U N T Y D E P O S I T M A R K E T S H A R E Michael L. Boyd Ron Giddiens Chairman of the Board, President Investments/Business and Chief Executive Officer Consulting D I R E C TO R S Hon. Marilyn Aboussie Chief Justice, Retired W. Dan Cravy, M.D. Physician Pat Crump President and CEO Former President - Bank of the West, San Angelo Joey Henderson President Porter Henderson Implement Company, Inc. J. Bruce Hildebrand Baptist Memorials Services First Financial Bankshares, Inc. Rick DeHoyos Attorney Robert D. Housley President and Owner F. Scott Dueser First Financial Bankshares, Inc. Doug Eakman Owner Pecos Street Pharmacy Steve Eustis Commercial Real Estate David F. Lupton President Angelo Glass & Mirror Company, Inc. John E. Schwartz, Sr. Farmer/Rancher Mary Jane Steadman Attorney Real Estate Investment Management S E N I O R O F F I C E R S Michael L. Boyd Wes Masters Chairman of the Board, Senior Vice President President Robert Pate Jim Davidson and Cashier Senior Vice President Executive Vice President Chuck Shore Senior Vice President Executive Vice President Ruth Wheeler Senior Vice President Cindy George Senior Vice President Bill Wiedenfeld Senior Vice President Carrol E. Hill Senior Vice President and Chief Executive Officer Reba Priddy Glasheen, Valles & DeHoyos, LLP Housley Communications IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 349,676 139,847 290,797 48,441 6,250 1.82% 45.54% DEC. 31, 2008 $ 333,330 135,618 276,803 45,757 6,157 1.86% 44.64% SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR M A I N O F F I C E ( 8 1 7 ) 4 1 0 - 2 9 1 5 3205 E. Highway 114 Southlake, Texas 76092 LO C AT I O N S 95 Trophy Club Drive 891 E. Keller Parkway 909 Stevens 609 Rock Island Avenue 608 W. Hale Avenue Trophy Club, Texas 76262 Keller, Texas 76248 Bridgeport, Texas 76426 Boyd, Texas 76023 Decatur, Texas 76234 M A R K L . J O N E S Pre s i d e n t a n d C E O C I T I E S O F S O U T H L A K E, T R O P HY C LU B & K E L L E R D E P O S I T M A R K E T S H A R E W I S E CO U N T Y D E P O S I T M A R K E T S H A R E S E N I O R O F F I C E R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer F. Mills Shallene Wise County Market President Henson Dunn Senior Vice President Les Mariotti Senior Vice President and Chief Financial Officer J. Sean Shope Senior Vice President Steve Sims Senior Vice President Trent Swearengin Senior Vice President D I R E C TO R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer William Ray Cook, Jr., CPA Cook McDonald & Co. Jack Dortch Jack Dortch Farmers Insurance Agency F. Scott Dueser First Financial Bankshares, Inc. J. Bruce Hildebrand First Financial Bankshares, Inc. Derrell E. Johnson Former President and CEO Rady Associates Consulting Engineers K. Wayne Lee President, DDFW Properties Ralph Manoushagian Land Manager Approach Resources, Inc. Oil & Gas Exploration Jim Ridenour President Sunbelt Station Service IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 264,306 157,919 210,764 39,084 2,515 0.94% 62.24% DEC. 31, 2008 $ 272,185 163,936 217,818 37,664 2,793 0.99% 61.32% STEPHENVILLE GRANBURY GLEN ROSE ACTON M A I N O F F I C E ( 2 5 4 ) 9 6 5 - 5 0 3 6 2201 W. South Loop Stephenville, Texas 76401 LO C AT I O N S 1875 Lingleville Road 199 N. Columbia 400 Big Bend Trail 2007 East Highway 377 1600 S. Morgan Stephenville, Texas 76401 Stephenville, Texas 76401 Glen Rose, Texas 76043 Granbury, Texas 76049 Granbury, Texas 76048 2915 Fall Creek Highway Acton, Texas 76049 R O N N . M U L L I N S Pre s i d e n t a n d C E O E R AT H , H O O D & S O M E R V E L L CO U N T I E S D E P O S I T M A R K E T S H A R E D I R E C TO R S Ron N. Mullins Chairman of the Board, President and Chief Executive Officer Jerry Parham Investments S E N I O R O F F I C E R S President John Power Bart Rodgers Ron N. Mullins Angie Dusek Chairman of the Board, Senior Vice President and Chief Executive Officer Donna Feller Senior Vice President Keith Brown Prime Building Components, LLC F. Scott Dueser First Financial Bankshares, Inc. Glen Rose Market President Connie Frank J. Bruce Hildebrand Senior Vice President First Financial Bankshares, Inc. Julie Graham Frank Terrell, M.D. Ophthalmologist John Terrill Attorney ADVISORY DIRECTORS SPEC Management Co. Ron Hance Hance Financial Services Granbury Market President Mike Gandy Dereece Howell Executive Vice President Vickie Pettit and Cashier Senior Vice President Senior Vice President Monty Bedwell Robert Reeves Executive Vice President Senior Vice President Robert Lemons Larry Upshaw Executive Vice President Senior Vice President Bill Hooks Autos - Real Estate John Moore Craft Associates, Inc. Ron Pack RP’s Western Wear, Inc. Bill Parham Parham & Parham, CPAs IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 350,059 181,726 298,355 44,383 4,267 1.31% 48.89% DEC. 31, 2008 $ 330,942 192,202 279,209 42,033 5,107 1.56% 48.29% SWEETWATER ROBY TRENT MERKEL J . V. M A R T I N Chairman of the Board K I R BY N . A N D R E WS President and CEO NOLAN & FISHER COUNTIES D E P O S I T M A R K E T S H A R E M A I N O F F I C E 201 Elm LO C AT I O N S 123 N. Concho 117 N. Main 301 Edwards Street ( 3 2 5 ) 2 3 5 - 6 6 0 0 Sweetwater, Texas 79556 Roby, Texas 79543 Trent, Texas 79561 Merkel, Texas 79536 S E N I O R O F F I C E R S D I R E C TO R S J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Donnie Ruppert Executive Vice President and Cashier/Controller Rodney Foster Senior Vice President Lending J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Jeff Branson General Partner Williamson-Branson Real Estate Louis Brooks, Jr. Rancher Ronnie Cox Owner Cox Jewelry J. Bruce Hildebrand First Financial Bankshares, Inc. Jay Lawrence President MAL Enterprises, Inc. Thomas L. Rees, Sr. Rees and Rees, Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 133,322 67,463 119,011 13,248 2,420 1.81% 51.54% DEC. 31, 2008 $ 130,078 68,665 117,320 11,833 2,168 1.66% 51.87% WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH D OYL E L E E Chairman of the Board and Chief Executive O fficer M A I N O F F I C E 101 N. Main LO C AT I O N S 101 College Park Drive 1214 N. Main 210 N. Main 505 FM 1187 N. 4100 E. I-20 1100 FM 1189 ( 8 1 7 ) 5 9 6 - 0 3 0 7 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Aledo, Texas 76008 Willow Park, Texas 76087 Brock, Texas 76066 550 Bailey Avenue Suite 300 Fort Worth, Texas 76107 S E N I O R O F F I C E R S D I R E C TO R S Doyle Lee Chairman of the Board and Chief Executive Officer Doyle Lee Chairman of the Board and Chief Executive Officer Bob Bradberry Executive Vice President Larry Mangrem Executive Vice President and Cashier Mike Carter Senior Vice President Lori Hill Senior Vice President Justin Hooper Senior Vice President Kent Hudson Senior Vice President Jimmie Sue Lawson Senior Vice President Greg L. Barron President G.L. Barron Company, Inc. Stephen G. Brogdon, D.D.S. General and Cosmetic Dentistry Mac A. Coalson Owner Mac A. Coalson Real Estate F. Scott Dueser First Financial Bankshares, Inc. Clay Hicks Oil and Gas Investments Nan Kingsley President Bluestem Studios, Inc. Mike White, O.D. Therapeutic Optometrist J AY G I B B S President Jay Gibbs President Jay Gibbs President PARKER COUNTY D E P O S I T M A R K E T S H A R E IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 355,621 149,607 309,465 33,608 5,124 1.49% 49.92% DEC. 31, 2008 $ 375,424 156,616 331,288 29,326 5,830 1.71% 50.52% First Financial Trust & Asset Management Co., N.A. Abilene Office 400 Pine St. LO C AT I O N S Fort Worth Office 550 Bailey Ave., Suite 300 Odessa Office 2651 JBS Parkway Bldg. 4, Suite E San Angelo Office 301 W. Beauregard Stephenville Office 2201 W. South Loop Sweetwater Office 201 Elm ( 3 2 5 ) 6 2 7 - 7 1 0 0 ( 8 1 7 ) 4 1 0 - 4 9 7 0 ( 4 3 2 ) 3 6 7 - 8 9 0 0 ( 3 2 5 ) 6 5 9 - 5 9 8 7 ( 2 5 4 ) 9 1 8 - 6 2 6 2 ( 3 2 5 ) 2 3 5 - 6 6 4 0 performed well in 2009 considering the challenging economic environment it confronted. Total assets continued to grow, and our equity and fixed-income investments all outperformed their respective bench- marks. We also opened an office in a new market. Assets at year-end totaled $1.67 billion in book value and $2.10 billion in market value. These levels rep- resented increases of 2.1 percent and 11.7 percent, respectively, from 2008. Earnings for 2009 were down from 2008, reflecting the low levels of the stock market that prevailed in the first half of the year. Also contributing to the earnings reduction were significantly lower oil and gas prices, which negatively affected the large oil and gas portfolio that we manage. Net income decreased $179,000, or 6.4 percent, to $2.6 million from $2.8 million in 2008. Trust fee revenue, the main source of our net income, decreased $358,000, or 3.8 percent, to $9.1 million from $9.4 million. Although the markets were extremely volatile throughout the year, our investment team produced outstanding results. All of our equity and fixed-income investments exceeded their respective benchmarks. A highlight of the year was our opening in June of an office in Odessa, which is a new market for us. Barbara Hill manages this office. We are very pleased with the results she has achieved thus far and are excited about the prospects for our growth in the Permian Basin. Our Fort Worth office also achieved excellent results in 2009. Fee revenue for the office increased $123,000, or 41.4 percent, and the number of accounts increased by 34.5 percent. To accommodate the expansion of our business, we moved into a larger office suite during the year. Our experienced team of trust professionals remains committed to providing quality customer service and superior investment results. 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 TRUST ASSETS (IN MILLIONS) $1,664 $1,631 $1,428 $1,300 $1,150 $ 400 600 800 1,000 1,200 1,400 1,600 1,800 TRUST FEES (IN MILLIONS) $9.08 $9.44 $8.75 $7.66 $7.07 $2.631 $2.810 $2.549 $ 1 2 3 4 5 6 7 8 9 10 TRUST NET INCOME (IN MILLIONS) $2.076 $1.909 $ 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 (L-R - Back Row) DAVID W. CASTLEBERRY (Stephenville), RICHARD YOUNG (Abilene), MICHAEL SHEEHAN (Sweetwater), KIRK THAXTON (Abilene), DAVID BYRD (San Angelo) and JOE AYRES (Stephenville) (L-R - seated) BARBARA HILL (Odessa) and KONRAD HALBERT (Fort Worth) O F F I C E R S Kirk W. Thaxton Chairman of the Board, President, and Chief Executive Officer David Castleberry Senior Vice President Manager, Stephenville D I R E C TO R S Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Byrd Executive Vice President Manager, San Angelo Konrad S. Halbert Executive Vice President Manager, Fort Worth Michael D. Sheehan Executive Vice President Manager, Sweetwater Richard Young Executive Vice President Manager, Abilene Shelton Family Foundation Chairman of the Board, President Robert S. Patterson Former President & CEO First Financial Trust & Asset Management Company, N.A. Kirk W. Thaxton and Chief Executive Officer First Financial Trust & Asset Management Company, N.A. ADVISORY DIRECTORS Beckham Rector & Eagle Paul L. Cannon First Financial Bankshares, Inc. John L. Beckham Angelo Glass & Mirror McMahon Surovik Suttle, P.C. Barbara Hill Senior Vice President Manager, Odessa Larry Cleveland Senior Vice President Manager, Operations Ralph Gibson Senior Vice President Manager, Investments David B. Pitzer Senior Vice President Manager, Real Property Randy Spiva Senior Vice President Manager, Oil & Gas David Copeland President Ronnie Cox Owner Cox Jewelry F. Scott Dueser David F. Lupton President Company, Inc. Bill Parham Parham & Parham, CPAs (L - R ): CLAY TRUMBLE, KAY BERRY, GARY TUCKER, DENNIS STECKLY, MICHELLE McDONALD AND LARRY WILLIAMS First Technology Services, Inc. (FTS) is the shared services company for First Financial Bankshares, Inc. (FFIN) Our mission is to maximize efficiencies and control costs for common functions within FFIN while providing the best possible customer service to our internal and external customers. FTS plays a key role in customer service functions within FFIN through its customer call center and innovative technology for online banking, auto- matic bill pay services, backroom operations and other technology-based banking services. FTS also supports employees with classroom and online technology training and a responsive technology help desk. FTS provides more than 100 technology applications to FFIN and its family of 10 banks and the Trust Company. Services include check processing, account services, a help desk, desktop support, network services, server support, software support, information security, computer operations, business continuity planning, loan and credit operations, loan document preparation and the corporate call center. M A I N O F F I C E 400 Pine Abilene, Texas 79601 ( 3 2 5 ) 6 2 7 - 7 1 9 5 S E N I O R O F F I C E R S Gary D. Tucker President and Chief Executive Officer Kay Berry Senior Vice President Deposit Operations Michelle McDonald Senior Vice President Customer Service D I R E C TO R S Clay Trumble Senior Vice President Credit Administration Dennis Steckly Senior Vice President Production Services Larry Williams Senior Vice President Infrastructure Services Gary L. Webb Chairman of the Board Ron Butler President and First Technology Services, Inc. Chief Executive Officer Executive Vice President, First Financial Bank Abilene Operations First Financial Bankshares, Inc. Gary D. Tucker President and Chief Executive Officer First Technology Services, Inc. F. Scott Dueser Chairman, President and Chief Executive Officer Jay Gibbs President First Financial Bank Weatherford Derrell E. Johnson Former President and Chief Executive Officer Rady and Associates Consulting Engineers First Financial Bankshares, Inc. Les Mariotti J. Bruce Hildebrand Chief Financial Officer Executive Vice President and First Financial Bank Southlake Senior Vice President and Chief Financial Officer First Financial Bankshares, Inc. Mike Mauldin Michael L. Boyd Chairman, President and Chief Executive Officer First Financial Bank San Angelo Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 2 0 0 9 W A L T E R J O H N S O N A W A R D K E N N E T H T . M U R P H Y Through the 120 years of First Financial Bankshares’ history, there have been many people who have contributed greatly to the success of this company, and Ken Murphy has to be at the top of that list with Walter Johnson and the James family. Therefore, it is extremely appropriate that we honor Ken for his outstanding leadership during the past 39 years with the Walter Johnson Award, as well as dedicating this Annual Report to him. Ken was hired by Walter Johnson in 1971 and has held the following positions: First Financial Bank, N.A., Abilene (formerly First National Bank of Abilene) Executive Vice President President President and Chief Executive Officer Chairman of the Board and Chief Executive Officer 1993–2000 Chairman of the Board First Financial Bankshares, Inc. Executive Vice President President and Chief Executive Officer Chairman, President and Chief Executive Officer Chairman of the Board Senior Chairman of the Board 1971-1975 1975-1981 1981-1984 1984-1993 1973-1985 1985-1986 1986-2000 2001-2007 2008-2009 When Ken joined the bank in 1971, the Company had total assets of $87 million and net income of $806,000. This past year we finished the year with total assets of $3.3 billion and net earnings of $53.8 million. During Ken’s tenure with this company, we have experienced great success. While he was President and CEO of First Financial Bankshares, he purchased 11 banks and added numerous locations to the Company. During his tenure, he held many civic, cultural and professional leadership positions with the most notable positions being: President, Abilene Chamber of Commerce; Chairman, United Way Campaign in Abilene; Chairman, West Texas Rehabilitation Center; Chairman and Trustee, Alliance for Women and Children; Director, Hendrick Medical Center; Director, West Central Texas Municipal Water District; Director, Hardin-Simmons University Board of Development; Director, The Grace Museum of Abilene; Director, Treasurer and Chairman, Texas Bankers Association; and Class A Director, Federal Reserve Bank of Dallas. In 2003, Ken was honored as Outstanding Citizen of the Year by the Abilene Chamber of Commerce. As he retires from the First Financial Bankshares Board after 37 years, he leaves us with a great legacy and many Murphy stories, reports and sayings, but, most of all, his knowledge of how to manage outstanding banks. For me personally, Ken has been a mentor, confidant and boss for 33 years. I have learned so much from him. Although he is retiring from the Board, I know we will continue to have his advice and counsel, as well as his ever-present support and encouragement. It is our pleasure to honor Ken Murphy with the Walter Johnson Award for what he has contributed in going beyond the call of duty for our company and, especially, for our customers, stockholders and employees. Sincerely, F. Scott Dueser 13 15 17 19 21 23 14 16 18 20 22 BACK ROW (L-R): JOSEPH CANON, DAVID COPELAND, KADE MATTHEWS, RON GIDDIENS, MURRAY EDWARDS, TUCKER BRIDWELL, JOHNNY TROTTER FRONT ROW (L - R): KENNETH MURPHY, DERRELL JOHNSON, DIAN STAI, MAC COALSON, F. SCOTT DUESER BOARD MEMBER YEAR ELECTED BOARD MEMBER YEAR ELECTED COMMITTEE APPOINTMENT COMMITTEE APPOINTMENT Tucker S. Bridwell, CPA 2007 2, 4 Board of Directors F. Scott Dueser Chairman of the Board, President and CEO President Mansefeldt Investment Corporation Joseph E. Canon, J.D. Executive Director Dodge Jones Foundation Mac A. Coalson Mac A. Coalson Real Estate David Copeland, CPA President, SIPCO, Inc. and Shelton Family Foundation Murray Edwards Principal, The Edwards Group Ron Giddiens Investments/Business Consulting Former President - Bank of the West, San Angelo 1991 1996 1996 1998 2006 2009 1 3 2 2 1, 3, 4 1, 2, 4 2000 1998 1971 1993 Derrell E. Johnson Former President and CEO Rady and Associates Consulting Engineers Kade Matthews Ranching and Investments Kenneth T. Murphy Senior Chairman of the Board Dian Graves Stai Chair, Mansefeldt Investment Corp. Director, Dian Graves Owen Foundation Johnny E. Trotter President and CEO 2 3 1, 4 1, 3, 4 Livestock Investors, Ltd. 2003 1, 3, 4 * CO M M I T T E E S 1 Executive Committee – F. Scott Dueser, Chairman 2 Audit Committee – David Copeland, Chairman 3 Compensation Committee – Dian Graves Stai, Chairman 4 Nominating/Corporate Governance Committee – Mac A. Coalson, Chairman 24 Corporate Information OFFICERS F. Scott Dueser Chairman, President and Chief Executive Officer J. Bruce Hildebrand Executive Vice President and Chief Financial Officer Gary S. Gragg Executive Vice President, Lending Gary L. Webb Executive Vice President, Operations Tommy J. Barrow Senior Vice President, Lending Courtney Jordan Senior Vice President, Training and Education Michele P. Stevens Senior Vice President, Advertising and Marketing William A. Rowe Vice President, Investment Services Gaila Kilpatrick Assistant Secretary Bob Goodner Compliance Officer Michelle Fagan Compliance Officer A N N UA L M E E T I N G Tuesday, April 27, 2010 10:30 a.m. Abilene Civic Center 1100 N. Sixth Abilene, Texas 79601 CORPORATE OFFICES 400 Pine Abilene, Texas 79601 325-627-7155 • 800-588-7000 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 T R A N S F E R AG E N T Registrar and Transfer Company 800-368-5948 ADDRESS SHAREHOLDER INQUIRIES TO: Registrar and Transfer Company Investor Relations Department 10 Commerce Drive Cranford, NJ 07016 E-MAIL ADDRESS: info@rtco.com REGISTRAR AND TRANSFER COMPANY WEB SITE www.rtco.com S E N D C E R T I F I C AT E S F O R T R A N S F E R & A D D R E S S C H A N G E S TO : Registrar & Transfer Company 10 Commerce Drive Cranford, NJ 07016-3572 4 0 0 P i n e • A b i l e n e , Te x a s 7 9 6 0 1 www.f f in.com 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. Note: Market share data is calculated from June 30, 2009, deposit information compiled by the Federal Deposit Insurance Corporation. FIRST FINANCIAL BANKSHARES EXECUTIVE OFFICERS (L - R ): J. BRUCE HILDEBRAND, MICHELE P. STEVENS, GARY S. GRAGG, F. SCOTT DUESER, GARY L. WEBB, KIRK W. THAXTON AND TOMMY J. BARROW SM A F a m i l y o f C o m m u n i t y B a n k s S M 4 0 0 Pi n e • Abi l e n e , Te x a s 7 9 6 0 1 • w w w. f f i n . c om 21% 47% 30% 7% 15% 20% 37% 26% HEREFORD M A I N O F F I C E 212 E. Third ( 8 0 6 ) 3 6 3 - 8 2 0 0 Hereford, Texas 79045 M I K E M AU L D I N Pre s i d e n t a n d C E O D I R E C TO R S D E A F S M I T H CO U N T Y D E P O S I T M A R K E T S H A R E 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 Pet Care, Inc. Allen Parson Restaurateur and Investments Craig Smith Rancher and Retired Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 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 S E N I O R O F F I C E R S Mike Mauldin Chairman of the Board, President and Chief Executive Officer Steve Gilbert Executive Vice President and Cashier Kent Jackson Executive Vice President and Chief Credit Officer IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 147,652 96,028 130,728 12,284 2,121 1.56% 47.16% DEC. 31, 2008 $ 149,264 94,426 118,656 10,728 2,104 1.54% 44.71% MINERAL WELLS M A I N O F F I C E 1900 E. Hubbard ( 9 4 0 ) 3 2 7 - 5 4 0 0 Mineral Wells, Texas 76067 K E N N E T H W I L L I A M S O N Pre s i d e n t a n d C E O PA LO P I N TO CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Spencer Baum, D.D.S. Baum Dental Clinic F. Scott Dueser First Financial Bankshares, Inc. George Gault Attorney Gault & Gault Terry L. Murphy President and Chief Executive Officer Murphy and Murphy, Inc. David Ramsey, M.D. Family Practice Center Albert Rincon Vice President of Operations Texas Packaging Company, Inc. Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Paul McGettes Chief Financial Officer Upham Oil & Gas Company, L.P. S E N I O R O F F I C E R S Brad Seay Lending Executive Vice President Eddie Gregory Senior Vice President and Cashier Mike Mearse Senior Vice President Lending IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,259 101,050 132,997 22,436 3,542 2.10% 39.01% DEC. 31, 2008 $ 173,565 99,555 138,325 20,276 3,147 1.93% 43.43% SAN ANGELO M A I N O F F I C E 301 W. Beauregard LO C AT I O N S www.historicmuralsofsanangelo.org ( 3 2 5 ) 6 5 9 - 5 9 0 0 San Angelo, Texas 76903 3471 Knickerbocker San Angelo, Texas 76904 M I C H A E L L . B OYD Pre s i d e n t a n d C E O TO M G R E E N CO U N T Y D E P O S I T M A R K E T S H A R E Michael L. Boyd Ron Giddiens Chairman of the Board, President Investments/Business and Chief Executive Officer Consulting D I R E C TO R S Hon. Marilyn Aboussie Chief Justice, Retired W. Dan Cravy, M.D. Physician Pat Crump President and CEO Former President - Bank of the West, San Angelo Joey Henderson President Porter Henderson Implement Company, Inc. J. Bruce Hildebrand Baptist Memorials Services First Financial Bankshares, Inc. Rick DeHoyos Attorney Robert D. Housley President and Owner F. Scott Dueser First Financial Bankshares, Inc. Doug Eakman Owner Pecos Street Pharmacy Steve Eustis Commercial Real Estate David F. Lupton President Angelo Glass & Mirror Company, Inc. John E. Schwartz, Sr. Farmer/Rancher Mary Jane Steadman Attorney Real Estate Investment Management S E N I O R O F F I C E R S Michael L. Boyd Wes Masters Chairman of the Board, Senior Vice President President Robert Pate Jim Davidson and Cashier Senior Vice President Executive Vice President Chuck Shore Senior Vice President Executive Vice President Ruth Wheeler Senior Vice President Cindy George Senior Vice President Bill Wiedenfeld Senior Vice President Carrol E. Hill Senior Vice President and Chief Executive Officer Reba Priddy Glasheen, Valles & DeHoyos, LLP Housley Communications IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 349,676 139,847 290,797 48,441 6,250 1.82% 45.54% DEC. 31, 2008 $ 333,330 135,618 276,803 45,757 6,157 1.86% 44.64% SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR M A I N O F F I C E ( 8 1 7 ) 4 1 0 - 2 9 1 5 3205 E. Highway 114 Southlake, Texas 76092 LO C AT I O N S 95 Trophy Club Drive 891 E. Keller Parkway 909 Stevens 609 Rock Island Avenue 608 W. Hale Avenue Trophy Club, Texas 76262 Keller, Texas 76248 Bridgeport, Texas 76426 Boyd, Texas 76023 Decatur, Texas 76234 M A R K L . J O N E S Pre s i d e n t a n d C E O C I T I E S O F S O U T H L A K E, T R O P HY C LU B & K E L L E R D E P O S I T M A R K E T S H A R E W I S E CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer William Ray Cook, Jr., CPA Cook McDonald & Co. Jack Dortch Jack Dortch Farmers Insurance Agency F. Scott Dueser First Financial Bankshares, Inc. J. Bruce Hildebrand First Financial Bankshares, Inc. Derrell E. Johnson Former President and CEO Rady Associates Consulting Engineers K. Wayne Lee President, DDFW Properties Ralph Manoushagian Land Manager Approach Resources, Inc. Oil & Gas Exploration Jim Ridenour President Sunbelt Station Service S E N I O R O F F I C E R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer F. Mills Shallene Wise County Market President Henson Dunn Senior Vice President Les Mariotti Senior Vice President and Chief Financial Officer J. Sean Shope Senior Vice President Steve Sims Senior Vice President Trent Swearengin Senior Vice President IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 264,306 157,919 210,764 39,084 2,515 0.94% 62.24% DEC. 31, 2008 $ 272,185 163,936 217,818 37,664 2,793 0.99% 61.32% STEPHENVILLE GRANBURY GLEN ROSE ACTON R O N N . M U L L I N S Pre s i d e n t a n d C E O E R AT H , H O O D & S O M E R V E L L CO U N T I E S D E P O S I T M A R K E T S H A R E S E N I O R O F F I C E R S Ron N. Mullins Chairman of the Board, President and Chief Executive Officer John Power Glen Rose Market President Bart Rodgers Granbury Market President Dereece Howell Executive Vice President and Cashier Angie Dusek Senior Vice President Donna Feller Senior Vice President Connie Frank Senior Vice President Mike Gandy Senior Vice President Vickie Pettit Senior Vice President Monty Bedwell Executive Vice President Robert Reeves Senior Vice President Robert Lemons Executive Vice President Larry Upshaw Senior Vice President M A I N O F F I C E ( 2 5 4 ) 9 6 5 - 5 0 3 6 2201 W. South Loop Stephenville, Texas 76401 LO C AT I O N S 1875 Lingleville Road 199 N. Columbia 400 Big Bend Trail 2007 East Highway 377 1600 S. Morgan Stephenville, Texas 76401 Stephenville, Texas 76401 Glen Rose, Texas 76043 Granbury, Texas 76049 Granbury, Texas 76048 2915 Fall Creek Highway Acton, Texas 76049 D I R E C TO R S Ron N. Mullins Chairman of the Board, President and Chief Executive Officer Jerry Parham Investments Frank Terrell, M.D. Ophthalmologist John Terrill Attorney ADVISORY DIRECTORS Julie Graham SPEC Management Co. Ron Hance Hance Financial Services Keith Brown Prime Building Components, LLC F. Scott Dueser First Financial Bankshares, Inc. J. Bruce Hildebrand First Financial Bankshares, Inc. Bill Hooks Autos - Real Estate John Moore Craft Associates, Inc. Ron Pack RP’s Western Wear, Inc. Bill Parham Parham & Parham, CPAs IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 350,059 181,726 298,355 44,383 4,267 1.31% 48.89% DEC. 31, 2008 $ 330,942 192,202 279,209 42,033 5,107 1.56% 48.29% SWEETWATER ROBY TRENT MERKEL J . V. M A R T I N Chairman of the Board K I R BY N . A N D R E WS President and CEO NOLAN & FISHER COUNTIES D E P O S I T M A R K E T S H A R E M A I N O F F I C E 201 Elm LO C AT I O N S 123 N. Concho 117 N. Main 301 Edwards Street ( 3 2 5 ) 2 3 5 - 6 6 0 0 Sweetwater, Texas 79556 Roby, Texas 79543 Trent, Texas 79561 Merkel, Texas 79536 S E N I O R O F F I C E R S D I R E C TO R S J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Donnie Ruppert Executive Vice President and Cashier/Controller Rodney Foster Senior Vice President Lending J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Jeff Branson General Partner Williamson-Branson Real Estate Louis Brooks, Jr. Rancher Ronnie Cox Owner Cox Jewelry J. Bruce Hildebrand First Financial Bankshares, Inc. Jay Lawrence President MAL Enterprises, Inc. Thomas L. Rees, Sr. Rees and Rees, Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 133,322 67,463 119,011 13,248 2,420 1.81% 51.54% DEC. 31, 2008 $ 130,078 68,665 117,320 11,833 2,168 1.66% 51.87% WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH D OYL E L E E Chairman of the Board and Chief Executive O fficer M A I N O F F I C E 101 N. Main LO C AT I O N S 101 College Park Drive 1214 N. Main 210 N. Main 505 FM 1187 N. 4100 E. I-20 1100 FM 1189 ( 8 1 7 ) 5 9 6 - 0 3 0 7 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Aledo, Texas 76008 Willow Park, Texas 76087 Brock, Texas 76066 550 Bailey Avenue Suite 300 Fort Worth, Texas 76107 S E N I O R O F F I C E R S D I R E C TO R S Doyle Lee Chairman of the Board and Chief Executive Officer Doyle Lee Chairman of the Board and Chief Executive Officer Bob Bradberry Executive Vice President Larry Mangrem Executive Vice President and Cashier Mike Carter Senior Vice President Lori Hill Senior Vice President Justin Hooper Senior Vice President Kent Hudson Senior Vice President Jimmie Sue Lawson Senior Vice President Greg L. Barron President G.L. Barron Company, Inc. Stephen G. Brogdon, D.D.S. General and Cosmetic Dentistry Mac A. Coalson Owner Mac A. Coalson Real Estate F. Scott Dueser First Financial Bankshares, Inc. Clay Hicks Oil and Gas Investments Nan Kingsley President Bluestem Studios, Inc. Mike White, O.D. Therapeutic Optometrist J AY G I B B S President Jay Gibbs President Jay Gibbs President PARKER COUNTY D E P O S I T M A R K E T S H A R E IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 355,621 149,607 309,465 33,608 5,124 1.49% 49.92% DEC. 31, 2008 $ 375,424 156,616 331,288 29,326 5,830 1.71% 50.52% First Financial Trust & Asset Management Co., N.A. Abilene Office 400 Pine St. LO C AT I O N S Fort Worth Office 550 Bailey Ave., Suite 300 Odessa Office 2651 JBS Parkway Bldg. 4, Suite E San Angelo Office 301 W. Beauregard Stephenville Office 2201 W. South Loop Sweetwater Office 201 Elm ( 3 2 5 ) 6 2 7 - 7 1 0 0 ( 8 1 7 ) 4 1 0 - 4 9 7 0 ( 4 3 2 ) 3 6 7 - 8 9 0 0 ( 3 2 5 ) 6 5 9 - 5 9 8 7 ( 2 5 4 ) 9 1 8 - 6 2 6 2 ( 3 2 5 ) 2 3 5 - 6 6 4 0 performed well in 2009 considering the challenging economic environment it confronted. Total assets continued to grow, and our equity and fixed-income investments all outperformed their respective bench- marks. We also opened an office in a new market. Assets at year-end totaled $1.67 billion in book value and $2.10 billion in market value. These levels rep- resented increases of 2.1 percent and 11.7 percent, respectively, from 2008. Earnings for 2009 were down from 2008, reflecting the low levels of the stock market that prevailed in the first half of the year. Also contributing to the earnings reduction were significantly lower oil and gas prices, which negatively affected the large oil and gas portfolio that we manage. Net income decreased $179,000, or 6.4 percent, to $2.6 million from $2.8 million in 2008. Trust fee revenue, the main source of our net income, decreased $358,000, or 3.8 percent, to $9.1 million from $9.4 million. Although the markets were extremely volatile throughout the year, our investment team produced outstanding results. All of our equity and fixed-income investments exceeded their respective benchmarks. A highlight of the year was our opening in June of an office in Odessa, which is a new market for us. Barbara Hill manages this office. We are very pleased with the results she has achieved thus far and are excited about the prospects for our growth in the Permian Basin. Our Fort Worth office also achieved excellent results in 2009. Fee revenue for the office increased $123,000, or 41.4 percent, and the number of accounts increased by 34.5 percent. To accommodate the expansion of our business, we moved into a larger office suite during the year. Our experienced team of trust professionals remains committed to providing quality customer service and superior investment results. 