FIRST FINANCIAL BANKSHARES ANNOUNCES FOURTH QUARTER 2023 EARNINGS RESULTS

ABILENE, Texas, Jan. 25, 2024 /PRNewswire/ -- First Financial Bankshares, Inc. (the "Company," "we," "us" or "our") (NASDAQ: FFIN) today reported earnings of $45.98 million for the fourth quarter of 2023 compared to earnings of $58.67 million for the same quarter a year ago. Basic and diluted earnings per share were $0.32 for the fourth quarter of 2023 compared with $0.41 for the same quarter a year ago.

"2023 was a very challenging year for the banking industry due to the Federal Reserve's highest and most rapid increase in interest rates in our country's history. Despite the decline in our year-over-year net income in 2023, I am proud of the many accomplishments we achieved during the year and we continued to outperform our peer group of banks," said F. Scott Dueser, Chairman, President and CEO of First Financial Bankshares, Inc. "We are pleased that we ended 2023 having maintained our total deposit levels when compared to 2022 year-end balances primarily resulting from the addition of over 12,500 net new accounts. Additionally, we grew loans organically $706.92 million, or 10.97 percent, during the year while maintaining our conservative credit standards. In addition, we took advantage of opportunities to restructure our balance sheet by selling $411.13 million in securities with lower yields and redeployed those dollars into our higher earning loan portfolio. The cash flows provided from the sales of securities combined with the monthly maturities in our bond and loan portfolios are providing us with the needed liquidity to grow loans which will also benefit our interest income as we go forward. Entering 2024, I believe we are well positioned for success in the economic environment. We appreciate the continued support of our customers, shareholders and associates," Mr. Dueser added.

As further described below, the results this quarter when compared to the same quarter a year ago included (i) a $6.53 million decrease in net interest income, (ii) a $964 thousand decrease in mortgage revenues, (iii) a $6.34 million loss on sale of securities, (iv) a $2.08 million increase in FDIC insurance premiums, which includes a $1.75 million special assessment, and (v) a $1.51 million increase in incentive and profit sharing expenses.

Net earnings for the year ended December 31, 2023, totaled $198.98 million compared to $234.48 million for the year ended December 31, 2022. Basic and diluted earnings per share were $1.39 for the year ended December 31, 2023, compared with basic and diluted earnings per share of $1.64 for the year ended December 31, 2022. Included in earnings for the year ended December 31, 2023, when compared to the year ended December 31, 2022, were (i) a decrease of $17.61 million in net interest income, (ii) a decrease in debit card revenues of $8.56 million, (iii) a decrease in mortgage revenues of $7.15 million, (iv) a $9.26 million decline in gains on sales of securities, and (v) an increase of $4.04 million in FDIC insurance premiums, which includes a $1.75 million special assessment. Offsetting these reductions to earnings were (i) a decline of $6.80 million in the provision for credit losses and (ii) a decline of $5.30 million in incentive and profit sharing expenses.

Net interest income for the fourth quarter of 2023 was $97.51 million compared to $94.15 million for the third quarter of 2023 and $104.04 million for the fourth quarter of 2022. The net interest margin, on a taxable equivalent basis, was 3.33 percent for the fourth quarter of 2023, compared to 3.22 percent for the third quarter of 2023, and 3.47 percent for the fourth quarter of 2022. Average interest-earning assets were $11.93 billion for the fourth quarter of 2023 compared to $12.32 billion for the same quarter a year ago.

The Company did not record a provision for credit losses for the fourth quarter of 2023 compared to a provision for credit losses of $4.08 million for the fourth quarter of 2022. At December 31, 2023, the allowance for credit losses totaled $88.73 million, or 1.24 percent of loans held-for-investment ("loans" hereafter), compared to $75.83 million at December 31, 2022, or 1.18 percent of loans. Additionally, the reserve for unfunded commitments totaled $7.90 million at December 31, 2023, compared to $12.32 million at December 31, 2022.

For the fourth quarter of 2023, net charge-offs totaled $980 thousand compared to net charge-offs of $905 thousand for the fourth quarter of 2022, or 6 basis points of loans in both periods. Nonperforming assets as a percentage of loans and foreclosed assets totaled 0.49 percent at December 31, 2023, compared with 0.38 percent at December 31, 2022.  Classified loans totaled $176.21 million at December 31, 2023, compared to $150.70 million at December 31, 2022.

