Business Overview
First Financial Bankshares, Inc. (NASDAQ:FFIN) is a leading financial holding company that operates primarily in the state of Texas. With a rich history spanning over a century, the company has established itself as a trusted provider of banking and financial services to individuals, businesses, and communities across the Lone Star State.First Financial Bankshares is a diversified financial services company that offers a wide range of products and services, including commercial and consumer banking, trust and wealth management, and insurance. The company operates through a network of 79 locations across Texas, serving customers in various industries and sectors.
The company's commercial banking division caters to the needs of small and medium-sized businesses, providing a comprehensive suite of lending, deposit, and treasury management solutions. The consumer banking segment, on the other hand, offers personal banking services, such as checking and savings accounts, consumer loans, and mortgage products.
First Financial Bankshares' trust and wealth management division manages over $10.15 billion in assets, providing investment management, retirement planning, and estate planning services to its clients. The company's insurance division offers a range of insurance products, including life, property, and casualty insurance, further diversifying its revenue streams.
Financial Performance
In the fiscal year 2023, First Financial Bankshares reported annual net income of $198,977,000 and annual revenue of $634,548,000. The company's annual operating cash flow stood at $287,061,000, while its annual free cash flow reached $269,810,000.For the first quarter of 2024, the company reported net earnings of $53,397,000, up from $52,568,000 in the same period of the previous year. Total revenue for the quarter was $149,495,000, an increase from $121,508,000 in the first quarter of 2023. The company's net interest income for the quarter was $100,242,000, compared to $96,286,000 in the same period last year.
The company's efficiency ratio, a key metric that measures the relationship between noninterest expense and net interest income plus noninterest income, deteriorated to 48.37% in the first quarter of 2024, compared to 44.93% in the same period of 2023. This change reflects an increase in the company's expenses relative to its income.
First Financial Bankshares' net interest margin, a measure of the difference between the interest income generated and the interest paid out, was 3.34% in the first quarter of 2024, consistent with the same period in the previous year.
Loan Portfolio and Asset Quality
As of March 31, 2024, First Financial Bankshares' total loan portfolio stood at $7.23 billion, up from $7.15 billion at the end of 2023. The company's loan portfolio is diversified across various sectors, including commercial and industrial (C&I), real estate, agricultural, and consumer loans.The company's nonperforming assets, which include nonaccrual loans, loans past due 90 days or more and still accruing, and foreclosed assets, were $37.20 million as of March 31, 2024, representing 0.51% of total loans and foreclosed assets. This compares to $35.10 million, or 0.49% of total loans and foreclosed assets, as of December 31, 2023.
The company's allowance for credit losses as a percentage of total loans held-for-investment was 1.24% as of March 31, 2024, consistent with the level at the end of 2023.
Funding and Liquidity
First Financial Bankshares maintains a strong liquidity position, with total deposits of $11.29 billion as of March 31, 2024, up from $11.14 billion at the end of 2023. The company's deposit mix is well-balanced, with 29.7% in noninterest-bearing deposits and 70.3% in interest-bearing deposits.The company's available cash and cash equivalents, investment securities, and available dividends from its subsidiaries provide ample liquidity to fund its operations, support growth initiatives, and meet its financial obligations.
Regulatory Capital and Shareholder Returns
First Financial Bankshares remains well-capitalized, with a total risk-based capital ratio of 19.70% and a Tier 1 leverage ratio of 12.12% as of March 31, 2024. These ratios exceed the regulatory requirements for well-capitalized institutions, demonstrating the company's strong financial position.The company has a history of returning capital to its shareholders through dividends. In the first quarter of 2024, the company declared a quarterly cash dividend of $0.18 per share, representing a dividend yield of 2.33% based on the current stock price.
Outlook and Guidance
First Financial Bankshares has not provided any specific guidance for the remainder of 2024. However, the company's management has expressed confidence in the company's ability to navigate the current economic environment and continue delivering strong financial performance.Risks and Challenges
Like any financial institution, First Financial Bankshares faces a variety of risks, including interest rate risk, credit risk, and regulatory risk. The company's exposure to the Texas economy and its reliance on the state's performance could also present challenges if the regional economy experiences a downturn.Additionally, the company operates in a highly competitive banking environment, which may pressure its margins and require ongoing investments in technology and innovation to maintain its competitive edge.