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 TRUST ASSETS (IN MILLIONS) $1,664 $1,631 $1,428 $1,300 $1,150 $ 400 600 800 1,000 1,200 1,400 1,600 1,800 TRUST FEES (IN MILLIONS) $9.08 $9.44 $8.75 $7.66 $7.07 $2.631 $2.810 $2.549 $ 1 2 3 4 5 6 7 8 9 10 TRUST NET INCOME (IN MILLIONS) $2.076 $1.909 $ 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 (L-R - Back Row) DAVID W. CASTLEBERRY (Stephenville), RICHARD YOUNG (Abilene), MICHAEL SHEEHAN (Sweetwater), KIRK THAXTON (Abilene), DAVID BYRD (San Angelo) and JOE AYRES (Stephenville) (L-R - seated) BARBARA HILL (Odessa) and KONRAD HALBERT (Fort Worth) O F F I C E R S Kirk W. Thaxton Chairman of the Board, President, and Chief Executive Officer David Castleberry Senior Vice President Manager, Stephenville D I R E C TO R S Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Byrd Executive Vice President Manager, San Angelo Konrad S. Halbert Executive Vice President Manager, Fort Worth Michael D. Sheehan Executive Vice President Manager, Sweetwater Richard Young Executive Vice President Manager, Abilene Shelton Family Foundation Chairman of the Board, President Robert S. Patterson Former President & CEO First Financial Trust & Asset Management Company, N.A. Kirk W. Thaxton and Chief Executive Officer First Financial Trust & Asset Management Company, N.A. ADVISORY DIRECTORS Beckham Rector & Eagle Paul L. Cannon First Financial Bankshares, Inc. John L. Beckham Angelo Glass & Mirror McMahon Surovik Suttle, P.C. Barbara Hill Senior Vice President Manager, Odessa Larry Cleveland Senior Vice President Manager, Operations Ralph Gibson Senior Vice President Manager, Investments David B. Pitzer Senior Vice President Manager, Real Property Randy Spiva Senior Vice President Manager, Oil & Gas David Copeland President Ronnie Cox Owner Cox Jewelry F. Scott Dueser David F. Lupton President Company, Inc. Bill Parham Parham & Parham, CPAs (L - R ): CLAY TRUMBLE, KAY BERRY, GARY TUCKER, DENNIS STECKLY, MICHELLE McDONALD AND LARRY WILLIAMS First Technology Services, Inc. (FTS) is the shared services company for First Financial Bankshares, Inc. (FFIN) Our mission is to maximize efficiencies and control costs for common functions within FFIN while providing the best possible customer service to our internal and external customers. FTS plays a key role in customer service functions within FFIN through its customer call center and innovative technology for online banking, auto- matic bill pay services, backroom operations and other technology-based banking services. FTS also supports employees with classroom and online technology training and a responsive technology help desk. FTS provides more than 100 technology applications to FFIN and its family of 10 banks and the Trust Company. Services include check processing, account services, a help desk, desktop support, network services, server support, software support, information security, computer operations, business continuity planning, loan and credit operations, loan document preparation and the corporate call center. M A I N O F F I C E 400 Pine Abilene, Texas 79601 ( 3 2 5 ) 6 2 7 - 7 1 9 5 S E N I O R O F F I C E R S Gary D. Tucker President and Chief Executive Officer Kay Berry Senior Vice President Deposit Operations Michelle McDonald Senior Vice President Customer Service D I R E C TO R S Clay Trumble Senior Vice President Credit Administration Dennis Steckly Senior Vice President Production Services Larry Williams Senior Vice President Infrastructure Services Gary L. Webb Chairman of the Board Ron Butler President and First Technology Services, Inc. Chief Executive Officer Executive Vice President, First Financial Bank Abilene Operations First Financial Bankshares, Inc. Gary D. Tucker President and Chief Executive Officer First Technology Services, Inc. F. Scott Dueser Chairman, President and Chief Executive Officer Jay Gibbs President First Financial Bank Weatherford Derrell E. Johnson Former President and Chief Executive Officer Rady and Associates Consulting Engineers First Financial Bankshares, Inc. Les Mariotti J. Bruce Hildebrand Chief Financial Officer Executive Vice President and First Financial Bank Southlake Senior Vice President and Chief Financial Officer First Financial Bankshares, Inc. Mike Mauldin Michael L. Boyd Chairman, President and Chief Executive Officer First Financial Bank San Angelo Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 2 0 0 9 W A L T E R J O H N S O N A W A R D K E N N E T H T . M U R P H Y Through the 120 years of First Financial Bankshares’ history, there have been many people who have contributed greatly to the success of this company, and Ken Murphy has to be at the top of that list with Walter Johnson and the James family. Therefore, it is extremely appropriate that we honor Ken for his outstanding leadership during the past 39 years with the Walter Johnson Award, as well as dedicating this Annual Report to him. Ken was hired by Walter Johnson in 1971 and has held the following positions: First Financial Bank, N.A., Abilene (formerly First National Bank of Abilene) Executive Vice President President President and Chief Executive Officer Chairman of the Board and Chief Executive Officer 1993–2000 Chairman of the Board First Financial Bankshares, Inc. Executive Vice President President and Chief Executive Officer Chairman, President and Chief Executive Officer Chairman of the Board Senior Chairman of the Board 1971-1975 1975-1981 1981-1984 1984-1993 1973-1985 1985-1986 1986-2000 2001-2007 2008-2009 When Ken joined the bank in 1971, the Company had total assets of $87 million and net income of $806,000. This past year we finished the year with total assets of $3.3 billion and net earnings of $53.8 million. During Ken’s tenure with this company, we have experienced great success. While he was President and CEO of First Financial Bankshares, he purchased 11 banks and added numerous locations to the Company. During his tenure, he held many civic, cultural and professional leadership positions with the most notable positions being: President, Abilene Chamber of Commerce; Chairman, United Way Campaign in Abilene; Chairman, West Texas Rehabilitation Center; Chairman and Trustee, Alliance for Women and Children; Director, Hendrick Medical Center; Director, West Central Texas Municipal Water District; Director, Hardin-Simmons University Board of Development; Director, The Grace Museum of Abilene; Director, Treasurer and Chairman, Texas Bankers Association; and Class A Director, Federal Reserve Bank of Dallas. In 2003, Ken was honored as Outstanding Citizen of the Year by the Abilene Chamber of Commerce. As he retires from the First Financial Bankshares Board after 37 years, he leaves us with a great legacy and many Murphy stories, reports and sayings, but, most of all, his knowledge of how to manage outstanding banks. For me personally, Ken has been a mentor, confidant and boss for 33 years. I have learned so much from him. Although he is retiring from the Board, I know we will continue to have his advice and counsel, as well as his ever-present support and encouragement. It is our pleasure to honor Ken Murphy with the Walter Johnson Award for what he has contributed in going beyond the call of duty for our company and, especially, for our customers, stockholders and employees. Sincerely, F. Scott Dueser 13 15 17 19 21 23 14 16 18 20 22 BACK ROW (L-R): JOSEPH CANON, DAVID COPELAND, KADE MATTHEWS, RON GIDDIENS, MURRAY EDWARDS, TUCKER BRIDWELL, JOHNNY TROTTER FRONT ROW (L - R): KENNETH MURPHY, DERRELL JOHNSON, DIAN STAI, MAC COALSON, F. SCOTT DUESER BOARD MEMBER YEAR ELECTED BOARD MEMBER YEAR ELECTED COMMITTEE APPOINTMENT COMMITTEE APPOINTMENT Tucker S. Bridwell, CPA 2007 2, 4 Board of Directors F. Scott Dueser Chairman of the Board, President and CEO President Mansefeldt Investment Corporation Joseph E. Canon, J.D. Executive Director Dodge Jones Foundation Mac A. Coalson Mac A. Coalson Real Estate David Copeland, CPA President, SIPCO, Inc. and Shelton Family Foundation Murray Edwards Principal, The Edwards Group Ron Giddiens Investments/Business Consulting Former President - Bank of the West, San Angelo 1991 1996 1996 1998 2006 2009 1 3 2 2 1, 3, 4 1, 2, 4 2000 1998 1971 1993 Derrell E. Johnson Former President and CEO Rady and Associates Consulting Engineers Kade Matthews Ranching and Investments Kenneth T. Murphy Senior Chairman of the Board Dian Graves Stai Chair, Mansefeldt Investment Corp. Director, Dian Graves Owen Foundation Johnny E. Trotter President and CEO 2 3 1, 4 1, 3, 4 Livestock Investors, Ltd. 2003 1, 3, 4 * CO M M I T T E E S 1 Executive Committee – F. Scott Dueser, Chairman 2 Audit Committee – David Copeland, Chairman 3 Compensation Committee – Dian Graves Stai, Chairman 4 Nominating/Corporate Governance Committee – Mac A. Coalson, Chairman 24 Corporate Information OFFICERS F. Scott Dueser Chairman, President and Chief Executive Officer J. Bruce Hildebrand Executive Vice President and Chief Financial Officer Gary S. Gragg Executive Vice President, Lending Gary L. Webb Executive Vice President, Operations Tommy J. Barrow Senior Vice President, Lending Courtney Jordan Senior Vice President, Training and Education Michele P. Stevens Senior Vice President, Advertising and Marketing William A. Rowe Vice President, Investment Services Gaila Kilpatrick Assistant Secretary Bob Goodner Compliance Officer Michelle Fagan Compliance Officer A N N UA L M E E T I N G Tuesday, April 27, 2010 10:30 a.m. Abilene Civic Center 1100 N. Sixth Abilene, Texas 79601 CORPORATE OFFICES 400 Pine Abilene, Texas 79601 325-627-7155 • 800-588-7000 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 T R A N S F E R AG E N T Registrar and Transfer Company 800-368-5948 ADDRESS SHAREHOLDER INQUIRIES TO: Registrar and Transfer Company Investor Relations Department 10 Commerce Drive Cranford, NJ 07016 E-MAIL ADDRESS: info@rtco.com REGISTRAR AND TRANSFER COMPANY WEB SITE www.rtco.com S E N D C E R T I F I C AT E S F O R T R A N S F E R & A D D R E S S C H A N G E S TO : Registrar & Transfer Company 10 Commerce Drive Cranford, NJ 07016-3572 4 0 0 P i n e • A b i l e n e , Te x a s 7 9 6 0 1 www.f f in.com 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. Note: Market share data is calculated from June 30, 2009, deposit information compiled by the Federal Deposit Insurance Corporation. FIRST FINANCIAL BANKSHARES EXECUTIVE OFFICERS (L - R ): J. BRUCE HILDEBRAND, MICHELE P. STEVENS, GARY S. GRAGG, F. SCOTT DUESER, GARY L. WEBB, KIRK W. THAXTON AND TOMMY J. BARROW SM A F a m i l y o f C o m m u n i t y B a n k s S M 4 0 0 Pi n e • Abi l e n e , Te x a s 7 9 6 0 1 • w w w. f f i n . c om 21% 47% 30% 7% 15% 20% 37% 26% HEREFORD M A I N O F F I C E 212 E. Third ( 8 0 6 ) 3 6 3 - 8 2 0 0 Hereford, Texas 79045 M I K E M AU L D I N Pre s i d e n t a n d C E O D I R E C TO R S D E A F S M I T H CO U N T Y D E P O S I T M A R K E T S H A R E 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 Pet Care, Inc. Allen Parson Restaurateur and Investments Craig Smith Rancher and Retired Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 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 S E N I O R O F F I C E R S Mike Mauldin Chairman of the Board, President and Chief Executive Officer Steve Gilbert Executive Vice President and Cashier Kent Jackson Executive Vice President and Chief Credit Officer IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 147,652 96,028 130,728 12,284 2,121 1.56% 47.16% DEC. 31, 2008 $ 149,264 94,426 118,656 10,728 2,104 1.54% 44.71% MINERAL WELLS M A I N O F F I C E 1900 E. Hubbard ( 9 4 0 ) 3 2 7 - 5 4 0 0 Mineral Wells, Texas 76067 K E N N E T H W I L L I A M S O N Pre s i d e n t a n d C E O PA LO P I N TO CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Spencer Baum, D.D.S. Baum Dental Clinic F. Scott Dueser First Financial Bankshares, Inc. George Gault Attorney Gault & Gault Terry L. Murphy President and Chief Executive Officer Murphy and Murphy, Inc. David Ramsey, M.D. Family Practice Center Albert Rincon Vice President of Operations Texas Packaging Company, Inc. Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Paul McGettes Chief Financial Officer Upham Oil & Gas Company, L.P. S E N I O R O F F I C E R S Brad Seay Lending Executive Vice President Eddie Gregory Senior Vice President and Cashier Mike Mearse Senior Vice President Lending IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,259 101,050 132,997 22,436 3,542 2.10% 39.01% DEC. 31, 2008 $ 173,565 99,555 138,325 20,276 3,147 1.93% 43.43% SAN ANGELO M A I N O F F I C E 301 W. Beauregard LO C AT I O N S www.historicmuralsofsanangelo.org ( 3 2 5 ) 6 5 9 - 5 9 0 0 San Angelo, Texas 76903 3471 Knickerbocker San Angelo, Texas 76904 M I C H A E L L . B OYD Pre s i d e n t a n d C E O TO M G R E E N CO U N T Y D E P O S I T M A R K E T S H A R E Michael L. Boyd Ron Giddiens Chairman of the Board, President Investments/Business and Chief Executive Officer Consulting D I R E C TO R S Hon. Marilyn Aboussie Chief Justice, Retired W. Dan Cravy, M.D. Physician Pat Crump President and CEO Former President - Bank of the West, San Angelo Joey Henderson President Porter Henderson Implement Company, Inc. J. Bruce Hildebrand Baptist Memorials Services First Financial Bankshares, Inc. Rick DeHoyos Attorney Robert D. Housley President and Owner F. Scott Dueser First Financial Bankshares, Inc. Doug Eakman Owner Pecos Street Pharmacy Steve Eustis Commercial Real Estate David F. Lupton President Angelo Glass & Mirror Company, Inc. John E. Schwartz, Sr. Farmer/Rancher Mary Jane Steadman Attorney Real Estate Investment Management S E N I O R O F F I C E R S Michael L. Boyd Wes Masters Chairman of the Board, Senior Vice President President Robert Pate Jim Davidson and Cashier Senior Vice President Executive Vice President Chuck Shore Senior Vice President Executive Vice President Ruth Wheeler Senior Vice President Cindy George Senior Vice President Bill Wiedenfeld Senior Vice President Carrol E. Hill Senior Vice President and Chief Executive Officer Reba Priddy Glasheen, Valles & DeHoyos, LLP Housley Communications IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 349,676 139,847 290,797 48,441 6,250 1.82% 45.54% DEC. 31, 2008 $ 333,330 135,618 276,803 45,757 6,157 1.86% 44.64% SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR M A I N O F F I C E ( 8 1 7 ) 4 1 0 - 2 9 1 5 3205 E. Highway 114 Southlake, Texas 76092 LO C AT I O N S 95 Trophy Club Drive 891 E. Keller Parkway 909 Stevens 609 Rock Island Avenue 608 W. Hale Avenue Trophy Club, Texas 76262 Keller, Texas 76248 Bridgeport, Texas 76426 Boyd, Texas 76023 Decatur, Texas 76234 M A R K L . J O N E S Pre s i d e n t a n d C E O C I T I E S O F S O U T H L A K E, T R O P HY C LU B & K E L L E R D E P O S I T M A R K E T S H A R E W I S E CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer William Ray Cook, Jr., CPA Cook McDonald & Co. Jack Dortch Jack Dortch Farmers Insurance Agency F. Scott Dueser First Financial Bankshares, Inc. J. Bruce Hildebrand First Financial Bankshares, Inc. Derrell E. Johnson Former President and CEO Rady Associates Consulting Engineers K. Wayne Lee President, DDFW Properties Ralph Manoushagian Land Manager Approach Resources, Inc. Oil & Gas Exploration Jim Ridenour President Sunbelt Station Service S E N I O R O F F I C E R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer F. Mills Shallene Wise County Market President Henson Dunn Senior Vice President Les Mariotti Senior Vice President and Chief Financial Officer J. Sean Shope Senior Vice President Steve Sims Senior Vice President Trent Swearengin Senior Vice President IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 264,306 157,919 210,764 39,084 2,515 0.94% 62.24% DEC. 31, 2008 $ 272,185 163,936 217,818 37,664 2,793 0.99% 61.32% STEPHENVILLE GRANBURY GLEN ROSE ACTON M A I N O F F I C E ( 2 5 4 ) 9 6 5 - 5 0 3 6 2201 W. South Loop Stephenville, Texas 76401 LO C AT I O N S 1875 Lingleville Road 199 N. Columbia 400 Big Bend Trail 2007 East Highway 377 1600 S. Morgan Stephenville, Texas 76401 Stephenville, Texas 76401 Glen Rose, Texas 76043 Granbury, Texas 76049 Granbury, Texas 76048 2915 Fall Creek Highway Acton, Texas 76049 R O N N . M U L L I N S Pre s i d e n t a n d C E O E R AT H , H O O D & S O M E R V E L L CO U N T I E S D E P O S I T M A R K E T S H A R E D I R E C TO R S Ron N. Mullins Chairman of the Board, President and Chief Executive Officer Jerry Parham Investments S E N I O R O F F I C E R S President John Power Bart Rodgers Ron N. Mullins Angie Dusek Chairman of the Board, Senior Vice President and Chief Executive Officer Donna Feller Senior Vice President Keith Brown Prime Building Components, LLC F. Scott Dueser First Financial Bankshares, Inc. Glen Rose Market President Connie Frank J. Bruce Hildebrand Senior Vice President First Financial Bankshares, Inc. Julie Graham Frank Terrell, M.D. Ophthalmologist John Terrill Attorney ADVISORY DIRECTORS SPEC Management Co. Ron Hance Hance Financial Services Granbury Market President Mike Gandy Dereece Howell Executive Vice President Vickie Pettit and Cashier Senior Vice President Senior Vice President Monty Bedwell Robert Reeves Executive Vice President Senior Vice President Robert Lemons Larry Upshaw Executive Vice President Senior Vice President Bill Hooks Autos - Real Estate John Moore Craft Associates, Inc. Ron Pack RP’s Western Wear, Inc. Bill Parham Parham & Parham, CPAs IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 350,059 181,726 298,355 44,383 4,267 1.31% 48.89% DEC. 31, 2008 $ 330,942 192,202 279,209 42,033 5,107 1.56% 48.29% SWEETWATER ROBY TRENT MERKEL J . V. M A R T I N Chairman of the Board K I R BY N . A N D R E WS President and CEO NOLAN & FISHER COUNTIES D E P O S I T M A R K E T S H A R E M A I N O F F I C E 201 Elm LO C AT I O N S 123 N. Concho 117 N. Main 301 Edwards Street ( 3 2 5 ) 2 3 5 - 6 6 0 0 Sweetwater, Texas 79556 Roby, Texas 79543 Trent, Texas 79561 Merkel, Texas 79536 S E N I O R O F F I C E R S D I R E C TO R S J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Donnie Ruppert Executive Vice President and Cashier/Controller Rodney Foster Senior Vice President Lending J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Jeff Branson General Partner Williamson-Branson Real Estate Louis Brooks, Jr. Rancher Ronnie Cox Owner Cox Jewelry J. Bruce Hildebrand First Financial Bankshares, Inc. Jay Lawrence President MAL Enterprises, Inc. Thomas L. Rees, Sr. Rees and Rees, Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 133,322 67,463 119,011 13,248 2,420 1.81% 51.54% DEC. 31, 2008 $ 130,078 68,665 117,320 11,833 2,168 1.66% 51.87% WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH D OYL E L E E Chairman of the Board and Chief Executive O fficer M A I N O F F I C E 101 N. Main LO C AT I O N S 101 College Park Drive 1214 N. Main 210 N. Main 505 FM 1187 N. 4100 E. I-20 1100 FM 1189 ( 8 1 7 ) 5 9 6 - 0 3 0 7 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Aledo, Texas 76008 Willow Park, Texas 76087 Brock, Texas 76066 550 Bailey Avenue Suite 300 Fort Worth, Texas 76107 S E N I O R O F F I C E R S D I R E C TO R S Doyle Lee Chairman of the Board and Chief Executive Officer Doyle Lee Chairman of the Board and Chief Executive Officer Bob Bradberry Executive Vice President Larry Mangrem Executive Vice President and Cashier Mike Carter Senior Vice President Lori Hill Senior Vice President Justin Hooper Senior Vice President Kent Hudson Senior Vice President Jimmie Sue Lawson Senior Vice President Greg L. Barron President G.L. Barron Company, Inc. Stephen G. Brogdon, D.D.S. General and Cosmetic Dentistry Mac A. Coalson Owner Mac A. Coalson Real Estate F. Scott Dueser First Financial Bankshares, Inc. Clay Hicks Oil and Gas Investments Nan Kingsley President Bluestem Studios, Inc. Mike White, O.D. Therapeutic Optometrist J AY G I B B S President Jay Gibbs President Jay Gibbs President PARKER COUNTY D E P O S I T M A R K E T S H A R E IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 355,621 149,607 309,465 33,608 5,124 1.49% 49.92% DEC. 31, 2008 $ 375,424 156,616 331,288 29,326 5,830 1.71% 50.52% First Financial Trust & Asset Management Co., N.A. Abilene Office 400 Pine St. LO C AT I O N S Fort Worth Office 550 Bailey Ave., Suite 300 Odessa Office 2651 JBS Parkway Bldg. 4, Suite E San Angelo Office 301 W. Beauregard Stephenville Office 2201 W. South Loop Sweetwater Office 201 Elm ( 3 2 5 ) 6 2 7 - 7 1 0 0 ( 8 1 7 ) 4 1 0 - 4 9 7 0 ( 4 3 2 ) 3 6 7 - 8 9 0 0 ( 3 2 5 ) 6 5 9 - 5 9 8 7 ( 2 5 4 ) 9 1 8 - 6 2 6 2 ( 3 2 5 ) 2 3 5 - 6 6 4 0 performed well in 2009 considering the challenging economic environment it confronted. Total assets continued to grow, and our equity and fixed-income investments all outperformed their respective bench- marks. We also opened an office in a new market. Assets at year-end totaled $1.67 billion in book value and $2.10 billion in market value. These levels rep- resented increases of 2.1 percent and 11.7 percent, respectively, from 2008. Earnings for 2009 were down from 2008, reflecting the low levels of the stock market that prevailed in the first half of the year. Also contributing to the earnings reduction were significantly lower oil and gas prices, which negatively affected the large oil and gas portfolio that we manage. Net income decreased $179,000, or 6.4 percent, to $2.6 million from $2.8 million in 2008. Trust fee revenue, the main source of our net income, decreased $358,000, or 3.8 percent, to $9.1 million from $9.4 million. Although the markets were extremely volatile throughout the year, our investment team produced outstanding results. All of our equity and fixed-income investments exceeded their respective benchmarks. A highlight of the year was our opening in June of an office in Odessa, which is a new market for us. Barbara Hill manages this office. We are very pleased with the results she has achieved thus far and are excited about the prospects for our growth in the Permian Basin. Our Fort Worth office also achieved excellent results in 2009. Fee revenue for the office increased $123,000, or 41.4 percent, and the number of accounts increased by 34.5 percent. To accommodate the expansion of our business, we moved into a larger office suite during the year. Our experienced team of trust professionals remains committed to providing quality customer service and superior investment results. 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 TRUST ASSETS (IN MILLIONS) $1,664 $1,631 $1,428 $1,300 $1,150 $ 400 600 800 1,000 1,200 1,400 1,600 1,800 TRUST FEES (IN MILLIONS) $9.08 $9.44 $8.75 $7.66 $7.07 $2.631 $2.810 $2.549 $ 1 2 3 4 5 6 7 8 9 10 TRUST NET INCOME (IN MILLIONS) $2.076 $1.909 $ 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 (L-R - Back Row) DAVID W. CASTLEBERRY (Stephenville), RICHARD YOUNG (Abilene), MICHAEL SHEEHAN (Sweetwater), KIRK THAXTON (Abilene), DAVID BYRD (San Angelo) and JOE AYRES (Stephenville) (L-R - seated) BARBARA HILL (Odessa) and KONRAD HALBERT (Fort Worth) O F F I C E R S Kirk W. Thaxton Chairman of the Board, President, and Chief Executive Officer David Castleberry Senior Vice President Manager, Stephenville D I R E C TO R S Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Byrd Executive Vice President Manager, San Angelo Konrad S. Halbert Executive Vice President Manager, Fort Worth Michael D. Sheehan Executive Vice President Manager, Sweetwater Richard Young Executive Vice President Manager, Abilene Shelton Family Foundation Chairman of the Board, President Robert S. Patterson Former President & CEO First Financial Trust & Asset Management Company, N.A. Kirk W. Thaxton and Chief Executive Officer First Financial Trust & Asset Management Company, N.A. ADVISORY DIRECTORS Beckham Rector & Eagle Paul L. Cannon First Financial Bankshares, Inc. John L. Beckham Angelo Glass & Mirror McMahon Surovik Suttle, P.C. Barbara Hill Senior Vice President Manager, Odessa Larry Cleveland Senior Vice President Manager, Operations Ralph Gibson Senior Vice President Manager, Investments David B. Pitzer Senior Vice President Manager, Real Property Randy Spiva Senior Vice President Manager, Oil & Gas David Copeland President Ronnie Cox Owner Cox Jewelry F. Scott Dueser David F. Lupton President Company, Inc. Bill Parham Parham & Parham, CPAs (L - R ): CLAY TRUMBLE, KAY BERRY, GARY TUCKER, DENNIS STECKLY, MICHELLE McDONALD AND LARRY WILLIAMS First Technology Services, Inc. (FTS) is the shared services company for First Financial Bankshares, Inc. (FFIN) Our mission is to maximize efficiencies and control costs for common functions within FFIN while providing the best possible customer service to our internal and external customers. FTS plays a key role in customer service functions within FFIN through its customer call center and innovative technology for online banking, auto- matic bill pay services, backroom operations and other technology-based banking services. FTS also supports employees with classroom and online technology training and a responsive technology help desk. FTS provides more than 100 technology applications to FFIN and its family of 10 banks and the Trust Company. Services include check processing, account services, a help desk, desktop support, network services, server support, software support, information security, computer operations, business continuity planning, loan and credit operations, loan document preparation and the corporate call center. M A I N O F F I C E 400 Pine Abilene, Texas 79601 ( 3 2 5 ) 6 2 7 - 7 1 9 5 S E N I O R O F F I C E R S Gary D. Tucker President and Chief Executive Officer Kay Berry Senior Vice President Deposit Operations Michelle McDonald Senior Vice President Customer Service D I R E C TO R S Clay Trumble Senior Vice President Credit Administration Dennis Steckly Senior Vice President Production Services Larry Williams Senior Vice President Infrastructure Services Gary L. Webb Chairman of the Board Ron Butler President and First Technology Services, Inc. Chief Executive Officer Executive Vice President, First Financial Bank Abilene Operations First Financial Bankshares, Inc. Gary D. Tucker President and Chief Executive Officer First Technology Services, Inc. F. Scott Dueser Chairman, President and Chief Executive Officer Jay Gibbs President First Financial Bank Weatherford Derrell E. Johnson Former President and Chief Executive Officer Rady and Associates Consulting Engineers First Financial Bankshares, Inc. Les Mariotti J. Bruce Hildebrand Chief Financial Officer Executive Vice President and First Financial Bank Southlake Senior Vice President and Chief Financial Officer First Financial Bankshares, Inc. Mike Mauldin Michael L. Boyd Chairman, President and Chief Executive Officer First Financial Bank San Angelo Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 2 0 0 9 W A L T E R J O H N S O N A W A R D K E N N E T H T . M U R P H Y Through the 120 years of First Financial Bankshares’ history, there have been many people who have contributed greatly to the success of this company, and Ken Murphy has to be at the top of that list with Walter Johnson and the James family. Therefore, it is extremely appropriate that we honor Ken for his outstanding leadership during the past 39 years with the Walter Johnson Award, as well as dedicating this Annual Report to him. Ken was hired by Walter Johnson in 1971 and has held the following positions: First Financial Bank, N.A., Abilene (formerly First National Bank of Abilene) Executive Vice President President President and Chief Executive Officer Chairman of the Board and Chief Executive Officer 1993–2000 Chairman of the Board First Financial Bankshares, Inc. Executive Vice President President and Chief Executive Officer Chairman, President and Chief Executive Officer Chairman of the Board Senior Chairman of the Board 1971-1975 1975-1981 1981-1984 1984-1993 1973-1985 1985-1986 1986-2000 2001-2007 2008-2009 When Ken joined the bank in 1971, the Company had total assets of $87 million and net income of $806,000. This past year we finished the year with total assets of $3.3 billion and net earnings of $53.8 million. During Ken’s tenure with this company, we have experienced great success. While he was President and CEO of First Financial Bankshares, he purchased 11 banks and added numerous locations to the Company. During his tenure, he held many civic, cultural and professional leadership positions with the most notable positions being: President, Abilene Chamber of Commerce; Chairman, United Way Campaign in Abilene; Chairman, West Texas Rehabilitation Center; Chairman and Trustee, Alliance for Women and Children; Director, Hendrick Medical Center; Director, West Central Texas Municipal Water District; Director, Hardin-Simmons University Board of Development; Director, The Grace Museum of Abilene; Director, Treasurer and Chairman, Texas Bankers Association; and Class A Director, Federal Reserve Bank of Dallas. In 2003, Ken was honored as Outstanding Citizen of the Year by the Abilene Chamber of Commerce. As he retires from the First Financial Bankshares Board after 37 years, he leaves