Noninterest income for the fourth quarter of 2023 was $21.98 million compared to $28.52 million for the fourth quarter of 2022, primarily as a result of the following:

• Available-for-sale securities totaling $90.72 million with an average book yield of 1.89 percent were sold in the fourth quarter of 2023 resulting in a loss on sales of securities of $6.21 million compared to a gain on sales of securities of $131 thousand in the fourth quarter of 2022. The proceeds from the sales of these securities are being used to fund organic loan growth that is yielding approximately 8 percent, resulting in an anticipated earn back period of less than 18 months.
• Mortgage income declined to $1.94 million for the fourth quarter of 2023 compared to $2.90 million for the fourth quarter of 2022 due to lower overall origination volume.
• Debit card fees decreased by $875 thousand for the fourth quarter of 2023 compared to the same quarter a year ago. The decrease was mostly due to the recognition of $1.11 million of volume incentive income in the fourth quarter of 2022 compared to $375 thousand in the fourth quarter of 2023.
• Trust fees increased to $10.68 million for the fourth quarter of 2023 compared to $10.12 million for the fourth quarter of 2022, driven by the increase in fair value of trust assets managed to $9.78 billion at December 31, 2023, compared to $8.75 billion at December 31, 2022.
• Service charges on deposits increased to $6.52 million for the fourth quarter of 2023 compared with $6.40 million for the fourth quarter of 2022, driven by the continued growth in net new accounts.

Noninterest expense for the fourth quarter of 2023 totaled $63.47 million compared to $57.78 million for the fourth quarter of 2022, as a result of the following:

• Salary, commissions and employee benefit costs totaled $35.75 million for the fourth quarter of 2023, compared to $32.96 million in the fourth quarter of 2022 reflecting some bonuses and profit sharing expenses paid to several of our Bank regions that met their performance criteria, annual merit-based and market driven pay increases and increased medical expenses.
• FDIC insurance premiums increased to $3.11 million in the fourth quarter of 2023 compared with $1.02 million in the fourth quarter of 2022 due to the recognition of $1.75 million related to the special assessment in the fourth quarter of 2023.

The Company's efficiency ratio was 47.26 percent for the year ended December 31, 2023, compared to 42.80 percent for the year ended December 31, 2022.

As of December 31, 2023, consolidated assets for the Company totaled $13.11 billion compared to $12.97 billion at December 31, 2022. Loans totaled $7.15 billion at December 31, 2023, compared with loans of $6.44 billion at December 31, 2022. During the fourth quarter of 2023, loans grew $154.10 million, or 8.81 percent annualized, when compared to September 30, 2023 balances. Deposits totaled $11.14 billion at December 31, 2023, compared to $11.01 billion at December 31, 2022.

Shareholders' equity was $1.50 billion as of December 31, 2023, compared to $1.27 billion at December 31, 2022, primarily as a result of changes in Other Comprehensive Income ("OCI") due to interest rate changes over the past year. The unrealized loss on the available-for-sale investment securities portfolio, net of applicable tax, totaled $403.30 million at December 31, 2023, compared to an unrealized loss of $535.23 million at December 31, 2022.

About First Financial Bankshares, Inc.

Headquartered in Abilene, Texas, First Financial Bankshares is a financial holding company that through its wholly-owned subsidiary, First Financial Bank, N.A., operates multiple banking regions with 79 locations in Texas, including Abilene, Acton, Albany, Aledo, Alvarado, Beaumont, Boyd, Bridgeport, Brock, Bryan, Burleson, College Station, Cisco, Cleburne, Clyde, Conroe, Cut and Shoot, Decatur, Eastland, El Campo, Fort Worth, Franklin, Fulshear, Glen Rose, Granbury, Grapevine, Hereford, Huntsville, Lumberton, Keller, Kingwood, Magnolia, Mauriceville, Merkel, Midlothian, Mineral Wells, Montgomery, Moran, New Waverly, Newton, Odessa, Orange, Palacios, Port Arthur, Ranger, Rising Star, Roby, San Angelo, Southlake, Spring, Stephenville, Sweetwater, Tomball, Trent, Trophy Club, Vidor, Waxahachie, Weatherford, Willis, and Willow Park. The Company also operates First Financial Trust and Asset Management Company, N.A., with nine locations and First Technology Services, Inc., a technology operating company.

The Company is listed on The NASDAQ Global Select Market under the trading symbol FFIN. For more information about First Financial, please visit our website at https://www.ffin.com.

Certain statements contained herein 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," "project," 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; economic impact of oil and gas prices, 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 and Filings" on the Company's Website or by writing or calling the Company at 325.627.7155. Except as otherwise stated in this news announcement, the Company does not undertake any obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise.