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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.01pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.03pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.05pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
misrepresented+4
fraudulent+4
misrepresentation+3
incident+2
fraud+2
Positive rising
opportunities+1
enhance+1
Risk Factors (Item 1A)
12,565 words
ITEM 1A.
RISK FACTORS
Our business, financial condition, operating results and cash flows can be impacted by a number of factors, including but not limited to those set forth below, any one of which could cause our actual results to vary materially from recent results or from our anticipated future results and other forward-looking statements that we make from time to time in our news releases, annual reports and other written communications, as well as oral forward-looking statements, and other statements made from time to time by our representatives.
Risks Related to Our Business
Interest Rate Risk
We are subject to interest rate risk.
Our profitability is dependent to a large extent on our net interest income, which is the difference between interest income we earn as a result of interest paid to us on loans and investments and interest we pay to third-parties such as our depositors and those from which we borrow funds. Like most financial institutions, we are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve Board. Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and securities and the amount of interest we pay on deposits and borrowings, but such changes could also affect (i) our ability to originate loans and obtain deposits, (ii) the fair value of our financial assets and liabilities, (iii) the average duration of our securities portfolio, and (iv) the slope of the overall yield curve and its impact on the value of the investment portfolio and reinvestment income. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and investments, our net interest income, and earnings, could be affected. Earnings could also be affected if the interest rates received on loans and investments fall more quickly than the interest rates paid on deposits and other borrowings.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
disclose+4
loss+2
deterioration+2
unable+1
impaired+1
Positive rising
improvement+3
strong+2
able+1
attainment+1
satisfied+1
MD&A (Item 7)
38,602 words
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements as a result of certain factors, including but not limited to those listed in “Item 1A – Risk Factors” and in the “Cautionary Statement Regarding Forward-Looking Statements” notice on page 1.
Introduction
As a financial holding company, we generate most of our revenue from interest on loans and investments, trust fees, gain on sale of mortgage loans and service charges and fees on deposit accounts. Our primary source of funding for our loans and investments are deposits held by our bank subsidiary, First Financial Bank. Our largest expenses are salaries and related employee benefits. We measure our performance by calculating our return on average assets, return on average equity, regulatory capital ratios, net interest margin and efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income on a tax equivalent basis and noninterest income.
The following discussion and analysis of the major elements of our consolidated balance sheets as of December 31, 2025 and 2024, and consolidated statements of earnings for the years 2023 through 2025 should be read in conjunction with our consolidated financial statements, accompanying notes, and selected financial data presented elsewhere in this Form 10-K.
After an extended period at a target rate of 0-0.25%, the Federal Reserve Board began aggressively increasing interest rates in March 2022 and continuing into 2023 reaching a target range of 5.25% to 5.50%. Beginning in September 2024, the Federal Reserve Board began lowering interest rates resulting in a target rate range of 3.50% to 3.75% at December 31, 2025. Today, there continues to be uncertainty regarding future interest rates. Increases in interest rates can have negative impacts on our business, including reducing our customers’ desire to borrow money from us or adversely affecting their ability to repay their outstanding loans by increasing their debt obligations through the periodic reset of adjustable interest rate loans. If our borrowers’ ability to pay their loans is impaired by increasing interest payment obligations, our level of non-performing assets would increase, producing an adverse effect on operating results. Asset values, especially commercial real estate as collateral,
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securities or other fixed rate earning assets, can decline significantly with relatively minor changes in interest rates reducing the demand for collateral securing the loan. Conversely, decreases in interest rates can affect the amount of interest we earn on our loans and investment securities, which could have a material adverse effect on the Company’s financial condition and results of operations. Although we have implemented strategies that we believe reduce the potential effects of adverse changes in interest rates on our results of operations, these strategies may not always be successful. Any of these events could adversely affect our results of operations, financial condition and liquidity.
Credit Risk
In our business, we must effectively manage our credit risk.
As a lender, we are exposed to the risk that our borrowers may not repay their loans according to the terms of these loans and the collateral securing the payment of these loans may be inadequately documented or may be insufficient to fully compensate us for the outstanding balance of the loan plus the costs to dispose of the collateral. We may experience significant loan losses, which could have a material adverse effect on our operating results and financial condition. Management makes various assumptions and judgments about the collectability of our loan portfolio, including the diversification by industry of our commercial loan portfolio, the amount of nonperforming loans and related collateral, the volume, growth and composition of our loan portfolio, the effects on the loan portfolio of current economic indicators and their probable impact on borrowers and the evaluation of our loan portfolio through our internal loan review process and other relevant factors.
We maintain an allowance for credit losses, which is an allowance established through a provision for credit losses charged to expense that represents management’s best estimate of expected losses in our loan portfolio. Additional credit losses will occur in the future and may occur at a rate greater than we have experienced to date. In determining the amount of the allowance, we rely on an analysis of our loan portfolio, our experience and our evaluation of general economic conditions. If our assumptions prove to be incorrect, our current allowance may not be sufficient and adjustments may be necessary to allow for different economic conditions or adverse developments in our loan portfolio. Material additions to the allowance could materially decrease our net income.
In addition, banking regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or recognize further charge-offs, based on judgments different than those of our management. Any increase in our allowance for credit losses or charge-offs as required by these regulatory agencies could have a material negative effect on our operating results and financial condition.
We are subject to environmental liability risk associated with lending activities.
A significant portion of our loan portfolio is secured by real property. During the ordinary course of business, we may foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require us to incur substantial expenses and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. To remediate these risks, often we will obtain a phase 1 and if deemed necessary, a phase 2 inspection report to evaluate potential environmental risks before making loans secured by real property and before considering foreclosing on these assets. Environmental reviews of real property before initiating foreclosure actions may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our business, financial condition and results of operations.
The value of real estate collateral may fluctuate significantly resulting in an under-collateralized loan portfolio.
The market value of real estate, particularly real estate held-for-investment (“HFI”), can fluctuate significantly in a short period of time as a result of market conditions in the geographic area in which the real estate is located. If the value of the real estate serving as collateral for our loan portfolio were to decline materially, a significant part of our loan portfolio could become under-collateralized. If the loans that are collateralized by real estate become troubled during a time when market conditions are declining or have declined, then, in the event of foreclosure, we may not be able to realize the amount of collateral that we anticipated at the time of originating the loan. This could have a material adverse effect on our provision for credit losses and our operating results and financial condition.
Liquidity Risk
We are subject to liquidity risk.
The Company requires liquidity to meet our deposit and other obligations as they come due. The Company’s access to funding sources in amounts adequate to finance its activities or on reasonable terms could be impaired by factors that affect it specifically or the financial services industry or the general economy. Factors that could reduce its access to liquidity sources include a downturn in the Texas market, difficult credit
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markets, depreciation in investment security values, or adverse regulatory actions against the Company. The Company’s access to deposits may also be affected by the liquidity needs of its depositors. In particular, a substantial majority of the Company’s liabilities are demand, savings, interest checking and money market deposits, which are payable on demand or upon several days’ notice, while by comparison, a substantial portion of its assets are loans, which cannot be called or sold in the same time frame. The Company may not be able to replace maturing deposits and advances as necessary in the future, especially if a large number of its depositors sought to withdraw their accounts, regardless of the reason.
In 2023, certain banks with elevated levels of uninsured deposits, which may be less likely to remain at the bank over time and less stable as a source of funding than insured deposits, failed, which led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions.
These events have led to a greater focus by institutions, investors and regulators on the on-balance sheet liquidity of and funding sources for financial institutions, the composition of their deposits, including the amount of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and interest rate risk management.
If we are unable to adequately manage our liquidity, we may experience a material adverse effect on our financial condition and results of operations. We must maintain sufficient funds to respond to the needs of depositors and borrowers. Deposits have traditionally been our primary source of funds for use in lending and investment activities. We also receive funds from loan repayments, investment maturities and income on other interest-earning assets. While we emphasize the generation of low-cost core deposits as a source of funding, there is strong competition for such deposits in our market area. Additionally, deposit balances can decrease if customers perceive alternative investments as providing a better risk/return tradeoff. Accordingly, as a part of our liquidity management, we must use a number of funding sources in addition to deposits and repayments and maturities of loans and investments, which may include Federal Home Loan Bank of Dallas advances, federal funds purchased and brokered certificates of deposit. Adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional funding sources.
Any decline in available funding could adversely impact our ability to originate loans, invest in securities, pay our expenses, or fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity, business, financial condition and results of operations.
A lack of liquidity could also attract increased regulatory scrutiny and potential restraints imposed on us by regulators. Depending on the capitalization status and regulatory treatment of depository institutions, including whether an institution is subject to a supervisory prompt corrective action directive, certain additional regulatory restrictions and prohibitions may apply, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on payment of dividends and restrictions on the acceptance of brokered deposits.
Our financial flexibility would be severely constrained if we were unable to maintain our access to funding or if adequate financing were not available at acceptable interest rates. Further, if we were required to rely more heavily on more expensive funding sources to support liquidity, our revenues may not increase proportionately to cover our increased costs. In this case, our operating margins and profitability would be adversely affected. If alternative funding sources were no longer available to us, we may need to sell a portion of our investment and/or loan portfolio to raise funds, which, depending upon market conditions, could result in us realizing a loss on the sale of such assets. As of December 31, 2025, we had a net unrealized loss of $342.03 million on our available for-sale investment securities portfolio as a result of the elevated interest rate environment. Our investment securities totaled $5.51 billion, or 35.70% of total assets, at December 31, 2025. The details of this portfolio are included in Note 2 to the consolidated financial statements.
Operational Risk
Our accounting estimates and risk management processes rely on analytical and forecasting models.
The processes we use to estimate our allowance for credit losses and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates depends upon the use of analytical and forecasting models, including various inputs and assumptions (collectively, the "models"). In addition, these models are used to calculate the fair value of our assets and liabilities when we acquire other financial institutions. These models reflect assumptions that may not be accurate, particularly in times of market stress or other unforeseen circumstances. Even if these assumptions are adequate, the models may prove to be inadequate or inaccurate because of other flaws in their design or their implementation. If the models we use for interest rate risk and asset-liability management are inadequate, we may incur increased or unexpectedlosses upon changes in market interest rates or other market measures. If the models we use for determining our current expected credit losses are inadequate, the allowance for credit losses may not be sufficient to support future charge-offs. If the models we use to measure the fair value of financial instruments is inadequate, the fair value of such financial instruments may fluctuate unexpectedly or may not accurately reflect what we could realize upon sale or settlement of such financial instruments. Such failure in our analytical or forecasting models could have a material adverse effect on our business, financial condition and results of operations.
The value of our goodwill and other intangible assets may decline in the future.
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As of December 31, 2025, we had $313.65 million of goodwill and other intangible assets. A significant decline in our financial condition, a significant adverse change in the business climate, slower growth rates or a significant and sustained decline in the price of our common stock may necessitate taking charges in the future related to the impairment of our goodwill and other intangible assets. If we were to conclude that a future write-down of goodwill and other intangible assets is necessary, we would record the appropriate charge, which could have a material adverse effect on our financial condition and results of operations.
Breakdowns in our internal controls and procedures could have an adverse effect on us.
We believe our internal control system as currently documented and functioning is adequate to provide reasonable assurance over our internal controls. Nevertheless, because of the inherent limitation in administering a cost effective control system, misstatements due to error or fraud may occur and not be detected. Breakdowns in our internal controls and procedures could occur in the future, and any such breakdowns could have an adverse effect on us. See “Item 9A – Controls and Procedures” for additional information.
New lines of business or new products and services may subject the Company to additional risks.
From time to time, the Company may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or products and services, the Company may invest significant time and resources. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. If we are unable to successfully manage these risks in the development and implementation of new lines of business or new products or services, it could have a material adverse effect on the Company’s business, financial condition and result of operations.
First Financial Bankshares, Inc. relies on dividends from its subsidiaries for most of its revenue.
First Financial Bankshares , Inc. is a separate and distinct legal entity from its subsidiaries. It receives substantially all of its revenue from dividends paid by its subsidiaries. These dividends are the principal source of funds to pay dividends on the Company’s common stock to shareholders and interest and principal on First Financial Bankshares, Inc. debt (to the extent we have balances outstanding). Various federal and/or state laws and regulations limit the amount of dividends that our bank and trust subsidiaries may pay to First Financial Bankshares, Inc. In the event our subsidiaries are unable to pay dividends to First Financial Bankshares, Inc., the Company may not be able to service debt, if any, or pay dividends on the Company’s common stock. The inability to receive dividends from our subsidiaries could have a material adverse effect on the Company’s business, financial condition, results of operations and liquidity.
Hurricanes, tornadoes, extended drought conditions, severe weather and natural disasters could significantly impact the Company's business.
Hurricanes, tornadoes, extended drought conditions, severe weather and natural disasters and other adverse external events could have a significant impact on the Company's ability to conduct business. Such events affect the stability of the Company's deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of the collateral securing our loans, cause significant property damage, result in loss of revenue and/or cause the Company to incur additional expenses. The occurrence of any such events in the future could have a material adverse effect on the Company's business, which in turn, could have a material adverse effect on the Company's business, financial condition and result of operations.
We rely heavily on our management team, and the unexpectedloss of key management or inability to recruit qualified personnel in the future may adversely impact our operations.
Our success to date has been strongly influenced by our ability to attract and retain senior management experienced in banking in the markets we serve. Our ability to retain executive officers and the current management teams will continue to be important to the successful implementation of our strategies. Outside of the transition and retirement agreement with the chairman of the board, we do not have employment agreements with these other key employees other than executive agreements in the event of a change of control and a confidential information, non-solicitation and non-competition agreement related to our stock options and restricted stock award, restricted stock unit and performance stock unit grants. The unexpectedloss of services of any key management personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business and financial results. In addition, the scope and content of U.S. banking regulators policies on incentive compensation, could adversely affect our ability to hire, retain and motivate our key employees.
