Business Overview First Financial Bankshares was founded in 1956 under the original name F M Operating Company. The company's banking operations, however, trace their roots back to 1890, when Farmers and Merchants National Bank opened its doors in Abilene, Texas. Over the decades, First Financial Bankshares has grown both organically and through strategic acquisitions, expanding its footprint to 79 financial centers across the state of Texas as of December 31, 2024.
Since 1997, the company has completed fourteen bank acquisitions, significantly increasing its total assets from $1.57 billion to $13.98 billion as of December 31, 2024. This impressive growth has positioned First Financial Bankshares as one of the largest independent bank holding companies in Texas.
In September 2001, First Financial Bankshares made a strategic decision to become a financial holding company, which expanded its ability to offer a broader range of financial products and services. This move allowed the company to affiliate with securities firms and insurance companies and engage in other activities deemed financial in nature, further diversifying its revenue streams and strengthening its market position.
Throughout its history, First Financial Bankshares has successfully navigated various challenges common to the banking industry, including economic fluctuations, interest rate risk management, and regulatory changes. The company demonstrated its resilience during the 2008 financial crisis and has continued to adapt to an evolving regulatory landscape, including the implementation of the Dodd-Frank Act and Basel III capital requirements.
The company's primary subsidiary, First Financial Bank, provides a full range of commercial banking services, including accepting deposits, making loans, offering automated teller machines (ATMs), and providing trust and wealth management activities through its First Financial Trust Asset Management Company. The bank's regional approach, with separate advisory boards and local decision-making processes, has been a key driver of its success, allowing it to maintain a strong connection with the communities it serves.
Financial Performance First Financial Bankshares has consistently delivered solid financial results, even during challenging economic environments. For the year ended December 31, 2024, the company reported net income of $223.51 million, or $1.56 per diluted share, compared to $198.98 million, or $1.39 per diluted share, for the previous year. This represents an impressive 12.33% increase in net income. The company's annual revenue for the fiscal year ended December 31, 2024, was $628.92 million.
For the quarter ended December 31, 2024, FFIN reported revenue of $143.65 million and net income of $62.32 million, representing a year-over-year increase compared to the same quarter in the prior year.
The company's strong performance was driven by robust growth in its loan portfolio, which expanded from $7.15 billion as of December 31, 2023, to $7.91 billion as of December 31, 2024 – a 10.64% increase. This organic loan growth, combined with disciplined pricing and effective risk management, has enabled First Financial Bankshares to maintain a healthy net interest margin. As of December 31, 2024, the company's net interest margin stood at 3.50%, up from 3.29% a year earlier.
In addition to its strong lending business, First Financial Bankshares has also benefited from its diversified revenue streams, including trust fees, service charges on deposit accounts, and debit card fees. The company's trust and wealth management division, First Financial Trust Asset Management Company, has been a particularly strong contributor, with assets under management reaching $10.83 billion as of December 31, 2024, up from $9.78 billion a year earlier.
Balance Sheet and Capital Strength First Financial Bankshares maintains a robust balance sheet, with total assets of $13.98 billion as of December 31, 2024, up from $13.11 billion a year earlier. The company's capital position remains strong, with a total risk-based capital ratio of 20.00% and a Tier 1 capital to risk-weighted assets ratio of 18.83% as of the same date. These ratios comfortably exceed the regulatory requirements for a "well-capitalized" institution, providing the company with ample cushion to withstand potential economic headwinds.
Liquidity The company's liquidity position is sound, with cash and cash equivalents totaling $763.41 million as of December 31, 2024. First Financial Bankshares has access to additional sources of liquidity, including a $1.86 billion line of credit with the Federal Home Loan Bank of Dallas and a $25 million revolving line of credit with Frost Bank, which matures on June 30, 2025. These funding sources, coupled with the company's stable deposit base, ensure that First Financial Bankshares is well-positioned to meet its liquidity needs and support its ongoing growth initiatives.