us with a great legacy and many Murphy stories, reports and sayings, but, most of all, his knowledge of how to manage outstanding banks. For me personally, Ken has been a mentor, confidant and boss for 33 years. I have learned so much from him. Although he is retiring from the Board, I know we will continue to have his advice and counsel, as well as his ever-present support and encouragement. It is our pleasure to honor Ken Murphy with the Walter Johnson Award for what he has contributed in going beyond the call of duty for our company and, especially, for our customers, stockholders and employees. Sincerely, F. Scott Dueser 13 15 17 19 21 23 14 16 18 20 22 BACK ROW (L-R): JOSEPH CANON, DAVID COPELAND, KADE MATTHEWS, RON GIDDIENS, MURRAY EDWARDS, TUCKER BRIDWELL, JOHNNY TROTTER FRONT ROW (L - R): KENNETH MURPHY, DERRELL JOHNSON, DIAN STAI, MAC COALSON, F. SCOTT DUESER BOARD MEMBER YEAR ELECTED BOARD MEMBER YEAR ELECTED COMMITTEE APPOINTMENT COMMITTEE APPOINTMENT Tucker S. Bridwell, CPA 2007 2, 4 Board of Directors F. Scott Dueser Chairman of the Board, President and CEO President Mansefeldt Investment Corporation Joseph E. Canon, J.D. Executive Director Dodge Jones Foundation Mac A. Coalson Mac A. Coalson Real Estate David Copeland, CPA President, SIPCO, Inc. and Shelton Family Foundation Murray Edwards Principal, The Edwards Group Ron Giddiens Investments/Business Consulting Former President - Bank of the West, San Angelo 1991 1996 1996 1998 2006 2009 1 3 2 2 1, 3, 4 1, 2, 4 2000 1998 1971 1993 Derrell E. Johnson Former President and CEO Rady and Associates Consulting Engineers Kade Matthews Ranching and Investments Kenneth T. Murphy Senior Chairman of the Board Dian Graves Stai Chair, Mansefeldt Investment Corp. Director, Dian Graves Owen Foundation Johnny E. Trotter President and CEO 2 3 1, 4 1, 3, 4 Livestock Investors, Ltd. 2003 1, 3, 4 * CO M M I T T E E S 1 Executive Committee – F. Scott Dueser, Chairman 2 Audit Committee – David Copeland, Chairman 3 Compensation Committee – Dian Graves Stai, Chairman 4 Nominating/Corporate Governance Committee – Mac A. Coalson, Chairman 24 Corporate Information OFFICERS F. Scott Dueser Chairman, President and Chief Executive Officer J. Bruce Hildebrand Executive Vice President and Chief Financial Officer Gary S. Gragg Executive Vice President, Lending Gary L. Webb Executive Vice President, Operations Tommy J. Barrow Senior Vice President, Lending Courtney Jordan Senior Vice President, Training and Education Michele P. Stevens Senior Vice President, Advertising and Marketing William A. Rowe Vice President, Investment Services Gaila Kilpatrick Assistant Secretary Bob Goodner Compliance Officer Michelle Fagan Compliance Officer A N N UA L M E E T I N G Tuesday, April 27, 2010 10:30 a.m. Abilene Civic Center 1100 N. Sixth Abilene, Texas 79601 CORPORATE OFFICES 400 Pine Abilene, Texas 79601 325-627-7155 • 800-588-7000 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 T R A N S F E R AG E N T Registrar and Transfer Company 800-368-5948 ADDRESS SHAREHOLDER INQUIRIES TO: Registrar and Transfer Company Investor Relations Department 10 Commerce Drive Cranford, NJ 07016 E-MAIL ADDRESS: info@rtco.com REGISTRAR AND TRANSFER COMPANY WEB SITE www.rtco.com S E N D C E R T I F I C AT E S F O R T R A N S F E R & A D D R E S S C H A N G E S TO : Registrar & Transfer Company 10 Commerce Drive Cranford, NJ 07016-3572 4 0 0 P i n e • A b i l e n e , Te x a s 7 9 6 0 1 www.f f in.com 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. Note: Market share data is calculated from June 30, 2009, deposit information compiled by the Federal Deposit Insurance Corporation. FIRST FINANCIAL BANKSHARES EXECUTIVE OFFICERS (L - R ): J. BRUCE HILDEBRAND, MICHELE P. STEVENS, GARY S. GRAGG, F. SCOTT DUESER, GARY L. WEBB, KIRK W. THAXTON AND TOMMY J. BARROW SM A F a m i l y o f C o m m u n i t y B a n k s S M 4 0 0 Pi n e • Abi l e n e , Te x a s 7 9 6 0 1 • w w w. f f i n . c om 21% 47% 30% 7% 15% 20% 37% 26% HEREFORD M A I N O F F I C E 212 E. Third ( 8 0 6 ) 3 6 3 - 8 2 0 0 Hereford, Texas 79045 M I K E M AU L D I N Pre s i d e n t a n d C E O D I R E C TO R S D E A F S M I T H CO U N T Y D E P O S I T M A R K E T S H A R E 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 Pet Care, Inc. Allen Parson Restaurateur and Investments Craig Smith Rancher and Retired Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 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 S E N I O R O F F I C E R S Mike Mauldin Chairman of the Board, President and Chief Executive Officer Steve Gilbert Executive Vice President and Cashier Kent Jackson Executive Vice President and Chief Credit Officer IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 147,652 96,028 130,728 12,284 2,121 1.56% 47.16% DEC. 31, 2008 $ 149,264 94,426 118,656 10,728 2,104 1.54% 44.71% MINERAL WELLS M A I N O F F I C E 1900 E. Hubbard ( 9 4 0 ) 3 2 7 - 5 4 0 0 Mineral Wells, Texas 76067 K E N N E T H W I L L I A M S O N Pre s i d e n t a n d C E O PA LO P I N TO CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Spencer Baum, D.D.S. Baum Dental Clinic F. Scott Dueser First Financial Bankshares, Inc. George Gault Attorney Gault & Gault Terry L. Murphy President and Chief Executive Officer Murphy and Murphy, Inc. David Ramsey, M.D. Family Practice Center Albert Rincon Vice President of Operations Texas Packaging Company, Inc. Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Paul McGettes Chief Financial Officer Upham Oil & Gas Company, L.P. S E N I O R O F F I C E R S Brad Seay Lending Executive Vice President Eddie Gregory Senior Vice President and Cashier Mike Mearse Senior Vice President Lending IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,259 101,050 132,997 22,436 3,542 2.10% 39.01% DEC. 31, 2008 $ 173,565 99,555 138,325 20,276 3,147 1.93% 43.43% SAN ANGELO M A I N O F F I C E 301 W. Beauregard LO C AT I O N S www.historicmuralsofsanangelo.org ( 3 2 5 ) 6 5 9 - 5 9 0 0 San Angelo, Texas 76903 3471 Knickerbocker San Angelo, Texas 76904 M I C H A E L L . B OYD Pre s i d e n t a n d C E O TO M G R E E N CO U N T Y D E P O S I T M A R K E T S H A R E Michael L. Boyd Ron Giddiens Chairman of the Board, President Investments/Business and Chief Executive Officer Consulting D I R E C TO R S Hon. Marilyn Aboussie Chief Justice, Retired W. Dan Cravy, M.D. Physician Pat Crump President and CEO Former President - Bank of the West, San Angelo Joey Henderson President Porter Henderson Implement Company, Inc. J. Bruce Hildebrand Baptist Memorials Services First Financial Bankshares, Inc. Rick DeHoyos Attorney Robert D. Housley President and Owner F. Scott Dueser First Financial Bankshares, Inc. Doug Eakman Owner Pecos Street Pharmacy Steve Eustis Commercial Real Estate David F. Lupton President Angelo Glass & Mirror Company, Inc. John E. Schwartz, Sr. Farmer/Rancher Mary Jane Steadman Attorney Real Estate Investment Management S E N I O R O F F I C E R S Michael L. Boyd Wes Masters Chairman of the Board, Senior Vice President President Robert Pate Jim Davidson and Cashier Senior Vice President Executive Vice President Chuck Shore Senior Vice President Executive Vice President Ruth Wheeler Senior Vice President Cindy George Senior Vice President Bill Wiedenfeld Senior Vice President Carrol E. Hill Senior Vice President and Chief Executive Officer Reba Priddy Glasheen, Valles & DeHoyos, LLP Housley Communications IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 349,676 139,847 290,797 48,441 6,250 1.82% 45.54% DEC. 31, 2008 $ 333,330 135,618 276,803 45,757 6,157 1.86% 44.64% SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR M A I N O F F I C E ( 8 1 7 ) 4 1 0 - 2 9 1 5 3205 E. Highway 114 Southlake, Texas 76092 LO C AT I O N S 95 Trophy Club Drive 891 E. Keller Parkway 909 Stevens 609 Rock Island Avenue 608 W. Hale Avenue Trophy Club, Texas 76262 Keller, Texas 76248 Bridgeport, Texas 76426 Boyd, Texas 76023 Decatur, Texas 76234 M A R K L . J O N E S Pre s i d e n t a n d C E O C I T I E S O F S O U T H L A K E, T R O P HY C LU B & K E L L E R D E P O S I T M A R K E T S H A R E W I S E CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer William Ray Cook, Jr., CPA Cook McDonald & Co. Jack Dortch Jack Dortch Farmers Insurance Agency F. Scott Dueser First Financial Bankshares, Inc. J. Bruce Hildebrand First Financial Bankshares, Inc. Derrell E. Johnson Former President and CEO Rady Associates Consulting Engineers K. Wayne Lee President, DDFW Properties Ralph Manoushagian Land Manager Approach Resources, Inc. Oil & Gas Exploration Jim Ridenour President Sunbelt Station Service S E N I O R O F F I C E R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer F. Mills Shallene Wise County Market President Henson Dunn Senior Vice President Les Mariotti Senior Vice President and Chief Financial Officer J. Sean Shope Senior Vice President Steve Sims Senior Vice President Trent Swearengin Senior Vice President IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 264,306 157,919 210,764 39,084 2,515 0.94% 62.24% DEC. 31, 2008 $ 272,185 163,936 217,818 37,664 2,793 0.99% 61.32% STEPHENVILLE GRANBURY GLEN ROSE ACTON M A I N O F F I C E ( 2 5 4 ) 9 6 5 - 5 0 3 6 2201 W. South Loop Stephenville, Texas 76401 LO C AT I O N S 1875 Lingleville Road 199 N. Columbia 400 Big Bend Trail 2007 East Highway 377 1600 S. Morgan Stephenville, Texas 76401 Stephenville, Texas 76401 Glen Rose, Texas 76043 Granbury, Texas 76049 Granbury, Texas 76048 2915 Fall Creek Highway Acton, Texas 76049 R O N N . M U L L I N S Pre s i d e n t a n d C E O E R AT H , H O O D & S O M E R V E L L CO U N T I E S D E P O S I T M A R K E T S H A R E D I R E C TO R S Ron N. Mullins Chairman of the Board, President and Chief Executive Officer Jerry Parham Investments S E N I O R O F F I C E R S President John Power Bart Rodgers Ron N. Mullins Angie Dusek Chairman of the Board, Senior Vice President and Chief Executive Officer Donna Feller Senior Vice President Keith Brown Prime Building Components, LLC F. Scott Dueser First Financial Bankshares, Inc. Glen Rose Market President Connie Frank J. Bruce Hildebrand Senior Vice President First Financial Bankshares, Inc. Julie Graham Frank Terrell, M.D. Ophthalmologist John Terrill Attorney ADVISORY DIRECTORS SPEC Management Co. Ron Hance Hance Financial Services Granbury Market President Mike Gandy Dereece Howell Executive Vice President Vickie Pettit and Cashier Senior Vice President Senior Vice President Monty Bedwell Robert Reeves Executive Vice President Senior Vice President Robert Lemons Larry Upshaw Executive Vice President Senior Vice President Bill Hooks Autos - Real Estate John Moore Craft Associates, Inc. Ron Pack RP’s Western Wear, Inc. Bill Parham Parham & Parham, CPAs IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 350,059 181,726 298,355 44,383 4,267 1.31% 48.89% DEC. 31, 2008 $ 330,942 192,202 279,209 42,033 5,107 1.56% 48.29% SWEETWATER ROBY TRENT MERKEL J . V. M A R T I N Chairman of the Board K I R BY N . A N D R E WS President and CEO NOLAN & FISHER COUNTIES D E P O S I T M A R K E T S H A R E M A I N O F F I C E 201 Elm LO C AT I O N S 123 N. Concho 117 N. Main 301 Edwards Street ( 3 2 5 ) 2 3 5 - 6 6 0 0 Sweetwater, Texas 79556 Roby, Texas 79543 Trent, Texas 79561 Merkel, Texas 79536 S E N I O R O F F I C E R S D I R E C TO R S J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Donnie Ruppert Executive Vice President and Cashier/Controller Rodney Foster Senior Vice President Lending J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Jeff Branson General Partner Williamson-Branson Real Estate Louis Brooks, Jr. Rancher Ronnie Cox Owner Cox Jewelry J. Bruce Hildebrand First Financial Bankshares, Inc. Jay Lawrence President MAL Enterprises, Inc. Thomas L. Rees, Sr. Rees and Rees, Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 133,322 67,463 119,011 13,248 2,420 1.81% 51.54% DEC. 31, 2008 $ 130,078 68,665 117,320 11,833 2,168 1.66% 51.87% WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH D OYL E L E E Chairman of the Board and Chief Executive O fficer M A I N O F F I C E 101 N. Main LO C AT I O N S 101 College Park Drive 1214 N. Main 210 N. Main 505 FM 1187 N. 4100 E. I-20 1100 FM 1189 ( 8 1 7 ) 5 9 6 - 0 3 0 7 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Aledo, Texas 76008 Willow Park, Texas 76087 Brock, Texas 76066 550 Bailey Avenue Suite 300 Fort Worth, Texas 76107 S E N I O R O F F I C E R S D I R E C TO R S Doyle Lee Chairman of the Board and Chief Executive Officer Doyle Lee Chairman of the Board and Chief Executive Officer J AY G I B B S President Jay Gibbs President Jay Gibbs President PARKER COUNTY D E P O S I T M A R K E T S H A R E Bob Bradberry Executive Vice President Larry Mangrem Executive Vice President and Cashier Mike Carter Senior Vice President Lori Hill Senior Vice President Justin Hooper Senior Vice President Kent Hudson Senior Vice President Jimmie Sue Lawson Senior Vice President Greg L. Barron President G.L. Barron Company, Inc. Stephen G. Brogdon, D.D.S. General and Cosmetic Dentistry Mac A. Coalson Owner Mac A. Coalson Real Estate F. Scott Dueser First Financial Bankshares, Inc. Clay Hicks Oil and Gas Investments Nan Kingsley President Bluestem Studios, Inc. Mike White, O.D. Therapeutic Optometrist IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 355,621 149,607 309,465 33,608 5,124 1.49% 49.92% DEC. 31, 2008 $ 375,424 156,616 331,288 29,326 5,830 1.71% 50.52% First Financial Trust & Asset Management Co., N.A. Abilene Office 400 Pine St. LO C AT I O N S Fort Worth Office 550 Bailey Ave., Suite 300 Odessa Office 2651 JBS Parkway Bldg. 4, Suite E San Angelo Office 301 W. Beauregard Stephenville Office 2201 W. South Loop Sweetwater Office 201 Elm ( 3 2 5 ) 6 2 7 - 7 1 0 0 ( 8 1 7 ) 4 1 0 - 4 9 7 0 ( 4 3 2 ) 3 6 7 - 8 9 0 0 ( 3 2 5 ) 6 5 9 - 5 9 8 7 ( 2 5 4 ) 9 1 8 - 6 2 6 2 ( 3 2 5 ) 2 3 5 - 6 6 4 0 performed well in 2009 considering the challenging economic environment it confronted. Total assets continued to grow, and our equity and fixed-income investments all outperformed their respective bench- marks. We also opened an office in a new market. Assets at year-end totaled $1.67 billion in book value and $2.10 billion in market value. These levels rep- resented increases of 2.1 percent and 11.7 percent, respectively, from 2008. Earnings for 2009 were down from 2008, reflecting the low levels of the stock market that prevailed in the first half of the year. Also contributing to the earnings reduction were significantly lower oil and gas prices, which negatively affected the large oil and gas portfolio that we manage. Net income decreased $179,000, or 6.4 percent, to $2.6 million from $2.8 million in 2008. Trust fee revenue, the main source of our net income, decreased $358,000, or 3.8 percent, to $9.1 million from $9.4 million. Although the markets were extremely volatile throughout the year, our investment team produced outstanding results. All of our equity and fixed-income investments exceeded their respective benchmarks. A highlight of the year was our opening in June of an office in Odessa, which is a new market for us. Barbara Hill manages this office. We are very pleased with the results she has achieved thus far and are excited about the prospects for our growth in the Permian Basin. Our Fort Worth office also achieved excellent results in 2009. Fee revenue for the office increased $123,000, or 41.4 percent, and the number of accounts increased by 34.5 percent. To accommodate the expansion of our business, we moved into a larger office suite during the year. Our experienced team of trust professionals remains committed to providing quality customer service and superior investment results. 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 TRUST ASSETS (IN MILLIONS) $1,664 $1,631 $1,428 $1,300 $1,150 $ 400 600 800 1,000 1,200 1,400 1,600 1,800 TRUST FEES (IN MILLIONS) $9.08 $9.44 $8.75 $7.66 $7.07 $2.631 $2.810 $2.549 $ 1 2 3 4 5 6 7 8 9 10 TRUST NET INCOME (IN MILLIONS) $2.076 $1.909 $ 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 (L-R - Back Row) DAVID W. CASTLEBERRY (Stephenville), RICHARD YOUNG (Abilene), MICHAEL SHEEHAN (Sweetwater), KIRK THAXTON (Abilene), DAVID BYRD (San Angelo) and JOE AYRES (Stephenville) (L-R - seated) BARBARA HILL (Odessa) and KONRAD HALBERT (Fort Worth) O F F I C E R S Kirk W. Thaxton Chairman of the Board, President, and Chief Executive Officer David Castleberry Senior Vice President Manager, Stephenville D I R E C TO R S Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Byrd Executive Vice President Manager, San Angelo Konrad S. Halbert Executive Vice President Manager, Fort Worth Michael D. Sheehan Executive Vice President Manager, Sweetwater Richard Young Executive Vice President Manager, Abilene Shelton Family Foundation Chairman of the Board, President Robert S. Patterson Former President & CEO First Financial Trust & Asset Management Company, N.A. Kirk W. Thaxton and Chief Executive Officer First Financial Trust & Asset Management Company, N.A. ADVISORY DIRECTORS Beckham Rector & Eagle Paul L. Cannon First Financial Bankshares, Inc. John L. Beckham Angelo Glass & Mirror McMahon Surovik Suttle, P.C. Barbara Hill Senior Vice President Manager, Odessa Larry Cleveland Senior Vice President Manager, Operations Ralph Gibson Senior Vice President Manager, Investments David B. Pitzer Senior Vice President Manager, Real Property Randy Spiva Senior Vice President Manager, Oil & Gas David Copeland President Ronnie Cox Owner Cox Jewelry F. Scott Dueser David F. Lupton President Company, Inc. Bill Parham Parham & Parham, CPAs (L - R ): CLAY TRUMBLE, KAY BERRY, GARY TUCKER, DENNIS STECKLY, MICHELLE McDONALD AND LARRY WILLIAMS First Technology Services, Inc. (FTS) is the shared services company for First Financial Bankshares, Inc. (FFIN) Our mission is to maximize efficiencies and control costs for common functions within FFIN while providing the best possible customer service to our internal and external customers. FTS plays a key role in customer service functions within FFIN through its customer call center and innovative technology for online banking, auto- matic bill pay services, backroom operations and other technology-based banking services. FTS also supports employees with classroom and online technology training and a responsive technology help desk. FTS provides more than 100 technology applications to FFIN and its family of 10 banks and the Trust Company. Services include check processing, account services, a help desk, desktop support, network services, server support, software support, information security, computer operations, business continuity planning, loan and credit operations, loan document preparation and the corporate call center. M A I N O F F I C E 400 Pine Abilene, Texas 79601 ( 3 2 5 ) 6 2 7 - 7 1 9 5 S E N I O R O F F I C E R S Gary D. Tucker President and Chief Executive Officer Kay Berry Senior Vice President Deposit Operations Michelle McDonald Senior Vice President Customer Service D I R E C TO R S Clay Trumble Senior Vice President Credit Administration Dennis Steckly Senior Vice President Production Services Larry Williams Senior Vice President Infrastructure Services Gary L. Webb Chairman of the Board Ron Butler President and First Technology Services, Inc. Chief Executive Officer Executive Vice President, First Financial Bank Abilene Operations First Financial Bankshares, Inc. Gary D. Tucker President and Chief Executive Officer First Technology Services, Inc. F. Scott Dueser Chairman, President and Chief Executive Officer Jay Gibbs President First Financial Bank Weatherford Derrell E. Johnson Former President and Chief Executive Officer Rady and Associates Consulting Engineers First Financial Bankshares, Inc. Les Mariotti J. Bruce Hildebrand Chief Financial Officer Executive Vice President and First Financial Bank Southlake Senior Vice President and Chief Financial Officer First Financial Bankshares, Inc. Mike Mauldin Michael L. Boyd Chairman, President and Chief Executive Officer First Financial Bank San Angelo Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 2 0 0 9 W A L T E R J O H N S O N A W A R D K E N N E T H T . M U R P H Y Through the 120 years of First Financial Bankshares’ history, there have been many people who have contributed greatly to the success of this company, and Ken Murphy has to be at the top of that list with Walter Johnson and the James family. Therefore, it is extremely appropriate that we honor Ken for his outstanding leadership during the past 39 years with the Walter Johnson Award, as well as dedicating this Annual Report to him. Ken was hired by Walter Johnson in 1971 and has held the following positions: First Financial Bank, N.A., Abilene (formerly First National Bank of Abilene) Executive Vice President President President and Chief Executive Officer Chairman of the Board and Chief Executive Officer 1993–2000 Chairman of the Board First Financial Bankshares, Inc. Executive Vice President President and Chief Executive Officer Chairman, President and Chief Executive Officer Chairman of the Board Senior Chairman of the Board 1971-1975 1975-1981 1981-1984 1984-1993 1973-1985 1985-1986 1986-2000 2001-2007 2008-2009 When Ken joined the bank in 1971, the Company had total assets of $87 million and net income of $806,000. This past year we finished the year with total assets of $3.3 billion and net earnings of $53.8 million. During Ken’s tenure with this company, we have experienced great success. While he was President and CEO of First Financial Bankshares, he purchased 11 banks and added numerous locations to the Company. During his tenure, he held many civic, cultural and professional leadership positions with the most notable positions being: President, Abilene Chamber of Commerce; Chairman, United Way Campaign in Abilene; Chairman, West Texas Rehabilitation Center; Chairman and Trustee, Alliance for Women and Children; Director, Hendrick Medical Center; Director, West Central Texas Municipal Water District; Director, Hardin-Simmons University Board of Development; Director, The Grace Museum of Abilene; Director, Treasurer and Chairman, Texas Bankers Association; and Class A Director, Federal Reserve Bank of Dallas. In 2003, Ken was honored as Outstanding Citizen of the Year by the Abilene Chamber of Commerce. As he retires from the First Financial Bankshares Board after 37 years, he leaves us with a great legacy and many Murphy stories, reports and sayings, but, most of all, his knowledge of how to manage outstanding banks. For me personally, Ken has been a mentor, confidant and boss for 33 years. I have learned so much from him. Although he is retiring from the Board, I know we will continue to have his advice and counsel, as well as his ever-present support and encouragement. It is our pleasure to honor Ken Murphy with the Walter Johnson Award for what he has contributed in going beyond the call of duty for our company and, especially, for our customers, stockholders and employees. Sincerely, F. Scott Dueser 13 15 17 19 21 23 14 16 18 20 22 BACK ROW (L-R): JOSEPH CANON, DAVID COPELAND, KADE MATTHEWS, RON GIDDIENS, MURRAY EDWARDS, TUCKER BRIDWELL, JOHNNY TROTTER FRONT ROW (L - R): KENNETH MURPHY, DERRELL JOHNSON, DIAN STAI, MAC COALSON, F. SCOTT DUESER BOARD MEMBER YEAR ELECTED BOARD MEMBER YEAR ELECTED COMMITTEE APPOINTMENT COMMITTEE APPOINTMENT Tucker S. Bridwell, CPA 2007 2, 4 Board of Directors F. Scott Dueser Chairman of the Board, President and CEO President Mansefeldt Investment Corporation Joseph E. Canon, J.D. Executive Director Dodge Jones Foundation Mac A. Coalson Mac A. Coalson Real Estate David Copeland, CPA President, SIPCO, Inc. and Shelton Family Foundation Murray Edwards Principal, The Edwards Group Ron Giddiens Investments/Business Consulting Former President - Bank of the West, San Angelo 1991 1996 1996 1998 2006 2009 1 3 2 2 1, 3, 4 1, 2, 4 2000 1998 1971 1993 Derrell E. Johnson Former President and CEO Rady and Associates Consulting Engineers Kade Matthews Ranching and Investments Kenneth T. Murphy Senior Chairman of the Board Dian Graves Stai Chair, Mansefeldt Investment Corp. Director, Dian Graves Owen Foundation Johnny E. Trotter President and CEO 2 3 1, 4 1, 3, 4 Livestock Investors, Ltd. 2003 1, 3, 4 * CO M M I T T E E S 1 Executive Committee – F. Scott Dueser, Chairman 2 Audit Committee – David Copeland, Chairman 3 Compensation Committee – Dian Graves Stai, Chairman 4 Nominating/Corporate Governance Committee – Mac A. Coalson, Chairman 24 Corporate Information OFFICERS F. Scott Dueser Chairman, President and Chief Executive Officer J. Bruce Hildebrand Executive Vice President and Chief Financial Officer Gary S. Gragg Executive Vice President, Lending Gary L. Webb Executive Vice President, Operations Tommy J. Barrow Senior Vice President, Lending Courtney Jordan Senior Vice President, Training and Education Michele P. Stevens Senior Vice President, Advertising and Marketing William A. Rowe Vice President, Investment Services Gaila Kilpatrick Assistant Secretary Bob Goodner Compliance Officer Michelle Fagan Compliance Officer A N N UA L M E E T I N G Tuesday, April 27, 2010 10:30 a.m. Abilene Civic Center 1100 N. Sixth Abilene, Texas 79601 CORPORATE OFFICES 400 Pine Abilene, Texas 79601 325-627-7155 • 800-588-7000 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 T R A N S F E R AG E N T Registrar and Transfer Company 800-368-5948 ADDRESS SHAREHOLDER INQUIRIES TO: Registrar and Transfer Company Investor Relations Department 10 Commerce Drive Cranford, NJ 07016 E-MAIL ADDRESS: info@rtco.com REGISTRAR AND TRANSFER COMPANY WEB SITE www.rtco.com S E N D C E R T I F I C AT E S F O R T R A N S F E R & A D D R E S S C H A N G E S TO : Registrar & Transfer Company 10 Commerce Drive Cranford, NJ 07016-3572 4 0 0 P i n e • A b i l e n e , Te x a s 7 9 6 0 1 www.f f in.com 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. Note: Market share data is calculated from June 30, 2009, deposit information compiled by the Federal Deposit Insurance Corporation. FIRST FINANCIAL BANKSHARES EXECUTIVE OFFICERS (L - R ): J. BRUCE HILDEBRAND, MICHELE P. STEVENS, GARY S. GRAGG, F. SCOTT DUESER, GARY L. WEBB, KIRK W. THAXTON AND TOMMY J. BARROW SM A F a m i l y o f C o m m u n i t y B a n k s S M 4 0 0 Pi n e • Abi l e n e , Te x a s 7 9 6 0 1 • w w w. f f i n . c om 21% 47% 30% 7% 15% 20% 37% 26% HEREFORD M A I N O F F I C E 212 E. Third ( 8 0 6 ) 3 6 3 - 8 2 0 0 Hereford, Texas 79045 M I K E M AU L D I N Pre s i d e n t a n d C E O D I R E C TO R S D E A F S M I T H CO U N T Y D E P O S I T M A R K E T S H A R E 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 Pet Care, Inc. Allen Parson Restaurateur and Investments Craig Smith Rancher and Retired Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 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 S E N I O R O F F I C E R S Mike Mauldin Chairman of the Board, President and Chief Executive Officer Steve Gilbert Executive Vice President and Cashier Kent Jackson Executive Vice President and Chief Credit Officer IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 147,652 96,028 130,728 12,284 2,121 1.56% 47.16% DEC. 31, 2008 $ 149,264 94,426 118,656 10,728 2,104 1.54% 44.71% MINERAL WELLS M A I N O F F I C E 1900 E. Hubbard ( 9 4 0 ) 3 2 7 - 5 4 0 0 Mineral Wells, Texas 76067 K E N N E T H W I L L I A M S O N Pre s i d e n t a n d C E O PA LO P I N TO CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Spencer Baum, D.D.S. Baum Dental Clinic F. Scott Dueser First Financial Bankshares, Inc. George Gault Attorney Gault & Gault Terry L. Murphy President and Chief Executive Officer Murphy and Murphy, Inc. David Ramsey, M.D. Family Practice Center Albert Rincon Vice President of Operations Texas Packaging Company, Inc. Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Paul McGettes Chief Financial Officer Upham Oil & Gas Company, L.P. S E N I O R O F F I C E R S Brad Seay Lending Executive Vice President Eddie Gregory Senior Vice President and Cashier Mike Mearse Senior Vice President Lending IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,259 101,050 132,997 22,436 3,542 2.10% 39.01% DEC. 31, 2008 $ 173,565 99,555 138,325 20,276 3,147 1.93% 43.43% SAN ANGELO M A I N O F F I C E 301 W. Beauregard LO C AT I O N S www.historicmuralsofsanangelo.org ( 3 2 5 ) 6 5 9 - 5 9 0 0 San Angelo, Texas 76903 3471 Knickerbocker San Angelo, Texas 76904 M I C H A E L L . B OYD Pre s i d e n t a n d C E O TO M G R E E N CO U N T Y D E P O S I T M A R K E T S H A R E Michael L. Boyd Ron Giddiens Chairman of the Board, President Investments/Business and Chief Executive Officer Consulting D I R E C TO R S Hon. Marilyn Aboussie Chief Justice, Retired W. Dan Cravy, M.D. Physician Pat Crump President and CEO Former President - Bank of the West, San Angelo Joey Henderson President Porter Henderson Implement Company, Inc. J. Bruce Hildebrand Baptist Memorials Services First Financial Bankshares, Inc. Rick DeHoyos Attorney Robert D. Housley President and Owner F. Scott Dueser First Financial Bankshares, Inc. Doug Eakman Owner Pecos Street Pharmacy Steve Eustis Commercial Real Estate David F. Lupton President Angelo Glass & Mirror Company, Inc. John E. Schwartz, Sr. Farmer/Rancher Mary Jane Steadman Attorney Real Estate Investment Management S E N I O R O F F I C E R S Michael L. Boyd Wes Masters Chairman of the Board, Senior Vice President President Robert Pate Jim Davidson and Cashier Senior Vice President Executive Vice President Chuck Shore Senior Vice President Executive Vice President Ruth Wheeler Senior Vice President Cindy George Senior Vice President Bill Wiedenfeld Senior Vice President Carrol E. Hill Senior Vice President and Chief Executive Officer Reba Priddy Glasheen, Valles & DeHoyos, LLP Housley Communications IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 349,676 139,847 290,797 48,441 6,250 1.82% 45.54% DEC. 31, 2008 $ 333,330 135,618 276,803 45,757 6,157 1.86% 44.64% SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR M A I N O F F I C E ( 8 1 7 ) 4 1 0 - 2 9 1 5 3205 E. Highway 114 Southlake, Texas 76092 LO C AT I O N S 95 Trophy Club Drive 891 E. Keller Parkway 909 Stevens 609 Rock Island Avenue 608 W. Hale Avenue Trophy Club, Texas 76262 Keller, Texas 76248 Bridgeport, Texas 76426 Boyd, Texas 76023 Decatur, Texas 76234 M A R K L . J O N E S Pre s i d e n t a n d C E O C I T I E S O F S O U T H L A K E, T R O P HY C LU B & K E L L E R D E P O S I T M A R K E T S H A R E W I S E CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer William Ray Cook, Jr., CPA Cook McDonald & Co. Jack Dortch Jack Dortch Farmers Insurance Agency F. Scott Dueser First Financial Bankshares, Inc. J. Bruce Hildebrand First Financial Bankshares, Inc. Derrell E. Johnson Former President and CEO Rady Associates Consulting Engineers K. Wayne Lee President, DDFW Properties Ralph Manoushagian Land Manager Approach Resources, Inc. Oil & Gas Exploration Jim Ridenour President Sunbelt Station Service S E N I O R O F F I C E R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer F. Mills Shallene Wise County Market President Henson Dunn Senior Vice President Les Mariotti Senior Vice President and Chief Financial Officer J. Sean Shope Senior Vice President Steve Sims Senior Vice President Trent Swearengin Senior Vice President IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 264,306 157,919 210,764 39,084 2,515 0.94% 62.24% DEC. 31, 2008 $ 272,185 163,936 217,818 37,664 2,793 0.99% 61.32% STEPHENVILLE GRANBURY GLEN ROSE ACTON M A I N O F F I C E ( 2 5 4 ) 9 6 5 - 5 0 3 6 2201 W. South Loop Stephenville, Texas 76401 LO C AT I O N S 1875 Lingleville Road 199 N. Columbia 400 Big Bend Trail 2007 East Highway 377 1600 S. Morgan Stephenville, Texas 76401 Stephenville, Texas 76401 Glen Rose, Texas 76043 Granbury, Texas 76049 Granbury, Texas 76048 2915 Fall Creek Highway Acton, Texas 76049 R O N N . M U L L I N S Pre s i d e n t a n d C E O E R AT H , H O O D & S O M E R V E L L CO U N T I E S D E P O S I T M A R K E T S H A R E D I R E C TO R S Ron N. Mullins Chairman of the Board, President and Chief Executive Officer Jerry Parham Investments S E N I O R O F F I C E R S President John Power Bart Rodgers Ron N. Mullins Angie Dusek Chairman of the Board, Senior Vice President and Chief Executive Officer Donna Feller Senior Vice President Keith Brown Prime Building Components, LLC F. Scott Dueser First Financial Bankshares, Inc. Glen Rose Market President Connie Frank J. Bruce Hildebrand Senior Vice President First Financial Bankshares, Inc. Julie Graham Frank Terrell, M.D. Ophthalmologist John Terrill Attorney ADVISORY DIRECTORS SPEC Management Co. Ron Hance Hance Financial Services Granbury Market President Mike Gandy Dereece Howell Executive Vice President Vickie Pettit and Cashier Senior Vice President Senior Vice President Monty Bedwell Robert Reeves Executive Vice President Senior Vice President Robert Lemons Larry Upshaw Executive Vice President Senior Vice President Bill Hooks Autos - Real Estate John Moore Craft Associates, Inc. Ron Pack RP’s Western Wear, Inc. Bill Parham Parham & Parham, CPAs IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 350,059 181,726 298,355 44,383 4,267 1.31% 48.89% DEC. 31, 2008 $ 330,942 192,202 279,209 42,033 5,107 1.56% 48.29% SWEETWATER ROBY TRENT MERKEL J . V. M A R T I N Chairman of the Board K I R BY N . A N D R E WS President and CEO NOLAN & FISHER COUNTIES D E P O S I T M A R K E T S H A R E M A I N O F F I C E 201 Elm LO C AT I O N S 123 N. Concho 117 N. Main 301 Edwards Street ( 3 2 5 ) 2 3 5 - 6 6 0 0 Sweetwater, Texas 79556 Roby, Texas 79543 Trent, Texas 79561 Merkel, Texas 79536 S E N I O R O F F I C E R S D I R E C TO R S J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Donnie Ruppert Executive Vice President and Cashier/Controller Rodney Foster Senior Vice President Lending J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Jeff Branson General Partner Williamson-Branson Real Estate Louis Brooks, Jr. Rancher Ronnie Cox Owner Cox Jewelry J. Bruce Hildebrand First Financial Bankshares, Inc. Jay Lawrence President MAL Enterprises, Inc. Thomas L. Rees, Sr. Rees and Rees, Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 133,322 67,463 119,011 13,248 2,420 1.81% 51.54% DEC. 31, 2008 $ 130,078 68,665 117,320 11,833 2,168 1.66% 51.87% WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH D OYL E L E E Chairman of the Board and Chief Executive O fficer M A I N O F F I C E 101 N. Main LO C AT I O N S 101 College Park Drive 1214 N. Main 210 N. Main 505 FM 1187 N. 4100 E. I-20 1100 FM 1189 ( 8 1 7 ) 5 9 6 - 0 3 0 7 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Aledo, Texas 76008 Willow Park, Texas 76087 Brock, Texas 76066 550 Bailey Avenue Suite 300 Fort Worth, Texas 76107 S E N I O R O F F I C E R S D I R E C TO R S Doyle Lee Chairman of the Board and Chief Executive Officer Doyle Lee Chairman of the Board and Chief Executive Officer Bob Bradberry Executive Vice President Larry Mangrem Executive Vice President and Cashier Mike Carter Senior Vice President Lori Hill Senior Vice President Justin Hooper Senior Vice President Kent Hudson Senior Vice President Jimmie Sue Lawson Senior Vice President Greg L. Barron President G.L. Barron Company, Inc. Stephen G. Brogdon, D.D.S. General and Cosmetic Dentistry Mac A. Coalson Owner Mac A. Coalson Real Estate F. Scott Dueser First Financial Bankshares, Inc. Clay Hicks Oil and Gas Investments Nan Kingsley President Bluestem Studios, Inc. Mike White, O.D. Therapeutic Optometrist J AY G I B B S President Jay Gibbs President Jay Gibbs President PARKER COUNTY D E P O S I T M A R K E T S H A R E IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 355,621 149,607 309,465 33,608 5,124 1.49% 49.92% DEC. 31, 2008 $ 375,424 156,616 331,288 29,326 5,830 1.71% 50.52% First Financial Trust & Asset Management Co., N.A. performed well in 2009 considering the challenging economic environment it confronted. Total assets continued to grow, and our equity and fixed-income investments all outperformed their respective bench- marks. We also opened an office in a new market. Assets at year-end totaled $1.67 billion in book value and $2.10 billion in market value. These levels rep- resented increases of 2.1 percent and 11.7 percent, respectively, from 2008. Earnings for 2009 were down from 2008, reflecting the low levels of the stock market that prevailed in the first half of the year. Also contributing to the earnings reduction were significantly lower oil and gas prices, which negatively affected the large oil and gas portfolio that we manage. Net income decreased $179,000, or 6.4 percent, to $2.6 million from $2.8 million in 2008. Trust fee revenue, the main source of our net income, decreased $358,000, or 3.8 percent, to $9.1 million from $9.4 million. Although the markets were extremely volatile throughout the year, our investment team produced outstanding results. All of our equity and fixed-income investments exceeded their respective benchmarks. A highlight of the year was our opening in June of an office in Odessa, which is a new market for us. Barbara Hill manages this office. We are very pleased with the results she has achieved thus far and are excited about the prospects for our growth in the Permian Basin. Our Fort Worth office also achieved excellent results in 2009. Fee revenue for the office increased $123,000, or 41.4 percent, and the number of accounts increased by 34.5 percent. To accommodate the expansion of our business, we moved into a larger office suite during the year. Our experienced team of trust professionals remains committed to providing quality customer service and superior investment results. LO C AT I O N S Abilene Office 400 Pine St. Fort Worth Office 550 Bailey Ave., Suite 300 Odessa Office 2651 JBS Parkway Bldg. 4, Suite E San Angelo Office 301 W. Beauregard Stephenville Office 2201 W. South Loop Sweetwater Office 201 Elm ( 3 2 5 ) 6 2 7 - 7 1 0 0 ( 8 1 7 ) 4 1 0 - 4 9 7 0 ( 4 3 2 ) 3 6 7 - 8 9 0 0 ( 3 2 5 ) 6 5 9 - 5 9 8 7 ( 2 5 4 ) 9 1 8 - 6 2 6 2 ( 3 2 5 ) 2 3 5 - 6 6 4 0 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 TRUST ASSETS (IN MILLIONS) $1,664 $1,631 $1,428 $1,300 $1,150 $ 400 600 800 1,000 1,200 1,400 1,600 1,800 TRUST FEES (IN MILLIONS) $9.08 $9.44 $8.75 $7.66 $7.07 $ 1 2 3 4 5 6 7 8 9 10 TRUST NET INCOME (IN MILLIONS) $2.631 $2.810 $2.549 $2.076 $1.909 $ 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 (L-R - Back Row) DAVID W. CASTLEBERRY (Stephenville), RICHARD YOUNG (Abilene), MICHAEL SHEEHAN (Sweetwater), KIRK THAXTON (Abilene), DAVID BYRD (San Angelo) and JOE AYRES (Stephenville) (L-R - seated) BARBARA HILL (Odessa) and KONRAD HALBERT (Fort Worth) O F F I C E R S Kirk W. Thaxton Chairman of the Board, President, and Chief Executive Officer David Castleberry Senior Vice President Manager, Stephenville D I R E C TO R S Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Byrd Executive Vice President Manager, San Angelo Konrad S. Halbert Executive Vice President Manager, Fort Worth Michael D. Sheehan Executive Vice President Manager, Sweetwater Richard Young Executive Vice President Manager, Abilene Shelton Family Foundation Chairman of the Board, President Robert S. Patterson Former President & CEO First Financial Trust & Asset Management Company, N.A. Kirk W. Thaxton and Chief Executive Officer First Financial Trust & Asset Management Company, N.A. ADVISORY DIRECTORS Beckham Rector & Eagle Paul L. Cannon First Financial Bankshares, Inc. John L. Beckham Angelo Glass & Mirror McMahon Surovik Suttle, P.C. Barbara Hill Senior Vice President Manager, Odessa Larry Cleveland Senior Vice President Manager, Operations Ralph Gibson Senior Vice President Manager, Investments David B. Pitzer Senior Vice President Manager, Real Property Randy Spiva Senior Vice President Manager, Oil & Gas David Copeland President Ronnie Cox Owner Cox Jewelry F. Scott Dueser David F. Lupton President Company, Inc. Bill Parham Parham & Parham, CPAs (L - R ): CLAY TRUMBLE, KAY BERRY, GARY TUCKER, DENNIS STECKLY, MICHELLE McDONALD AND LARRY WILLIAMS First Technology Services, Inc. (FTS) is the shared services company for First Financial Bankshares, Inc. (FFIN) Our mission is to maximize efficiencies and control costs for common functions within FFIN while providing the best possible customer service to our internal and external customers. FTS plays a key role in customer service functions within FFIN through its customer call center and innovative technology for online banking, auto- matic bill pay services, backroom operations and other technology-based banking services. FTS also supports employees with classroom and online technology training and a responsive technology help desk. FTS provides more than 100 technology applications to FFIN and its family of 10 banks and the Trust Company. Services include check processing, account services, a help desk, desktop support, network services, server support, software support, information security, computer operations, business continuity planning, loan and credit operations, loan document preparation and the corporate call center. M A I N O F F I C E 400 Pine Abilene, Texas 79601 ( 3 2 5 ) 6 2 7 - 7 1 9 5 S E N I O R O F F I C E R S Gary D. Tucker President and Chief Executive Officer Kay Berry Senior Vice President Deposit Operations Michelle McDonald Senior Vice President Customer Service D I R E C TO R S Clay Trumble Senior Vice President Credit Administration Dennis Steckly Senior Vice President Production Services Larry Williams Senior Vice President Infrastructure Services Gary L. Webb Chairman of the Board Ron Butler President and First Technology Services, Inc. Chief Executive Officer Executive Vice President, First Financial Bank Abilene Operations First Financial Bankshares, Inc. Gary D. Tucker President and Chief Executive Officer First Technology Services, Inc. F. Scott Dueser Chairman, President and Chief Executive Officer Jay Gibbs President First Financial Bank Weatherford Derrell E. Johnson Former President and Chief Executive Officer Rady and Associates Consulting Engineers First Financial Bankshares, Inc. Les Mariotti J. Bruce Hildebrand Chief Financial Officer Executive Vice President and First Financial Bank Southlake Senior Vice President and Chief Financial Officer First Financial Bankshares, Inc. Mike Mauldin Michael L. Boyd Chairman, President and Chief Executive Officer First Financial Bank San Angelo Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 2 0 0 9 W A L T E R J O H N S O N A W A R D K E N N E T H T . M U R P H Y Through the 120 years of First Financial Bankshares’ history, there have been many people who have contributed greatly to the success of this company, and Ken Murphy has to be at the top of that list with Walter Johnson and the James family. Therefore, it is extremely appropriate that we honor Ken for his outstanding leadership during the past 39 years with the Walter Johnson Award, as well as dedicating this Annual Report to him. Ken was hired by Walter Johnson in 1971 and has held the following positions: First Financial Bank, N.A., Abilene (formerly First National Bank of Abilene) Executive Vice President President President and Chief Executive Officer Chairman of the Board and Chief Executive Officer 1993–2000 Chairman of the Board First Financial Bankshares, Inc. Executive Vice President President and Chief Executive Officer Chairman, President and Chief Executive Officer Chairman of the Board Senior Chairman of the Board 1971-1975 1975-1981 1981-1984 1984-1993 1973-1985 1985-1986 1986-2000 2001-2007 2008-2009 When Ken joined the bank in 1971, the Company had total assets of $87 million and net income of $806,000. This past year we finished the year with total assets of $3.3 billion and net earnings of $53.8 million. During Ken’s tenure with this company, we have experienced great success. While he was President and CEO of First Financial Bankshares, he purchased 11 banks and added numerous locations to the Company. During his tenure, he held many civic, cultural and professional leadership positions with the most notable positions being: President, Abilene Chamber of Commerce; Chairman, United Way Campaign in Abilene; Chairman, West Texas Rehabilitation Center; Chairman and Trustee, Alliance for Women and Children; Director, Hendrick Medical Center; Director, West Central Texas Municipal Water District; Director, Hardin-Simmons University Board of Development; Director, The Grace Museum of Abilene; Director, Treasurer and Chairman, Texas Bankers Association; and Class A Director, Federal Reserve Bank of Dallas. In 2003, Ken was honored as Outstanding Citizen of the Year by the Abilene Chamber of Commerce. As he retires from the First Financial Bankshares Board after 37 years, he leaves us with a great legacy and many Murphy stories, reports and sayings, but, most of all, his knowledge of how to manage outstanding banks. For me personally, Ken has been a mentor, confidant and boss for 33 years. I have learned so much from him. Although he is retiring from the Board, I know we will continue to have his advice and counsel, as well as his ever-present support and encouragement. It is our pleasure to honor Ken Murphy with the Walter Johnson Award for what he has contributed in going beyond the call of duty for our company and, especially, for our customers, stockholders and employees. Sincerely, F. Scott Dueser 13 15 17 19 21 23 14 16 18 20 22 BACK ROW (L-R): JOSEPH CANON, DAVID COPELAND, KADE MATTHEWS, RON GIDDIENS, MURRAY EDWARDS, TUCKER BRIDWELL, JOHNNY TROTTER FRONT ROW (L - R): KENNETH MURPHY, DERRELL JOHNSON, DIAN STAI, MAC COALSON, F. SCOTT DUESER BOARD MEMBER YEAR ELECTED BOARD MEMBER YEAR ELECTED COMMITTEE APPOINTMENT COMMITTEE APPOINTMENT Tucker S. Bridwell, CPA 2007 2, 4 Board of Directors F. Scott Dueser Chairman of the Board, President and CEO President Mansefeldt Investment Corporation Joseph E. Canon, J.D. Executive Director Dodge Jones Foundation Mac A. Coalson Mac A. Coalson Real Estate David Copeland, CPA President, SIPCO, Inc. and Shelton Family Foundation Murray Edwards Principal, The Edwards Group Ron Giddiens Investments/Business Consulting Former President - Bank of the West, San Angelo 1991 1996 1996 1998 2006 2009 1 3 2 2 1, 3, 4 1, 2, 4 2000 1998 1971 1993 Derrell E. Johnson Former President and CEO Rady and Associates Consulting Engineers Kade Matthews Ranching and Investments Kenneth T. Murphy Senior Chairman of the Board Dian Graves Stai Chair, Mansefeldt Investment Corp. Director, Dian Graves Owen Foundation Johnny E. Trotter President and CEO 2 3 1, 4 1, 3, 4 Livestock Investors, Ltd. 2003 1, 3, 4 * CO M M I T T E E S 1 Executive Committee – F. Scott Dueser, Chairman 2 Audit Committee – David Copeland, Chairman 3 Compensation Committee – Dian Graves Stai, Chairman 4 Nominating/Corporate Governance Committee – Mac A. Coalson, Chairman 24 Corporate Information OFFICERS F. Scott Dueser Chairman, President and Chief Executive Officer J. Bruce Hildebrand Executive Vice President and Chief Financial Officer Gary S. Gragg Executive Vice President, Lending Gary L. Webb Executive Vice President, Operations Tommy J. Barrow Senior Vice President, Lending Courtney Jordan Senior Vice President, Training and Education Michele P. Stevens Senior Vice President, Advertising and Marketing William A. Rowe Vice President, Investment Services Gaila Kilpatrick Assistant Secretary Bob Goodner Compliance Officer Michelle Fagan Compliance Officer A N N UA L M E E T I N G Tuesday, April 27, 2010 10:30 a.m. Abilene Civic Center 1100 N. Sixth Abilene, Texas 79601 CORPORATE OFFICES 400 Pine Abilene, Texas 79601 325-627-7155 • 800-588-7000 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 T R A N S F E R AG E N T Registrar and Transfer Company 800-368-5948 ADDRESS SHAREHOLDER INQUIRIES TO: Registrar and Transfer Company Investor Relations Department 10 Commerce Drive Cranford, NJ 07016 E-MAIL ADDRESS: info@rtco.com REGISTRAR AND TRANSFER COMPANY WEB SITE www.rtco.com S E N D C E R T I F I C AT E S F O R T R A N S F E R & A D D R E S S C H A N G E S TO : Registrar & Transfer Company 10 Commerce Drive Cranford, NJ 07016-3572 4 0 0 P i n e • A b i l e n e , Te x a s 7 9 6 0 1 www.f f in.com 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. Note: Market share data is calculated from June 30, 2009, deposit information compiled by the Federal Deposit Insurance Corporation. FIRST FINANCIAL BANKSHARES EXECUTIVE OFFICERS (L - R ): J. BRUCE HILDEBRAND, MICHELE P. STEVENS, GARY S. GRAGG, F. SCOTT DUESER, GARY L. WEBB, KIRK W. THAXTON AND TOMMY J. BARROW SM A F a m i l y o f C o m m u n i t y B a n k s S M 4 0 0 Pi n e • Abi l e n e , Te x a s 7 9 6 0 1 • w w w. f f i n . c om 21% 47% 30% 7% 15% 20% 37% 26% HEREFORD M A I N O F F I C E 212 E. Third ( 8 0 6 ) 3 6 3 - 8 2 0 0 Hereford, Texas 79045 M I K E M AU L D I N Pre s i d e n t a n d C E O D I R E C TO R S D E A F S M I T H CO U N T Y D E P O S I T M A R K E T S H A R E 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 Pet Care, Inc. Allen Parson Restaurateur and Investments Craig Smith Rancher and Retired Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 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 S E N I O R O F F I C E R S Mike Mauldin Chairman of the Board, President and Chief Executive Officer Steve Gilbert Executive Vice President and Cashier Kent Jackson Executive Vice President and Chief Credit Officer IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 147,652 96,028 130,728 12,284 2,121 1.56% 47.16% DEC. 31, 2008 $ 149,264 94,426 118,656 10,728 2,104 1.54% 44.71% MINERAL WELLS M A I N O F F I C E 1900 E. Hubbard ( 9 4 0 ) 3 2 7 - 5 4 0 0 Mineral Wells, Texas 76067 K E N N E T H W I L L I A M S O N Pre s i d e n t a n d C E O PA LO P I N TO CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Spencer Baum, D.D.S. Baum Dental Clinic F. Scott Dueser First Financial Bankshares, Inc. George Gault Attorney Gault & Gault Terry L. Murphy President and Chief Executive Officer Murphy and Murphy, Inc. David Ramsey, M.D. Family Practice Center Albert Rincon Vice President of Operations Texas Packaging Company, Inc. Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Paul McGettes Chief Financial Officer Upham Oil & Gas Company, L.P. S E N I O R O F F I C E R S Brad Seay Lending Executive Vice President Eddie Gregory Senior Vice President and Cashier Mike Mearse Senior Vice President Lending IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,259 101,050 132,997 22,436 3,542 2.10% 39.01% DEC. 31, 2008 $ 173,565 99,555 138,325 20,276 3,147 1.93% 43.43% SAN ANGELO M A I N O F F I C E 301 W. Beauregard LO C AT I O N S www.historicmuralsofsanangelo.org ( 3 2 5 ) 6 5 9 - 5 9 0 0 San Angelo, Texas 76903 3471 Knickerbocker San Angelo, Texas 76904 M I C H A E L L . B OYD Pre s i d e n t a n d C E O TO M G R E E N CO U N T Y D E P O S I T M A R K E T S H A R E Michael L. Boyd Ron Giddiens Chairman of the Board, President Investments/Business and Chief Executive Officer Consulting D I R E C TO R S Hon. Marilyn Aboussie Chief Justice, Retired W. Dan Cravy, M.D. Physician Pat Crump President and CEO Former President - Bank of the West, San Angelo Joey Henderson President Porter Henderson Implement Company, Inc. J. Bruce Hildebrand Baptist Memorials Services First Financial Bankshares, Inc. Rick DeHoyos Attorney Robert D. Housley President and Owner F. Scott Dueser First Financial Bankshares, Inc. Doug Eakman Owner Pecos Street Pharmacy Steve Eustis Commercial Real Estate David F. Lupton President Angelo Glass & Mirror Company, Inc. John E. Schwartz, Sr. Farmer/Rancher Mary Jane Steadman Attorney Real Estate Investment Management S E N I O R O F F I C E R S Michael L. Boyd Wes Masters Chairman of the Board, Senior Vice President President Robert Pate Jim Davidson and Cashier Senior Vice President Executive Vice President Chuck Shore Senior Vice President Executive Vice President Ruth Wheeler Senior Vice President Cindy George Senior Vice President Bill Wiedenfeld Senior Vice President Carrol E. Hill Senior Vice President and Chief Executive Officer Reba Priddy Glasheen, Valles & DeHoyos, LLP Housley Communications IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 349,676 139,847 290,797 48,441 6,250 1.82% 45.54% DEC. 31, 2008 $ 333,330 135,618 276,803 45,757 6,157 1.86% 44.64% SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR M A I N O F F I C E ( 8 1 7 ) 4 1 0 - 2 9 1 5 3205 E. Highway 114 Southlake, Texas 76092 LO C AT I O N S 95 Trophy Club Drive 891 E. Keller Parkway 909 Stevens 609 Rock Island Avenue 608 W. Hale Avenue Trophy Club, Texas 76262 Keller, Texas 76248 Bridgeport, Texas 76426 Boyd, Texas 76023 Decatur, Texas 76234 M A R K L . J O N E S Pre s i d e n t a n d C E O C I T I E S O F S O U T H L A K E, T R O P HY C LU B & K E L L E R D E P O S I T M A R K E T S H A R E W I S E CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer William Ray Cook, Jr., CPA Cook McDonald & Co. Jack Dortch Jack Dortch Farmers Insurance Agency F. Scott Dueser First Financial Bankshares, Inc. J. Bruce Hildebrand First Financial Bankshares, Inc. Derrell E. Johnson Former President and CEO Rady Associates Consulting Engineers K. Wayne Lee President, DDFW Properties Ralph Manoushagian Land Manager Approach Resources, Inc. Oil & Gas Exploration Jim Ridenour President Sunbelt Station Service S E N I O R O F F I C E R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer F. Mills Shallene Wise County Market President Henson Dunn Senior Vice President Les Mariotti Senior Vice President and Chief Financial Officer J. Sean Shope Senior Vice President Steve Sims Senior Vice President Trent Swearengin Senior Vice President IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 264,306 157,919 210,764 39,084 2,515 0.94% 62.24% DEC. 31, 2008 $ 272,185 163,936 217,818 37,664 2,793 0.99% 61.32% STEPHENVILLE GRANBURY GLEN ROSE ACTON M A I N O F F I C E ( 2 5 4 ) 9 6 5 - 5 0 3 6 2201 W. South Loop Stephenville, Texas 76401 LO C AT I O N S 1875 Lingleville Road 199 N. Columbia 400 Big Bend Trail 2007 East Highway 377 1600 S. Morgan Stephenville, Texas 76401 Stephenville, Texas 76401 Glen Rose, Texas 76043 Granbury, Texas 76049 Granbury, Texas 76048 2915 Fall Creek Highway Acton, Texas 76049 R O N N . M U L L I N S Pre s i d e n t a n d C E O E R AT H , H O O D & S O M E R V E L L CO U N T I E S D E P O S I T M A R K E T S H A R E D I R E C TO R S Ron N. Mullins Chairman of the Board, President and Chief Executive Officer Jerry Parham Investments S E N I O R O F F I C E R S President John Power Bart Rodgers Ron N. Mullins Angie Dusek Chairman of the Board, Senior Vice President and Chief Executive Officer Donna Feller Senior Vice President Keith Brown Prime Building Components, LLC F. Scott Dueser First Financial Bankshares, Inc. Glen Rose Market President Connie Frank J. Bruce Hildebrand Senior Vice President First Financial Bankshares, Inc. Julie Graham Frank Terrell, M.D. Ophthalmologist John Terrill Attorney ADVISORY DIRECTORS SPEC Management Co. Ron Hance Hance Financial Services Granbury Market President Mike Gandy Dereece Howell Executive Vice President Vickie Pettit and Cashier Senior Vice President Senior Vice President Monty Bedwell Robert Reeves Executive Vice President Senior Vice President Robert Lemons Larry Upshaw Executive Vice President Senior Vice President Bill Hooks Autos - Real Estate John Moore Craft Associates, Inc. Ron Pack RP’s Western Wear, Inc. Bill Parham Parham & Parham, CPAs IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 350,059 181,726 298,355 44,383 4,267 1.31% 48.89% DEC. 31, 2008 $ 330,942 192,202 279,209 42,033 5,107 1.56% 48.29% SWEETWATER ROBY TRENT MERKEL J . V. M A R T I N Chairman of the Board K I R BY N . A N D R E WS President and CEO NOLAN & FISHER COUNTIES D E P O S I T M A R K E T S H A R E M A I N O F F I C E 201 Elm LO C AT I O N S 123 N. Concho 117 N. Main 301 Edwards Street ( 3 2 5 ) 2 3 5 - 6 6 0 0 Sweetwater, Texas 79556 Roby, Texas 79543 Trent, Texas 79561 Merkel, Texas 79536 S E N I O R O F F I C E R S D I R E C TO R S J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Donnie Ruppert Executive Vice President and Cashier/Controller Rodney Foster Senior Vice President Lending J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Jeff Branson General Partner Williamson-Branson Real Estate Louis Brooks, Jr. Rancher Ronnie Cox Owner Cox Jewelry J. Bruce Hildebrand First Financial Bankshares, Inc. Jay Lawrence President MAL Enterprises, Inc. Thomas L. Rees, Sr. Rees and Rees, Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 133,322 67,463 119,011 13,248 2,420 1.81% 51.54% DEC. 31, 2008 $ 130,078 68,665 117,320 11,833 2,168 1.66% 51.87% WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH D OYL E L E E Chairman of the Board and Chief Executive O fficer M A I N O F F I C E 101 N. Main LO C AT I O N S 101 College Park Drive 1214 N. Main 210 N. Main 505 FM 1187 N. 4100 E. I-20 1100 FM 1189 ( 8 1 7 ) 5 9 6 - 0 3 0 7 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Aledo, Texas 76008 Willow Park, Texas 76087 Brock, Texas 76066 550 Bailey Avenue Suite 300 Fort Worth, Texas 76107 S E N I O R O F F I C E R S D I R E C TO R S Doyle Lee Chairman of the Board and Chief Executive Officer Doyle Lee Chairman of the Board and Chief Executive Officer Bob Bradberry Executive Vice President Larry Mangrem Executive Vice President and Cashier Mike Carter Senior Vice President Lori Hill Senior Vice President Justin Hooper Senior Vice President Kent Hudson Senior Vice President Jimmie Sue Lawson Senior Vice President Greg L. Barron President G.L. Barron Company, Inc. Stephen G. Brogdon, D.D.S. General and Cosmetic Dentistry Mac A. Coalson Owner Mac A. Coalson Real Estate F. Scott Dueser First Financial Bankshares, Inc. Clay Hicks Oil and Gas Investments Nan Kingsley President Bluestem Studios, Inc. Mike White, O.D. Therapeutic Optometrist J AY G I B B S President Jay Gibbs President Jay Gibbs President PARKER COUNTY D E P O S I T M A R K E T S H A R E IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 355,621 149,607 309,465 33,608 5,124 1.49% 49.92% DEC. 31, 2008 $ 375,424 156,616 331,288 29,326 5,830 1.71% 50.52% First Financial Trust & Asset Management Co., N.A. Abilene Office 400 Pine St. LO C AT I O N S Fort Worth Office 550 Bailey Ave., Suite 300 Odessa Office 2651 JBS Parkway Bldg. 4, Suite E San Angelo Office 301 W. Beauregard Stephenville Office 2201 W. South Loop Sweetwater Office 201 Elm ( 3 2 5 ) 6 2 7 - 7 1 0 0 ( 8 1 7 ) 4 1 0 - 4 9 7 0 ( 4 3 2 ) 3 6 7 - 8 9 0 0 ( 3 2 5 ) 6 5 9 - 5 9 8 7 ( 2 5 4 ) 9 1 8 - 6 2 6 2 ( 3 2 5 ) 2 3 5 - 6 6 4 0 performed well in 2009 considering the challenging economic environment it confronted. Total assets continued to grow, and our equity and fixed-income investments all outperformed their respective bench- marks. We also opened an office in a new market. Assets at year-end totaled $1.67 billion in book value and $2.10 billion in market value. These levels rep- resented increases of 2.1 percent and 11.7 percent, respectively, from 2008. Earnings for 2009 were down from 2008, reflecting the low levels of the stock market that prevailed in the first half of the year. Also contributing to the earnings reduction were significantly lower oil and gas prices, which negatively affected the large oil and gas portfolio that we manage. Net income decreased $179,000, or 6.4 percent, to $2.6 million from $2.8 million in 2008. Trust fee revenue, the main source of our net income, decreased $358,000, or 3.8 percent, to $9.1 million from $9.4 million. Although the markets were extremely volatile throughout the year, our investment team produced outstanding results. All of our equity and fixed-income investments exceeded their respective benchmarks. A highlight of the year was our opening in June of an office in Odessa, which is a new market for us. Barbara Hill manages this office. We are very pleased with the results she has achieved thus far and are excited about the prospects for our growth in the Permian Basin. Our Fort Worth office also achieved excellent results in 2009. Fee revenue for the office increased $123,000, or 41.4 percent, and the number of accounts increased by 34.5 percent. To accommodate the expansion of our business, we moved into a larger office suite during the year. Our experienced team of trust professionals remains committed to providing quality customer service and superior investment results. 