World events such as the Russia-Ukraine conflict, the Israel-Palestine conflict and other world events, including health related events, may adversely impact our business and our financial results, and the ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted.
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The Russia-Ukraine conflict, the Israel-Palestine conflict and other world events, including health-related events, are creating disruptions in the global economy and to the lives of individuals throughout the world. In addition, financial markets and global supply chains may be adversely affected by the current or anticipated impact of military conflict, including the current Russian invasion of Ukraine, the Israel-Palestine conflict, terrorism or other geopolitical events. If these effects continue for a prolonged period or result in sustained economic stress or recession, many of the risk factors identified in our Form 10-K could be exacerbated and such effects could have a material adverse impact on us in a number of ways related to credit, collateral, customer demand, funding, operations, interest rate risk, human capital, and self-insurance, as previously described.
System failure or cybersecurity breaches of our network security could subject us to increased operating costs as well as litigation and other potential losses.
The computer systems and network infrastructure we use could be vulnerable to unforeseen hardware and cybersecurity issues, including “hacking” and “identity theft.” Our operations are dependent upon our ability to protect our computer equipment againstdamage from fire, power loss, telecommunications failure or a similar catastrophic event. Any damage or failure that causes an interruption in our operations could have an adverse effect on our financial condition and results of operations. In addition, our operations are dependent upon our ability to protect the computer systems and network infrastructure utilized by us, including our Internet banking activities, againstdamage from physical break-ins, cybersecurity breaches and other disruptiveproblems caused by the Internet or other users. Such computer break-ins and other disruptions would jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability to us, damage our reputation and inhibit current and potential customers from our Internet banking services. Each year, we add additional security measures to our computer systems and network infrastructure to mitigate the possibility of cybersecurity breaches including firewalls and penetration testing. We continue to investigate cost effective measures as well as insurance protection.
Furthermore, our customers could incorrectly blame the Company and terminate their accounts with the Company for a cyber-incident which occurred on their own system or to an unrelated third-party. In addition, a security breach could also subject us to additional regulatory scrutiny and expose us to civil litigation and possible financial liability.
Disruptions in our information technology systems or a compromise of security with respect to our systems could adversely affect our operating results by limiting our ability to effectively monitor and control our operations, adjust to changing market conditions, implement strategic initiatives, or support our customer transactions.
We rely on our information technology systems to be able to monitor and control our operations, adjust to changing market conditions, implement strategic initiatives, and support our online banking system. Any disruptions in these systems or the failure of these systems to operate as expected have in the past adversely affected, and could in the future adversely affect, our ability to access and use certain applications and could, depending on the nature and magnitude of the problem, adversely affect our operating results by limiting our ability to effectively monitor and control our operations, adjust to changing market conditions, implement strategic initiatives, and service customers. Although such disruptions and failures have not been material to date, we cannot guarantee that they will not be material in the future. In addition, the security measures we employ to protect our systems have in the past not detected or prevented, and may in the future not detect or prevent, all attempts to hack our systems, denial-of-service attacks, viruses, malicious software (malware), employee error or malfeasance, phishing attacks, security breaches, disruptions during the process of upgrading or replacing computer software or hardware or integrating systems of acquired businesses or assets or other attacks and similar disruptions that may jeopardize the security of information stored in or transmitted by the sites, networks, and systems that we otherwise maintain, which include cloud-based networks and data center storage.
We have, from time to time, experienced threats to and breaches of our data and systems, including malware and computer virus attacks. We are continuously developing and enhancing our controls, processes and practices designed to protect our systems, computers, software, data and networks from attack, damage, or unauthorized access. This continued development and enhancement requires us to expend significant resources. However, we may not anticipate or combat all types of future attacks until after they have been launched. If any of these breaches of security occur or are anticipated in the future, we could be required to expend additional capital and other resources, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants. Our response to attacks, and our investments in our technology and our controls, processes, and practices, may not be sufficient to shield us from significant losses or liability. Further, given the increasing sophistication of bad actors and complexity of the techniques used to obtain unauthorized access or disable systems, a breach or attack could potentially persist for an extended period of time before being detected. As a result, we may not be able to anticipate the attack or respond adequately or timely, and the extent of a particular incident, and the steps that we may need to take to investigate the incident, may not be immediately clear. It could take a significant amount of time before an investigation can be completed and full, reliable information about the incident becomes known. During an investigation, it is possible we may not necessarily know the extent of the harm or how to remediate it, which could further adversely impact us, and new regulations could result in us being required to disclose information about a material cybersecurity incident before it has been mitigated or resolved, or even fully investigated. We also face cybersecurity risks due to our reliance on internet technology and hybrid work arrangements, which could strain our technology resources or create additional opportunities for cybercriminals to exploitvulnerabilities.
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In addition, because our systems contain information about individuals and businesses, our failure to appropriately maintain the security of the data we hold, whether as a result of our own error or the malfeasance of others could lead to unauthorized release of confidential or otherwise protected information or corruption of data. Our failure to appropriately maintain the security of the data we hold could also violate applicable privacy, data security and other laws and subject us to lawsuits, fines, and other means of regulatory enforcement.
Any compromise or breach of our systems could result in adverse publicity, harm our reputation, lead to claimsagainst us and affect our relationships with our customers and employees, any of which could have a material adverse effect on our business. Although we maintain insurance coverage for various cybersecurity risks, there can be no guarantee that all costs or losses incurred will be fully insured.
We are subject to claims and litigation pertaining to intellectual property.
We rely on technology companies to provide information technology products and services necessary to support our day-to-day operations. Technology companies frequently enter into litigation based on allegations of patent infringement or other violations of intellectual property rights. In addition, patent holding companies seek to monetize patents they have purchased or otherwise obtained. Competitors of our vendors, or other individuals or companies, have from time to time claimed to hold intellectual property sold to us by its vendors. Such claims may increase in the future as the financial services sector becomes more reliant on information technology vendors. The plaintiffs in these actions frequently seek injunctions and substantial damages.
Regardless of the scope or validity of such patents or other intellectual property rights, or the merits of any claims by potential or actual litigants, we may have to engage in litigation that could be expensive, time-consuming, disruptive to our operations, and distracting to management. If we are found to infringe on one or more patents or other intellectual property rights, we may be required to pay substantial damages or royalties to a third-party. In certain cases, we may consider entering into licensing agreements for disputed intellectual property, although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur. These licenses may also significantly increase our operating expenses. If legal matters related to intellectual property claims were resolved against us or settled, we could be required to make payments in amounts that could have a material adverse effect on our business, financial condition and results of operations.
We depend on the accuracy and completeness of information provided to us by our borrowers and counterparties and any misrepresented or fraudulent information could adversely affect our business, results of operations and financial condition
In deciding whether to approve loans or to enter into other transactions with borrowers and counterparties, we rely on information furnished to us by, or on behalf of, borrowers and counterparties, including financial statements, credit reports and other financial information. We also rely on representations of borrowers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. If any of this information is intentionally or negligentlymisrepresented or fraudulent and such misrepresentation or fraud is not detected prior to loan funding, the value of the loan may be significantly lower than expected and we may be subject to regulatory action. Whether a misrepresentation is made by the loan applicant, another third party, or one of our employees, we generally bear the risk of loss associated with the misrepresentation or fraud. Our controls and processes may not have detected, or may not detect all, misrepresented or fraudulent information in our loan originations or from our business clients. Any such misrepresented or fraudulent information could adversely affect our business, financial condition and results of operations
We do business with other financial institutions that could experience financial difficulty.
We do business through the purchase and sale of federal funds, check clearing and through the purchase and sale of loan participations with other financial institutions. Because these financial institutions have many risks, as do we, we could be adversely affected should one of these financial institutions experience significant financial difficulties or fail to comply with our agreements with them.
We are subject to possible claims and litigation pertaining to fiduciary responsibility.
From time to time, customers could make claims and take legal actions pertaining to our performance of our fiduciary responsibilities. Whether customer claims and legal actions related to our performance of our fiduciary responsibilities are founded or unfounded, if such claims and legal actions are not resolved in a manner favorable to us, they may result in significant financial liability and/or adversely affect our market perception of our products and services as well as impact customer demand for those products and services. Any financial liability or reputation damage could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.
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Our operations rely on certain external vendors.
We rely on certain external vendors to provide products and services necessary to maintain our day-to-day operations. Accordingly, our operations are exposed to risk that these vendors will not perform in accordance with the contracted agreements under service level agreements. The failure of an external vendor to perform in accordance with the contracted arrangements under service level agreements, because of changes in the vendor’s organizational structure, financial condition, support for existing products or services or strategic focus or for any other reason, could be disruptive to our operations, which could have a material adverse effect on our business and, in turn, our financial condition and results of operations. Security breaches at certain external vendors may expose our Company's or customers' data, which poses operational, compliance and reputation risks.
Certain of our investment advisory and wealth management contracts are subject to termination on short notice, and termination of a significant number of investment advisory contracts could have a material adverse impact on our revenue.
Certain of our investment advisory and wealth management clients can terminate, with little or no notice, their relationships with us, reduce their aggregate assets under management, or shift their funds to other types of accounts with different rate structures for any number of reasons, including investment performance, changes in prevailing interest rates, inflation, changes in investment preferences of clients, changes in our reputation in the marketplace, change in management or control of clients, loss of key investment management personnel and financial market performance. We cannot be certain that our trust company subsidiary will be able to retain all of its clients. If its clients terminate their investment advisory and wealth management contracts, our trust company subsidiary, and consequently we, could lose a substantial portion of our revenues.
The trust wealth management fees we receive may decrease as a result of poor investment performance, in either relative or absolute terms, which could decrease our revenues and net earnings.
Our trust company subsidiary derives its revenues primarily from investment management fees based on assets under management. Our ability to maintain or increase assets under management is subject to a number of factors, including investors’ perception of our past performance, in either relative or absolute terms, market and economic conditions, including changes in oil and gas prices, and competition from investment management companies. Financial markets are affected by many factors, all of which are beyond our control, including general economic conditions, changes in oil and gas prices; securities market conditions; the level and volatility of interest rates and equity prices; competitive conditions; liquidity of global markets; international and regional political conditions; regulatory and legislative developments; monetary and fiscal policy; investor sentiment; availability and cost of capital; technological changes and events; outcome of legal proceedings; changes in currency values; inflation; credit ratings; and the size, volume and timing of transactions. A decline in the fair value of the assets under management, caused by a decline in general economic conditions, would decrease our wealth management fee income.
Investment performance is one of the most important factors in retaining existing clients and competing for new wealth management clients. Poor investment performance could reduce our revenues and impair our growth in the following ways:
existing clients may withdraw funds from our wealth management business in favor of better performing products;
asset-based management fees could decline from a decrease in assets under management;
our ability to attract funds from existing and new clients might diminish; and
our wealth managers and investment advisors may depart to join a competitor or otherwise.
Even when market conditions are generally favorable, our investment performance may be adversely affected by the investment style of our wealth management and investment advisors and the particular investments that they make. To the extent our future investment performance is perceived to be poor in either relative or absolute terms, the revenues and profitability of our wealth management business will likely be reduced and our ability to attract new clients will likely be impaired. As such, fluctuations in the equity and debt markets can have a direct impact upon our net earnings. In addition, as approximately 14% of trust fees came from management of oil and gas properties in 2025, a decline in the prices of oil and gas could lead to a loss of our trust income.
Our reputation and business could be damaged by negative publicity.
Reputation risk, or the risk to our earnings and capital by negative public opinion, is inherent in our business. Negative public opinion could adversely affect our ability to keep and attract customers and expose us to additional liquidity risk as well as adverse legal and regulatory consequences. Negative public opinion could result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance, perception of our environmental, social and governance practices and disclosures, regulatory compliance or investigations, mergers and acquisitions, sharing or inadequate protection of customer information, and from actions taken by government regulators and community organizations in response to that conduct. Negative public opinion could also result from adverse news or publicity that impairs the reputation of the financial services industry. In addition, adverse publicity or negative information posted on social media, whether or not factually correct, may adversely impact our business prospects or financial results.
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External and Market Related Risks
Our business faces unpredictable economic conditions, which could have an adverse effect on us.
General economic conditions impact the banking industry. The credit quality of our loan portfolio necessarily reflects, among other things, the general economic conditions in the areas in which we conduct our business. Our continued financial success depends somewhat on factors beyond our control, including:
general economic conditions, including national and local real estate markets and the price of oil and gas, wind farm subsidies from the federal government and other commodity prices;
the supply of and demand for investable funds;
demand for loans and access to credit;
interest rates; and
federal, state and local laws affecting these matters.
Any substantial deterioration in any of the foregoing conditions could have a material adverse effect on our financial condition, results of operations and liquidity, which would likely have an adverse affect on the market price of our common stock.
Our business is concentrated in Texas and a downturn in the economy of Texas may adversely affect our business.
Our network of bank regions is concentrated in Texas, primarily in the Central, North Central, Southeast and Western regions of the state. Most of our customers and revenue are derived from these areas. These economies include dynamic centers of higher education, agriculture, energy and natural resources, retail, military, healthcare, tourism, retirement living, manufacturing and distribution. Because we generally do not derive revenue or customers from other parts of the state or nation, our business and operations are dependent on economic conditions in our Texas markets. Any significant decline in one or more segments of the local economies could adversely affect our business, revenue, operations and properties.
The volatility in oil and gas prices results in uncertainty about the Texas economy. While we consider our exposure to credits related to the oil and gas industry to not be significant, at approximately 3.86%, of total loans HFI as of December 31, 2025, should the price of oil and gas decline and/or remain at low prices for an extended period, the general economic conditions in our Texas markets could be negatively affected, which could have a material adverse effect on our business, financial condition and results of operations. Additionally, the Company's trust revenues may be impacted by oil and gas prices which represented approximately 14% and 16% of total trust revenues in 2025 and 2024, respectively.
Our Company lends primarily to small to medium-sized businesses that may have fewer resources to weather a downturn in the economy, which could adversely impact the Company’s operating results.