Growth Strategies and Outlook First Financial Bankshares has a proven track record of successful organic growth and strategic acquisitions. The company's regional approach, with local decision-making and advisory boards, has allowed it to maintain a strong connection with the communities it serves, while also benefiting from the operational efficiencies and economies of scale achieved through its centralized support functions.
Looking ahead, the company remains focused on continued organic growth, with plans to open new branch locations and expand its lending and wealth management activities. Additionally, First Financial Bankshares continues to evaluate potential acquisition opportunities, particularly in non-metropolitan markets in Texas, that align with its corporate culture and strategic objectives.
The company's guidance for the year ended December 31, 2025, calls for continued growth in loans, deposits, and net interest income, driven by the favorable interest rate environment and the company's strong market presence. Management has also highlighted its commitment to maintaining disciplined underwriting standards and a robust risk management framework to ensure the long-term sustainability of the company's financial performance.
Risks and Challenges As with any financial institution, First Financial Bankshares is subject to various risks, including interest rate risk, credit risk, and regulatory risk. The company's concentration in the state of Texas, while a strength in terms of its deep understanding of the local markets, also exposes it to economic conditions specific to the state, such as volatility in the oil and gas industry.
Additionally, the company faces competition from larger regional and national banks, as well as emerging financial technology (fintech) firms, which may disrupt traditional banking models. First Financial Bankshares must continue to invest in technology and innovation to meet the evolving needs of its customer base and maintain its competitive edge.
Loan Portfolio and Asset Quality First Financial Bankshares maintains a diversified loan portfolio focused on commercial, real estate, and consumer lending across its Texas markets. As of December 31, 2024, the Commercial and Industrial (CI) segment represented the largest portion at 14.87% of total loans held-for-investment. The Municipal segment accounted for 4.67% of total loans.
The Real Estate segment, which made up 69.25% of total loans, is further divided into several subsegments. The largest of these is Residential real estate at 27.76% of total loans, followed by Owner Occupied Commercial Real Estate (CRE) at 13.69% and Non-Owner Occupied CRE at 10.18%. The Construction and Development as well as Farm subsegments comprised 13.33% and 4.29% of total loans, respectively.
The Consumer segment, which includes Auto and Non-Auto loans, represented 10.00% of the total loan portfolio. The Auto subsegment made up 8.07% while Non-Auto was 1.93% of total loans.
In terms of asset quality, the company's nonaccrual loans, loans still accruing and past due 90 days or more, and foreclosed assets totaled $63.10 million as of December 31, 2024, representing 0.80% of total loans held-for-investment plus foreclosed assets. This was an increase from 0.49% at the end of 2023. The allowance for credit losses was $98.33 million, or 1.24% of total loans held-for-investment, as of the end of 2024, relatively flat compared to the prior year.
Income and Expense Trends The company's net interest margin expanded to 3.50% in 2024, up from 3.29% in 2023, driven by growth in higher-yielding loans and the rising interest rate environment. Noninterest income increased 15.99% year-over-year, bolstered by gains from trust fees, which grew 17.24% to $47.45 million. Noninterest expense increased 11.43% in 2024, primarily due to higher salaries and employee benefits.
Geographic Performance First Financial Bankshares operates primarily in Texas, with 79 locations across the state. The company does not have significant operations outside of Texas. This focus on serving its local markets has allowed FFIN to capitalize on the favorable economic conditions in Texas, where the banking industry has seen steady growth with a CAGR of approximately 5% over the past 5 years.
Conclusion First Financial Bankshares, Inc. has consistently demonstrated its ability to navigate challenging economic conditions and deliver solid financial performance. The company's regional approach, strong capital position, and diversified revenue streams have been instrumental in its success, allowing it to serve the needs of its local communities while generating consistent growth and shareholder value. As First Financial Bankshares continues to execute on its strategic initiatives, the company appears well-positioned to build upon its legacy of resilience and success in the Texas banking market.