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 TRUST ASSETS (IN MILLIONS) $1,664 $1,631 $1,428 $1,300 $1,150 $ 400 600 800 1,000 1,200 1,400 1,600 1,800 TRUST FEES (IN MILLIONS) $9.08 $9.44 $8.75 $7.66 $7.07 $2.631 $2.810 $2.549 $ 1 2 3 4 5 6 7 8 9 10 TRUST NET INCOME (IN MILLIONS) $2.076 $1.909 $ 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 (L-R - Back Row) DAVID W. CASTLEBERRY (Stephenville), RICHARD YOUNG (Abilene), MICHAEL SHEEHAN (Sweetwater), KIRK THAXTON (Abilene), DAVID BYRD (San Angelo) and JOE AYRES (Stephenville) (L-R - seated) BARBARA HILL (Odessa) and KONRAD HALBERT (Fort Worth) O F F I C E R S Kirk W. Thaxton Chairman of the Board, President, and Chief Executive Officer David Castleberry Senior Vice President Manager, Stephenville David Byrd Executive Vice President Manager, San Angelo Konrad S. Halbert Executive Vice President Manager, Fort Worth Michael D. Sheehan Executive Vice President Manager, Sweetwater Richard Young Executive Vice President Manager, Abilene Barbara Hill Senior Vice President Manager, Odessa Larry Cleveland Senior Vice President Manager, Operations Ralph Gibson Senior Vice President Manager, Investments David B. Pitzer Senior Vice President Manager, Real Property Randy Spiva Senior Vice President Manager, Oil & Gas D I R E C TO R S Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Copeland President Shelton Family Foundation Ronnie Cox Owner Cox Jewelry F. Scott Dueser First Financial Bankshares, Inc. David F. Lupton President Angelo Glass & Mirror Company, Inc. Bill Parham Parham & Parham, CPAs Robert S. Patterson Former President & CEO First Financial Trust & Asset Management Company, N.A. Kirk W. Thaxton Chairman of the Board, President and Chief Executive Officer First Financial Trust & Asset Management Company, N.A. ADVISORY DIRECTORS John L. Beckham Beckham Rector & Eagle Paul L. Cannon McMahon Surovik Suttle, P.C. (L - R ): CLAY TRUMBLE, KAY BERRY, GARY TUCKER, DENNIS STECKLY, MICHELLE McDONALD AND LARRY WILLIAMS First Technology Services, Inc. (FTS) is the shared services company for First Financial Bankshares, Inc. (FFIN) Our mission is to maximize efficiencies and control costs for common functions within FFIN while providing the best possible customer service to our internal and external customers. FTS plays a key role in customer service functions within FFIN through its customer call center and innovative technology for online banking, auto- matic bill pay services, backroom operations and other technology-based banking services. FTS also supports employees with classroom and online technology training and a responsive technology help desk. FTS provides more than 100 technology applications to FFIN and its family of 10 banks and the Trust Company. Services include check processing, account services, a help desk, desktop support, network services, server support, software support, information security, computer operations, business continuity planning, loan and credit operations, loan document preparation and the corporate call center. M A I N O F F I C E 400 Pine Abilene, Texas 79601 ( 3 2 5 ) 6 2 7 - 7 1 9 5 S E N I O R O F F I C E R S Gary D. Tucker President and Chief Executive Officer Kay Berry Senior Vice President Deposit Operations Michelle McDonald Senior Vice President Customer Service D I R E C TO R S Clay Trumble Senior Vice President Credit Administration Dennis Steckly Senior Vice President Production Services Larry Williams Senior Vice President Infrastructure Services Gary L. Webb Chairman of the Board Ron Butler President and First Technology Services, Inc. Chief Executive Officer Executive Vice President, First Financial Bank Abilene Operations First Financial Bankshares, Inc. Gary D. Tucker President and Chief Executive Officer First Technology Services, Inc. F. Scott Dueser Chairman, President and Chief Executive Officer Jay Gibbs President First Financial Bank Weatherford Derrell E. Johnson Former President and Chief Executive Officer Rady and Associates Consulting Engineers First Financial Bankshares, Inc. Les Mariotti J. Bruce Hildebrand Chief Financial Officer Executive Vice President and First Financial Bank Southlake Senior Vice President and Chief Financial Officer First Financial Bankshares, Inc. Mike Mauldin Michael L. Boyd Chairman, President and Chief Executive Officer First Financial Bank San Angelo Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 2 0 0 9 W A L T E R J O H N S O N A W A R D K E N N E T H T . M U R P H Y Through the 120 years of First Financial Bankshares’ history, there have been many people who have contributed greatly to the success of this company, and Ken Murphy has to be at the top of that list with Walter Johnson and the James family. Therefore, it is extremely appropriate that we honor Ken for his outstanding leadership during the past 39 years with the Walter Johnson Award, as well as dedicating this Annual Report to him. Ken was hired by Walter Johnson in 1971 and has held the following positions: First Financial Bank, N.A., Abilene (formerly First National Bank of Abilene) Executive Vice President President President and Chief Executive Officer Chairman of the Board and Chief Executive Officer 1993–2000 Chairman of the Board First Financial Bankshares, Inc. Executive Vice President President and Chief Executive Officer Chairman, President and Chief Executive Officer Chairman of the Board Senior Chairman of the Board 1971-1975 1975-1981 1981-1984 1984-1993 1973-1985 1985-1986 1986-2000 2001-2007 2008-2009 When Ken joined the bank in 1971, the Company had total assets of $87 million and net income of $806,000. This past year we finished the year with total assets of $3.3 billion and net earnings of $53.8 million. During Ken’s tenure with this company, we have experienced great success. While he was President and CEO of First Financial Bankshares, he purchased 11 banks and added numerous locations to the Company. During his tenure, he held many civic, cultural and professional leadership positions with the most notable positions being: President, Abilene Chamber of Commerce; Chairman, United Way Campaign in Abilene; Chairman, West Texas Rehabilitation Center; Chairman and Trustee, Alliance for Women and Children; Director, Hendrick Medical Center; Director, West Central Texas Municipal Water District; Director, Hardin-Simmons University Board of Development; Director, The Grace Museum of Abilene; Director, Treasurer and Chairman, Texas Bankers Association; and Class A Director, Federal Reserve Bank of Dallas. In 2003, Ken was honored as Outstanding Citizen of the Year by the Abilene Chamber of Commerce. As he retires from the First Financial Bankshares Board after 37 years, he leaves us with a great legacy and many Murphy stories, reports and sayings, but, most of all, his knowledge of how to manage outstanding banks. For me personally, Ken has been a mentor, confidant and boss for 33 years. I have learned so much from him. Although he is retiring from the Board, I know we will continue to have his advice and counsel, as well as his ever-present support and encouragement. It is our pleasure to honor Ken Murphy with the Walter Johnson Award for what he has contributed in going beyond the call of duty for our company and, especially, for our customers, stockholders and employees. Sincerely, F. Scott Dueser 13 15 17 19 21 23 14 16 18 20 22 BACK ROW (L-R): JOSEPH CANON, DAVID COPELAND, KADE MATTHEWS, RON GIDDIENS, MURRAY EDWARDS, TUCKER BRIDWELL, JOHNNY TROTTER FRONT ROW (L - R): KENNETH MURPHY, DERRELL JOHNSON, DIAN STAI, MAC COALSON, F. SCOTT DUESER BOARD MEMBER YEAR ELECTED BOARD MEMBER YEAR ELECTED COMMITTEE APPOINTMENT COMMITTEE APPOINTMENT Tucker S. Bridwell, CPA 2007 2, 4 Board of Directors F. Scott Dueser Chairman of the Board, President and CEO President Mansefeldt Investment Corporation Joseph E. Canon, J.D. Executive Director Dodge Jones Foundation Mac A. Coalson Mac A. Coalson Real Estate David Copeland, CPA President, SIPCO, Inc. and Shelton Family Foundation Murray Edwards Principal, The Edwards Group Ron Giddiens Investments/Business Consulting Former President - Bank of the West, San Angelo 1991 1996 1996 1998 2006 2009 1 3 2 2 1, 3, 4 1, 2, 4 2000 1998 1971 1993 Derrell E. Johnson Former President and CEO Rady and Associates Consulting Engineers Kade Matthews Ranching and Investments Kenneth T. Murphy Senior Chairman of the Board Dian Graves Stai Chair, Mansefeldt Investment Corp. Director, Dian Graves Owen Foundation Johnny E. Trotter President and CEO 2 3 1, 4 1, 3, 4 Livestock Investors, Ltd. 2003 1, 3, 4 * CO M M I T T E E S 1 Executive Committee – F. Scott Dueser, Chairman 2 Audit Committee – David Copeland, Chairman 3 Compensation Committee – Dian Graves Stai, Chairman 4 Nominating/Corporate Governance Committee – Mac A. Coalson, Chairman 24 Corporate Information OFFICERS F. Scott Dueser Chairman, President and Chief Executive Officer J. Bruce Hildebrand Executive Vice President and Chief Financial Officer Gary S. Gragg Executive Vice President, Lending Gary L. Webb Executive Vice President, Operations Tommy J. Barrow Senior Vice President, Lending Courtney Jordan Senior Vice President, Training and Education Michele P. Stevens Senior Vice President, Advertising and Marketing William A. Rowe Vice President, Investment Services Gaila Kilpatrick Assistant Secretary Bob Goodner Compliance Officer Michelle Fagan Compliance Officer A N N UA L M E E T I N G Tuesday, April 27, 2010 10:30 a.m. Abilene Civic Center 1100 N. Sixth Abilene, Texas 79601 CORPORATE OFFICES 400 Pine Abilene, Texas 79601 325-627-7155 • 800-588-7000 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 T R A N S F E R AG E N T Registrar and Transfer Company 800-368-5948 ADDRESS SHAREHOLDER INQUIRIES TO: Registrar and Transfer Company Investor Relations Department 10 Commerce Drive Cranford, NJ 07016 E-MAIL ADDRESS: info@rtco.com REGISTRAR AND TRANSFER COMPANY WEB SITE www.rtco.com S E N D C E R T I F I C AT E S F O R T R A N S F E R & A D D R E S S C H A N G E S TO : Registrar & Transfer Company 10 Commerce Drive Cranford, NJ 07016-3572 4 0 0 P i n e • A b i l e n e , Te x a s 7 9 6 0 1 www.f f in.com 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. Note: Market share data is calculated from June 30, 2009, deposit information compiled by the Federal Deposit Insurance Corporation. FIRST FINANCIAL BANKSHARES EXECUTIVE OFFICERS (L - R ): J. BRUCE HILDEBRAND, MICHELE P. STEVENS, GARY S. GRAGG, F. SCOTT DUESER, GARY L. WEBB, KIRK W. THAXTON AND TOMMY J. BARROW SM A F a m i l y o f C o m m u n i t y B a n k s S M 4 0 0 Pi n e • Abi l e n e , Te x a s 7 9 6 0 1 • w w w. f f i n . c om 21% 47% 30% 7% 15% 20% 37% 26% 13 15 17 19 21 23 HEREFORD M A I N O F F I C E 212 E. Third ( 8 0 6 ) 3 6 3 - 8 2 0 0 Hereford, Texas 79045 M I K E M AU L D I N Pre s i d e n t a n d C E O D I R E C TO R S D E A F S M I T H CO U N T Y D E P O S I T M A R K E T S H A R E 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 Pet Care, Inc. Allen Parson Restaurateur and Investments Craig Smith Rancher and Retired Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 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 S E N I O R O F F I C E R S Mike Mauldin Chairman of the Board, President and Chief Executive Officer Steve Gilbert Executive Vice President and Cashier Kent Jackson Executive Vice President and Chief Credit Officer IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 147,652 96,028 130,728 12,284 2,121 1.56% 47.16% DEC. 31, 2008 $ 149,264 94,426 118,656 10,728 2,104 1.54% 44.71% MINERAL WELLS M A I N O F F I C E 1900 E. Hubbard ( 9 4 0 ) 3 2 7 - 5 4 0 0 Mineral Wells, Texas 76067 K E N N E T H W I L L I A M S O N Pre s i d e n t a n d C E O PA LO P I N TO CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Spencer Baum, D.D.S. Baum Dental Clinic F. Scott Dueser First Financial Bankshares, Inc. George Gault Attorney Gault & Gault Terry L. Murphy President and Chief Executive Officer Murphy and Murphy, Inc. David Ramsey, M.D. Family Practice Center Albert Rincon Vice President of Operations Texas Packaging Company, Inc. Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Paul McGettes Chief Financial Officer Upham Oil & Gas Company, L.P. S E N I O R O F F I C E R S Brad Seay Lending Executive Vice President Eddie Gregory Senior Vice President and Cashier Mike Mearse Senior Vice President Lending IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,259 101,050 132,997 22,436 3,542 2.10% 39.01% DEC. 31, 2008 $ 173,565 99,555 138,325 20,276 3,147 1.93% 43.43% SAN ANGELO M A I N O F F I C E 301 W. Beauregard LO C AT I O N S www.historicmuralsofsanangelo.org ( 3 2 5 ) 6 5 9 - 5 9 0 0 San Angelo, Texas 76903 3471 Knickerbocker San Angelo, Texas 76904 M I C H A E L L . B OYD Pre s i d e n t a n d C E O TO M G R E E N CO U N T Y D E P O S I T M A R K E T S H A R E Michael L. Boyd Ron Giddiens Chairman of the Board, President Investments/Business and Chief Executive Officer Consulting D I R E C TO R S Hon. Marilyn Aboussie Chief Justice, Retired W. Dan Cravy, M.D. Physician Pat Crump President and CEO Former President - Bank of the West, San Angelo Joey Henderson President Porter Henderson Implement Company, Inc. J. Bruce Hildebrand Baptist Memorials Services First Financial Bankshares, Inc. Rick DeHoyos Attorney Robert D. Housley President and Owner F. Scott Dueser First Financial Bankshares, Inc. Doug Eakman Owner Pecos Street Pharmacy Steve Eustis Commercial Real Estate David F. Lupton President Angelo Glass & Mirror Company, Inc. John E. Schwartz, Sr. Farmer/Rancher Mary Jane Steadman Attorney Real Estate Investment Management S E N I O R O F F I C E R S Michael L. Boyd Wes Masters Chairman of the Board, Senior Vice President President Robert Pate Jim Davidson and Cashier Senior Vice President Executive Vice President Chuck Shore Senior Vice President Executive Vice President Ruth Wheeler Senior Vice President Cindy George Senior Vice President Bill Wiedenfeld Senior Vice President Carrol E. Hill Senior Vice President and Chief Executive Officer Reba Priddy Glasheen, Valles & DeHoyos, LLP Housley Communications IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 349,676 139,847 290,797 48,441 6,250 1.82% 45.54% DEC. 31, 2008 $ 333,330 135,618 276,803 45,757 6,157 1.86% 44.64% SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR M A I N O F F I C E ( 8 1 7 ) 4 1 0 - 2 9 1 5 3205 E. Highway 114 Southlake, Texas 76092 LO C AT I O N S 95 Trophy Club Drive 891 E. Keller Parkway 909 Stevens 609 Rock Island Avenue 608 W. Hale Avenue Trophy Club, Texas 76262 Keller, Texas 76248 Bridgeport, Texas 76426 Boyd, Texas 76023 Decatur, Texas 76234 M A R K L . J O N E S Pre s i d e n t a n d C E O C I T I E S O F S O U T H L A K E, T R O P HY C LU B & K E L L E R D E P O S I T M A R K E T S H A R E W I S E CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer William Ray Cook, Jr., CPA Cook McDonald & Co. Jack Dortch Jack Dortch Farmers Insurance Agency F. Scott Dueser First Financial Bankshares, Inc. J. Bruce Hildebrand First Financial Bankshares, Inc. Derrell E. Johnson Former President and CEO Rady Associates Consulting Engineers K. Wayne Lee President, DDFW Properties Ralph Manoushagian Land Manager Approach Resources, Inc. Oil & Gas Exploration Jim Ridenour President Sunbelt Station Service S E N I O R O F F I C E R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer F. Mills Shallene Wise County Market President Henson Dunn Senior Vice President Les Mariotti Senior Vice President and Chief Financial Officer J. Sean Shope Senior Vice President Steve Sims Senior Vice President Trent Swearengin Senior Vice President IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 264,306 157,919 210,764 39,084 2,515 0.94% 62.24% DEC. 31, 2008 $ 272,185 163,936 217,818 37,664 2,793 0.99% 61.32% STEPHENVILLE GRANBURY GLEN ROSE ACTON M A I N O F F I C E ( 2 5 4 ) 9 6 5 - 5 0 3 6 2201 W. South Loop Stephenville, Texas 76401 LO C AT I O N S 1875 Lingleville Road 199 N. Columbia 400 Big Bend Trail 2007 East Highway 377 1600 S. Morgan Stephenville, Texas 76401 Stephenville, Texas 76401 Glen Rose, Texas 76043 Granbury, Texas 76049 Granbury, Texas 76048 2915 Fall Creek Highway Acton, Texas 76049 R O N N . M U L L I N S Pre s i d e n t a n d C E O E R AT H , H O O D & S O M E R V E L L CO U N T I E S D E P O S I T M A R K E T S H A R E D I R E C TO R S Ron N. Mullins Chairman of the Board, President and Chief Executive Officer Jerry Parham Investments S E N I O R O F F I C E R S President John Power Bart Rodgers Ron N. Mullins Angie Dusek Chairman of the Board, Senior Vice President and Chief Executive Officer Donna Feller Senior Vice President Keith Brown Prime Building Components, LLC F. Scott Dueser First Financial Bankshares, Inc. Glen Rose Market President Connie Frank J. Bruce Hildebrand Senior Vice President First Financial Bankshares, Inc. Julie Graham Frank Terrell, M.D. Ophthalmologist John Terrill Attorney ADVISORY DIRECTORS SPEC Management Co. Ron Hance Hance Financial Services Granbury Market President Mike Gandy Dereece Howell Executive Vice President Vickie Pettit and Cashier Senior Vice President Senior Vice President Monty Bedwell Robert Reeves Executive Vice President Senior Vice President Robert Lemons Larry Upshaw Executive Vice President Senior Vice President Bill Hooks Autos - Real Estate John Moore Craft Associates, Inc. Ron Pack RP’s Western Wear, Inc. Bill Parham Parham & Parham, CPAs IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 350,059 181,726 298,355 44,383 4,267 1.31% 48.89% DEC. 31, 2008 $ 330,942 192,202 279,209 42,033 5,107 1.56% 48.29% SWEETWATER ROBY TRENT MERKEL J . V. M A R T I N Chairman of the Board K I R BY N . A N D R E WS President and CEO NOLAN & FISHER COUNTIES D E P O S I T M A R K E T S H A R E M A I N O F F I C E 201 Elm LO C AT I O N S 123 N. Concho 117 N. Main 301 Edwards Street ( 3 2 5 ) 2 3 5 - 6 6 0 0 Sweetwater, Texas 79556 Roby, Texas 79543 Trent, Texas 79561 Merkel, Texas 79536 S E N I O R O F F I C E R S D I R E C TO R S J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Donnie Ruppert Executive Vice President and Cashier/Controller Rodney Foster Senior Vice President Lending J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Jeff Branson General Partner Williamson-Branson Real Estate Louis Brooks, Jr. Rancher Ronnie Cox Owner Cox Jewelry J. Bruce Hildebrand First Financial Bankshares, Inc. Jay Lawrence President MAL Enterprises, Inc. Thomas L. Rees, Sr. Rees and Rees, Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 133,322 67,463 119,011 13,248 2,420 1.81% 51.54% DEC. 31, 2008 $ 130,078 68,665 117,320 11,833 2,168 1.66% 51.87% WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH D OYL E L E E Chairman of the Board and Chief Executive O fficer M A I N O F F I C E 101 N. Main LO C AT I O N S 101 College Park Drive 1214 N. Main 210 N. Main 505 FM 1187 N. 4100 E. I-20 1100 FM 1189 ( 8 1 7 ) 5 9 6 - 0 3 0 7 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Aledo, Texas 76008 Willow Park, Texas 76087 Brock, Texas 76066 550 Bailey Avenue Suite 300 Fort Worth, Texas 76107 S E N I O R O F F I C E R S D I R E C TO R S Doyle Lee Chairman of the Board and Chief Executive Officer Doyle Lee Chairman of the Board and Chief Executive Officer Bob Bradberry Executive Vice President Larry Mangrem Executive Vice President and Cashier Mike Carter Senior Vice President Lori Hill Senior Vice President Justin Hooper Senior Vice President Kent Hudson Senior Vice President Jimmie Sue Lawson Senior Vice President Greg L. Barron President G.L. Barron Company, Inc. Stephen G. Brogdon, D.D.S. General and Cosmetic Dentistry Mac A. Coalson Owner Mac A. Coalson Real Estate F. Scott Dueser First Financial Bankshares, Inc. Clay Hicks Oil and Gas Investments Nan Kingsley President Bluestem Studios, Inc. Mike White, O.D. Therapeutic Optometrist J AY G I B B S President Jay Gibbs President Jay Gibbs President PARKER COUNTY D E P O S I T M A R K E T S H A R E IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 355,621 149,607 309,465 33,608 5,124 1.49% 49.92% DEC. 31, 2008 $ 375,424 156,616 331,288 29,326 5,830 1.71% 50.52% First Financial Trust & Asset Management Co., N.A. Abilene Office 400 Pine St. LO C AT I O N S Fort Worth Office 550 Bailey Ave., Suite 300 Odessa Office 2651 JBS Parkway Bldg. 4, Suite E San Angelo Office 301 W. Beauregard Stephenville Office 2201 W. South Loop Sweetwater Office 201 Elm ( 3 2 5 ) 6 2 7 - 7 1 0 0 ( 8 1 7 ) 4 1 0 - 4 9 7 0 ( 4 3 2 ) 3 6 7 - 8 9 0 0 ( 3 2 5 ) 6 5 9 - 5 9 8 7 ( 2 5 4 ) 9 1 8 - 6 2 6 2 ( 3 2 5 ) 2 3 5 - 6 6 4 0 performed well in 2009 considering the challenging economic environment it confronted. Total assets continued to grow, and our equity and fixed-income investments all outperformed their respective bench- marks. We also opened an office in a new market. Assets at year-end totaled $1.67 billion in book value and $2.10 billion in market value. These levels rep- resented increases of 2.1 percent and 11.7 percent, respectively, from 2008. Earnings for 2009 were down from 2008, reflecting the low levels of the stock market that prevailed in the first half of the year. Also contributing to the earnings reduction were significantly lower oil and gas prices, which negatively affected the large oil and gas portfolio that we manage. Net income decreased $179,000, or 6.4 percent, to $2.6 million from $2.8 million in 2008. Trust fee revenue, the main source of our net income, decreased $358,000, or 3.8 percent, to $9.1 million from $9.4 million. Although the markets were extremely volatile throughout the year, our investment team produced outstanding results. All of our equity and fixed-income investments exceeded their respective benchmarks. A highlight of the year was our opening in June of an office in Odessa, which is a new market for us. Barbara Hill manages this office. We are very pleased with the results she has achieved thus far and are excited about the prospects for our growth in the Permian Basin. Our Fort Worth office also achieved excellent results in 2009. Fee revenue for the office increased $123,000, or 41.4 percent, and the number of accounts increased by 34.5 percent. To accommodate the expansion of our business, we moved into a larger office suite during the year. Our experienced team of trust professionals remains committed to providing quality customer service and superior investment results. 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 TRUST ASSETS (IN MILLIONS) $1,664 $1,631 $1,428 $1,300 $1,150 $ 400 600 800 1,000 1,200 1,400 1,600 1,800 TRUST FEES (IN MILLIONS) $9.08 $9.44 $8.75 $7.66 $7.07 $2.631 $2.810 $2.549 $ 1 2 3 4 5 6 7 8 9 10 TRUST NET INCOME (IN MILLIONS) $2.076 $1.909 $ 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 (L-R - Back Row) DAVID W. CASTLEBERRY (Stephenville), RICHARD YOUNG (Abilene), MICHAEL SHEEHAN (Sweetwater), KIRK THAXTON (Abilene), DAVID BYRD (San Angelo) and JOE AYRES (Stephenville) (L-R - seated) BARBARA HILL (Odessa) and KONRAD HALBERT (Fort Worth) O F F I C E R S Kirk W. Thaxton Chairman of the Board, President, and Chief Executive Officer David Castleberry Senior Vice President Manager, Stephenville D I R E C TO R S Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Byrd Executive Vice President Manager, San Angelo Konrad S. Halbert Executive Vice President Manager, Fort Worth Michael D. Sheehan Executive Vice President Manager, Sweetwater Richard Young Executive Vice President Manager, Abilene Shelton Family Foundation Chairman of the Board, President Robert S. Patterson Former President & CEO First Financial Trust & Asset Management Company, N.A. Kirk W. Thaxton and Chief Executive Officer First Financial Trust & Asset Management Company, N.A. ADVISORY DIRECTORS Beckham Rector & Eagle Paul L. Cannon First Financial Bankshares, Inc. John L. Beckham Angelo Glass & Mirror McMahon Surovik Suttle, P.C. Barbara Hill Senior Vice President Manager, Odessa Larry Cleveland Senior Vice President Manager, Operations Ralph Gibson Senior Vice President Manager, Investments David B. Pitzer Senior Vice President Manager, Real Property Randy Spiva Senior Vice President Manager, Oil & Gas David Copeland President Ronnie Cox Owner Cox Jewelry F. Scott Dueser David F. Lupton President Company, Inc. Bill Parham Parham & Parham, CPAs (L - R ): CLAY TRUMBLE, KAY BERRY, GARY TUCKER, DENNIS STECKLY, MICHELLE McDONALD AND LARRY WILLIAMS First Technology Services, Inc. (FTS) is the shared services company for First Financial Bankshares, Inc. (FFIN) Our mission is to maximize efficiencies common costs and functions within FFIN while providing the best possible customer service to our internal and external customers. control for FTS plays a key role in customer service functions within FFIN through its customer call center and innovative technology for online banking, auto- matic bill pay services, backroom operations and other technology-based banking services. FTS also supports employees with classroom and online technology training and a responsive technology help desk. FTS provides more than 100 technology applications to FFIN and its family of 10 banks and the Trust Company. Services include check processing, account services, a help desk, desktop support, network server support, software support, information security, computer operations, business continuity planning, loan and credit operations, loan document preparation and the corporate call center. services, M A I N O F F I C E 400 Pine Abilene, Texas 79601 ( 3 2 5 ) 6 2 7 - 7 1 9 5 S E N I O R O F F I C E R S Gary D. Tucker President and Chief Executive Officer Kay Berry Senior Vice President Deposit Operations Michelle McDonald Senior Vice President Customer Service D I R E C TO R S Gary L. Webb Chairman of the Board First Technology Services, Inc. Executive Vice President, Operations First Financial Bankshares, Inc. Gary D. Tucker President and Chief Executive Officer First Technology Services, Inc. F. Scott Dueser Chairman, President and Chief Executive Officer First Financial Bankshares, Inc. J. Bruce Hildebrand Executive Vice President and Chief Financial Officer First Financial Bankshares, Inc. Michael L. Boyd Chairman, President and Chief Executive Officer First Financial Bank San Angelo Clay Trumble Senior Vice President Credit Administration Dennis Steckly Senior Vice President Production Services Larry Williams Senior Vice President Infrastructure Services Ron Butler President and Chief Executive Officer First Financial Bank Abilene Jay Gibbs President First Financial Bank Weatherford Derrell E. Johnson Former President and Chief Executive Officer Rady and Associates Consulting Engineers Les Mariotti Senior Vice President and Chief Financial Officer First Financial Bank Southlake Mike Mauldin Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 14 16 18 20 22 2 0 0 9 W A L T E R J O H N S O N A W A R D K E N N E T H T . M U R P H Y Through the 120 years of First Financial Bankshares’ history, there have been many people who have contributed greatly to the success of this company, and Ken Murphy has to be at the top of that list with Walter Johnson and the James family. Therefore, it is extremely appropriate that we honor Ken for his outstanding leadership during the past 39 years with the Walter Johnson Award, as well as dedicating this Annual Report to him. Ken was hired by Walter Johnson in 1971 and has held the following positions: First Financial Bank, N.A., Abilene (formerly First National Bank of Abilene) Executive Vice President President President and Chief Executive Officer Chairman of the Board and Chief Executive Officer 1993–2000 Chairman of the Board First Financial Bankshares, Inc. Executive Vice President President and Chief Executive Officer Chairman, President and Chief Executive Officer Chairman of the Board Senior Chairman of the Board 1971-1975 1975-1981 1981-1984 1984-1993 1973-1985 1985-1986 1986-2000 2001-2007 2008-2009 When Ken joined the bank in 1971, the Company had total assets of $87 million and net income of $806,000. This past year we finished the year with total assets of $3.3 billion and net earnings of $53.8 million. During Ken’s tenure with this company, we have experienced great success. While he was President and CEO of First Financial Bankshares, he purchased 11 banks and added numerous locations to the Company. During his tenure, he held many civic, cultural and professional leadership positions with the most notable positions being: President, Abilene Chamber of Commerce; Chairman, United Way Campaign in Abilene; Chairman, West Texas Rehabilitation Center; Chairman and Trustee, Alliance for Women and Children; Director, Hendrick Medical Center; Director, West Central Texas Municipal Water District; Director, Hardin-Simmons University Board of Development; Director, The Grace Museum of Abilene; Director, Treasurer and Chairman, Texas Bankers Association; and Class A Director, Federal Reserve Bank of Dallas. In 2003, Ken was honored as Outstanding Citizen of the Year by the Abilene Chamber of Commerce. As he retires from the First Financial Bankshares Board after 37 years, he leaves us with a great legacy and many Murphy stories, reports and sayings, but, most of all, his knowledge of how to manage outstanding banks. For me personally, Ken has been a mentor, confidant and boss for 33 years. I have learned so much from him. Although he is retiring from the Board, I know we will continue to have his advice and counsel, as well as his ever-present support and encouragement. It is our pleasure to honor Ken Murphy with the Walter Johnson Award for what he has contributed in going beyond the call of duty for our company and, especially, for our customers, stockholders and employees. Sincerely, F. Scott Dueser BACK ROW (L-R): JOSEPH CANON, DAVID COPELAND, KADE MATTHEWS, RON GIDDIENS, MURRAY EDWARDS, TUCKER BRIDWELL, JOHNNY TROTTER FRONT ROW (L - R): KENNETH MURPHY, DERRELL JOHNSON, DIAN STAI, MAC COALSON, F. SCOTT DUESER BOARD MEMBER YEAR ELECTED BOARD MEMBER YEAR ELECTED COMMITTEE APPOINTMENT COMMITTEE APPOINTMENT Tucker S. Bridwell, CPA 2007 2, 4 Board of Directors F. Scott Dueser Chairman of the Board, President and CEO President Mansefeldt Investment Corporation Joseph E. Canon, J.D. Executive Director Dodge Jones Foundation Mac A. Coalson Mac A. Coalson Real Estate David Copeland, CPA President, SIPCO, Inc. and Shelton Family Foundation Murray Edwards Principal, The Edwards Group Ron Giddiens Investments/Business Consulting Former President - Bank of the West, San Angelo 1991 1996 1996 1998 2006 2009 1 3 2 2 1, 3, 4 1, 2, 4 2000 1998 1971 1993 Derrell E. Johnson Former President and CEO Rady and Associates Consulting Engineers Kade Matthews Ranching and Investments Kenneth T. Murphy Senior Chairman of the Board Dian Graves Stai Chair, Mansefeldt Investment Corp. Director, Dian Graves Owen Foundation Johnny E. Trotter President and CEO 2 3 1, 4 1, 3, 4 Livestock Investors, Ltd. 2003 1, 3, 4 * CO M M I T T E E S 1 Executive Committee – F. Scott Dueser, Chairman 2 Audit Committee – David Copeland, Chairman 3 Compensation Committee – Dian Graves Stai, Chairman 4 Nominating/Corporate Governance Committee – Mac A. Coalson, Chairman 24 Corporate Information OFFICERS F. Scott Dueser Chairman, President and Chief Executive Officer J. Bruce Hildebrand Executive Vice President and Chief Financial Officer Gary S. Gragg Executive Vice President, Lending Gary L. Webb Executive Vice President, Operations Tommy J. Barrow Senior Vice President, Lending Courtney Jordan Senior Vice President, Training and Education Michele P. Stevens Senior Vice President, Advertising and Marketing William A. Rowe Vice President, Investment Services Gaila Kilpatrick Assistant Secretary Bob Goodner Compliance Officer Michelle Fagan Compliance Officer A N N UA L M E E T I N G Tuesday, April 27, 2010 10:30 a.m. Abilene Civic Center 1100 N. Sixth Abilene, Texas 79601 CORPORATE OFFICES 400 Pine Abilene, Texas 79601 325-627-7155 • 800-588-7000 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 T R A N S F E R AG E N T Registrar and Transfer Company 800-368-5948 ADDRESS SHAREHOLDER INQUIRIES TO: Registrar and Transfer Company Investor Relations Department 10 Commerce Drive Cranford, NJ 07016 E-MAIL ADDRESS: info@rtco.com REGISTRAR AND TRANSFER COMPANY WEB SITE www.rtco.com S E N D C E R T I F I C AT E S F O R T R A N S F E R & A D D R E S S C H A N G E S TO : Registrar & Transfer Company 10 Commerce Drive Cranford, NJ 07016-3572 4 0 0 P i n e • A b i l e n e , Te x a s 7 9 6 0 1 www.f f in.com 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. Note: Market share data is calculated from June 30, 2009, deposit information compiled by the Federal Deposit Insurance Corporation. FIRST FINANCIAL BANKSHARES EXECUTIVE OFFICERS (L - R ): J. BRUCE HILDEBRAND, MICHELE P. STEVENS, GARY S. GRAGG, F. SCOTT DUESER, GARY L. WEBB, KIRK W. THAXTON AND TOMMY J. BARROW SM A F a m i l y o f C o m m u n i t y B a n k s S M 4 0 0 Pi n e • Abi l e n e , Te x a s 7 9 6 0 1 • w w w. f f i n . c om 21% 47% 30% 7% 15% 20% 37% 26% HEREFORD M A I N O F F I C E 212 E. Third ( 8 0 6 ) 3 6 3 - 8 2 0 0 Hereford, Texas 79045 M I K E M AU L D I N Pre s i d e n t a n d C E O D I R E C TO R S D E A F S M I T H CO U N T Y D E P O S I T M A R K E T S H A R E 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 Pet Care, Inc. Allen Parson Restaurateur and Investments Craig Smith Rancher and Retired Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 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 S E N I O R O F F I C E R S Mike Mauldin Chairman of the Board, President and Chief Executive Officer Steve Gilbert Executive Vice President and Cashier Kent Jackson Executive Vice President and Chief Credit Officer IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 147,652 96,028 130,728 12,284 2,121 1.56% 47.16% DEC. 31, 2008 $ 149,264 94,426 118,656 10,728 2,104 1.54% 44.71% MINERAL WELLS M A I N O F F I C E 1900 E. Hubbard ( 9 4 0 ) 3 2 7 - 5 4 0 0 Mineral Wells, Texas 76067 K E N N E T H W I L L I A M S O N Pre s i d e n t a n d C E O PA LO P I N TO CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Spencer Baum, D.D.S. Baum Dental Clinic F. Scott Dueser First Financial Bankshares, Inc. George Gault Attorney Gault & Gault Terry L. Murphy President and Chief Executive Officer Murphy and Murphy, Inc. David Ramsey, M.D. Family Practice Center Albert Rincon Vice President of Operations Texas Packaging Company, Inc. Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Paul McGettes Chief Financial Officer Upham Oil & Gas Company, L.P. S E N I O R O F F I C E R S Brad Seay Lending Executive Vice President Eddie Gregory Senior Vice President and Cashier Mike Mearse Senior Vice President Lending IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,259 101,050 132,997 22,436 3,542 2.10% 39.01% DEC. 31, 2008 $ 173,565 99,555 138,325 20,276 3,147 1.93% 43.43% SAN ANGELO M A I N O F F I C E 301 W. Beauregard LO C AT I O N S www.historicmuralsofsanangelo.org ( 3 2 5 ) 6 5 9 - 5 9 0 0 San Angelo, Texas 76903 3471 Knickerbocker San Angelo, Texas 76904 M I C H A E L L . B OYD Pre s i d e n t a n d C E O TO M G R E E N CO U N T Y D E P O S I T M A R K E T S H A R E Michael L. Boyd Ron Giddiens Chairman of the Board, President Investments/Business and Chief Executive Officer Consulting D I R E C TO R S Hon. Marilyn Aboussie Chief Justice, Retired W. Dan Cravy, M.D. Physician Pat Crump President and CEO Former President - Bank of the West, San Angelo Joey Henderson President Porter Henderson Implement Company, Inc. J. Bruce Hildebrand Baptist Memorials Services First Financial Bankshares, Inc. Rick DeHoyos Attorney Robert D. Housley President and Owner F. Scott Dueser First Financial Bankshares, Inc. Doug Eakman Owner Pecos Street Pharmacy Steve Eustis Commercial Real Estate David F. Lupton President Angelo Glass & Mirror Company, Inc. John E. Schwartz, Sr. Farmer/Rancher Mary Jane Steadman Attorney Real Estate Investment Management S E N I O R O F F I C E R S Michael L. Boyd Wes Masters Chairman of the Board, Senior Vice President President Robert Pate Jim Davidson and Cashier Senior Vice President Executive Vice President Chuck Shore Senior Vice President Executive Vice President Ruth Wheeler Senior Vice President Cindy George Senior Vice President Bill Wiedenfeld Senior Vice President Carrol E. Hill Senior Vice President and Chief Executive Officer Reba Priddy Glasheen, Valles & DeHoyos, LLP Housley Communications IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 349,676 139,847 290,797 48,441 6,250 1.82% 45.54% DEC. 31, 2008 $ 333,330 135,618 276,803 45,757 6,157 1.86% 44.64% SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR M A I N O F F I C E ( 8 1 7 ) 4 1 0 - 2 9 1 5 3205 E. Highway 114 Southlake, Texas 76092 LO C AT I O N S 95 Trophy Club Drive 891 E. Keller Parkway 909 Stevens 609 Rock Island Avenue 608 W. Hale Avenue Trophy Club, Texas 76262 Keller, Texas 76248 Bridgeport, Texas 76426 Boyd, Texas 76023 Decatur, Texas 76234 M A R K L . J O N E S Pre s i d e n t a n d C E O C I T I E S O F S O U T H L A K E, T R O P HY C LU B & K E L L E R D E P O S I T M A R K E T S H A R E W I S E CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer William Ray Cook, Jr., CPA Cook McDonald & Co. Jack Dortch Jack Dortch Farmers Insurance Agency F. Scott Dueser First Financial Bankshares, Inc. J. Bruce Hildebrand First Financial Bankshares, Inc. Derrell E. Johnson Former President and CEO Rady Associates Consulting Engineers K. Wayne Lee President, DDFW Properties Ralph Manoushagian Land Manager Approach Resources, Inc. Oil & Gas Exploration Jim Ridenour President Sunbelt Station Service S E N I O R O F F I C E R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer F. Mills Shallene Wise County Market President Henson Dunn Senior Vice President Les Mariotti Senior Vice President and Chief Financial Officer J. Sean Shope Senior Vice President Steve Sims Senior Vice President Trent Swearengin Senior Vice President IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 264,306 157,919 210,764 39,084 2,515 0.94% 62.24% DEC. 31, 2008 $ 272,185 163,936 217,818 37,664 2,793 0.99% 61.32% STEPHENVILLE GRANBURY GLEN ROSE ACTON M A I N O F F I C E ( 2 5 4 ) 9 6 5 - 5 0 3 6 2201 W. South Loop Stephenville, Texas 76401 LO C AT I O N S 1875 Lingleville Road 199 N. Columbia 400 Big Bend Trail 2007 East Highway 377 1600 S. Morgan Stephenville, Texas 76401 Stephenville, Texas 76401 Glen Rose, Texas 76043 Granbury, Texas 76049 Granbury, Texas 76048 2915 Fall Creek Highway Acton, Texas 76049 R O N N . M U L L I N S Pre s i d e n t a n d C E O E R AT H , H O O D & S O M E R V E L L CO U N T I E S D E P O S I T M A R K E T S H A R E D I R E C TO R S Ron N. Mullins Chairman of the Board, President and Chief Executive Officer Jerry Parham Investments S E N I O R O F F I C E R S President John Power Bart Rodgers Ron N. Mullins Angie Dusek Chairman of the Board, Senior Vice President and Chief Executive Officer Donna Feller Senior Vice President Keith Brown Prime Building Components, LLC F. Scott Dueser First Financial Bankshares, Inc. Glen Rose Market President Connie Frank J. Bruce Hildebrand Senior Vice President First Financial Bankshares, Inc. Julie Graham Frank Terrell, M.D. Ophthalmologist John Terrill Attorney ADVISORY DIRECTORS SPEC Management Co. Ron Hance Hance Financial Services Granbury Market President Mike Gandy Dereece Howell Executive Vice President Vickie Pettit and Cashier Senior Vice President Senior Vice President Monty Bedwell Robert Reeves Executive Vice President Senior Vice President Robert Lemons Larry Upshaw Executive Vice President Senior Vice President Bill Hooks Autos - Real Estate John Moore Craft Associates, Inc. Ron Pack RP’s Western Wear, Inc. Bill Parham Parham & Parham, CPAs IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 350,059 181,726 298,355 44,383 4,267 1.31% 48.89% DEC. 31, 2008 $ 330,942 192,202 279,209 42,033 5,107 1.56% 48.29% SWEETWATER ROBY TRENT MERKEL J . V. M A R T I N Chairman of the Board K I R BY N . A N D R E WS President and CEO NOLAN & FISHER COUNTIES D E P O S I T M A R K E T S H A R E M A I N O F F I C E 201 Elm LO C AT I O N S 123 N. Concho 117 N. Main 301 Edwards Street ( 3 2 5 ) 2 3 5 - 6 6 0 0 Sweetwater, Texas 79556 Roby, Texas 79543 Trent, Texas 79561 Merkel, Texas 79536 S E N I O R O F F I C E R S D I R E C TO R S J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Donnie Ruppert Executive Vice President and Cashier/Controller Rodney Foster Senior Vice President Lending J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Jeff Branson General Partner Williamson-Branson Real Estate Louis Brooks, Jr. Rancher Ronnie Cox Owner Cox Jewelry J. Bruce Hildebrand First Financial Bankshares, Inc. Jay Lawrence President MAL Enterprises, Inc. Thomas L. Rees, Sr. Rees and Rees, Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 133,322 67,463 119,011 13,248 2,420 1.81% 51.54% DEC. 31, 2008 $ 130,078 68,665 117,320 11,833 2,168 1.66% 51.87% WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH D OYL E L E E Chairman of the Board and Chief Executive O fficer M A I N O F F I C E 101 N. Main LO C AT I O N S 101 College Park Drive 1214 N. Main 210 N. Main 505 FM 1187 N. 4100 E. I-20 1100 FM 1189 ( 8 1 7 ) 5 9 6 - 0 3 0 7 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Aledo, Texas 76008 Willow Park, Texas 76087 Brock, Texas 76066 550 Bailey Avenue Suite 300 Fort Worth, Texas 76107 S E N I O R O F F I C E R S D I R E C TO R S Doyle Lee Chairman of the Board and Chief Executive Officer Doyle Lee Chairman of the Board and Chief Executive Officer Bob Bradberry Executive Vice President Larry Mangrem Executive Vice President and Cashier Mike Carter Senior Vice President Lori Hill Senior Vice President Justin Hooper Senior Vice President Kent Hudson Senior Vice President Jimmie Sue Lawson Senior Vice President Greg L. Barron President G.L. Barron Company, Inc. Stephen G. Brogdon, D.D.S. General and Cosmetic Dentistry Mac A. Coalson Owner Mac A. Coalson Real Estate F. Scott Dueser First Financial Bankshares, Inc. Clay Hicks Oil and Gas Investments Nan Kingsley President Bluestem Studios, Inc. Mike White, O.D. Therapeutic Optometrist J AY G I B B S President Jay Gibbs President Jay Gibbs President PARKER COUNTY D E P O S I T M A R K E T S H A R E IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 355,621 149,607 309,465 33,608 5,124 1.49% 49.92% DEC. 31, 2008 $ 375,424 156,616 331,288 29,326 5,830 1.71% 50.52% First Financial Trust & Asset Management Co., N.A. Abilene Office 400 Pine St. LO C AT I O N S Fort Worth Office 550 Bailey Ave., Suite 300 Odessa Office 2651 JBS Parkway Bldg. 4, Suite E San Angelo Office 301 W. Beauregard Stephenville Office 2201 W. South Loop Sweetwater Office 201 Elm ( 3 2 5 ) 6 2 7 - 7 1 0 0 ( 8 1 7 ) 4 1 0 - 4 9 7 0 ( 4 3 2 ) 3 6 7 - 8 9 0 0 ( 3 2 5 ) 6 5 9 - 5 9 8 7 ( 2 5 4 ) 9 1 8 - 6 2 6 2 ( 3 2 5 ) 2 3 5 - 6 6 4 0 performed well in 2009 considering the challenging economic environment it confronted. Total assets continued to grow, and our equity and fixed-income investments all outperformed their respective bench- marks. We also opened an office in a new market. Assets at year-end totaled $1.67 billion in book value and $2.10 billion in market value. These levels rep- resented increases of 2.1 percent and 11.7 percent, respectively, from 2008. Earnings for 2009 were down from 2008, reflecting the low levels of the stock market that prevailed in the first half of the year. Also contributing to the earnings reduction were significantly lower oil and gas prices, which negatively affected the large oil and gas portfolio that we manage. Net income decreased $179,000, or 6.4 percent, to $2.6 million from $2.8 million in 2008. Trust fee revenue, the main source of our net income, decreased $358,000, or 3.8 percent, to $9.1 million from $9.4 million. Although the markets were extremely volatile throughout the year, our investment team produced outstanding results. All of our equity and fixed-income investments exceeded their respective benchmarks. A highlight of the year was our opening in June of an office in Odessa, which is a new market for us. Barbara Hill manages this office. We are very pleased with the results she has achieved thus far and are excited about the prospects for our growth in the Permian Basin. Our Fort Worth office also achieved excellent results in 2009. Fee revenue for the office increased $123,000, or 41.4 percent, and the number of accounts increased by 34.5 percent. To accommodate the expansion of our business, we moved into a larger office suite during the year. Our experienced team of trust professionals remains committed to providing quality customer service and superior investment results. 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 TRUST ASSETS (IN MILLIONS) $1,664 $1,631 $1,428 $1,300 $1,150 $ 400 600 800 1,000 1,200 1,400 1,600 1,800 TRUST FEES (IN MILLIONS) $9.08 $9.44 $8.75 $7.66 $7.07 $2.631 $2.810 $2.549 $ 1 2 3 4 5 6 7 8 9 10 TRUST NET INCOME (IN MILLIONS) $2.076 $1.909 $ 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 (L-R - Back Row) DAVID W. CASTLEBERRY (Stephenville), RICHARD YOUNG (Abilene), MICHAEL SHEEHAN (Sweetwater), KIRK THAXTON (Abilene), DAVID BYRD (San Angelo) and JOE AYRES (Stephenville) (L-R - seated) BARBARA HILL (Odessa) and KONRAD HALBERT (Fort Worth) O F F I C E R S Kirk W. Thaxton Chairman of the Board, President, and Chief Executive Officer David Castleberry Senior Vice President Manager, Stephenville D I R E C TO R S Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Byrd Executive Vice President Manager, San Angelo Konrad S. Halbert Executive Vice President Manager, Fort Worth Michael D. Sheehan Executive Vice President Manager, Sweetwater Richard Young Executive Vice President Manager, Abilene Shelton Family Foundation Chairman of the Board, President Robert S. Patterson Former President & CEO First Financial Trust & Asset Management Company, N.A. Kirk W. Thaxton and Chief Executive Officer First Financial Trust & Asset Management Company, N.A. ADVISORY DIRECTORS Beckham Rector & Eagle Paul L. Cannon First Financial Bankshares, Inc. John L. Beckham Angelo Glass & Mirror McMahon Surovik Suttle, P.C. Barbara Hill Senior Vice President Manager, Odessa Larry Cleveland Senior Vice President Manager, Operations Ralph Gibson Senior Vice President Manager, Investments David B. Pitzer Senior Vice President Manager, Real Property Randy Spiva Senior Vice President Manager, Oil & Gas David Copeland President Ronnie Cox Owner Cox Jewelry F. Scott Dueser David F. Lupton President Company, Inc. Bill Parham Parham & Parham, CPAs (L - R ): CLAY TRUMBLE, KAY BERRY, GARY TUCKER, DENNIS STECKLY, MICHELLE McDONALD AND LARRY WILLIAMS First Technology Services, Inc. (FTS) is the shared services company for First Financial Bankshares, Inc. (FFIN) Our mission is to maximize efficiencies and control costs for common functions within FFIN while providing the best possible customer service to our internal and external customers. FTS plays a key role in customer service functions within FFIN through its customer call center and innovative technology for online banking, auto- matic bill pay services, backroom operations and other technology-based banking services. FTS also supports employees with classroom and online technology training and a responsive technology help desk. FTS provides more than 100 technology applications to FFIN and its family of 10 banks and the Trust Company. Services include check processing, account services, a help desk, desktop support, network services, server support, software support, information security, computer operations, business continuity planning, loan and credit operations, loan document preparation and the corporate call center. M A I N O F F I C E 400 Pine Abilene, Texas 79601 ( 3 2 5 ) 6 2 7 - 7 1 9 5 S E N I O R O F F I C E R S Gary D. Tucker President and Chief Executive Officer Kay Berry Senior Vice President Deposit Operations Michelle McDonald Senior Vice President Customer Service D I R E C TO R S Clay Trumble Senior Vice President Credit Administration Dennis Steckly Senior Vice President Production Services Larry Williams Senior Vice President Infrastructure Services Gary L. Webb Chairman of the Board Ron Butler President and First Technology Services, Inc. Chief Executive Officer Executive Vice President, First Financial Bank Abilene Operations First Financial Bankshares, Inc. Gary D. Tucker President and Chief Executive Officer First Technology Services, Inc. F. Scott Dueser Chairman, President and Chief Executive Officer Jay Gibbs President First Financial Bank Weatherford Derrell E. Johnson Former President and Chief Executive Officer Rady and Associates Consulting Engineers First Financial Bankshares, Inc. Les Mariotti J. Bruce Hildebrand Chief Financial Officer Executive Vice President and First Financial Bank Southlake Senior Vice President and Chief Financial Officer First Financial Bankshares, Inc. Mike Mauldin Michael L. Boyd Chairman, President and Chief Executive Officer First Financial Bank San Angelo Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 2 0 0 9 W A L T E R J O H N S O N A W A R D K E N N E T H T . M U R P H Y Through the 120 years of First Financial Bankshares’ history, there have been many people who have contributed greatly to the success of this company, and Ken Murphy has to be at the top of that list with Walter Johnson and the James family. Therefore, it is extremely appropriate that we honor Ken for his outstanding leadership during the past 39 years with the Walter Johnson Award, as well as dedicating this Annual Report to him. Ken was hired by Walter Johnson in 1971 and has held the following positions: First Financial Bank, N.A., Abilene (formerly First National Bank of Abilene) 1971-1975 1975-1981 1981-1984 1984-1993 1993–2000 Executive Vice President President President and Chief Executive Officer Chairman of the Board and Chief Executive Officer Chairman of the Board First Financial Bankshares, Inc. 1973-1985 1985-1986 1986-2000 2001-2007 2008-2009 Executive Vice President President and Chief Executive Officer Chairman, President and Chief Executive Officer Chairman of the Board Senior Chairman of the Board When Ken joined the bank in 1971, the Company had total assets of $87 million and net income of $806,000. This past year we finished the year with total assets of $3.3 billion and net earnings of $53.8 million. During Ken’s tenure with this company, we have experienced great success. While he was President and CEO of First Financial Bankshares, he purchased 11 banks and added numerous locations to the Company. During his tenure, he held many civic, cultural and professional leadership positions with the most notable positions being: President, Abilene Chamber of Commerce; Chairman, United Way Campaign in Abilene; Chairman, West Texas Rehabilitation Center; Chairman and Trustee, Alliance for Women and Children; Director, Hendrick Medical Center; Director, West Central Texas Municipal Water District; Director, Hardin-Simmons University Board of Development; Director, The Grace Museum of Abilene; Director, Treasurer and Chairman, Texas Bankers Association; and Class A Director, Federal Reserve Bank of Dallas. In 2003, Ken was honored as Outstanding Citizen of the Year by the Abilene Chamber of Commerce. As he retires from the First Financial Bankshares Board after 37 years, he leaves us with a great legacy and many Murphy stories, reports and sayings, but, most of all, his knowledge of how to manage outstanding banks. For me personally, Ken has been a mentor, confidant and boss for 33 years. I have learned so much from him. Although he is retiring from the Board, I know we will continue to have his advice and counsel, as well as his ever-present support and encouragement. It is our pleasure to honor Ken Murphy with the Walter Johnson Award for what he has contributed in going beyond the call of duty for our company and, especially, for our customers, stockholders and employees. Sincerely, F. Scott Dueser 13 15 17 19 21 23 14 16 18 20 22 BACK ROW (L-R): JOSEPH CANON, DAVID COPELAND, KADE MATTHEWS, RON GIDDIENS, MURRAY EDWARDS, TUCKER BRIDWELL, JOHNNY TROTTER FRONT ROW (L - R): KENNETH MURPHY, DERRELL JOHNSON, DIAN STAI, MAC COALSON, F. SCOTT DUESER BOARD MEMBER YEAR ELECTED BOARD MEMBER YEAR ELECTED COMMITTEE APPOINTMENT COMMITTEE APPOINTMENT Tucker S. Bridwell, CPA 2007 2, 4 Board of Directors F. Scott Dueser Chairman of the Board, President and CEO President Mansefeldt Investment Corporation Joseph E. Canon, J.D. Executive Director Dodge Jones Foundation Mac A. Coalson Mac A. Coalson Real Estate David Copeland, CPA President, SIPCO, Inc. and Shelton Family Foundation Murray Edwards Principal, The Edwards Group Ron Giddiens Investments/Business Consulting Former President - Bank of the West, San Angelo 1991 1996 1996 1998 2006 2009 1 3 2 2 1, 3, 4 1, 2, 4 2000 1998 1971 1993 Derrell E. Johnson Former President and CEO Rady and Associates Consulting Engineers Kade Matthews Ranching and Investments Kenneth T. Murphy Senior Chairman of the Board Dian Graves Stai Chair, Mansefeldt Investment Corp. Director, Dian Graves Owen Foundation Johnny E. Trotter President and CEO 2 3 1, 4 1, 3, 4 Livestock Investors, Ltd. 2003 1, 3, 4 * CO M M I T T E E S 1 Executive Committee – F. Scott Dueser, Chairman 2 Audit Committee – David Copeland, Chairman 3 Compensation Committee – Dian Graves Stai, Chairman 4 Nominating/Corporate Governance Committee – Mac A. Coalson, Chairman 24 Corporate Information OFFICERS F. Scott Dueser Chairman, President and Chief Executive Officer J. Bruce Hildebrand Executive Vice President and Chief Financial Officer Gary S. Gragg Executive Vice President, Lending Gary L. Webb Executive Vice President, Operations Tommy J. Barrow Senior Vice President, Lending Courtney Jordan Senior Vice President, Training and Education Michele P. Stevens Senior Vice President, Advertising and Marketing William A. Rowe Vice President, Investment Services Gaila Kilpatrick Assistant Secretary Bob Goodner Compliance Officer Michelle Fagan Compliance Officer A N N UA L M E E T I N G Tuesday, April 27, 2010 10:30 a.m. Abilene Civic Center 1100 N. Sixth Abilene, Texas 79601 CORPORATE OFFICES 400 Pine Abilene, Texas 79601 325-627-7155 • 800-588-7000 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 T R A N S F E R AG E N T Registrar and Transfer Company 800-368-5948 ADDRESS SHAREHOLDER INQUIRIES TO: Registrar and Transfer Company Investor Relations Department 10 Commerce Drive Cranford, NJ 07016 E-MAIL ADDRESS: info@rtco.com REGISTRAR AND TRANSFER COMPANY WEB SITE www.rtco.com S E N D C E R T I F I C AT E S F O R T R A N S F E R & A D D R E S S C H A N G E S TO : Registrar & Transfer Company 10 Commerce Drive Cranford, NJ 07016-3572 4 0 0 P i n e • A b i l e n e , Te x a s 7 9 6 0 1 www.f f in.com 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. Note: Market share data is calculated from June 30, 2009, deposit information compiled by the Federal Deposit Insurance Corporation. FIRST FINANCIAL BANKSHARES EXECUTIVE OFFICERS (L - R ): J. BRUCE HILDEBRAND, MICHELE P. STEVENS, GARY S. GRAGG, F. SCOTT DUESER, GARY L. WEBB, KIRK W. THAXTON AND TOMMY J. BARROW SM A F a m i l y o f C o m m u n i t y B a n k s S M 4 0 0 Pi n e • Abi l e n e , Te x a s 7 9 6 0 1 • w w w. f f i n . c om 21% 47% 30% 7% 15% 20% 37% 26% HEREFORD M A I N O F F I C E 212 E. Third ( 8 0 6 ) 3 6 3 - 8 2 0 0 Hereford, Texas 79045 M I K E M AU L D I N Pre s i d e n t a n d C E O D I R E C TO R S D E A F S M I T H CO U N T Y D E P O S I T M A R K E T S H A R E 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 Pet Care, Inc. Allen Parson Restaurateur and Investments Craig Smith Rancher and Retired Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 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 S E N I O R O F F I C E R S Mike Mauldin Chairman of the Board, President and Chief Executive Officer Steve Gilbert Executive Vice President and Cashier Kent Jackson Executive Vice President and Chief Credit Officer IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 147,652 96,028 130,728 12,284 2,121 1.56% 47.16% DEC. 31, 2008 $ 149,264 94,426 118,656 10,728 2,104 1.54% 44.71% MINERAL WELLS M A I N O F F I C E 1900 E. Hubbard ( 9 4 0 ) 3 2 7 - 5 4 0 0 Mineral Wells, Texas 76067 K E N N E T H W I L L I A M S O N Pre s i d e n t a n d C E O PA LO P I N TO CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Spencer Baum, D.D.S. Baum Dental Clinic F. Scott Dueser First Financial Bankshares, Inc. George Gault Attorney Gault & Gault Terry L. Murphy President and Chief Executive Officer Murphy and Murphy, Inc. David Ramsey, M.D. Family Practice Center Albert Rincon Vice President of Operations Texas Packaging Company, Inc. Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Paul McGettes Chief Financial Officer Upham Oil & Gas Company, L.P. S E N I O R O F F I C E R S Brad Seay Lending Executive Vice President Eddie Gregory Senior Vice President and Cashier Mike Mearse Senior Vice President Lending IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,259 101,050 132,997 22,436 3,542 2.10% 39.01% DEC. 31, 2008 $ 173,565 99,555 138,325 20,276 3,147 1.93% 43.43% SAN ANGELO M A I N O F F I C E 301 W. Beauregard LO C AT I O N S www.historicmuralsofsanangelo.org ( 3 2 5 ) 6 5 9 - 5 9 0 0 San Angelo, Texas 76903 3471 Knickerbocker San Angelo, Texas 76904 M I C H A E L L . B OYD Pre s i d e n t a n d C E O TO M G R E E N CO U N T Y D E P O S I T M A R K E T S H A R E Michael L. Boyd Ron Giddiens Chairman of the Board, President Investments/Business and Chief Executive Officer Consulting D I R E C TO R S Hon. Marilyn Aboussie Chief Justice, Retired W. Dan Cravy, M.D. Physician Pat Crump President and CEO Former President - Bank of the West, San Angelo Joey Henderson President Porter Henderson Implement Company, Inc. J. Bruce Hildebrand Baptist Memorials Services First Financial Bankshares, Inc. Rick DeHoyos Attorney Robert D. Housley President and Owner F. Scott Dueser First Financial Bankshares, Inc. Doug Eakman Owner Pecos Street Pharmacy Steve Eustis Commercial Real Estate David F. Lupton President Angelo Glass & Mirror Company, Inc. John E. Schwartz, Sr. Farmer/Rancher Mary Jane Steadman Attorney Real Estate Investment Management S E N I O R O F F I C E R S Michael L. Boyd Wes Masters Chairman of the Board, Senior Vice President President Robert Pate Jim Davidson and Cashier Senior Vice President Executive Vice President Chuck Shore Senior Vice President Executive Vice President Ruth Wheeler Senior Vice President Cindy George Senior Vice President Bill Wiedenfeld Senior Vice President Carrol E. Hill Senior Vice President and Chief Executive Officer Reba Priddy Glasheen, Valles & DeHoyos, LLP Housley Communications IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 349,676 139,847 290,797 48,441 6,250 1.82% 45.54% DEC. 31, 2008 $ 333,330 135,618 276,803 45,757 6,157 1.86% 44.64% SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR M A I N O F F I C E ( 8 1 7 ) 4 1 0 - 2 9 1 5 3205 E. Highway 114 Southlake, Texas 76092 LO C AT I O N S 95 Trophy Club Drive 891 E. Keller Parkway 909 Stevens 609 Rock Island Avenue 608 W. Hale Avenue Trophy Club, Texas 76262 Keller, Texas 76248 Bridgeport, Texas 76426 Boyd, Texas 76023 Decatur, Texas 76234 M A R K L . J O N E S Pre s i d e n t a n d C E O C I T I E S O F S O U T H L A K E, T R O P HY C LU B & K E L L E R D E P O S I T M A R K E T S H A R E W I S E CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer William Ray Cook, Jr., CPA Cook McDonald & Co. Jack Dortch Jack Dortch Farmers Insurance Agency F. Scott Dueser First Financial Bankshares, Inc. J. Bruce Hildebrand First Financial Bankshares, Inc. Derrell E. Johnson Former President and CEO Rady Associates Consulting Engineers K. Wayne Lee President, DDFW Properties Ralph Manoushagian Land Manager Approach Resources, Inc. Oil & Gas Exploration Jim Ridenour President Sunbelt Station Service S E N I O R O F F I C E R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer F. Mills Shallene Wise County Market President Henson Dunn Senior Vice President Les Mariotti Senior Vice President and Chief Financial Officer J. Sean Shope Senior Vice President Steve Sims Senior Vice President Trent Swearengin Senior Vice President IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 264,306 157,919 210,764 39,084 2,515 0.94% 62.24% DEC. 31, 2008 $ 272,185 163,936 217,818 37,664 2,793 0.99% 61.32% STEPHENVILLE GRANBURY GLEN ROSE ACTON M A I N O F F I C E ( 2 5 4 ) 9 6 5 - 5 0 3 6 2201 W. South Loop Stephenville, Texas 76401 LO C AT I O N S 1875 Lingleville Road 199 N. Columbia 400 Big Bend Trail 2007 East Highway 377 1600 S. Morgan Stephenville, Texas 76401 Stephenville, Texas 76401 Glen Rose, Texas 76043 Granbury, Texas 76049 Granbury, Texas 76048 2915 Fall Creek Highway Acton, Texas 76049 R O N N . M U L L I N S Pre s i d e n t a n d C E O E R AT H , H O O D & S O M E R V E L L CO U N T I E S D E P O S I T M A R K E T S H A R E D I R E C TO R S Ron N. Mullins Chairman of the Board, President and Chief Executive Officer Jerry Parham Investments S E N I O R O F F I C E R S President John Power Bart Rodgers Ron N. Mullins Angie Dusek Chairman of the Board, Senior Vice President and Chief Executive Officer Donna Feller Senior Vice President Keith Brown Prime Building Components, LLC F. Scott Dueser First Financial Bankshares, Inc. Glen Rose Market President Connie Frank J. Bruce Hildebrand Senior Vice President First Financial Bankshares, Inc. Julie Graham Frank Terrell, M.D. Ophthalmologist John Terrill Attorney ADVISORY DIRECTORS SPEC Management Co. Ron Hance Hance Financial Services Granbury Market President Mike Gandy Dereece Howell Executive Vice President Vickie Pettit and Cashier Senior Vice President Senior Vice President Monty Bedwell Robert Reeves Executive Vice President Senior Vice President Robert Lemons Larry Upshaw Executive Vice President Senior Vice President Bill Hooks Autos - Real Estate John Moore Craft Associates, Inc. Ron Pack RP’s Western Wear, Inc. Bill Parham Parham & Parham, CPAs IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 350,059 181,726 298,355 44,383 4,267 1.31% 48.89% DEC. 31, 2008 $ 330,942 192,202 279,209 42,033 5,107 1.56% 48.29% SWEETWATER ROBY TRENT MERKEL J . V. M A R T I N Chairman of the Board K I R BY N . A N D R E WS President and CEO NOLAN & FISHER COUNTIES D E P O S I T M A R K E T S H A R E M A I N O F F I C E 201 Elm LO C AT I O N S 123 N. Concho 117 N. Main 301 Edwards Street ( 3 2 5 ) 2 3 5 - 6 6 0 0 Sweetwater, Texas 79556 Roby, Texas 79543 Trent, Texas 79561 Merkel, Texas 79536 S E N I O R O F F I C E R S D I R E C TO R S J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Donnie Ruppert Executive Vice President and Cashier/Controller Rodney Foster Senior Vice President Lending J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Jeff Branson General Partner Williamson-Branson Real Estate Louis Brooks, Jr. Rancher Ronnie Cox Owner Cox Jewelry J. Bruce Hildebrand First Financial Bankshares, Inc. Jay Lawrence President MAL Enterprises, Inc. Thomas L. Rees, Sr. Rees and Rees, Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 133,322 67,463 119,011 13,248 2,420 1.81% 51.54% DEC. 31, 2008 $ 130,078 68,665 117,320 11,833 2,168 1.66% 51.87% WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH D OYL E L E E Chairman of the Board and Chief Executive O fficer M A I N O F F I C E 101 N. Main LO C AT I O N S 101 College Park Drive 1214 N. Main 210 N. Main 505 FM 1187 N. 4100 E. I-20 1100 FM 1189 ( 8 1 7 ) 5 9 6 - 0 3 0 7 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Aledo, Texas 76008 Willow Park, Texas 76087 Brock, Texas 76066 550 Bailey Avenue Suite 300 Fort Worth, Texas 76107 S E N I O R O F F I C E R S D I R E C TO R S Doyle Lee Chairman of the Board and Chief Executive Officer Doyle Lee Chairman of the Board and Chief Executive Officer Bob Bradberry Executive Vice President Larry Mangrem Executive Vice President and Cashier Mike Carter Senior Vice President Lori Hill Senior Vice President Justin Hooper Senior Vice President Kent Hudson Senior Vice President Jimmie Sue Lawson Senior Vice President Greg L. Barron President G.L. Barron Company, Inc. Stephen G. Brogdon, D.D.S. General and Cosmetic Dentistry Mac A. Coalson Owner Mac A. Coalson Real Estate F. Scott Dueser First Financial Bankshares, Inc. Clay Hicks Oil and Gas Investments Nan Kingsley President Bluestem Studios, Inc. Mike White, O.D. Therapeutic Optometrist J AY G I B B S President Jay Gibbs President Jay Gibbs President PARKER COUNTY D E P O S I T M A R K E T S H A R E IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 355,621 149,607 309,465 33,608 5,124 1.49% 49.92% DEC. 31, 2008 $ 375,424 156,616 331,288 29,326 5,830 1.71% 50.52% First Financial Trust & Asset Management Co., N.A. Abilene Office 400 Pine St. LO C AT I O N S Fort Worth Office 550 Bailey Ave., Suite 300 Odessa Office 2651 JBS Parkway Bldg. 4, Suite E San Angelo Office 301 W. Beauregard Stephenville Office 2201 W. South Loop Sweetwater Office 201 Elm ( 3 2 5 ) 6 2 7 - 7 1 0 0 ( 8 1 7 ) 4 1 0 - 4 9 7 0 ( 4 3 2 ) 3 6 7 - 8 9 0 0 ( 3 2 5 ) 6 5 9 - 5 9 8 7 ( 2 5 4 ) 9 1 8 - 6 2 6 2 ( 3 2 5 ) 2 3 5 - 6 6 4 0 performed well in 2009 considering the challenging economic environment it confronted. Total assets continued to grow, and our equity and fixed-income investments all outperformed their respective bench- marks. We also opened an office in a new market. Assets at year-end totaled $1.67 billion in book value and $2.10 billion in market value. These levels rep- resented increases of 2.1 percent and 11.7 percent, respectively, from 2008. Earnings for 2009 were down from 2008, reflecting the low levels of the stock market that prevailed in the first half of the year. Also contributing to the earnings reduction were significantly lower oil and gas prices, which negatively affected the large oil and gas portfolio that we manage. Net income decreased $179,000, or 6.4 percent, to $2.6 million from $2.8 million in 2008. Trust fee revenue, the main source of our net income, decreased $358,000, or 3.8 percent, to $9.1 million from $9.4 million. Although the markets were extremely volatile throughout the year, our investment team produced outstanding results. All of our equity and fixed-income investments exceeded their respective benchmarks. A highlight of the year was our opening in June of an office in Odessa, which is a new market for us. Barbara Hill manages this office. We are very pleased with the results she has achieved thus far and are excited about the prospects for our growth in the Permian Basin. Our Fort Worth office also achieved excellent results in 2009. Fee revenue for the office increased $123,000, or 41.4 percent, and the number of accounts increased by 34.5 percent. To accommodate the expansion of our business, we moved into a larger office suite during the year. Our experienced team of trust professionals remains committed to providing quality customer service and superior investment results. 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 TRUST ASSETS (IN MILLIONS) $1,664 $1,631 $1,428 $1,300 $1,150 $ 400 600 800 1,000 1,200 1,400 1,600 1,800 TRUST FEES (IN MILLIONS) $9.08 $9.44 $8.75 $7.66 $7.07 $2.631 $2.810 $2.549 $ 1 2 3 4 5 6 7 8 9 10 TRUST NET INCOME (IN MILLIONS) $2.076 $1.909 $ 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 (L-R - Back Row) DAVID W. CASTLEBERRY (Stephenville), RICHARD YOUNG (Abilene), MICHAEL SHEEHAN (Sweetwater), KIRK THAXTON (Abilene), DAVID BYRD (San Angelo) and JOE AYRES (Stephenville) (L-R - seated) BARBARA HILL (Odessa) and KONRAD HALBERT (Fort Worth) O F F I C E R S Kirk W. Thaxton Chairman of the Board, President, and Chief Executive Officer David Castleberry Senior Vice President Manager, Stephenville D I R E C TO R S Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Byrd Executive Vice President Manager, San Angelo Konrad S. Halbert Executive Vice President Manager, Fort Worth Michael D. Sheehan Executive Vice President Manager, Sweetwater Richard Young Executive Vice President Manager, Abilene Shelton Family Foundation Chairman of the Board, President Robert S. Patterson Former President & CEO First Financial Trust & Asset Management Company, N.A. Kirk W. Thaxton and Chief Executive Officer First Financial Trust & Asset Management Company, N.A. ADVISORY DIRECTORS Beckham Rector & Eagle Paul L. Cannon First Financial Bankshares, Inc. John L. Beckham Angelo Glass & Mirror McMahon Surovik Suttle, P.C. Barbara Hill Senior Vice President Manager, Odessa Larry Cleveland Senior Vice President Manager, Operations Ralph Gibson Senior Vice President Manager, Investments David B. Pitzer Senior Vice President Manager, Real Property Randy Spiva Senior Vice President Manager, Oil & Gas David Copeland President Ronnie Cox Owner Cox Jewelry F. Scott Dueser David F. Lupton President Company, Inc. Bill Parham Parham & Parham, CPAs (L - R ): CLAY TRUMBLE, KAY BERRY, GARY TUCKER, DENNIS STECKLY, MICHELLE McDONALD AND LARRY WILLIAMS First Technology Services, Inc. (FTS) is the shared services company for First Financial Bankshares, Inc. (FFIN) Our mission is to maximize efficiencies and control costs for common functions within FFIN while providing the best possible customer service to our internal and external customers. FTS plays a key role in customer service functions within FFIN through its customer call center and innovative technology for online banking, auto- matic bill pay services, backroom operations and other technology-based banking services. FTS also supports employees with classroom and online technology training and a responsive technology help desk. FTS provides more than 100 technology applications to FFIN and its family of 10 banks and the Trust Company. Services include check processing, account services, a help desk, desktop support, network services, server support, software support, information security, computer operations, business continuity planning, loan and credit operations, loan document preparation and the corporate call center. M A I N O F F I C E 400 Pine Abilene, Texas 79601 ( 3 2 5 ) 6 2 7 - 7 1 9 5 S E N I O R O F F I C E R S Gary D. Tucker President and Chief Executive Officer Kay Berry Senior Vice President Deposit Operations Michelle McDonald Senior Vice President Customer Service D I R E C TO R S Clay Trumble Senior Vice President Credit Administration Dennis Steckly Senior Vice President Production Services Larry Williams Senior Vice President Infrastructure Services Gary L. Webb Chairman of the Board Ron Butler President and First Technology Services, Inc. Chief Executive Officer Executive Vice President, First Financial Bank Abilene Operations First Financial Bankshares, Inc. Gary D. Tucker President and Chief Executive Officer First Technology Services, Inc. F. Scott Dueser Chairman, President and Chief Executive Officer Jay Gibbs President First Financial Bank Weatherford Derrell E. Johnson Former President and Chief Executive Officer Rady and Associates Consulting Engineers First Financial Bankshares, Inc. Les Mariotti J. Bruce Hildebrand Chief Financial Officer Executive Vice President and First Financial Bank Southlake Senior Vice President and Chief Financial Officer First Financial Bankshares, Inc. Mike Mauldin Michael L. Boyd Chairman, President and Chief Executive Officer First Financial Bank San Angelo Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 2 0 0 9 W A L T E R J O H N S O N A W A R D K E N N E T H T . M U R P H Y Through the 120 years of First Financial Bankshares’ history, there have been many people who have contributed greatly to the success of this company, and Ken Murphy has to be at the top of that list with Walter Johnson and the James family. Therefore, it is extremely appropriate that we honor Ken for his outstanding leadership during the past 39 years with the Walter Johnson Award, as well as dedicating this Annual Report to him. Ken was hired by Walter Johnson in 1971 and has held the following positions: First Financial Bank, N.A., Abilene (formerly First National Bank of Abilene) Executive Vice President President President and Chief Executive Officer Chairman of the Board and Chief Executive Officer 1993–2000 Chairman of the Board First Financial Bankshares, Inc. Executive Vice President President and Chief Executive Officer Chairman, President and Chief Executive Officer Chairman of the Board Senior Chairman of the Board 1971-1975 1975-1981 1981-1984 1984-1993 1973-1985 1985-1986 1986-2000 2001-2007 2008-2009 When Ken joined the bank in 1971, the Company had total assets of $87 million and net income of $806,000. This past year we finished the year with total assets of $3.3 billion and net earnings of $53.8 million. During Ken’s tenure with this company, we have experienced great success. While he was President and CEO of First Financial Bankshares, he purchased 11 banks and added numerous locations to the Company. During his tenure, he held many civic, cultural and professional leadership positions with the most notable positions being: President, Abilene Chamber of Commerce; Chairman, United Way Campaign in Abilene; Chairman, West Texas Rehabilitation Center; Chairman and Trustee, Alliance for Women and Children; Director, Hendrick Medical Center; Director, West Central Texas Municipal Water District; Director, Hardin-Simmons University Board of Development; Director, The Grace Museum of Abilene; Director, Treasurer and Chairman, Texas Bankers Association; and Class A Director, Federal Reserve Bank of Dallas. In 2003, Ken was honored as Outstanding Citizen of the Year by the Abilene Chamber of Commerce. As he retires from the First Financial Bankshares Board after 37 years, he leaves us with a great legacy and many Murphy stories, reports and sayings, but, most of all, his knowledge of how to manage outstanding banks. For me personally, Ken has been a mentor, confidant and boss for 33 years. I have learned so much from him. Although he is retiring from the Board, I know we will continue to have his advice and counsel, as well as his ever-present support and encouragement. It is our pleasure to honor Ken Murphy with the Walter Johnson Award for what he has contributed in going beyond the call of duty for our company and, especially, for our customers, stockholders and employees. Sincerely, F. Scott Dueser 13 15 17 19 21 23 14 16 18 20 22 BACK ROW (L-R): JOSEPH CANON, DAVID COPELAND, KADE MATTHEWS, RON GIDDIENS, MURRAY EDWARDS, TUCKER BRIDWELL, JOHNNY TROTTER FRONT ROW (L - R): KENNETH MURPHY, DERRELL JOHNSON, DIAN STAI, MAC COALSON, F. SCOTT DUESER Board of Directors BOARD MEMBER YEAR ELECTED COMMITTEE APPOINTMENT BOARD MEMBER YEAR ELECTED COMMITTEE APPOINTMENT F. Scott Dueser Chairman of the Board, President and CEO Tucker S. Bridwell, CPA President Mansefeldt Investment Corporation Joseph E. Canon, J.D. Executive Director Dodge Jones Foundation Mac A. Coalson Mac A. Coalson Real Estate David Copeland, CPA President, SIPCO, Inc. and Shelton Family Foundation Murray Edwards Principal, The Edwards Group Ron Giddiens Investments/Business Consulting Former President - Bank of the West, San Angelo 1991 1 2007 2, 4 1996 3 1996 1998 2006 2009 1, 3, 4 1, 2, 4 2 2 Derrell E. Johnson Former President and CEO Rady and Associates Consulting Engineers Kade Matthews Ranching and Investments Kenneth T. Murphy Senior Chairman of the Board Dian Graves Stai Chair, Mansefeldt Investment Corp. Director, Dian Graves Owen Foundation Johnny E. Trotter President and CEO Livestock Investors, Ltd. 2000 1998 1971 1993 2 3 1, 4 1, 3, 4 2003 1, 3, 4 * CO M M I T T E E S 1 Executive Committee – F. Scott Dueser, Chairman 2 Audit Committee – David Copeland, Chairman 3 Compensation Committee – Dian Graves Stai, Chairman 4 Nominating/Corporate Governance Committee – Mac A. Coalson, Chairman 24 Corporate Information OFFICERS F. Scott Dueser Chairman, President and Chief Executive Officer J. Bruce Hildebrand Executive Vice President and Chief Financial Officer Gary S. Gragg Executive Vice President, Lending Gary L. Webb Executive Vice President, Operations Tommy J. Barrow Senior Vice President, Lending Courtney Jordan Senior Vice President, Training and Education Michele P. Stevens Senior Vice President, Advertising and Marketing William A. Rowe Vice President, Investment Services Gaila Kilpatrick Assistant Secretary Bob Goodner Compliance Officer Michelle Fagan Compliance Officer A N N UA L M E E T I N G Tuesday, April 27, 2010 10:30 a.m. Abilene Civic Center 1100 N. Sixth Abilene, Texas 79601 CORPORATE OFFICES 400 Pine Abilene, Texas 79601 325-627-7155 • 800-588-7000 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 T R A N S F E R AG E N T Registrar and Transfer Company 800-368-5948 ADDRESS SHAREHOLDER INQUIRIES TO: Registrar and Transfer Company Investor Relations Department 10 Commerce Drive Cranford, NJ 07016 E-MAIL ADDRESS: info@rtco.com REGISTRAR AND TRANSFER COMPANY WEB SITE www.rtco.com S E N D C E R T I F I C AT E S F O R T R A N S F E R & A D D R E S S C H A N G E S TO : Registrar & Transfer Company 10 Commerce Drive Cranford, NJ 07016-3572 4 0 0 P i n e • A b i l e n e , Te x a s 7 9 6 0 1 www.f f in.com 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. Note: Market share data is calculated from June 30, 2009, deposit information compiled by the Federal Deposit Insurance Corporation. FIRST FINANCIAL BANKSHARES EXECUTIVE OFFICERS (L - R ): J. BRUCE HILDEBRAND, MICHELE P. STEVENS, GARY S. GRAGG, F. SCOTT DUESER, GARY L. WEBB, KIRK W. THAXTON AND TOMMY J. BARROW SM A F a m i l y o f C o m m u n i t y B a n k s S M 4 0 0 Pi n e • Abi l e n e , Te x a s 7 9 6 0 1 • w w w. f f i n . c om 21% 47% 30% 7% 15% 20% 37% 26% HEREFORD M A I N O F F I C E 212 E. Third ( 8 0 6 ) 3 6 3 - 8 2 0 0 Hereford, Texas 79045 M I K E M AU L D I N Pre s i d e n t a n d C E O D I R E C TO R S D E A F S M I T H CO U N T Y D E P O S I T M A R K E T S H A R E 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 Pet Care, Inc. Allen Parson Restaurateur and Investments Craig Smith Rancher and Retired Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 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 S E N I O R O F F I C E R S Mike Mauldin Chairman of the Board, President and Chief Executive Officer Steve Gilbert Executive Vice President and Cashier Kent Jackson Executive Vice President and Chief Credit Officer IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 147,652 96,028 130,728 12,284 2,121 1.56% 47.16% DEC. 31, 2008 $ 149,264 94,426 118,656 10,728 2,104 1.54% 44.71% MINERAL WELLS M A I N O F F I C E 1900 E. Hubbard ( 9 4 0 ) 3 2 7 - 5 4 0 0 Mineral Wells, Texas 76067 K E N N E T H W I L L I A M S O N Pre s i d e n t a n d C E O PA LO P I N TO CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Spencer Baum, D.D.S. Baum Dental Clinic F. Scott Dueser First Financial Bankshares, Inc. George Gault Attorney Gault & Gault Terry L. Murphy President and Chief Executive Officer Murphy and Murphy, Inc. David Ramsey, M.D. Family Practice Center Albert Rincon Vice President of Operations Texas Packaging Company, Inc. Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Paul McGettes Chief Financial Officer Upham Oil & Gas Company, L.P. S E N I O R O F F I C E R S Brad Seay Lending Executive Vice President Eddie Gregory Senior Vice President and Cashier Mike Mearse Senior Vice President Lending IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,259 101,050 132,997 22,436 3,542 2.10% 39.01% DEC. 31, 2008 $ 173,565 99,555 138,325 20,276 3,147 1.93% 43.43% SAN ANGELO M A I N O F F I C E 301 W. Beauregard LO C AT I O N S www.historicmuralsofsanangelo.org ( 3 2 5 ) 6 5 9 - 5 9 0 0 San Angelo, Texas 76903 3471 Knickerbocker San Angelo, Texas 76904 M I C H A E L L . B OYD Pre s i d e n t a n d C E O TO M G R E E N CO U N T Y D E P O S I T M A R K E T S H A R E Michael L. Boyd Ron Giddiens Chairman of the Board, President Investments/Business and Chief Executive Officer Consulting D I R E C TO R S Hon. Marilyn Aboussie Chief Justice, Retired W. Dan Cravy, M.D. Physician Pat Crump President and CEO Former President - Bank of the West, San Angelo Joey Henderson President Porter Henderson Implement Company, Inc. J. Bruce Hildebrand Baptist Memorials Services First Financial Bankshares, Inc. Rick DeHoyos Attorney Robert D. Housley President and Owner F. Scott Dueser First Financial Bankshares, Inc. Doug Eakman Owner Pecos Street Pharmacy Steve Eustis Commercial Real Estate David F. Lupton President Angelo Glass & Mirror Company, Inc. John E. Schwartz, Sr. Farmer/Rancher Mary Jane Steadman Attorney Real Estate Investment Management S E N I O R O F F I C E R S Michael L. Boyd Wes Masters Chairman of the Board, Senior Vice President President Robert Pate Jim Davidson and Cashier Senior Vice President Executive Vice President Chuck Shore Senior Vice President Executive Vice President Ruth Wheeler Senior Vice President Cindy George Senior Vice President Bill Wiedenfeld Senior Vice President Carrol E. Hill Senior Vice President and Chief Executive Officer Reba Priddy Glasheen, Valles & DeHoyos, LLP Housley Communications IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 349,676 139,847 290,797 48,441 6,250 1.82% 45.54% DEC. 31, 2008 $ 333,330 135,618 276,803 45,757 6,157 1.86% 44.64% SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR M A I N O F F I C E ( 8 1 7 ) 4 1 0 - 2 9 1 5 3205 E. Highway 114 Southlake, Texas 76092 LO C AT I O N S 95 Trophy Club Drive 891 E. Keller Parkway 909 Stevens 609 Rock Island Avenue 608 W. Hale Avenue Trophy Club, Texas 76262 Keller, Texas 76248 Bridgeport, Texas 76426 Boyd, Texas 76023 Decatur, Texas 76234 M A R K L . J O N E S Pre s i d e n t a n d C E O C I T I E S O F S O U T H L A K E, T R O P HY C LU B & K E L L E R D E P O S I T M A R K E T S H A R E W I S E CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer William Ray Cook, Jr., CPA Cook McDonald & Co. Jack Dortch Jack Dortch Farmers Insurance Agency F. Scott Dueser First Financial Bankshares, Inc. J. Bruce Hildebrand First Financial Bankshares, Inc. Derrell E. Johnson Former President and CEO Rady Associates Consulting Engineers K. Wayne Lee President, DDFW Properties Ralph Manoushagian Land Manager Approach Resources, Inc. Oil & Gas Exploration Jim Ridenour President Sunbelt Station Service S E N I O R O F F I C E R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer F. Mills Shallene Wise County Market President Henson Dunn Senior Vice President Les Mariotti Senior Vice President and Chief Financial Officer J. Sean Shope Senior Vice President Steve Sims Senior Vice President Trent Swearengin Senior Vice President IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 264,306 157,919 210,764 39,084 2,515 0.94% 62.24% DEC. 31, 2008 $ 272,185 163,936 217,818 37,664 2,793 0.99% 61.32% STEPHENVILLE GRANBURY GLEN ROSE ACTON M A I N O F F I C E ( 2 5 4 ) 9 6 5 - 5 0 3 6 2201 W. South Loop Stephenville, Texas 76401 LO C AT I O N S 1875 Lingleville Road 199 N. Columbia 400 Big Bend Trail 2007 East Highway 377 1600 S. Morgan Stephenville, Texas 76401 Stephenville, Texas 76401 Glen Rose, Texas 76043 Granbury, Texas 76049 Granbury, Texas 76048 2915 Fall Creek Highway Acton, Texas 76049 R O N N . M U L L I N S Pre s i d e n t a n d C E O E R AT H , H O O D & S O M E R V E L L CO U N T I E S D E P O S I T M A R K E T S H A R E D I R E C TO R S Ron N. Mullins Chairman of the Board, President and Chief Executive Officer Jerry Parham Investments S E N I O R O F F I C E R S President John Power Bart Rodgers Ron N. Mullins Angie Dusek Chairman of the Board, Senior Vice President and Chief Executive Officer Donna Feller Senior Vice President Keith Brown Prime Building Components, LLC F. Scott Dueser First Financial Bankshares, Inc. Glen Rose Market President Connie Frank J. Bruce Hildebrand Senior Vice President First Financial Bankshares, Inc. Julie Graham Frank Terrell, M.D. Ophthalmologist John Terrill Attorney ADVISORY DIRECTORS SPEC Management Co. Ron Hance Hance Financial Services Granbury Market President Mike Gandy Dereece Howell Executive Vice President Vickie Pettit and Cashier Senior Vice President Senior Vice President Monty Bedwell Robert Reeves Executive Vice President Senior Vice President Robert Lemons Larry Upshaw Executive Vice President Senior Vice President Bill Hooks Autos - Real Estate John Moore Craft Associates, Inc. Ron Pack RP’s Western Wear, Inc. Bill Parham Parham & Parham, CPAs IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 350,059 181,726 298,355 44,383 4,267 1.31% 48.89% DEC. 31, 2008 $ 330,942 192,202 279,209 42,033 5,107 1.56% 48.29% SWEETWATER ROBY TRENT MERKEL J . V. M A R T I N Chairman of the Board K I R BY N . A N D R E WS President and CEO NOLAN & FISHER COUNTIES D E P O S I T M A R K E T S H A R E M A I N O F F I C E 201 Elm LO C AT I O N S 123 N. Concho 117 N. Main 301 Edwards Street ( 3 2 5 ) 2 3 5 - 6 6 0 0 Sweetwater, Texas 79556 Roby, Texas 79543 Trent, Texas 79561 Merkel, Texas 79536 S E N I O R O F F I C E R S D I R E C TO R S J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Donnie Ruppert Executive Vice President and Cashier/Controller Rodney Foster Senior Vice President Lending J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Jeff Branson General Partner Williamson-Branson Real Estate Louis Brooks, Jr. Rancher Ronnie Cox Owner Cox Jewelry J. Bruce Hildebrand First Financial Bankshares, Inc. Jay Lawrence President MAL Enterprises, Inc. Thomas L. Rees, Sr. Rees and Rees, Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 133,322 67,463 119,011 13,248 2,420 1.81% 51.54% DEC. 31, 2008 $ 130,078 68,665 117,320 11,833 2,168 1.66% 51.87% WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH D OYL E L E E Chairman of the Board and Chief Executive O fficer M A I N O F F I C E 101 N. Main LO C AT I O N S 101 College Park Drive 1214 N. Main 210 N. Main 505 FM 1187 N. 4100 E. I-20 1100 FM 1189 ( 8 1 7 ) 5 9 6 - 0 3 0 7 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Aledo, Texas 76008 Willow Park, Texas 76087 Brock, Texas 76066 550 Bailey Avenue Suite 300 Fort Worth, Texas 76107 S E N I O R O F F I C E R S D I R E C TO R S Doyle Lee Chairman of the Board and Chief Executive Officer Doyle Lee Chairman of the Board and Chief Executive Officer Bob Bradberry Executive Vice President Larry Mangrem Executive Vice President and Cashier Mike Carter Senior Vice President Lori Hill Senior Vice President Justin Hooper Senior Vice President Kent Hudson Senior Vice President Jimmie Sue Lawson Senior Vice President Greg L. Barron President G.L. Barron Company, Inc. Stephen G. Brogdon, D.D.S. General and Cosmetic Dentistry Mac A. Coalson Owner Mac A. Coalson Real Estate F. Scott Dueser First Financial Bankshares, Inc. Clay Hicks Oil and Gas Investments Nan Kingsley President Bluestem Studios, Inc. Mike White, O.D. Therapeutic Optometrist J AY G I B B S President Jay Gibbs President Jay Gibbs President PARKER COUNTY D E P O S I T M A R K E T S H A R E IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 355,621 149,607 309,465 33,608 5,124 1.49% 49.92% DEC. 31, 2008 $ 375,424 156,616 331,288 29,326 5,830 1.71% 50.52% First Financial Trust & Asset Management Co., N.A. Abilene Office 400 Pine St. LO C AT I O N S Fort Worth Office 550 Bailey Ave., Suite 300 Odessa Office 2651 JBS Parkway Bldg. 4, Suite E San Angelo Office 301 W. Beauregard Stephenville Office 2201 W. South Loop Sweetwater Office 201 Elm ( 3 2 5 ) 6 2 7 - 7 1 0 0 ( 8 1 7 ) 4 1 0 - 4 9 7 0 ( 4 3 2 ) 3 6 7 - 8 9 0 0 ( 3 2 5 ) 6 5 9 - 5 9 8 7 ( 2 5 4 ) 9 1 8 - 6 2 6 2 ( 3 2 5 ) 2 3 5 - 6 6 4 0 performed well in 2009 considering the challenging economic environment it confronted. Total assets continued to grow, and our equity and fixed-income investments all outperformed their respective bench- marks. We also opened an office in a new market. Assets at year-end totaled $1.67 billion in book value and $2.10 billion in market value. These levels rep- resented increases of 2.1 percent and 11.7 percent, respectively, from 2008. Earnings for 2009 were down from 2008, reflecting the low levels of the stock market that prevailed in the first half of the year. Also contributing to the earnings reduction were significantly lower oil and gas prices, which negatively affected the large oil and gas portfolio that we manage. Net income decreased $179,000, or 6.4 percent, to $2.6 million from $2.8 million in 2008. Trust fee revenue, the main source of our net income, decreased $358,000, or 3.8 percent, to $9.1 million from $9.4 million. Although the markets were extremely volatile throughout the year, our investment team produced outstanding results. All of our equity and fixed-income investments exceeded their respective benchmarks. A highlight of the year was our opening in June of an office in Odessa, which is a new market for us. Barbara Hill manages this office. We are very pleased with the results she has achieved thus far and are excited about the prospects for our growth in the Permian Basin. Our Fort Worth office also achieved excellent results in 2009. Fee revenue for the office increased $123,000, or 41.4 percent, and the number of accounts increased by 34.5 percent. To accommodate the expansion of our business, we moved into a larger office suite during the year. Our experienced team of trust professionals remains committed to providing quality customer service and superior investment results. 