The Company makes loans to privately-owned businesses, many of which are considered to be small to medium-sized businesses. Small to medium-sized businesses frequently have smaller market share than their competition, may be more vulnerable to economic downturns, often need additional capital to expand or compete and may experience more volatility in operating results. Any one or more of these factors may impair the borrower’s ability to repay a loan. In addition, the success of small to medium-sized businesses often depends on the management talents and efforts of a small group of persons, and the death, disability or resignation of one or more of these persons could have adverse impact on the business and its ability to repay our loans. Economic downturns, a sustained decline in commodity prices and other events that could negatively impact the businesses could cause the Company to incur credit losses that could negatively affect the Company’s results of operations and financial condition.
If we are unable to continue to originate residential real estate loans and sell them into the secondary market for a profit, our earnings could decrease.
We derive a portion of our noninterest income from the origination of residential real estate loans and the subsequent sale of such loans into the secondary market. If we are unable to continue to originate and sell residential real estate loans at historical or greater levels, our residential real estate loan volume would decrease, which could decrease our earnings. A rising interest rate environment, general economic conditions or other factors beyond our control could adversely affect our ability to originate residential real estate loans. We also are experiencing an increase in regulations and compliance requirements related to mortgage loan originations necessitating technology upgrades and other changes. If new regulations continue to increase and we are unable to make technology upgrades, our ability to originate mortgage loans will be reduced or eliminated. Additionally, we sell a large portion of our residential real estate loans to third-party investors, and rising interest rates could negatively affect our ability to generate suitable profits on the sale of such loans. If interest rates increase after we originate the loans, our
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ability to market those loans is impaired as the profitability on the loans decreases. These fluctuations can have an adverse effect on the revenue we generate from residential real estate loans and in certain instances, could result in a loss on the sale of the loans.
We originate the majority of our secondary market loans by issuing interest rate lock commitments ("IRLCs") to the customer based on prevailing rates in the market. We are exposed to changes in interest rates between the date of the IRLC and the closing of the loans. We hedge the price risk of the IRLCs based on various models and other factors using financial instruments which typically, but not always, correlate to the change in value to offset the risk. These hedges may not be equally correlated or effective and expose the Company to risk and loss of earnings.
Further, for the mortgage loans we sell in the secondary market, the mortgage loan sales contracts contain indemnification clauses should the loans default, generally in the first sixty to ninety days, or if documentation is determined not to be in compliance with regulations. While the Company’s historic losses as a result of these indemnities have been insignificant, we could be required to repurchase the mortgage loans or reimburse the purchaser of our loans for losses incurred. Both of these situations could have an adverse effect on the profitability of our mortgage loan activities and negatively impact our net income.
We compete in an industry that continually experiences technological change, and we may have fewer resources than many of our competitors to continue to invest in technological improvements.
The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services and new Fintech companies. In addition to improving the ability to serve customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for conveniences, as well as to create additional efficiencies in our operations. We may experience operational challenges in connection with the adoption of, or failure to adopt, new technology, such as artificial intelligence, which could result in unintended consequences or expenses as a result of the technology's limitations, our failure to use new technology effectively or at all, not fully realizing the anticipated benefits from such new technology, or the cost to implement or remedy any challenges associated with the adoption of new technology in a timely manner. Many of our larger competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers.
Difficult or changes in market conditions could adversely affect the financial services industry.
The financial markets have experienced volatility over the past several years. In some cases, the financial markets have produced downward pressure on stock prices and credit availability for certain companies without regard to those companies’ underlying financial strength. If financial market volatilityworsens, or there are disruptions in these financial markets, including disruptions to the United States banking systems, there can be no assurance that we will not experience an adverse effect on our ability to access capital and our business, financial condition and result of operations could be adversely impacted.
Inflationary pressures and rising prices may affect our results of operations and financial conditions.
Inflation rose in 2023 and 2022 at levels not seen for over 40 years, and such inflationary pressures continued into 2024 and 2025. Inflation could lead to increased costs to our customers, making it more difficult for them to repay their loans or other obligations increasing our credit risk. In general, the impact of inflation on the banking industry differs significantly from that of other industries in which a large portion of total resources are invested in fixed assets such as property, plant and equipment. Assets and liabilities of financial institutions are primarily all monetary in nature, and therefore are principally impacted by interest rates rather than changing prices. While the general level of inflation underlies most interest rates, interest rates react more to changes in the expected rate of inflation and to changes in monetary and fiscal policy.
Sustained higher interest rates by the Federal Reserve Board may be needed to tame persistent inflationary price pressures, which could depress asset prices and weaken economic activity. A deterioration in economic conditions in the United States and our markets could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our products and services, all of which, in turn, would adversely affect our business, financial condition and results of operations.
Our financial instruments expose us to certain market risks and may increase the volatility of earnings and AOCI.
We hold certain financial instruments measured at fair value. For those financial instruments measured at fair value, we are required to recognize the changes in the fair value of such instruments in earnings or accumulated other comprehensive income ("AOCI") each quarter. Therefore, any increases or decreases in the fair value of these financial instruments have a corresponding impact on reported earnings or AOCI. Fair value can be affected by a variety of factors, many of which are beyond our control, including our credit position, interest rate volatility, capital markets volatility, and other economic factors. Accordingly, we are subject to mark-to-market risk and the application of fair value accounting may cause our earnings and AOCI to be more volatile than would be suggested by our underlying performance.
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We may need to raise additional capital and such funds may not be available when needed .
We may need to raise additional capital in the future to provide us with sufficient capital resources to meet our commitments and business needs, particularly if our asset quality or earnings were to deteriorate significantly. Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital and financial markets at that time, which are outside of our control, and our financial performance. Economic conditions and the loss of confidence in financial institutions may increase our cost of funding and limit access to certain customary sources of capital, other financial institution borrowings and borrowings from the discount window of the Federal Reserve Board. Any occurrence that may limit our access to the capital markets, such as a decline in the confidence of other financial institutions, or counterparties participating in the capital markets, may adversely affect our costs and our ability to raise capital. An inability to raise additional capital on acceptable terms when needed could have a materially adverse effect on our financial condition and results of operations.
Climate change, and related legislative and regulatory initiatives, have the potential to disrupt our business and adversely impact the operations and creditworthiness of our customers.
Climate change may lead to more frequent and more extreme weather events, such as prolongeddroughts or flooding, hurricanes, wildfires and extreme seasonal weather, which could disrupt operations at one or more of our locations and our ability to provide financial products and services to our customers. Such events could also have a negative effect on the financial status and creditworthiness of our customers, which may decrease revenues and business activities from those customers and increase the credit risk associated with loans and other credit exposures to such customers. In addition, weather disasters, shifts in local climates and other disruptions related to climate change may adversely affect the value of real properties securing our loans, which could diminish the value of our loan portfolio. Such events may also cause reductions in regional and local economic activity that may have an adverse effect on our customers, which could limit our ability to raise and invest capital in these areas and communities, each of which could have a material effect on our financial conditions and results of operations.
Political and social attention to the issue of climate change has increased. The federal and state legislatures and regulatory agencies have proposed legislative and regulatory initiatives seeking to mitigate the effects of climate change. These agreements and measures may result in the imposition of taxes and fees, the required purchase of emission credits, and the implementation of significant operational changes. In addition, the federal banking agencies may address climate-related issues in their agendas in various ways, including by increasing supervisory expectations with respect to banks' risk management practices, accounting for the effects of climate change in stress testing scenarios and systemic risk assessments, revising expectations for credit portfolio concentrations based on climate-related factors, and encouraging investment by banks in climate-related initiatives and lending to communities disproportionately impacted by the effects of climate change. We may incur compliance, operating, maintenance and remediation costs.
Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our sustainability practices may impose additional costs on us or expose us to new or additional risks.
Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their sustainability practices and disclosure. Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environmental, health and safety, diversity, labor conditions and human risks. Increased sustainability related compliance costs could result in increases to our overall operational costs. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, and our stock price. New government regulations could also result in new or more stringent forms of sustainability oversight and expanding mandatory and voluntary reporting, diligence, and disclosure.
We compete with many larger financial institutions which have substantially greater financial resources than we have .
Competition among financial institutions in Texas is intense. We compete with other bank holding companies, state and national commercial banks, savings and loan associations, consumer financial companies, credit unions, securities brokers, insurance companies, mortgage banking companies, money market mutual funds, asset-based non-bank lenders and other non-bank financial institutions. Many of these competitors have substantially greater financial resources, larger lending limits, larger branch networks, enhanced technology and less regulatory oversight than we do, and are able to offer a broader range of products and services than we can. Failure to compete effectively for deposit, loan and other banking customers in our markets could cause us to lose market share, slow our growth rate and may have an adverse effect on our financial condition, results of operations and liquidity.
Compliance and Regulatory Risks
We may be subject to more stringent capital requirements which would adversely affect our net income and future growth.
The Federal Reserve Board adopted a final rule that implemented the Basel III Rule changes to the international regulatory capital framework and revised the U.S. risk-based and leverage capital requirements for U.S. banking organizations to strengthen identified areas of weakness in capital rules and to address relevant provisions of the Dodd-Frank Act.
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The final rule established a stricter regulatory capital framework that requires banking organizations to hold more and higher-quality capital to act as a financial cushion to absorb losses and help banking organizations better withstand periods of financial stress. The final rule increased capital ratios for all banking organizations and introduced a “capital conservation buffer” which is in addition to each capital ratio. If a banking organization dips into its capital conservation buffer, it may be restricted in its ability to pay dividends and discretionary bonus payments to its executive officers. The final rule assigned a higher risk weight to loans that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property. The final rule also required unrealized gains and losses on certain available-for-sale ("AFS") securities holdings to be included for purposes of calculating regulatory capital requirements unless a one-time opt-out is exercised. We exercised this opt-out right in our March 31, 2015 quarterly financial filing. The final rule also included changes in what constitutes regulatory capital. In addition, Tier 2 capital is no longer limited to the amount of Tier 1 capital included in total capital. Mortgage servicing rights, certain deferred tax assets and investments in unconsolidated subsidiaries over designated percentages of common stock are required to be deducted from capital. The final rule became effective for us on January 1, 2015. As of December 31, 2025, we met all of these new requirements, including the full capital conservation buffer.
Although we currently cannot predict the specific impact and long-term effects that Basel III will have on our Company and the banking industry more generally, the Company may be required to maintain higher regulatory capital levels through the capital conservation buffer which could impact our operations, net income and ability to grow. Furthermore, the Company’s failure to comply with the minimum capital requirements could result in our regulators taking formal or informal actions against us which could restrict our future growth or operations. For example, climate change advocates might not be able to force a regulatory ban on lending to certain industries, but the regulators could increase risk weighting on oil and gas loans.
Legislative and regulatory actions taken now or in the future that impact the financial industry may materially adversely affect us by increasing our costs, adding complexity in doing business, impeding the efficiency of our internal business processes, negatively impacting the recoverability of certain of our recorded assets, requiring us to increase our regulatory capital, limiting our ability to pursue business opportunities, and otherwise resulting in a material adverse impact on our financial condition, results of operation, liquidity, or stock price.
Both the scope of the laws and regulations and the intensity of the supervision to which we are subject may increase in connection with legislative and regulatory developments to address perceived unfairness and abuses under current regulations. Regulatory enforcement and fines have also increased across the banking and financial services sector. Compliance with these laws and regulations have resulted in and will continue to result in additional costs, which could be significant, and may have a material and adverse effect on our results of operations. In addition, if we do not appropriately comply with current or future legislation and regulations, especially those that apply to our consumer operations, which has been an area of heightened focus, we may be subject to fines, penalties or judgments, or material regulatory restrictions on our businesses, which could adversely affect operations and, in turn, financial results.
The CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions. The CFPB, OCC, the Department of Justice and other federal and state agencies are responsible for enforcing these laws and regulations. A successfulchallenge to an institution’s performance under the CRA or fair lending laws and regulations could result in a wide variety of direct and indirect negative consequence sanctions, including the required payment of damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity and restrictions on expansion activity. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. Such actions, or even the threat of such actions, could have a material adverse effect on the Company's business, financial condition or results of operations.
OFAC, the BSA and related FinCEN and FFIEC Guidelines and regulations could result in material implications.
Regulatory authorities routinely examine financial institutions for compliance with the USA PATRIOT ACT, OFAC, the BSA and related FinCEN and FFIEC Guidelines. Certain products we offer may expose us to enhanced risk in the event of noncompliance, including and not limited to providing our treasury management services to certain money transmitter and money services businesses. Failure to maintain and implement adequate programs as required by these obligations to combat terrorist financing, elder abuse, human trafficking, anti-money laundering and other suspicious activity and to fully comply with all of the relevant laws or regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required. Regulatory authorities have imposed cease and desist orders and significant civil money penaltiesagainst institutions found to be violating these regulations.
Our business is subject to significant government regulation.
We operate in a highly-regulated environment and are subject to supervision or regulation by a number of governmental regulatory agencies, including the Federal Reserve Board, Texas Department of Banking, the OCC, the FDIC and the CFPB. Regulations adopted by these agencies, which are generally intended to provide protection for depositors and customers rather than for the benefit of shareholders, govern a
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comprehensive range of matters relating to ownership and control of our shares, our acquisition of other companies and businesses, permissible activities for us to engage in, maintenance of adequate capital levels and other aspects of our operations. The bank regulatory agencies possess broad authority to prevent or remedy unsafe or unsound practices or violations of law.
We are subject to heightened regulatory requirements as our total assets exceed $10 billion.
Our total assets were approximately $15.45 billion as of December 31, 2025. The Dodd-Frank Act and its associated regulations impose various additional requirements on banks and bank holding companies with $10 billion or more in total assets, including a more frequent and enhanced regulatory examination regime. In addition, banks with $10 billion or more in total assets (including our bank) are primarily examined by the CFPB with respect to various federal consumer financial protection laws and regulations, with the Federal Reserve Board maintaining supervision over some consumer related regulations. In light of evolving priorities among government and agency leaders, there is some uncertainty as to how the CFPB examination and regulatory authorities might impact our business in the near and medium terms.
Debit card interchange fee restrictions set forth in the Dodd-Frank Act, which is known as the Durbin Amendment, as implemented by regulations of the Federal Reserve Board, cap the maximum debit interchange fee that a debit card issuer with $10 billion or more in total assets may receive per transaction at the sum of $0.21 plus five basis points of the transaction. A debit card issuer that adopts certain fraudprevention procedures may charge an additional $0.01 per transaction. In July 2022, the Company became subject to the Durbin Amendment which reduced our interchange income per transaction in 2022 and going forward.
Federal income tax reform could have unforeseen effects on our financial condition and results of operations.
Changes in the political makeup of the Senate and House of Representatives in the U.S. Congress could result also in the reversal of some or all of the effects of the Tax Cuts and Jobs Act, which may have an adverse effect on our business, financial conditions and results of operations.
Our FDIC deposit insurance assessments could increase substantially resulting in higher operating costs.
We have historically paid a low premium rate due to our sound financial position. Should the number of bank failures increase or the FDIC insurance fund become depleted in others ways, FDIC premiums could increase or additional special assessments could be imposed. These increased premiums would have an adverse effect on our net income and results of operations. In the fourth quarter of 2023, and the first quarter of 2024, the FDIC imposed a special assessment to a total of $2.06 million in response to the FDIC-insured financial institutions that failed in March 2023. The special assessment was accrued and expensed when imposed and is being paid over ten quarters beginning in the second quarter of 2024. In December 2025, the FDIC approved an interim final rule to amend the collection period to eight quarters.
Risks Related to Acquisition Activities
To continue our growth, we are affected by our ability to identify and acquire other financial institutions.
We intend to continue our current growth strategy, including opening new branches and acquiring other banks. The market for acquisitions remains highly competitive, and we may be unable to find satisfactory acquisition candidates in the future that fit our acquisition and growth strategy. To the extent that we are unable to find suitable acquisition candidates, we may be unable to execute on an important component of our growth strategy. Additionally, our completed acquisitions, or any future acquisitions, may not produce the revenue, earnings or synergies that we anticipated.
We may not be able to complete future acquisitions, may not be successful in realizing the benefits of any acquisitions that are completed, or may choose not to pursue acquisition opportunities we might find beneficial.
A substantial part of our historical growth has been a result of acquisitions of other financial institutions, and we may, from time to time, evaluate and engage in the acquisition of other financial institutions. We must generally satisfy a number of conditions prior to completing any such transaction, including certain bank regulatory approvals. Bank regulators consider a number of factors with regard to all institutions involved in the transaction when determining whether to approve a proposed transaction, including, among others, condition of the Company, its ratings and compliance history, anti-money laundering and BSA compliance history, CRA evaluation results, fair lending history and the effect of the proposed transaction on the financial stability of the institutions involved and the market as a whole.
The process for obtaining required regulatory approvals has become substantially more difficult, time-consuming and unpredictable. We may fail to pursue, evaluate or complete strategic and competitively significant business opportunities as a result of our inability, or our perceived inability, to obtain required regulatory approvals in a timely manner or at all.
Assuming we are able to successfully complete one or more transactions, we may not be able to successfully integrate and realize the expected synergies from any completed transaction in a timely manner or at all. In particular, we may be charged by federal and state regulators
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with regulatory and compliance failures at an acquired business prior to the date of the acquisition, and these failures by the acquired company may have negative consequences for us, including the imposition of formal or informal enforcement actions. Completion and integration of any transaction may also divert management’s attention from other matters, result in additional costs and expenses, or adversely affect our relationships with our customers and employees, any of which may adversely affect our business or results of operations. As a result, our financial condition may be affected, and we may become more susceptible to general economic conditions and competitive pressures.
Use of our common stock for future acquisitions or to raise capital may be dilutive to existing stockholders.
When we determine that appropriate strategic opportunities exist, we may acquire other financial institutions and related businesses, subject to applicable regulatory requirements. We may use our common stock for such acquisitions. We may also seek to raise capital through selling additional common stock, although we have not historically done so. It is possible that the issuance of additional common stock in such acquisition or capital transactions may be dilutive to the interests of our existing shareholders.
Risks Associated with our Common Stock
The trading volume in our common stock is less than other larger financial institutions.
Although the Company’s common stock is listed for trading on the Nasdaq Global Select Market, the trading volume in our common stock is less than that of other, larger financial services companies although such volume has increased in recent years. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of the Company’s common stock at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which the Company has no control. Given the lower trading volume of the Company’s common stock, significant sales of the Company’s common stock, or the expectation of these sales, could cause the Company’s stock price to fall.
Our stock ownership has shifted to larger institutional shareholders .
Our ownership base has shifted over the past several years resulting in institutional investors and indexed funds holding approximately 62% of our shares as compared to shareholders located in our footprint and other retail individual investors. These institutional shareholders could decide to sell their holdings in our common stock and as such could result in lower market prices of our stock.
Certain banking laws may have an anti-takeover effect.
Provisions of federal banking laws, including regulatory approval requirements, could make it more difficult for a third-party to acquire us, even if doing so would be perceived to be beneficial to our shareholders. These provisions effectively inhibit a non-negotiated merger or other business combination, which, in turn, could adversely affect the market price of our common stock.
We may not continue to pay dividends on our common stock in the future.
Holders of our common stock are only entitled to receive such dividends as our board of directors may declare out of funds legally available for such payments. Although we have historically declared cash dividends on our common stock, we are not required to do so and may reduce or eliminate our common stock dividends in the future. This could adversely affect the market price of our common stock. Also, we are a bank holding company, and our ability to declare and pay dividends is dependent on certain federal regulatory considerations, including the guidelines of the Federal Reserve Board regarding capital adequacy and dividends.
The Company’s stock price can be volatile.
Stock price volatility may make it more difficult for our shareholders to resell their common stock when they want and at prices they find attractive. The Company’s stock price can fluctuate significantly in response to a variety of factors including, among other things:
actual or anticipated variations in quarterly results of operations;
recommendations by securities analysts;
operating and stock price performance of other companies that investors deem comparable to the Company;
new reports relating to trends, concerns and other issues in the financial services industry or Texas economy, including oil and gas and cattle prices;
perceptions in the marketplace regarding the Company and/or its competitors;
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new technology used, or services offered, by competitors;
governmental investigations of the Company or administrative actions imposed by bank regulatory agencies;
significant acquisitions or business combinations involving the Company or its competitors; and
changes in economic, competitive, regulatory conditions and technical factors, or other developments affecting our industry, and publicity regarding our business or any of our significant customers or competitors.
The stock market and in particular, the market for financial institution stocks have experienced substantial fluctuations in recent years, which in many cases have been unrelated to the operating performance and prospects of particular companies. General market fluctuations, industry factors and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes or credit loss trends could also cause the Company’s stock price to decrease regardless of operational results
An investment in our common stock is not an insured deposit.
Our common stock is not a bank deposit and, therefore, is not insured againstloss by the FDIC, any other deposit insurance fund, or by any other public or private entity. Investment in our common stock is inherently risky for the reasons described in this “Risk Factors” section and elsewhere in this Report. As a result, if you acquire our common stock, you may lose some or all of your investment.
General Risk Factors
If we are unable to continue our historical levels of growth, we may not be able to maintain our historical earnings trends.
To achieve our past levels of growth, we have focused on both internal growth and acquisitions. We may not be able to sustain our historical rate of growth or may not be able to grow at all. Additionally, we may not be able to obtain the financing necessary to fund additional growth and may not be able to find suitable acquisition candidates. Various factors, such as economic conditions, competition and heightened regulatory scrutiny, may impede or prohibit the opening of new banking centers and the completion of acquisitions. Further, we may be unable to attract and retain experienced bankers, which could adversely affect our internal growth. If we are not able to continue our historical levels of growth, we may not be able to maintain our historical earnings trends.
ITE M 1B. UNRESOLVED STAFF COMMENTS
None.
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ITEM 1C. CYBER SECURITY
Risk Management and Strategy
The Company’s Information Security Program (“Program”) uses a variety of safeguards to protect the confidentiality, integrity, and availability of information. The Program is designed to identify, prevent, or mitigate the risks from cybersecurity threats. The Program leverages recognized security frameworks, such as National Institute of Standards and Technology (NIST) and Federal Financial Institutions Examination Council (FFEIC), to organize, improve, and assess the program and to better manage and reduce cybersecurity risk. The Program is assessed and updated annually and as needed.
The Program is integrated into the Company’s enterprise risk management program. The Company regularly assesses the threats and vulnerabilities to its environment so it can update and maintain its systems and controls to effectively mitigate these risks. Layered security controls are designed to complement each other to protect customer information and transactions. The Company periodically engages third-party experts and consultants to conduct evaluations of our security controls, whether through penetration testing, audits, assessments, or consulting on best practices to address new challenges . Results are used to help drive priorities and initiatives to improve the Program. Additionally, as a regulated entity, bank regulators assess the quality of our information security program during their regular examinations of the Company and its compliance with federal regulations and requirements.
The Company’s third-party risk management program is designed to oversee and identify the cybersecurity threats associated with the use of third-party service providers. While the optics into a third-party’s operation are limited, the Company performs risk-based evaluations of third-party service providers. These evaluations including reviewing information including, but not limited to, security assessment questionnaires, security testing summaries, audit reports performed under the SSAE 18 Audit Standard, and information security policies.
We view security awareness as a continuous program. All Company employees receive cybersecurity and fraud training at required new employee orientation and subsequently receive information security tips via email each business day. Employees also receive monthly security awareness video training and are required to complete annual computer-based training. The Company also provides information security awareness training to business customers and individuals in our communities.
We periodically test elements of our incident response capability through tabletop exercises and other assessments. We use these exercises to identify opportunities to enhance our processes, including incident escalation, communications, and recovery procedures, and we integrate lessons learned into our information security program.
During the fiscal year of this Report, the Company has not identified risks from cybersecurity threats that individually or in the aggregate have materially affected or are reasonably anticipated to materially affect the organization . Nevertheless, the Company recognizes cybersecurity threats are ongoing and evolving, and we continue to remain vigilant.
Governance
The Company’s system of internal controls also incorporates a protocol for the appropriate reporting and escalation of information and cyber security matters to management and the Board of Directors for resolution and, if necessary, disclosure of any material incidents. The Board of Directors is actively engaged in the oversight of the Company’s continuous efforts to reinforce and enhance its operational resilience and receives education to enhance their oversight efforts accommodate for the ever-evolving information and cyber security threat landscape. The Chief Information Security Officer (“CISO”) regularly updates these committees on the information and cyber security risks, threats, exposures, and mitigation measures. The Company’s incident response process is periodically tested and includes cybersecurity scenarios.
The Program is included in the Company’s enterprise risk management program. The CISO is responsible for developing and implementing our Program and reporting on cybersecurity matters to the Board. Our CISO has over 20 years of related experience, and others on our Corporate Information Security team have cybersecurity experience or certifications, such as the Certified Information Systems Security Professional certification. We view cybersecurity as a shared responsibility, and we periodically perform simulations and tabletop exercises at a management level and incorporate external resources and advisors as needed.
The Program is overseen by the Company’s Risk Committee, First Technology Services Board of Directors, Technology Risk Committee, and Security Advisory Committee. Additionally, the First Financial Trust and Asset Management Board of Directors oversee the Program as it relates to the trust subsidiary. Operational committees that manage risks associated with cybersecurity are Change Control Committee and Patch Management Committee .
The Company’s Board of Directors and subsidiary technology and trust companies’ Boards of Directors monitor the Program including policies and practices. The Company’s Risk Committee and technology company’s Board of Directors oversees areas of operational risk such as information technology activities; risks associated with development, infrastructure, and cybersecurity; oversight of information security risk
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assessments, strategies, policies, and programs; and disaster recovery, business continuity, and incident response process. The CISO also provides periodic cybersecurity updates to the Audit Committee and the Audit Committee Chairman is member of the Risk Committee. The management-level Technology Risk Committee and Security Advisory Committee oversee management of the Program and related assessments. Operational committees that manage risks associated with cybersecurity are Change Control Committee and Patch Management Committee.
We face a number of cybersecurity risks in connection with our business. Although such risks have not materially affected us, including our business strategy, results of operations or financial condition, to date, we have, from time to time, experienced threats to and breaches of our data and systems, including malware and computer virus attacks. For more information about the cybersecurity risks we face, see the risk factor entitled “Disruptions in our information technology systems or a compromise of security with respect to our systems could adversely affect our operating results by limiting our ability to effectively monitor and control our operations, adjust to changing market conditions, implement strategic initiatives or support our customer transactions” and “Our business may be adversely affected by security breaches at third-parties.” in Item 1A- Risk Factors.
Critical Accounting Policies
We prepare consolidated financial statements based on generally accepted accounting principles (“GAAP”) and customary practices in the banking industry. These policies, in certain areas, require us to make significant estimates and assumptions.
We deem a policy critical if (1) the accounting estimate required us to make assumptions about matters that are highly uncertain at the time we make the accounting estimate; and (2) different estimates that reasonably could have been used in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, would have a material impact on the financial statements.
We deem our most critical accounting policies to be (1) our allowance for credit losses (“ACL”) and our provision for credit losses and (2) our valuation of financial instruments. We have other significant accounting policies and continue to evaluate the materiality of their impact on our consolidated financial statements, but we believe these other policies either do not generally require us to make estimates and judgments that are difficult or subjective, or it is less likely they would have a material impact on our reported results for a given period. A discussion of (1) our allowance for credit losses and our provision for credit losses and (2) our valuation of financial instruments is included in Notes 1 and 10, respectively, to our Consolidated Financial Statements.
It is difficult to estimate how potential changes in any one economic factor or input might affect the overall allowance because a wide variety of factors and inputs are considered in estimating the ACL and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all product types. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others. A large driver to the ACL is the overall credit quality of the underlying credits. Deterioration or improvement in credit quality could have a significant impact on the overall level of ACL.
Stock Repurchase
On July 22, 2025, the Company’s Board of Directors extended the authorization to repurchase up to 5,000,000 common shares through July 31, 2026. The prior authorization had been in place since July 27, 2021. The stock repurchase plan authorizes management to repurchase and retire the stock at such time as repurchases and retirements are considered beneficial to the Company and stockholders. Any repurchase of stock will be made through the open market, block trades, or in privately negotiated transactions in accordance with applicable laws and regulations. Under the repurchase plan, there is no minimum number of shares that the Company is required to repurchase. There have been no repurchases during 2024 or 2025.
Other Recently Issued and Effective Authoritative Accounting Guidance
ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 requires entities to disclose more detailed information in their reconciliation of their statutory tax rate to their effective tax rate. Public business entities (PBEs) are required to provide this incremental detail in a numerical, tabular format. The ASU also requires entities to disclose more detailed information about income taxes paid, including by jurisdiction; pretax income (or loss) from continuing operations; and income tax expense (or benefit). ASU 2023-09 became effective for our annual financial statements in 2025 and did not have a significant effect on the financial statements.
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ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires new financial statement disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense caption. The prescribed categories include, among other things, employee compensation, depreciation, and intangible asset amortization. Additionally, entities must disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. ASU 2024-03 will be effective, on a prospective basis, for our 2027 annual report and interim periods thereafter. The Company is evaluating the impact of this ASU and does not believe it will have a significant impact on the Company's financial statements.
ASU 2025-08, "Financial Instruments - Credit Losses (Topic 326): Purchased Loans.” ASU 2025-08 amends the guidance on the accounting for certain purchased loans. The new guidance makes significant changes to the accounting for certain acquired seasoned loans subject to the current expected credit loss model. The amendments in ASU 2025-08 apply prospectively and will be effective for the Company beginning January 1, 2027, with early adoption permitted, and is not expected to have a significant impact on the Company’s financial statements.
ASU 2025-11, "Interim Reporting (Topic 270): Narrow-Scope Improvements.” ASU 2025-11 is intended to provide clarity about the current interim reporting requirements, provides a list of the interim disclosures required by all other Codification topics and establishes a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASC 2025-11 will be effective for the Company beginning January 1, 2028, with early adoption permitted, and is not expected to have a significant impact on the Company’s financial statements.
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Selected Financial Data
The selected financial data presented below as of and for the years ended December 31, 2025, 2024, 2023, 2022, and 2021, have been derived from our audited consolidated financial statements. The data set forth below may not be fully comparable from period to period (see Notes 1 and 3 to the Notes to Consolidated Financial Statements for further information). The results of operations presented below are not necessarily indicative of the results of operations that may be achieved in the future.
Year Ended December 31,
(dollars in thousands, except per share data)
Summary Income Statement Information:
Interest income
Interest expense
Net interest income
Provision for credit losses
Noninterest income
Noninterest expense
Earnings before income taxes
Income tax expense
Net earnings
Per Share Data:
Earnings per share, basic
Earnings per share, diluted
Cash dividends declared
Book value at period-end
Earnings performance ratios:
Return on average assets
Return on average equity
Dividend payout ratio
Summary Balance Sheet Data (Period-end):
Securities
Loans, held-for-investment
Total assets
Deposits
Total liabilities
Total shareholders’ equity
Asset quality ratios:
Allowance for credit losses/period-end loans
held-for-investment
Nonperforming assets/period-end loans held-
for-investment plus foreclosed assets
Net charge offs (recoveries)/average loans
Capital ratios:
Average shareholders’ equity/average assets
Leverage ratio (1)
Tier 1 risk-based capital (2)
Common equity tier 1 capital (3)
Total risk-based capital (4)
Calculated by dividing at period-end, shareholders’ equity (before accumulated other comprehensive earnings/loss) less intangible assets by fourth quarter average assets less intangible assets.
Calculated by dividing at period-end, shareholders’ equity (before accumulated other comprehensive earnings/loss) less intangible assets by risk-adjusted assets.
Calculated by dividing at period-end, shareholders’ equity (before accumulated other comprehensive earnings/loss) less intangible assets by risk-adjusted assets.
Calculated by dividing at period-end, shareholders’ equity (before accumulated other comprehensive earnings/loss) less intangible assets plus allowance for loan losses to the extent allowed under regulatory guidelines by risk-adjusted assets.
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Results of Operations
Performance Summary . Net earnings for 2025 were $253.58 million compared to net earnings of $223.51 million for 2024, reflecting an increase of $30.07 million, or 13.45%. The increase in earnings for 2025 over 2024 was primarily attributable to the overall growth in net interest income driven by strong growth in the Company's interest earning assets. Additionally, with the strong growth in deposits in 2025 combined with the continued proceeds resulting from maturities and paydowns of the Company's lower yielding investment portfolio, we were able to redeploy those funds into higher-yielding organic loans and investments during 2025. Furthermore, trust fee income increased $4.41 million, or 9.30%, when compared to 2024.
Net earnings for 2024 were $223.51 million compared to $198.98 million for 2023, reflecting an increase of $24.53 million, or 12.33%. The increase in earnings for 2024 over 2023 was primarily attributable to the overall growth in net interest income from the growth in earning assets. Additionally, trust fee income increased $6.99 million when compared to 2023 and there was no loss on sales of AFS securities in 2024 when compared to a $7.12 million loss in 2023. The proceeds from sales of securities during 2023 were used to fund higher-yielding organic loan growth during 2024.
On a diluted net earnings per share basis, net earnings were $1.77 for 2025, as compared to $1.56 for 2024 and $1.39 for 2023. The return on average assets was 1.76% for 2025, as compared to 1.68% for 2024 and 1.55% for 2023. The return on average equity was 14.59% for 2025, as compared to 14.51% for 2024 and to 14.99% for 2023.
Net Interest Income . Net interest income is the difference between interest income on earning assets and interest expense on liabilities incurred to fund those assets. Our earning assets consist primarily of loans and investment securities. Our liabilities to fund those assets consist primarily of noninterest-bearing and interest-bearing deposits.
Tax-equivalent net interest income was $513.63 million in 2025, as compared to $437.19 million in 2024, and $395.36 million in 2023. Average earning assets were $13.55 billion in 2025, as compared to $12.48 billion in 2024 and $12.00 billion in 2023. The increase in tax-equivalent net interest income in 2025 compared to 2024 was largely attributable to the change in the mix of interest earning assets primarily derived from continued loan growth combined with increase in volume and yield on the Company's taxable and tax-exempt securities. The increase of $1.06 billion in average earning assets in 2025 when compared to 2024 was primarily a result of an increase in loans of $607.02 million, an increase in taxable securities of $265.67 million, and an increase in tax-exempt securities of $109.59 million. The increase in tax-equivalent net interest income in 2024 compared to 2023 was largely attributable to the change in the mix of interest earning assets primarily derived from an increase in average loans offset by a decrease in taxable and tax-exempt securities. Additionally, the rates received on loans continued to increase along with the rates paid on deposits. The increase of $483.34 million in average earning assets in 2024 when compared to 2023 was primarily a result of an increase in loans of $732.00 million, offset by a decrease in taxable securities of $211.16 million and a decrease in tax-exempt securities of $176.36 million. Average interest-bearing liabilities were $9.18 billion in 2025, as compared to $8.39 billion in 2024 and $7.84 billion in 2023. The yield on earning assets increased 16 basis points in 2025 when compared to 2024 while the rate paid on interest-bearing liabilities decreased 21 basis points. The yield on earning assets increased 62 basis points in 2024 when compared to 2023 while the rate paid on interest-bearing liabilities increased 57 basis points.
The table below allocates the change in tax-equivalent net interest income between the amount of change attributable to volume and to rate.
Changes in Interest Income and Interest Expense (in thousands):
2025 Compared to 2024
2024 Compared to 2023
Change Attributable to
Total
Change Attributable to
Total
Volume
Rate
Change
Volume
Rate
Change
Short-term investments
Taxable investment securities
Tax-exempt investment securities (1)
Loans (1) (2)
Interest income
Interest-bearing deposits
Repurchase agreements
Borrowings
Interest expense
Net interest income
Computed on a tax-equivalent basis assuming a marginal tax rate of 21%.
Nonaccrual loans are included in loans.
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The net interest margin for 2025 was 3.79% which was an increase of 29 basis points from 2024. The net interest margin in 2024 was 3.50%, an increase of 21 basis points from 2023. The net interest margin has expanded during the past year primarily due to (i) a shift in asset mix from lower yielding investment securities to higher yielding loans and investment securities, (ii) strong growth in deposits that has enabled the Company to deploy those funds into higher yielding loan and securities portfolio and (iii) increased loan yields due to new and renewing loans and variable rate loans repricing higher. The Federal Reserve began increasing interest rates in March 2022 and continuing into 2023 to a peak of 5.25% to 5.50%. Most recently, the Federal Reserve decreased interest rates 100 basis points in 2024, and 25 basis points in September, October, and December 2025, respectively, resulting in a target range of 3.50% to 3.75% at December 31, 2025.
There are $1.52 billion of municipal and related deposits which are indexed to short-term treasury rates which have continued to fluctuate with the changes in the applicable rate index. Average municipal and related deposits totaled $1.58 billion and $1.46 billion for the years ended December 31, 2025 and 2024, respectively, with an average rate paid of 3.42% and 3.94%, for the respective years then ended.
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The net interest margin, which measures tax-equivalent net interest income as a percentage of average earning assets, is illustrated in the table below for the years 2023 through 2025.
Average Balances and Average Yields and Rates (in thousands, except percentages):
Average
Balance
Income/
Expense
Yield/
Rate
Average
Balance
Income/
Expense
Yield/
Rate
Average
Balance
Income/
Expense
Yield/
Rate
Assets
Short-term investments (1)
Taxable investment
securities (2)
Tax-exempt investment
securities (2)(3)
Loans (3)(4)
Total earning assets
Cash and due from banks
Bank premises and
equipment, net
Other assets
Goodwill and other
intangible assets, net
Allowance for credit losses
Total assets
Liabilities and Shareholders’
Equity
Interest-bearing deposits
Repurchase Agreements
Borrowings
Total interest-bearing
liabilities
Noninterest-bearing
deposits
Other liabilities
Total liabilities
Shareholders’ equity
Total liabilities and
shareholders’ equity
Net interest income
Rate Analysis:
Interest income/earning
assets
Interest expense/earning
assets
Net interest margin
Short-term investments are comprised of federal funds sold, interest-bearing deposits in banks and interest- bearing time deposits in banks.
Average balances include unrealized gains and losses on AFS securities.
Includes tax-equivalent yield adjustment of approximately $12.74 million, $10.45 million and $11.55 million for the years ended December 31, 2025, 2024 and 2023, respectively, using an effective tax rate of 21%.
Includes nonaccrual loans.
Noninterest Income . Noninterest income for 2025 was $130.72 million compared to $123.99 million in 2024. Notable changes in certain categories of noninterest income included an increase in trust fee income of $4.41 million, or 9.30%, and an increase in mortgage related income of $2.37 million, or 17.95%, compared to 2024. There were no securities sales in 2025 and 2024. Trust revenue increased primarily due to growth in assets under management to $11.94 billion at December 31, 2025 compared to $10.83 billion at December 31, 2024. Mortgage income increased to $15.55 million in 2025 compared to $13.18 million in 2024 due to increased loan origination volume and pricing margins have improved.
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Noninterest income for 2024 was $123.99 million compared to $108.00 million in 2023. Changes in certain categories of noninterest income included (i) no losses on sales of AFS securities in 2024 when compared to $7.12 million losses in 2023, (ii) an increase in Trust fee income of $6.99 million and (iii) an increase in gain on sale and fees of mortgage loans of $1.29 million when compared to 2023. AFS securities totaling $411.13 million were sold during 2023 resulting in a loss on sales of securities of $7.12 million. There were no securities sales in 2024. Trust revenue increased primarily due to growth in assets under management to $10.83 billion at December 31, 2024 compared to $9.78 billion at December 31, 2023, as well as increases in oil and gas related fees. Mortgage income increased to $13.18 million in 2024 compared to $11.89 million in 2023 due to increased loan origination volume.
Noninterest Income (in thousands):
Increase
(Decrease)
Increase
(Decrease)
Trust fees
Service charges on deposit accounts
Debit card fees
Credit card fees
Gain on sale and fees of mortgage loans
Net gain (loss) on sale of available-for-sale securities
Net gain (loss) on sale of foreclosed assets
Net gain (loss) on sale of assets
Loan recoveries
Other:
Check printing fees
Safe deposit rental fees
Credit life and debt protection fees
Brokerage commissions
Wire transfer fees
Miscellaneous income
Total other
Total Noninterest Income
Noninterest Expense . Total noninterest expense for 2025 amounted to $293.39 million, an increase of $28.33 million, or 10.69%, as compared to 2024. Total noninterest expense for 2024 was $265.06 million, an increase of $27.18 million, or 11.43%, as compared to 2023. An important measure in determining whether a financial institution effectively manages noninterest expenses is the efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income on a tax-equivalent basis and noninterest income. Lower ratios indicate betterefficiency since more income is generated with a lower noninterest expense total. Our efficiency ratio for 2025 was 45.53%, as compared to 47.23% for 2024 and 47.26% for 2023.
Salaries and employee benefits for 2025 totaled $174.55 million, an increase of $21.26 million, or 13.87%, as compared to 2024. The net increase reflected an increase of $3.00 million in profit sharing expense and $3.16 million in officer bonus and incentive accruals related to growth in earnings over the prior year. Additionally, officer and employee salaries increased for merit-based pay increases, an increase in headcount, as well as market adjustments for front line staff over the past year.
All other categories of noninterest expense for 2025 totaled $118.84 million, an increase of $7.07 million, or 6.33%, as compared to 2024. Included in noninterest expense during 2025, excluding salary and employee benefit related costs, were increases in software amortization and expense and operational and other losses offset by a decrease in legal fees and other related costs of $2.08 million.
Salaries and employee benefits for 2024 totaled $153.30 million, an increase of $21.38 million, or 16.21%, as compared to 2023. The net increase reflected an increase of $8.09 million in profit sharing expense and $4.81 million in officer bonus and incentive accruals related to growth in earnings over the prior year. Additionally, officer and employee salaries increased for additions to the middle market lending team and the audit and risk departments due to growth, as well as merit-based pay increases since the prior year.
All other categories of noninterest expense for 2024 totaled $111.77 million, an increase of $5.80 million, or 5.47%, as compared to 2023. Included in noninterest expense during 2024, excluding salary and employee benefit related costs, were increases in software amortization and expense, occupancy expense, and legal and professional fees offset by a decrease in FDIC insurance premiums of $1.25 million due to the special assessment accrued and expensed in the prior year.
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Noninterest Expense (in thousands):
Increase
(Decrease)
Increase
(Decrease)
Salaries, commissions and incentives (excluding mortgage)
Mortgage salaries and incentives
Medical
Profit sharing
401(k) match expense
Payroll taxes
Stock based compensation
Total salaries and employee benefits
Net occupancy expense
Equipment expense
FDIC assessment fees
Debit card expense
Professional and service fees
Printing, stationery and supplies
Operational and other losses
Software amortization and expense
Amortization of intangible assets
Other:
Data processing fees
Postage
Advertising
Correspondent bank service charges
Telephone
Public relations and business development
Directors’ fees
Audit and accounting fees
Legal fees and other related costs
Regulatory exam fees
Travel
Courier expense
Other real estate owned
Other miscellaneous expense
Total other
Total Noninterest Expense
Income Taxes . Income tax expense was $56.02 million for 2025, as compared to $48.34 million for 2024 and $44.32 million for 2023. Our effective tax rates on pretax income were 18.10%, 17.78% and 18.22%, respectively, for the years 2025, 2024 and 2023. The effective tax rates differ from the statutory federal tax rate of 21.0% largely due to tax exempt interest income earned on certain investment securities and loans, the deductibility of dividends paid to our employee stock ownership plan, excess tax benefits for distribution under our deferred compensation plan and vesting of equity awards, New Market Tax Credit ("NMTC") benefits, and Low Income Housing Tax Credits ("LIHTC").
Balance Sheet Review
Loans . Our portfolio is comprised of loans made to businesses, professionals, individuals, and farm and ranch operations located in the primary trade areas served by our subsidiary bank. As of December 31, 2025, total loans HFI were $8.16 billion, an increase of $245.18 million as compared to December 31, 2024.
As compared to year-end 2024 balances, total commercial loans decreased by $87.28 million, agricultural loans increased $233 thousand, total real estate loans increased $245.04 million, and total consumer loans increased $87.18 million. Loans averaged $8.12 billion during 2025, an increase of $607.02 million over 2024 average balances.
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For modeling purposes, our loan portfolio segments include Commercial and Industrial (“C&I”), Municipal, Agricultural, Construction and Development, Farm, Non-Owner Occupied and Owner Occupied Commercial Real Estate (“CRE”), Residential, Consumer Auto, and Consumer Non-Auto. This additional segmentation allows for a more precise pooling of loans with similar credit risk characteristics and credit monitor procedures for the Company’s calculation of its allowance for credit losses.
The table below outlines the composition of the Company’s HFI loans by portfolio segment.
Composition of Loans Held-For-Investment (in thousands):
December 31,
Commercial:
Municipal
Total Commercial
Agricultural
Real Estate:
Construction & Development
Farm
Non-Owner Occupied CRE
Owner Occupied CRE
Residential
Total Real Estate
Consumer:
Auto
Non-Auto
Total Consumer
Total
Loans HFS, consisting of secondary market mortgage loans, totaled $29.99 million and $8.24 million at December 31, 2025 and 2024, respectively. At December 31, 2025 and 2024, $4.56 million and $442 thousand are valued at the lower of cost or fair value, and the remaining amount is valued under the fair value option.
The Company has certain lending policies and procedures in place that are designed to maximize loan growth with an acceptable level of risk. Management reviews and approves these policies and procedures on an annual basis and makes changes as appropriate with input from our Board of Directors. Management and the board receives and reviews monthly reports related to loan originations, quality, concentrations, delinquencies, nonperforming and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions, both by type of loan and geographic location.
Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and effectively. Underwriting standards are designed to determine whether the borrower possesses sound business ethics and practices and to evaluate current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed. Commercial loans are primarily made based on the identified cash flows of the borrower and, secondarily, on the underlying collateral provided by the borrower. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and include personal guarantees.
Agricultural loans are subject to underwriting standards and processes similar to commercial loans. These agricultural loans are based primarily on the identified cash flows of the borrower and, secondarily, on the underlying collateral provided by the borrower. Most agricultural loans are secured by the agriculture related assets being financed, such as farm land, cattle or equipment, and include personal guarantees.
Real estate loans are also subject to underwriting standards and processes similar to commercial and agricultural loans. These loans are underwritten primarily based on projected cash flows and, secondarily, as loans secured by real estate. The repayment of real estate loans is generally largely dependent on the successful operation of the property securing the loans or the business conducted on the property securing the loan. Real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s real estate portfolio are generally diverse in terms of type and geographic location within Texas. This diversity helps reduce the exposure to adverse economic events that affect any single market or industry.
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Consumer loan underwriting utilizes methodical credit standards and analysis to supplement the Company’s underwriting policies and procedures. The Company’s loan policy addresses types of consumer loans that may be originated and the collateral, if secured, which must be perfected. The relatively smaller individual dollar amounts of consumer loans that are spread over numerous individual borrowers also minimize the Company’s risk.
Commercial real estate loans (owner and non-owner occupied CRE) represent 23.94% of the Company's total loan portfolio as of December 31, 2025. Non-owner occupied CRE represents $832.82 million, or 10.21%, of the Company's total loan portfolio as of December 31, 2025. The properties securing this portfolio are diverse as to geographic location in Texas as well as industry type. Collateral for CRE loans is located throughout the Company's markets in central west Texas, the Dallas-Forth Worth metroplex and southeast Texas with less than 1% of properties located outside of the state. The largest concentrations in the CRE portfolio as to type are industrial/manufacturing at approximately 18.60% and multifamily at approximately 7.75% as of December 31, 2025. All additional CRE portfolio property type categories are below the identified concentration levels. Credit underwriting standards are periodically reviewed and adjusted based upon observations from our ongoing monitoring of economic conditions in our lending areas. In response to the current interest rate environment and increases in benchmark rates, the Company has enhancedstress testing and loan review activities to mitigate interest rate reset risk with a specific emphasis on borrowers' abilities to absorb the impact of higher interest rates as loans that were made in a much lower rate environment renew.
Maturity Distribution and Interest Sensitivity of Loans at December 31, 2025 (in thousands):
The following tables summarize maturity information of our loan portfolio as of December 31, 2025. The table also presents the portion of loans that have fixed interest rates or variable interest rates that fluctuate over the life of the loans in accordance with changes in an interest rate index.
Total Loans Held-for-Investment
Due in One Year or Less
After One but Within Five Years
After Five but Within Fifteen Years
After Fifteen Years
Total
Commercial:
Municipal
Total Commercial
Agricultural
Real Estate:
Construction & Development
Farm
Non-Owner Occupied CRE
Owner Occupied CRE
Residential
Total Real Estate
Consumer:
Auto
Non-Auto
Total Consumer
Total
% of Total Loans
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Loans with fixed interest rates:
Due in One Year or Less
After One but Within Five Years
After Five but Within Fifteen Years
After Fifteen Years
Total
Commercial:
Municipal
Total Commercial
Agricultural
Real Estate:
Construction & Development
Farm
Non-Owner Occupied CRE
Owner Occupied CRE
Residential
Total Real Estate
Consumer:
Auto
Non-Auto
Total Consumer
Total
% of Total Loans
Loans with variable interest rates:
Due in One Year or Less
After One but Within Five Years
After Five but Within Fifteen Years
After Fifteen Years
Total
Commercial:
Municipal
Total Commercial
Agricultural
Real Estate:
Construction & Development
Farm
Non-Owner Occupied CRE
Owner Occupied CRE
Residential
Total Real Estate
Consumer:
Auto
Non-Auto
Total Consumer
Total
% of Total Loans
Of the $4.71 billion of the variable interest rate loans shown above, loans totaling $2.17 billion mature or reprice over the next twelve months. Of this amount, approximately $1.81 billion will reprice immediately upon changes in the underlying index rate (primarily U.S. prime rate) with the remaining $354.40 million being subject to floors above or ceilings below the current index.
Asset Quality . Our loan portfolio is subject to periodic reviews by our centralized independent loan review group as well as periodic examinations by bank regulatory agencies. Loans are placed on nonaccrual status when, in management's opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Nonaccrual, past due 90 days or more and still accruing, and restructured loans plus foreclosed assets were $56.49 million at December 31, 2025, as compared to $63.10 million at December 31, 2024 and $35.10 million at December 31, 2023. As a percent of loans HFI and foreclosed assets, these assets were 0.69% at December 31, 2025, as compared to 0.80% at December 31, 2024 and 0.49% at December 31, 2023. As a percent of total assets, these assets were 0.37% at December 31, 2025, as compared to 0.45% at December 31, 2024 and 0.27% at December 31, 2023. We believe the level of these assets to be manageable and are not aware of any material classified credits not properly disclosed as nonperforming at December 31, 2025.
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Nonaccrual, Past Due 90 Days or More and Still Accruing, Restructured Loans and Foreclosed Assets (in thousands, except percentages):
At December 31,
Nonaccrual loans
Loans still accruing and past due 90 days or more
Nonperforming loans
Foreclosed assets
Total nonperforming assets
As a % of loans held-for-investment and foreclosed assets
As a % of total assets
We record interest payments received on nonaccrual loans as reductions of principal. Prior to the loans being placed on nonaccrual, we recognized interest income on these loans as of December 31, 2025 of approximately $795 thousand during the year ended December 31, 2025. If interest on all nonaccrual loans at December 31, 2025 had been recognized on a full accrual basis during the year ended December 31, 2025, such income would have approximated $5.69 million.
Included in our loan portfolio are certain other loans not included in the table above that are deemed to be potential problem loans. Potential problem loans are those loans that are currently performing, but for which known information about trends, uncertainties or possible credit problems of the borrowers causes management to have seriousdoubts as to the ability of such borrowers to comply with present repayment terms, possibly resulting in the transfer of such loans to nonperforming status. These potential problem loans totaled $3.67 million as of December 31, 2025.
See Note 3 to the Consolidated Financial Statements for more information on these assets.
Allowance for Credit Losses . The allowance for credit losses is the amount we determine as of a specific date to be appropriate to absorb current expected credit losses on existing loans. For a discussion of our methodology, see our accounting policies in Note 1 to the Consolidated Financial Statements. The provision for credit losses was $28.61 million in 2025, $13.82 million in 2024, and $10.63 million in 2023. The Company's provision for credit losses during 2025 was impacted by a $21.55 million credit loss believed to be due to fraudulent activity associated with a commercial borrower. The Company's provision for credit losses during 2024 was driven by strong organic loan growth and an increase in classified loans.
As a percent of average loans, net loan charge-offs were 0.29%, 0.05%, and 0.03% during 2025, 2024, and 2023, respectively. The allowance for credit losses as a percent of loans HFI was 1.29% as of December 31, 2025, as compared to 1.24% as of December 31, 2024, and 2023, respectively. Included in the following tables are further analysis of our allowance for credit losses.
Although we believe we use the best information available to make credit loss allowance determinations, future adjustments could be necessary if circumstances or economic conditions differ substantially from the assumptions used in making our initial determinations. A downturn in the economy or lower employment could result in increased levels of nonaccrual, past due 90 days or more and still accruing, foreclosed assets, charge-offs, increased provision for credit losses and reductions in income. Additionally, as an integral part of their examination process, bank regulatory agencies regularly review the adequacy of our allowance for credit losses. The banking agencies could require additions to our allowance for credit losses based on their judgment of information available to them at the time of their examinations of our bank subsidiary.
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Loan Loss Experience and Allowance for Credit Losses (in thousands, except percentages):
Balance at January 1,
Charge-offs:
Commercial:
Municipal
Total Commercial
Agricultural
Real estate:
Construction & Development
Farm
Non-Owner Occupied CRE
Owner Occupied CRE
Residential real estate
Total real estate
Consumer:
Auto
Non-Auto
Total Consumer
Total charge-offs
Recoveries:
Commercial:
Municipal
Total Commercial
Agricultural
Real estate:
Construction & Development
Farm
Non-Owner Occupied CRE
Owner Occupied CRE
Residential real estate
Total Real Estate
Consumer:
Auto
Non-Auto
Total Consumer
Total recoveries
Net recoveries (charge-offs)
Provision (reversal) for loan losses
Balance at December 31,
Loans, held-for-investment at year-end
Average loans
Net (recoveries) charge-offs/average loans
Allowance for credit losses/year-end loans
held-for-investment
Allowance for credit losses/nonaccrual, past due
90 days still accruing and restructured loans
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Allocation of Allowance for Credit Losses (in thousands):
At December 31,
Allocation
Amount
Allocation
Amount
Allocation
Amount
Allocation
Amount
Allocation
Amount
Commercial:
Municipal
Total Commercial
Agricultural
Real estate:
Construction & Development
Farm
Non-Owner Occupied CRE
Owner Occupied CRE
Residential real estate
Total Real Estate
Consumer:
Auto
Non-Auto
Total Consumer
Total
Percent of Loans in Each Category of Total Loans:
At December 31,
Commercial:
Municipal
Total Commercial
Agricultural
Real estate:
Construction & Development
Farm
Non-Owner Occupied CRE
Owner Occupied CRE
Residential real estate
Total Real Estate
Consumer:
Auto
Non-Auto
Total Consumer
Total
Interest-Bearing Demand Deposits in Banks. The Company had interest-bearing demand deposits in banks of $826.95 million at December 31, 2025 and $503.42 million at December 31, 2024, respectively. At December 31, 2025, our interest-bearing deposits in banks included $820.75 million maintained at the Federal Reserve Bank of Dallas and $6.20 million on deposit with the Federal Home Loan Bank of Dallas (FHLB). The average balance of interest-bearing deposits in banks was $329.39 million, $253.39 million and $115.79 million in 2025, 2024 and 2023, respectively. The average yield on interest-bearing deposits in banks was 4.26%, 5.23% and 5.09% in 2025, 2024 and 2023, respectively.