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 TRUST ASSETS (IN MILLIONS) $1,664 $1,631 $1,428 $1,300 $1,150 $ 400 600 800 1,000 1,200 1,400 1,600 1,800 TRUST FEES (IN MILLIONS) $9.08 $9.44 $8.75 $7.66 $7.07 $2.631 $2.810 $2.549 $ 1 2 3 4 5 6 7 8 9 10 TRUST NET INCOME (IN MILLIONS) $2.076 $1.909 $ 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 (L-R - Back Row) DAVID W. CASTLEBERRY (Stephenville), RICHARD YOUNG (Abilene), MICHAEL SHEEHAN (Sweetwater), KIRK THAXTON (Abilene), DAVID BYRD (San Angelo) and JOE AYRES (Stephenville) (L-R - seated) BARBARA HILL (Odessa) and KONRAD HALBERT (Fort Worth) O F F I C E R S Kirk W. Thaxton Chairman of the Board, President, and Chief Executive Officer David Castleberry Senior Vice President Manager, Stephenville D I R E C TO R S Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Byrd Executive Vice President Manager, San Angelo Konrad S. Halbert Executive Vice President Manager, Fort Worth Michael D. Sheehan Executive Vice President Manager, Sweetwater Richard Young Executive Vice President Manager, Abilene Shelton Family Foundation Chairman of the Board, President Robert S. Patterson Former President & CEO First Financial Trust & Asset Management Company, N.A. Kirk W. Thaxton and Chief Executive Officer First Financial Trust & Asset Management Company, N.A. ADVISORY DIRECTORS Beckham Rector & Eagle Paul L. Cannon First Financial Bankshares, Inc. John L. Beckham Angelo Glass & Mirror McMahon Surovik Suttle, P.C. Barbara Hill Senior Vice President Manager, Odessa Larry Cleveland Senior Vice President Manager, Operations Ralph Gibson Senior Vice President Manager, Investments David B. Pitzer Senior Vice President Manager, Real Property Randy Spiva Senior Vice President Manager, Oil & Gas David Copeland President Ronnie Cox Owner Cox Jewelry F. Scott Dueser David F. Lupton President Company, Inc. Bill Parham Parham & Parham, CPAs (L - R ): CLAY TRUMBLE, KAY BERRY, GARY TUCKER, DENNIS STECKLY, MICHELLE McDONALD AND LARRY WILLIAMS First Technology Services, Inc. (FTS) is the shared services company for First Financial Bankshares, Inc. (FFIN) Our mission is to maximize efficiencies and control costs for common functions within FFIN while providing the best possible customer service to our internal and external customers. FTS plays a key role in customer service functions within FFIN through its customer call center and innovative technology for online banking, auto- matic bill pay services, backroom operations and other technology-based banking services. FTS also supports employees with classroom and online technology training and a responsive technology help desk. FTS provides more than 100 technology applications to FFIN and its family of 10 banks and the Trust Company. Services include check processing, account services, a help desk, desktop support, network services, server support, software support, information security, computer operations, business continuity planning, loan and credit operations, loan document preparation and the corporate call center. M A I N O F F I C E 400 Pine Abilene, Texas 79601 ( 3 2 5 ) 6 2 7 - 7 1 9 5 S E N I O R O F F I C E R S Gary D. Tucker President and Chief Executive Officer Kay Berry Senior Vice President Deposit Operations Michelle McDonald Senior Vice President Customer Service D I R E C TO R S Clay Trumble Senior Vice President Credit Administration Dennis Steckly Senior Vice President Production Services Larry Williams Senior Vice President Infrastructure Services Gary L. Webb Chairman of the Board Ron Butler President and First Technology Services, Inc. Chief Executive Officer Executive Vice President, First Financial Bank Abilene Operations First Financial Bankshares, Inc. Gary D. Tucker President and Chief Executive Officer First Technology Services, Inc. F. Scott Dueser Chairman, President and Chief Executive Officer Jay Gibbs President First Financial Bank Weatherford Derrell E. Johnson Former President and Chief Executive Officer Rady and Associates Consulting Engineers First Financial Bankshares, Inc. Les Mariotti J. Bruce Hildebrand Chief Financial Officer Executive Vice President and First Financial Bank Southlake Senior Vice President and Chief Financial Officer First Financial Bankshares, Inc. Mike Mauldin Michael L. Boyd Chairman, President and Chief Executive Officer First Financial Bank San Angelo Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 2 0 0 9 W A L T E R J O H N S O N A W A R D K E N N E T H T . M U R P H Y Through the 120 years of First Financial Bankshares’ history, there have been many people who have contributed greatly to the success of this company, and Ken Murphy has to be at the top of that list with Walter Johnson and the James family. Therefore, it is extremely appropriate that we honor Ken for his outstanding leadership during the past 39 years with the Walter Johnson Award, as well as dedicating this Annual Report to him. Ken was hired by Walter Johnson in 1971 and has held the following positions: First Financial Bank, N.A., Abilene (formerly First National Bank of Abilene) Executive Vice President President President and Chief Executive Officer Chairman of the Board and Chief Executive Officer 1993–2000 Chairman of the Board First Financial Bankshares, Inc. Executive Vice President President and Chief Executive Officer Chairman, President and Chief Executive Officer Chairman of the Board Senior Chairman of the Board 1971-1975 1975-1981 1981-1984 1984-1993 1973-1985 1985-1986 1986-2000 2001-2007 2008-2009 When Ken joined the bank in 1971, the Company had total assets of $87 million and net income of $806,000. This past year we finished the year with total assets of $3.3 billion and net earnings of $53.8 million. During Ken’s tenure with this company, we have experienced great success. While he was President and CEO of First Financial Bankshares, he purchased 11 banks and added numerous locations to the Company. During his tenure, he held many civic, cultural and professional leadership positions with the most notable positions being: President, Abilene Chamber of Commerce; Chairman, United Way Campaign in Abilene; Chairman, West Texas Rehabilitation Center; Chairman and Trustee, Alliance for Women and Children; Director, Hendrick Medical Center; Director, West Central Texas Municipal Water District; Director, Hardin-Simmons University Board of Development; Director, The Grace Museum of Abilene; Director, Treasurer and Chairman, Texas Bankers Association; and Class A Director, Federal Reserve Bank of Dallas. In 2003, Ken was honored as Outstanding Citizen of the Year by the Abilene Chamber of Commerce. As he retires from the First Financial Bankshares Board after 37 years, he leaves us with a great legacy and many Murphy stories, reports and sayings, but, most of all, his knowledge of how to manage outstanding banks. For me personally, Ken has been a mentor, confidant and boss for 33 years. I have learned so much from him. Although he is retiring from the Board, I know we will continue to have his advice and counsel, as well as his ever-present support and encouragement. It is our pleasure to honor Ken Murphy with the Walter Johnson Award for what he has contributed in going beyond the call of duty for our company and, especially, for our customers, stockholders and employees. Sincerely, F. Scott Dueser 13 15 17 19 21 23 14 16 18 20 22 BACK ROW (L-R): JOSEPH CANON, DAVID COPELAND, KADE MATTHEWS, RON GIDDIENS, MURRAY EDWARDS, TUCKER BRIDWELL, JOHNNY TROTTER FRONT ROW (L - R): KENNETH MURPHY, DERRELL JOHNSON, DIAN STAI, MAC COALSON, F. SCOTT DUESER BOARD MEMBER YEAR ELECTED BOARD MEMBER YEAR ELECTED COMMITTEE APPOINTMENT COMMITTEE APPOINTMENT Tucker S. Bridwell, CPA 2007 2, 4 Board of Directors F. Scott Dueser Chairman of the Board, President and CEO President Mansefeldt Investment Corporation Joseph E. Canon, J.D. Executive Director Dodge Jones Foundation Mac A. Coalson Mac A. Coalson Real Estate David Copeland, CPA President, SIPCO, Inc. and Shelton Family Foundation Murray Edwards Principal, The Edwards Group Ron Giddiens Investments/Business Consulting Former President - Bank of the West, San Angelo 1991 1996 1996 1998 2006 2009 1 3 2 2 1, 3, 4 1, 2, 4 2000 1998 1971 1993 Derrell E. Johnson Former President and CEO Rady and Associates Consulting Engineers Kade Matthews Ranching and Investments Kenneth T. Murphy Senior Chairman of the Board Dian Graves Stai Chair, Mansefeldt Investment Corp. Director, Dian Graves Owen Foundation Johnny E. Trotter President and CEO 2 3 1, 4 1, 3, 4 Livestock Investors, Ltd. 2003 1, 3, 4 * CO M M I T T E E S 1 Executive Committee – F. Scott Dueser, Chairman 2 Audit Committee – David Copeland, Chairman 3 Compensation Committee – Dian Graves Stai, Chairman 4 Nominating/Corporate Governance Committee – Mac A. Coalson, Chairman 24 Corporate Information OFFICERS F. Scott Dueser Chairman, President and Chief Executive Officer J. Bruce Hildebrand Executive Vice President and Chief Financial Officer Gary S. Gragg Executive Vice President, Lending Gary L. Webb Executive Vice President, Operations Tommy J. Barrow Senior Vice President, Lending Courtney Jordan Senior Vice President, Training and Education Michele P. Stevens Senior Vice President, Advertising and Marketing William A. Rowe Vice President, Investment Services Gaila Kilpatrick Assistant Secretary Bob Goodner Compliance Officer Michelle Fagan Compliance Officer A N N UA L M E E T I N G Tuesday, April 27, 2010 10:30 a.m. Abilene Civic Center 1100 N. Sixth Abilene, Texas 79601 CORPORATE OFFICES 400 Pine Abilene, Texas 79601 325-627-7155 • 800-588-7000 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 T R A N S F E R AG E N T Registrar and Transfer Company 800-368-5948 ADDRESS SHAREHOLDER INQUIRIES TO: Registrar and Transfer Company Investor Relations Department 10 Commerce Drive Cranford, NJ 07016 E-MAIL ADDRESS: info@rtco.com REGISTRAR AND TRANSFER COMPANY WEB SITE www.rtco.com S E N D C E R T I F I C AT E S F O R T R A N S F E R & A D D R E S S C H A N G E S TO : Registrar & Transfer Company 10 Commerce Drive Cranford, NJ 07016-3572 4 0 0 P i n e • A b i l e n e , Te x a s 7 9 6 0 1 www.f f in.com 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. Note: Market share data is calculated from June 30, 2009, deposit information compiled by the Federal Deposit Insurance Corporation. FIRST FINANCIAL BANKSHARES EXECUTIVE OFFICERS (L - R ): J. BRUCE HILDEBRAND, MICHELE P. STEVENS, GARY S. GRAGG, F. SCOTT DUESER, GARY L. WEBB, KIRK W. THAXTON AND TOMMY J. BARROW SM A F a m i l y o f C o m m u n i t y B a n k s S M 4 0 0 Pi n e • Abi l e n e , Te x a s 7 9 6 0 1 • w w w. f f i n . c om 21% 47% 30% 7% 15% 20% 37% 26% HEREFORD M A I N O F F I C E 212 E. Third ( 8 0 6 ) 3 6 3 - 8 2 0 0 Hereford, Texas 79045 M I K E M AU L D I N Pre s i d e n t a n d C E O D I R E C TO R S D E A F S M I T H CO U N T Y D E P O S I T M A R K E T S H A R E 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 Pet Care, Inc. Allen Parson Restaurateur and Investments Craig Smith Rancher and Retired Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 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 S E N I O R O F F I C E R S Mike Mauldin Chairman of the Board, President and Chief Executive Officer Steve Gilbert Executive Vice President and Cashier Kent Jackson Executive Vice President and Chief Credit Officer IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 147,652 96,028 130,728 12,284 2,121 1.56% 47.16% DEC. 31, 2008 $ 149,264 94,426 118,656 10,728 2,104 1.54% 44.71% MINERAL WELLS M A I N O F F I C E 1900 E. Hubbard ( 9 4 0 ) 3 2 7 - 5 4 0 0 Mineral Wells, Texas 76067 K E N N E T H W I L L I A M S O N Pre s i d e n t a n d C E O PA LO P I N TO CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Spencer Baum, D.D.S. Baum Dental Clinic F. Scott Dueser First Financial Bankshares, Inc. George Gault Attorney Gault & Gault Terry L. Murphy President and Chief Executive Officer Murphy and Murphy, Inc. David Ramsey, M.D. Family Practice Center Albert Rincon Vice President of Operations Texas Packaging Company, Inc. Kenneth A. Williamson Chairman of the Board, President and Chief Executive Officer Paul McGettes Chief Financial Officer Upham Oil & Gas Company, L.P. S E N I O R O F F I C E R S Brad Seay Lending Executive Vice President Eddie Gregory Senior Vice President and Cashier Mike Mearse Senior Vice President Lending IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 167,259 101,050 132,997 22,436 3,542 2.10% 39.01% DEC. 31, 2008 $ 173,565 99,555 138,325 20,276 3,147 1.93% 43.43% SAN ANGELO M A I N O F F I C E 301 W. Beauregard LO C AT I O N S www.historicmuralsofsanangelo.org ( 3 2 5 ) 6 5 9 - 5 9 0 0 San Angelo, Texas 76903 3471 Knickerbocker San Angelo, Texas 76904 M I C H A E L L . B OYD Pre s i d e n t a n d C E O TO M G R E E N CO U N T Y D E P O S I T M A R K E T S H A R E Michael L. Boyd Ron Giddiens Chairman of the Board, President Investments/Business and Chief Executive Officer Consulting D I R E C TO R S Hon. Marilyn Aboussie Chief Justice, Retired W. Dan Cravy, M.D. Physician Pat Crump President and CEO Former President - Bank of the West, San Angelo Joey Henderson President Porter Henderson Implement Company, Inc. J. Bruce Hildebrand Baptist Memorials Services First Financial Bankshares, Inc. Rick DeHoyos Attorney Robert D. Housley President and Owner F. Scott Dueser First Financial Bankshares, Inc. Doug Eakman Owner Pecos Street Pharmacy Steve Eustis Commercial Real Estate David F. Lupton President Angelo Glass & Mirror Company, Inc. John E. Schwartz, Sr. Farmer/Rancher Mary Jane Steadman Attorney Real Estate Investment Management S E N I O R O F F I C E R S Michael L. Boyd Wes Masters Chairman of the Board, Senior Vice President President Robert Pate Jim Davidson and Cashier Senior Vice President Executive Vice President Chuck Shore Senior Vice President Executive Vice President Ruth Wheeler Senior Vice President Cindy George Senior Vice President Bill Wiedenfeld Senior Vice President Carrol E. Hill Senior Vice President and Chief Executive Officer Reba Priddy Glasheen, Valles & DeHoyos, LLP Housley Communications IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 349,676 139,847 290,797 48,441 6,250 1.82% 45.54% DEC. 31, 2008 $ 333,330 135,618 276,803 45,757 6,157 1.86% 44.64% SOUTHLAKE TROPHY CLUB KELLER BRIDGEPORT BOYD DECATUR M A I N O F F I C E ( 8 1 7 ) 4 1 0 - 2 9 1 5 3205 E. Highway 114 Southlake, Texas 76092 LO C AT I O N S 95 Trophy Club Drive 891 E. Keller Parkway 909 Stevens 609 Rock Island Avenue 608 W. Hale Avenue Trophy Club, Texas 76262 Keller, Texas 76248 Bridgeport, Texas 76426 Boyd, Texas 76023 Decatur, Texas 76234 M A R K L . J O N E S Pre s i d e n t a n d C E O C I T I E S O F S O U T H L A K E, T R O P HY C LU B & K E L L E R D E P O S I T M A R K E T S H A R E W I S E CO U N T Y D E P O S I T M A R K E T S H A R E D I R E C TO R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer William Ray Cook, Jr., CPA Cook McDonald & Co. Jack Dortch Jack Dortch Farmers Insurance Agency F. Scott Dueser First Financial Bankshares, Inc. J. Bruce Hildebrand First Financial Bankshares, Inc. Derrell E. Johnson Former President and CEO Rady Associates Consulting Engineers K. Wayne Lee President, DDFW Properties Ralph Manoushagian Land Manager Approach Resources, Inc. Oil & Gas Exploration Jim Ridenour President Sunbelt Station Service S E N I O R O F F I C E R S Mark L. Jones Chairman of the Board, President and Chief Executive Officer F. Mills Shallene Wise County Market President Henson Dunn Senior Vice President Les Mariotti Senior Vice President and Chief Financial Officer J. Sean Shope Senior Vice President Steve Sims Senior Vice President Trent Swearengin Senior Vice President IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 264,306 157,919 210,764 39,084 2,515 0.94% 62.24% DEC. 31, 2008 $ 272,185 163,936 217,818 37,664 2,793 0.99% 61.32% STEPHENVILLE GRANBURY GLEN ROSE ACTON M A I N O F F I C E ( 2 5 4 ) 9 6 5 - 5 0 3 6 2201 W. South Loop Stephenville, Texas 76401 LO C AT I O N S 1875 Lingleville Road 199 N. Columbia 400 Big Bend Trail 2007 East Highway 377 1600 S. Morgan Stephenville, Texas 76401 Stephenville, Texas 76401 Glen Rose, Texas 76043 Granbury, Texas 76049 Granbury, Texas 76048 2915 Fall Creek Highway Acton, Texas 76049 R O N N . M U L L I N S Pre s i d e n t a n d C E O E R AT H , H O O D & S O M E R V E L L CO U N T I E S D E P O S I T M A R K E T S H A R E D I R E C TO R S Ron N. Mullins Chairman of the Board, President and Chief Executive Officer Jerry Parham Investments S E N I O R O F F I C E R S President John Power Bart Rodgers Ron N. Mullins Angie Dusek Chairman of the Board, Senior Vice President and Chief Executive Officer Donna Feller Senior Vice President Keith Brown Prime Building Components, LLC F. Scott Dueser First Financial Bankshares, Inc. Glen Rose Market President Connie Frank J. Bruce Hildebrand Senior Vice President First Financial Bankshares, Inc. Julie Graham Frank Terrell, M.D. Ophthalmologist John Terrill Attorney ADVISORY DIRECTORS SPEC Management Co. Ron Hance Hance Financial Services Granbury Market President Mike Gandy Dereece Howell Executive Vice President Vickie Pettit and Cashier Senior Vice President Senior Vice President Monty Bedwell Robert Reeves Executive Vice President Senior Vice President Robert Lemons Larry Upshaw Executive Vice President Senior Vice President Bill Hooks Autos - Real Estate John Moore Craft Associates, Inc. Ron Pack RP’s Western Wear, Inc. Bill Parham Parham & Parham, CPAs IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 350,059 181,726 298,355 44,383 4,267 1.31% 48.89% DEC. 31, 2008 $ 330,942 192,202 279,209 42,033 5,107 1.56% 48.29% SWEETWATER ROBY TRENT MERKEL J . V. M A R T I N Chairman of the Board K I R BY N . A N D R E WS President and CEO NOLAN & FISHER COUNTIES D E P O S I T M A R K E T S H A R E M A I N O F F I C E 201 Elm LO C AT I O N S 123 N. Concho 117 N. Main 301 Edwards Street ( 3 2 5 ) 2 3 5 - 6 6 0 0 Sweetwater, Texas 79556 Roby, Texas 79543 Trent, Texas 79561 Merkel, Texas 79536 S E N I O R O F F I C E R S D I R E C TO R S J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Donnie Ruppert Executive Vice President and Cashier/Controller Rodney Foster Senior Vice President Lending J.V. Martin Chairman of the Board Kirby N. Andrews President and Chief Executive Officer Jeff Branson General Partner Williamson-Branson Real Estate Louis Brooks, Jr. Rancher Ronnie Cox Owner Cox Jewelry J. Bruce Hildebrand First Financial Bankshares, Inc. Jay Lawrence President MAL Enterprises, Inc. Thomas L. Rees, Sr. Rees and Rees, Attorneys IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 133,322 67,463 119,011 13,248 2,420 1.81% 51.54% DEC. 31, 2008 $ 130,078 68,665 117,320 11,833 2,168 1.66% 51.87% WEATHERFORD ALEDO WILLOW PARK BROCK FORT WORTH D OYL E L E E Chairman of the Board and Chief Executive O fficer M A I N O F F I C E 101 N. Main LO C AT I O N S 101 College Park Drive 1214 N. Main 210 N. Main 505 FM 1187 N. 4100 E. I-20 1100 FM 1189 ( 8 1 7 ) 5 9 6 - 0 3 0 7 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Weatherford, Texas 76086 Aledo, Texas 76008 Willow Park, Texas 76087 Brock, Texas 76066 550 Bailey Avenue Suite 300 Fort Worth, Texas 76107 S E N I O R O F F I C E R S D I R E C TO R S Doyle Lee Chairman of the Board and Chief Executive Officer Doyle Lee Chairman of the Board and Chief Executive Officer Bob Bradberry Executive Vice President Larry Mangrem Executive Vice President and Cashier Mike Carter Senior Vice President Lori Hill Senior Vice President Justin Hooper Senior Vice President Kent Hudson Senior Vice President Jimmie Sue Lawson Senior Vice President Greg L. Barron President G.L. Barron Company, Inc. Stephen G. Brogdon, D.D.S. General and Cosmetic Dentistry Mac A. Coalson Owner Mac A. Coalson Real Estate F. Scott Dueser First Financial Bankshares, Inc. Clay Hicks Oil and Gas Investments Nan Kingsley President Bluestem Studios, Inc. Mike White, O.D. Therapeutic Optometrist J AY G I B B S President Jay Gibbs President Jay Gibbs President PARKER COUNTY D E P O S I T M A R K E T S H A R E IN THOUSANDS Assets Loans Deposits Equity Net Income Return on Ef f iciency Average Assets Ratio DEC. 31, 2009 $ 355,621 149,607 309,465 33,608 5,124 1.49% 49.92% DEC. 31, 2008 $ 375,424 156,616 331,288 29,326 5,830 1.71% 50.52% First Financial Trust & Asset Management Co., N.A. Abilene Office 400 Pine St. LO C AT I O N S Fort Worth Office 550 Bailey Ave., Suite 300 Odessa Office 2651 JBS Parkway Bldg. 4, Suite E San Angelo Office 301 W. Beauregard Stephenville Office 2201 W. South Loop Sweetwater Office 201 Elm ( 3 2 5 ) 6 2 7 - 7 1 0 0 ( 8 1 7 ) 4 1 0 - 4 9 7 0 ( 4 3 2 ) 3 6 7 - 8 9 0 0 ( 3 2 5 ) 6 5 9 - 5 9 8 7 ( 2 5 4 ) 9 1 8 - 6 2 6 2 ( 3 2 5 ) 2 3 5 - 6 6 4 0 performed well in 2009 considering the challenging economic environment it confronted. Total assets continued to grow, and our equity and fixed-income investments all outperformed their respective bench- marks. We also opened an office in a new market. Assets at year-end totaled $1.67 billion in book value and $2.10 billion in market value. These levels rep- resented increases of 2.1 percent and 11.7 percent, respectively, from 2008. Earnings for 2009 were down from 2008, reflecting the low levels of the stock market that prevailed in the first half of the year. Also contributing to the earnings reduction were significantly lower oil and gas prices, which negatively affected the large oil and gas portfolio that we manage. Net income decreased $179,000, or 6.4 percent, to $2.6 million from $2.8 million in 2008. Trust fee revenue, the main source of our net income, decreased $358,000, or 3.8 percent, to $9.1 million from $9.4 million. Although the markets were extremely volatile throughout the year, our investment team produced outstanding results. All of our equity and fixed-income investments exceeded their respective benchmarks. A highlight of the year was our opening in June of an office in Odessa, which is a new market for us. Barbara Hill manages this office. We are very pleased with the results she has achieved thus far and are excited about the prospects for our growth in the Permian Basin. Our Fort Worth office also achieved excellent results in 2009. Fee revenue for the office increased $123,000, or 41.4 percent, and the number of accounts increased by 34.5 percent. To accommodate the expansion of our business, we moved into a larger office suite during the year. Our experienced team of trust professionals remains committed to providing quality customer service and superior investment results. 09 08 07 06 05 09 08 07 06 05 09 08 07 06 05 TRUST ASSETS (IN MILLIONS) $1,664 $1,631 $1,428 $1,300 $1,150 $ 400 600 800 1,000 1,200 1,400 1,600 1,800 TRUST FEES (IN MILLIONS) $9.08 $9.44 $8.75 $7.66 $7.07 $2.631 $2.810 $2.549 $ 1 2 3 4 5 6 7 8 9 10 TRUST NET INCOME (IN MILLIONS) $2.076 $1.909 $ 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 (L-R - Back Row) DAVID W. CASTLEBERRY (Stephenville), RICHARD YOUNG (Abilene), MICHAEL SHEEHAN (Sweetwater), KIRK THAXTON (Abilene), DAVID BYRD (San Angelo) and JOE AYRES (Stephenville) (L-R - seated) BARBARA HILL (Odessa) and KONRAD HALBERT (Fort Worth) O F F I C E R S Kirk W. Thaxton Chairman of the Board, President, and Chief Executive Officer David Castleberry Senior Vice President Manager, Stephenville D I R E C TO R S Joe E. Canon, J.D. Executive Director Dodge Jones Foundation David Byrd Executive Vice President Manager, San Angelo Konrad S. Halbert Executive Vice President Manager, Fort Worth Michael D. Sheehan Executive Vice President Manager, Sweetwater Richard Young Executive Vice President Manager, Abilene Shelton Family Foundation Chairman of the Board, President Robert S. Patterson Former President & CEO First Financial Trust & Asset Management Company, N.A. Kirk W. Thaxton and Chief Executive Officer First Financial Trust & Asset Management Company, N.A. ADVISORY DIRECTORS Beckham Rector & Eagle Paul L. Cannon First Financial Bankshares, Inc. John L. Beckham Angelo Glass & Mirror McMahon Surovik Suttle, P.C. Barbara Hill Senior Vice President Manager, Odessa Larry Cleveland Senior Vice President Manager, Operations Ralph Gibson Senior Vice President Manager, Investments David B. Pitzer Senior Vice President Manager, Real Property Randy Spiva Senior Vice President Manager, Oil & Gas David Copeland President Ronnie Cox Owner Cox Jewelry F. Scott Dueser David F. Lupton President Company, Inc. Bill Parham Parham & Parham, CPAs (L - R ): CLAY TRUMBLE, KAY BERRY, GARY TUCKER, DENNIS STECKLY, MICHELLE McDONALD AND LARRY WILLIAMS First Technology Services, Inc. (FTS) is the shared services company for First Financial Bankshares, Inc. (FFIN) Our mission is to maximize efficiencies and control costs for common functions within FFIN while providing the best possible customer service to our internal and external customers. FTS plays a key role in customer service functions within FFIN through its customer call center and innovative technology for online banking, auto- matic bill pay services, backroom operations and other technology-based banking services. FTS also supports employees with classroom and online technology training and a responsive technology help desk. FTS provides more than 100 technology applications to FFIN and its family of 10 banks and the Trust Company. Services include check processing, account services, a help desk, desktop support, network services, server support, software support, information security, computer operations, business continuity planning, loan and credit operations, loan document preparation and the corporate call center. M A I N O F F I C E 400 Pine Abilene, Texas 79601 ( 3 2 5 ) 6 2 7 - 7 1 9 5 S E N I O R O F F I C E R S Gary D. Tucker President and Chief Executive Officer Kay Berry Senior Vice President Deposit Operations Michelle McDonald Senior Vice President Customer Service D I R E C TO R S Clay Trumble Senior Vice President Credit Administration Dennis Steckly Senior Vice President Production Services Larry Williams Senior Vice President Infrastructure Services Gary L. Webb Chairman of the Board Ron Butler President and First Technology Services, Inc. Chief Executive Officer Executive Vice President, First Financial Bank Abilene Operations First Financial Bankshares, Inc. Gary D. Tucker President and Chief Executive Officer First Technology Services, Inc. F. Scott Dueser Chairman, President and Chief Executive Officer Jay Gibbs President First Financial Bank Weatherford Derrell E. Johnson Former President and Chief Executive Officer Rady and Associates Consulting Engineers First Financial Bankshares, Inc. Les Mariotti J. Bruce Hildebrand Chief Financial Officer Executive Vice President and First Financial Bank Southlake Senior Vice President and Chief Financial Officer First Financial Bankshares, Inc. Mike Mauldin Michael L. Boyd Chairman, President and Chief Executive Officer First Financial Bank San Angelo Chairman of the Board, President and Chief Executive Officer First Financial Bank Hereford 2 0 0 9 W A L T E R J O H N S O N A W A R D K E N N E T H T . M U R P H Y Through the 120 years of First Financial Bankshares’ history, there have been many people who have contributed greatly to the success of this company, and Ken Murphy has to be at the top of that list with Walter Johnson and the James family. Therefore, it is extremely appropriate that we honor Ken for his outstanding leadership during the past 39 years with the Walter Johnson Award, as well as dedicating this Annual Report to him. Ken was hired by Walter Johnson in 1971 and has held the following positions: First Financial Bank, N.A., Abilene (formerly First National Bank of Abilene) Executive Vice President President President and Chief Executive Officer Chairman of the Board and Chief Executive Officer 1993–2000 Chairman of the Board First Financial Bankshares, Inc. Executive Vice President President and Chief Executive Officer Chairman, President and Chief Executive Officer Chairman of the Board Senior Chairman of the Board 1971-1975 1975-1981 1981-1984 1984-1993 1973-1985 1985-1986 1986-2000 2001-2007 2008-2009 When Ken joined the bank in 1971, the Company had total assets of $87 million and net income of $806,000. This past year we finished the year with total assets of $3.3 billion and net earnings of $53.8 million. During Ken’s tenure with this company, we have experienced great success. While he was President and CEO of First Financial Bankshares, he purchased 11 banks and added numerous locations to the Company. During his tenure, he held many civic, cultural and professional leadership positions with the most notable positions being: President, Abilene Chamber of Commerce; Chairman, United Way Campaign in Abilene; Chairman, West Texas Rehabilitation Center; Chairman and Trustee, Alliance for Women and Children; Director, Hendrick Medical Center; Director, West Central Texas Municipal Water District; Director, Hardin-Simmons University Board of Development; Director, The Grace Museum of Abilene; Director, Treasurer and Chairman, Texas Bankers Association; and Class A Director, Federal Reserve Bank of Dallas. In 2003, Ken was honored as Outstanding Citizen of the Year by the Abilene Chamber of Commerce. As he retires from the First Financial Bankshares Board after 37 years, he leaves us with a great legacy and many Murphy stories, reports and sayings, but, most of all, his knowledge of how to manage outstanding banks. For me personally, Ken has been a mentor, confidant and boss for 33 years. I have learned so much from him. Although he is retiring from the Board, I know we will continue to have his advice and counsel, as well as his ever-present support and encouragement. It is our pleasure to honor Ken Murphy with the Walter Johnson Award for what he has contributed in going beyond the call of duty for our company and, especially, for our customers, stockholders and employees. Sincerely, F. Scott Dueser 13 15 17 19 21 23 14 16 18 20 22 BACK ROW (L-R): JOSEPH CANON, DAVID COPELAND, KADE MATTHEWS, RON GIDDIENS, MURRAY EDWARDS, TUCKER BRIDWELL, JOHNNY TROTTER FRONT ROW (L - R): KENNETH MURPHY, DERRELL JOHNSON, DIAN STAI, MAC COALSON, F. SCOTT DUESER BOARD MEMBER YEAR ELECTED BOARD MEMBER YEAR ELECTED COMMITTEE APPOINTMENT COMMITTEE APPOINTMENT Tucker S. Bridwell, CPA 2007 2, 4 Board of Directors F. Scott Dueser Chairman of the Board, President and CEO President Mansefeldt Investment Corporation Joseph E. Canon, J.D. Executive Director Dodge Jones Foundation Mac A. Coalson Mac A. Coalson Real Estate David Copeland, CPA President, SIPCO, Inc. and Shelton Family Foundation Murray Edwards Principal, The Edwards Group Ron Giddiens Investments/Business Consulting Former President - Bank of the West, San Angelo 1991 1996 1996 1998 2006 2009 1 3 2 2 1, 3, 4 1, 2, 4 2000 1998 1971 1993 Derrell E. Johnson Former President and CEO Rady and Associates Consulting Engineers Kade Matthews Ranching and Investments Kenneth T. Murphy Senior Chairman of the Board Dian Graves Stai Chair, Mansefeldt Investment Corp. Director, Dian Graves Owen Foundation Johnny E. Trotter President and CEO 2 3 1, 4 1, 3, 4 Livestock Investors, Ltd. 2003 1, 3, 4 * CO M M I T T E E S 1 Executive Committee – F. Scott Dueser, Chairman 2 Audit Committee – David Copeland, Chairman 3 Compensation Committee – Dian Graves Stai, Chairman 4 Nominating/Corporate Governance Committee – Mac A. Coalson, Chairman 24 Corporate Information OFFICERS F. Scott Dueser Chairman, President and Chief Executive Officer J. Bruce Hildebrand Executive Vice President and Chief Financial Officer Gary S. Gragg Executive Vice President, Lending Gary L. Webb Executive Vice President, Operations Tommy J. Barrow Senior Vice President, Lending Courtney Jordan Senior Vice President, Training and Education Michele P. Stevens Senior Vice President, Advertising and Marketing William A. Rowe Vice President, Investment Services Gaila Kilpatrick Assistant Secretary Bob Goodner Compliance Officer Michelle Fagan Compliance Officer A N N UA L M E E T I N G Tuesday, April 27, 2010 10:30 a.m. Abilene Civic Center 1100 N. Sixth Abilene, Texas 79601 CORPORATE OFFICES 400 Pine Abilene, Texas 79601 325-627-7155 • 800-588-7000 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 T R A N S F E R AG E N T Registrar and Transfer Company 800-368-5948 ADDRESS SHAREHOLDER INQUIRIES TO: Registrar and Transfer Company Investor Relations Department 10 Commerce Drive Cranford, NJ 07016 E-MAIL ADDRESS: info@rtco.com REGISTRAR AND TRANSFER COMPANY WEB SITE www.rtco.com S E N D C E R T I F I C AT E S F O R T R A N S F E R & A D D R E S S C H A N G E S TO : Registrar & Transfer Company 10 Commerce Drive Cranford, NJ 07016-3572 4 0 0 P i n e • A b i l e n e , Te x a s 7 9 6 0 1 www.f f in.com 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. Note: Market share data is calculated from June 30, 2009, deposit information compiled by the Federal Deposit Insurance Corporation. FIRST FINANCIAL BANKSHARES EXECUTIVE OFFICERS (L - R ): J. BRUCE HILDEBRAND, MICHELE P. STEVENS, GARY S. GRAGG, F. SCOTT DUESER, GARY L. WEBB, KIRK W. THAXTON AND TOMMY J. BARROW SM A F a m i l y o f C o m m u n i t y B a n k s S M 4 0 0 Pi n e • Abi l e n e , Te x a s 7 9 6 0 1 • w w w. f f i n . c om 21% 47% 30% 7% 15% 20% 37% 26% 

Continue reading text version or see original annual report in PDF format above