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Available-for-Sale Securities . At December 31, 2025, securities with a fair value of $5.51 billion were classified as securities AFS. There were no securities classified as held-to-maturity at December 31, 2025 and 2024. As compared to December 31, 2024, the AFS portfolio at December 31, 2025, reflected (i) an increase of $802.36 million in mortgage-backed securities; (ii) an increase of $311.13 million in obligations of states and political subdivisions; (iii) a decrease of $212.75 million in U.S. Treasury securities; and (iv) a decrease of $4.39 million in corporate bonds and other securities. As compared to December 31, 2023, the AFS portfolio at December 31, 2024, reflected (i) a decrease of $208.67 million in U.S. Treasury securities (ii) a decrease of $56.91 million in obligations of states and political subdivisions; (iii) an increase of $149.87 million in mortgage-backed securities; and (iv) an increase of $711 thousand in corporate bonds and other securities. Securities AFS included an unrealized loss fair value adjustment of $342.03 million, $537.55 million and $510.92 million at December 31, 2025, 2024, and 2023, respectively. Our mortgage related securities are backed by GNMA, FNMA or FHLMC or are collateralized by securities backed by these agencies.
See the below table and Note 2 to the Consolidated Financial Statements for additional disclosures relating to the maturities and fair values of the investment portfolio at December 31, 2025 and 2024.
Maturities and Yields of Available-for-Sale Held at December 31, 2025 (in thousands, except percentages):
Maturing
One Year
or Less
After One Year
Through
Five Years
After Five Years
Through
Ten Years
After
Ten Years
Total
Available-for-Sale:
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
U.S. Treasury securities
Obligations of states and
political subdivisions
Corporate bonds and other
securities
Mortgage-backed securities
Total
All yields are computed on a tax-equivalent basis assuming a marginal tax rate of 21%. Yields on AFS securities are based on amortized cost. Maturities of mortgage-backed securities are based on contractual maturities and could differ due to prepayments of underlying mortgages. Maturities of other securities are reported at the earlier of maturity date or call date.
As of December 31, 2025, the investment portfolio had an overall tax equivalent yield of 3.10%, a weighted average life of 6.54 years and modified duration of 5.43 years. At December 31, 2024, the investment portfolio had an overall tax equivalent yield of 2.55%, a weighted average life of 7.03 years and modified duration of 5.82 years.
Deposits . Deposits held by our subsidiary bank represent our primary source of funding. Total deposits were $13.35 billion as of December 31, 2025, as compared to $12.10 billion as of December 31, 2024 and $11.14 billion as of December 31, 2023. The table below provides a breakdown of average deposits and rates paid over the past three years and the remaining maturity of time deposits of $250,000 or more:
Composition of Average Deposits and Remaining Maturity of Time Deposits of $250,000 or More (in thousands, except percentages):
Average
Balance
Average
Rate
Average
Balance
Average
Rate
Average
Balance
Average
Rate
Noninterest-bearing deposits
Interest-bearing deposits
Interest-bearing checking
Savings and money market accounts
Time deposits under $250,000
Time deposits of $250,000 or more
Total interest-bearing deposits
Total average deposits
Total cost of deposits
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The table below outlines the maturity of time deposits of $250,000 or more (in thousands):
As of December 31, 2025
Three months or less
Over three through six months
Over six through twelve months
Over twelve months
Total time deposits of $250,000 or more
The estimated amount of uninsured and uncollateralized deposits including related interest accrued and unpaid is approximately $4.03 billion, or 30.23% of total deposits, as of December 31, 2025.
Borrowings. Included in borrowings were federal funds purchased, advances from the FHLB and other borrowings of $21.68 million, $135.60 million and $22.15 million at December 31, 2025, 2024 and 2023, respectively. The average balance of federal funds purchased, advances from the FHLB and other borrowings were $44.75 million, $54.94 million and $81.26 million during 2025, 2024 and 2023, respectively. The average rates paid on these borrowings were 2.76%, 3.47% and 4.05% during the years ended December 31, 2025, 2024 and 2023, respectively.
Repurchase Agreements. Securities sold under repurchase agreements were $62.96 million, $61.42 million and $381.93 million at December 31, 2025, 2024 and 2023, respectively. Securities sold under repurchase agreements are generally with significant customers of the Company that require short-term liquidity for their funds for which we pledge certain securities that have a fair value equal to at least the amount of the short-term borrowing. The average balances of securities sold under repurchase agreements were $53.75 million, $173.07 million and $568.21 million in 2025, 2024 and 2023, respectively. The average balances of securities sold under repurchase agreements has decreased from the prior year related to the timing of customers moving funds to IntraFi deposit accounts throughout 2024. The average rates paid on securities sold under repurchase agreements were 1.60%, 3.16% and 2.84% for the years ended December 31, 2025, 2024 and 2023, respectively. The weighted average interest rate on federal funds purchased, securities sold under repurchase agreements and advances from the FHLB was 1.46%, 2.01% and 3.27% at December 31, 2025, 2024 and 2023, respectively. The highest amount of federal funds purchased, securities sold under repurchase agreements and advances from the FHLB at any month-end during 2025, 2024 and 2023 was $197.51 million, $563.28 million and $822.98 million, respectively.
Interest Rate Risk
Interest rate risk results when the maturity or repricing intervals of interest-earning assets and interest-bearing liabilities are different. Our exposure to interest rate risk is managed primarily through our strategy of selecting the types and terms of interest-earning assets and interest-bearing liabilities that generate favorable earnings while limiting the potential negative effects of changes in market interest rates. We use no off-balance-sheet financial instruments to manage interest rate risk.
Our subsidiary bank has an asset liability management committee that monitors interest rate risk and compliance with investment policies. The subsidiary bank utilizes an earnings simulation model as the primary quantitative tool in measuring the amount of interest rate risk associated with changing market rates. The model quantifies the effects of various interest rate scenarios on projected net interest income and net income over the next twelve months. The model measures the impact on net interest income relative to a base case scenario of hypothetical fluctuations in interest rates over the next twelve months. These simulations incorporate assumptions regarding balance sheet growth and mix, pricing and the re-pricing and maturity characteristics of the existing and projected balance sheet.
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The following analysis depicts the estimated impact on net interest income of immediate changes in interest rates at the specified levels for the periods presented.
Percentage change in net interest income:
Change in interest rates:
December 31,
(in basis points)
The results for the net interest income simulations as of December 31, 2025 and December 31, 2024 resulted in an asset sensitive position. These are good faith estimates and assume that the composition of our interest sensitive assets and liabilities existing at each year-end will remain constant over the relevant twelve-month measurement period and that changes in market interest rates are instantaneous and sustained across the yield curve regardless of duration of pricing characteristics on specific assets or liabilities. Also, this analysis does not contemplate any actions that we might undertake in response to changes in market interest rates. We believe these estimates are not necessarily indicative of what actually could occur in the event of immediate interest rate increases or decreases of this magnitude. As interest-bearing assets and liabilities reprice in different time frames and proportions to market interest rate movements, various assumptions must be made based on historical relationships of these variables in reaching any conclusion. Since these correlations are based on competitive and market conditions, we anticipate that our future results will likely be different from the foregoing estimates, and such differences could be material.
Should we be unable to maintain a reasonable balance of maturities and repricing of our interest-earning assets and our interest-bearing liabilities, we could be required to dispose of our assets in an unfavorable manner or pay a higher than market rate to fund our activities. Our asset liability committee oversees and monitors this risk.
The fair value of our investment securities classified as available-for-sale totaled $5.51 billion at December 31, 2025. During the year ended December 31, 2025, the corresponding unrealized loss before taxes on the portfolio of $537.55 million at December 31, 2024, declined to an unrealized loss before taxes of $342.03 million at December 31, 2025, which is recorded net of taxes in accumulated other comprehensive earnings (loss) in shareholders' equity. The unrealized gains or losses, net of taxes, on the portfolio are excluded from the calculation of all regulatory capital ratios. The improvement in the fair value was driven by changes in interest rates based on expected actions by the Federal Reserve Board and other market conditions. The overall valuation of the portfolio is most correlated to the 5-year U.S. Treasury rates based on the composition and duration of the portfolio. At December 31, 2025, the 5-year U.S. Treasury rate was 3.72% compared to 4.39% at December 31, 2024, representing a 66 basis point decrease during the year. As of December 31, 2025, an increase of 100 basis points in the 5-year U.S. Treasury rate would result in an increase to unrealized losses by approximately $259.83 million before taxes, while a 100 basis point decrease in the same rate would result in a decrease to unrealized losses by approximately $228.37 million before taxes. The Company does not intend to sell any impaired available for sale securities before fair value recovers to the current amortized cost, and it is more-likely-than-not that the Company will not be required to sell impaired securities before fair value recovers, which may be maturity.
Capital and Liquidity
Capital. We evaluate capital resources by our ability to maintain adequate regulatory capital ratios to do business in the banking industry. Issues related to capital resources arise primarily when we are growing at an accelerated rate but not retaining a significant amount of our profits or when we experience significant asset quality deterioration.
Total shareholders’ equity was $1.92 billion, or 12.41% of total assets at December 31, 2025, as compared to $1.61 billion, or 11.49% of total assets at December 31, 2024. Included in shareholders’ equity were $269.94 million and $424.29 million at December 31, 2025 and 2024, respectively, in unrealized losses on investment securities AFS, net of related income taxes. Unrealized gains and losses on investment securities AFS are excluded from and do not impact regulatory capital. During 2025, total shareholders’ equity averaged $1.74 billion, or 12.08% of average assets, as compared to $1.54 billion, or 11.56% of average assets during 2024.
Banking regulators measure capital adequacy by means of the risk-based capital ratios and leverage ratio under the Basel III Rules and prompt corrective action regulations. The risk-based capital rules provide for the weighting of assets and off-balance-sheet commitments and contingencies according to prescribed risk categories. Regulatory capital is then divided by risk-weighted assets to determine the risk-adjusted capital ratios. The leverage ratio is computed by dividing shareholders’ equity less intangible assets by quarter-to-date average assets less intangible assets.
Beginning in January 2015, under the Basel III Rules, the implementation of the capital conservation buffer was effective for the Company starting at the 0.625% level and increasing 0.625% each year thereafter, until it reached 2.5% on January 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress and requires increased capital levels for the purpose of capital distributions and
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other payments. Failure to meet the amount of the buffer will result in restrictions on the Company’s ability to make capital distributions, including divided payments and stock repurchases, and to pay discretionary bonuses to executive officers.
As of December 31, 2025 and 2024, we had a total risk-based capital ratio of 21.17% and 20.00%, a Tier 1 capital to risk-weighted assets ratio of 19.99% and 18.83%, a common equity Tier 1 capital to risk-weighted ratio of 19.99% and 18.83% and a Tier 1 leverage ratio of 12.55% and 12.49%, respectively. The regulatory capital ratios as of December 31, 2025 and 2024 were calculated under Basel III Rules.
Our subsidiary bank made the election to continue to exclude accumulated other comprehensive income from capital in connection with its March 31, 2015 quarterly financial filing and, in effect, to retain the accumulated other comprehensive income treatment under the prior capital rules.
Liquidity. Liquidity is our ability to meet cash demands as they arise. Such needs can develop from loan demand, deposit withdrawals or acquisition opportunities. Potential obligations resulting from the issuance of standby letters of credit and commitments to fund future borrowings to our loan customers are other factors affecting our liquidity needs. Many of these obligations and commitments are expected to expire without being drawn upon; therefore the total commitment amounts do not necessarily represent future cash requirements affecting our liquidity position. The potential need for liquidity arising from these types of financial instruments is represented by the contractual notional amount of the instrument. Asset liquidity is provided by cash and assets which are readily marketable or which will mature in the near future. Liquid assets include cash, federal funds sold, and short-term investments in time deposits in banks. Liquidity is also provided by access to funding sources, which include core depositors and correspondent banks that maintain accounts with and sell federal funds to our subsidiary bank. Other sources of funds include our ability to borrow from short-term sources, such as purchasing federal funds from correspondent banks, sales of securities under agreements to repurchase and other borrowings, which amounted to $84.64 million at December 31, 2025, and an unfunded $50.00 million revolving line of credit established with Frost Bank, a nonaffiliated bank, which matures on June 30, 2027 (see next paragraph). Our subsidiary bank also has federal funds purchased lines of credit with two non-affiliated banks totaling $175.00 million. At December 31, 2025, there were no amounts drawn on these lines of credit. Our subsidiary bank also has (i) an available line of credit with the FHLB totaling $2.31 billion at December 31, 2025, secured by portions of our loan portfolio and certain investment securities; and (ii) access to approximately $1.85 billion at the Federal Reserve Bank of Dallas discount window lending program secured by portions of certain
investment securities and portions of our loan portfolio. At December 31, 2025, there was $670.00 million used on the FHLB line advance for undisbursed commitments (letters of credit) used to secure public funds.
The Company renewed and amended its loan agreement, effective June 30, 2025, with Frost Bank. Under the loan agreement, as renewed and amended, we are permitted to draw up to $50.00 million on a revolving line of credit. See Note 8 - Line of Credit in the accompanying notes to consolidated financial statements regarding further information on this line of credit.
In addition, we anticipate that any future acquisition of financial institutions, expansion of branch locations or offering of new products could also place a demand on our cash resources. Available cash and cash equivalents at our parent company, which totaled $138.86 million at December 31, 2025, investment securities which totaled $1.12 million at December 31, 2025 with maturities over 4 to 5 years, available dividends from our subsidiaries which totaled $366.54 million at December 31, 2025, utilization of available lines of credit, and future debt or equity offerings are expected to be the source of funding for these potential acquisitions or expansions.
The Company continuously monitors the Company's liquidity position to ensure that assets and liabilities are managed in a manner that will meet all of the Company's short-term and long-term cash requirements. The Company manages the Company's liquidity position to meet the daily cash flow needs of customers, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of the Company's shareholders. The Company also monitors its liquidity requirements in light of interest rate trends, changes in the economy, and the scheduled maturity and interest rate sensitivity of the investment and loan portfolios and deposits.
In the ordinary course of business, we have entered into contractual obligations and have made other commitments to make future payments. Refer to the accompanying notes to consolidated financial statements for the expected timing of such payments as of December 31, 2025. These payments related to time deposits with stated maturity dates (Note 7 - Deposits and Borrowings) and operating leases (Note 11 - Commitments and Contingencies). In addition, we have construction contracts with remaining future minimum contractual obligations of approximately $4.89 million in 2026.
Off-Balance Sheet/Reserve for Unfunded Commitments. We are a party to financial instruments with off-balance sheet (“OBS”) risk in the normal course of business to meet the financing needs of our customers. These financial instruments include unfunded lines of credit, commitments to extend credit and federal funds sold to correspondent banks and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. At December 31, 2025, the Company’s reserve for unfunded commitments totaled $6.39 million which is recorded in other liabilities.
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Our exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for unfunded lines of credit, commitments to extend credit and standby letters of credit is represented by the contractual notional amount of these instruments. We generally use the same credit policies in making commitments and conditional obligations as we do for on-balance-sheet instruments.
Unfunded lines of credit and commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. These commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, as we deem necessary upon extension of credit, is based on our credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant, and equipment and income-producing commercial properties.
Standby letters of credit are conditional commitments we issue to guarantee the performance of a customer to a third-party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The average collateral value held on letters of credit usually exceeds the contract amount.
See further disclosure of the unfunded lines of credit, unfunded commitments to extend credit and standby letters of credit (Note 12 - Financial Instruments with Off-Balance-Sheet Risk). Future notional amounts committed are $904.09 million in less than one year, $445.74 million in more than one year but less than three years and $442.28 million thereafter.
We believe we have no other OBS arrangements or transactions with unconsolidated, special purpose entities that would expose us to liability that is not reflected on the face of the financial statements.
Parent Company Funding . Our ability to fund various operating expenses, dividends, and cash acquisitions is generally dependent on our own earnings (without giving effect to our subsidiaries), cash reserves and funds derived from our subsidiaries. These funds historically have been produced by intercompany dividends and management fees that are limited to reimbursement of actual expenses. We anticipate that our recurring cash sources will continue to include dividends and management fees from our subsidiaries. At December 31, 2025, $366.54 million was available for the payment of intercompany dividends by our subsidiaries without the prior approval of regulatory agencies. Our subsidiaries paid aggregate dividends to us of $149.40 million in 2025 and $55.50 million in 2024.
Dividends . Our long-term dividend policy is to pay cash dividends to our shareholders of approximately 40% to 50% of annual net earnings while maintaining adequate capital to support growth. We are also restricted by a loan covenant within our line of credit agreement with Frost Bank to dividend no greater than 55% of net income, as defined in such loan agreement. The cash dividend payout ratios have amounted to 42.38%, 46.06% and 50.96% of net earnings, respectively, in 2025, 2024 and 2023. Given our current capital position, projected earnings and asset growth rates, we do not anticipate any significant change in our current dividend policy.
To pay dividends, we and our subsidiary bank must maintain adequate capital above regulatory guidelines and comply with the general requirements applicable to a Texas corporation. Generally, a Texas corporation may not pay a dividend to its shareholders if (i) after giving effect to the dividend, the corporation would be insolvent, or (ii) the amount of the dividend would exceed the surplus of the corporation. In addition, if the applicable regulatory authority believes that a bank under its jurisdiction is engaged in or is about to engage in an unsafe or unsound practice (which, depending on the financial condition of the bank, could include the payment of dividends), the authority may require, after notice and hearing, that such bank cease and desist from the unsafe practice. As a member bank, First Financial Bank may not declare or pay a dividend if the total of all dividends declared during the calendar year, including the proposed dividend, exceeds the sum of the bank's net income (as reportable in its Reports of Condition and Income) during the current calendar year and the retained net income of the prior two calendar years, unless the dividend has been approved by the Federal Reserve Board.
The Federal Reserve Board, the FDIC, the Texas Department of Banking, and the OCC have each indicated that paying dividends that deplete a bank’s capital base to an inadequate level would be an unsafe and unsound banking practice. The Federal Reserve Board, the Texas Department of Banking, the OCC and the FDIC expect that bank holding companies and insured banks should generally only pay dividends out of current operating earnings.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management considers interest rate risk to be a significant market risk for the Company. See “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Interest Rate Risk” for disclosure regarding this market risk.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements and the report of our independent registered public accounting firm begin on page F-1.
Quarterly Results of Operations (in thousands, except per share and common stock data):
The following tables set forth certain unaudited historical quarterly financial data for each of the eight consecutive quarters in the fiscal years of 2025 and 2024. This information is derived from unaudited consolidated financial statements that include, in our opinion, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation when read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this Form 10-K.
(dollars in thousands, except per share amounts)
Summary Income Statement Information:
Interest income
Interest expense
Net interest income
Provision for credit losses
Net interest income after provision for credit losses
Noninterest income
Noninterest expense
Earnings before income taxes
Income tax expense
Net earnings
Per Share Data:
Earnings per share, basic
Earnings per share, diluted
Cash dividends declared
Book value at period-end
Common stock sales price:
High
Low
Close
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(dollars in thousands, except per share amounts)
Summary Income Statement Information:
Interest income
Interest expense
Net interest income
Provision for credit losses
Net interest income after provision for credit losses
Noninterest income
Noninterest expense
Earnings before income taxes
Income tax expense
Net earnings
Per Share Data:
Earnings per share, basic
Earnings per share, diluted
Cash dividends declared
Book value at period-end
Common stock sales price:
High
Low
Close
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
CONTROLS AND PROCEDURES
As of December 31, 2025, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934). Our management, which includes our principal executive officer and our principal financial officer, does not expect that our disclosure controls and procedures will prevent all errors and all fraud.
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Our principal executive officer and principal financial officer have concluded, based on our evaluation of our disclosure controls and procedures, that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2025.
Subsequent to our evaluation, there were no significant changes in our internal control over financial reporting or other factors that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of First Financial Bankshares, Inc. and subsidiaries is responsible for establishing and maintaining adequate internal control over financial reporting. First Financial Bankshares, Inc. and subsidiaries’ internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
First Financial Bankshares, Inc. and subsidiaries’ management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025. In making this assessment, it used the criteria for effective internal control over financial reporting set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (COSO) in Internal Control – Integrated Framework . Based on our assessment we believe that, as of December 31, 2025, the Company’s internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Securities Exchange Act of 1934, is effective based on those criteria.
Ernst & Young LLP, Dallas, Texas, (U.S. PCAOB Auditor Firm I.D.: 42 ), the independent registered public accounting firm that audited our consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2025. The report, which expresses an opinion on the effectiveness of our internal control over financial reporting as of December 31, 2025, is included below.
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of First Financial Bankshares, Inc.
Opinion on Internal Control over Financial Reporting
We have audited First Financial Bankshares, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, First Financial Bankshares, Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of earnings, comprehensive earnings (loss), shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2025 and the related notes and our report dated February 25, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Dallas, Texas
February 25, 2026
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OTHER INFORMATION
None .
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by Item 10 is hereby incorporated by reference from our proxy statement for our 2026 Annual Meeting of Shareholders which will be filed with the SEC not later than 120 days after December 31, 2025.
EXECUTIVE COMPENSATION
The information required by Item 11 is hereby incorporated by reference from our proxy statement for our 2026 Annual Meeting of Shareholders which will be filed with the SEC not later than 120 days after December 31, 2025.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by Item 12 related to security ownership of certain beneficial owners and management is hereby incorporated by reference from our proxy statement for our 2026 Annual Meeting of Shareholders. The following chart gives aggregate information under our equity compensation plans as of December 31, 2025. Additional information regarding stock-based compensation plans is presented in Note 17 – Stock Based Compensation in the notes to consolidated financial statements.
Number of
Shares
To be Issued
Upon
Exercise or Vesting of
Outstanding
Awards
Weighted
Average
Exercise
Price of
Outstanding
Awards
Number of
Shares
Remaining
Available
For Future
Issuance
Under Equity
Compensation
Plans
(Excluding
Securities
Reflected in
Far Left
Column)
Equity compensation plans approved by
security holders
Equity compensation plans not approved by
security holders
Total
Includes 1,545,453 shares related to stock options, 24,876 shares related to non-vested restricted stock, 81,707 shares related to restricted stock units and 231,362 shares related to performance stock units (assuming attainment of the maximum payout rate as set forth by the performance criteria).
Excludes outstanding restricted stock and stock units which are exercised for no consideration.
The remainder of the information required by Item 12 is incorporated by reference from our proxy statement for our 2026 Annual Meeting of Shareholders.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 13 is hereby incorporated by reference from our proxy statement for our 2026 Annual Meeting of Shareholders which will be filed with the SEC not later than 120 days after December 31, 2025.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Item 14 is hereby incorporated by reference from our proxy statement for our 2026 Annual Meeting of Shareholders which will be filed with the SEC not later than 120 days after December 31, 2025.
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PART IV
EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this report:
Financial Statements:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2025 and 2024
Consolidated Statements of Earnings for the years ended December 31, 2025, 2024 and 2023
Consolidated Statements of Comprehensive Earnings for the years ended December 31, 2025, 2024 and 2023
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2025, 2024 and 2023
Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023
Notes to Consolidated Financial Statements
Financial Statement Schedules:
These schedules have been omitted because they are not required, are not applicable or have been included in our consolidated financial statements.
Exhibits:
The following exhibits are included or incorporated by reference in this Annual Report on Form 10-K:
Amended and Restated Certificate of Formation (incorporated by reference from Exhibit 3.1 of the Registrant’s Form 10-Q filed July 30, 2019).
Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed April 3, 2020).
Amendment to the Amended and Restated Bylaws of the Registrant, dated July 27, 2021 (incorporated by reference from Exhibit 3.3 to the Registrant's Form 10-Q filed August 2, 2021).
Specimen certificate of First Financial Common Stock (incorporated by reference from Exhibit 3 of the Registrant’s Amendment No. 1 to Form 8-A filed on Form 8-A/A No. 1 on January 7, 1994).
Description of Registrant’s Securities*
2012 Incentive Stock Option Plan (incorporated by reference from Appendix A of the Registrant’s Definitive Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 filed March 1, 2012).++
2021 Omnibus Stock and Incentive Plan (incorporated by reference from Exhibit 10.1 of the Registrant's Form 8-K filed April 28, 2021).++
Amended and Restated Loan Agreement, dated June 30, 2023, by and between First Financial Bankshares, Inc. and Frost Bank (incorporated by reference from Exhibit 10.2 of the Registrant's Form 8-K filed July 7, 2023).
First Amendment to Loan Agreement, dated June 30, 2025, between First Financial Bankshares, Inc. and Frost Bank
(incorporated by reference from Exhibit 10.1 of the Registrant's Form 8-K filed July 7, 2025).
Renewal Promissory Note (Revolving), dated June 30, 2025, between First Financial Bankshares, Inc. and Frost Bank
(incorporated by reference from Exhibit 10.2 of the Registrant's Form 8-K filed July 7, 2025).
Form of Executive Recognition Agreement (incorporated by reference from Exhibit 10.1 of the Registrant’s Form 10-Q filed November 4, 2024).++
First Financial Bankshares, Inc. Supplemental Executive Retirement Plan, as amended and restated, effective July 26, 2022 (incorporated by reference from Exhibit 10.1 of the Registrant's Form 8-K filed July 29, 2022).++
Transition and Retirement Agreement (incorporated by reference from Exhibit 10.1 of the Registrant's Form 8-K filed January 29, 2026).++
First Financial Bankshares Policy Prohibiting Insider Trading and Unauthorized Disclosure of Information to Others.*
Subsidiaries of Registrant.*
Consent of Ernst & Young LLP.*
Power of Attorney (included on signature page of this Form 10-K).*
Rule 13a-14(a) / 15(d)-14(a) Certification of Chief Executive Officer of First Financial Bankshares, Inc.*
Rule 13a-14(a) / 15(d)-14(a) Certification of Chief Financial Officer of First Financial Bankshares, Inc.*
Section 1350 Certification of Chief Executive Officer of First Financial Bankshares, Inc.+
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Section 1350 Certification of Chief Financial Officer of First Financial Bankshares, Inc.+
First Financial Bankshares, Inc. Compensation Recovery Policy.*
101.INS
Inline XBRL Instance Document. – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document.*
101.SCH
Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents.*
The cover page for the Company's Annual Report on Form 10-K for the year ended December 31, 2025, has been formatted in Inline XBRL and contained in Exhibit 101
* Filed herewith.
+ Furnished herewith. This Exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section, and shall not be deemed to be incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
++ Management contract or compensatory plan on arrangement.
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FORM 10-K SUMMARY
The Registrant has not selected the option to provide the summary information in this Item 16.
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SIG NATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
The undersigned directors and officers of First Financial Bankshares, Inc. hereby constitute and appoint Michelle S. Hickox, with full power to act and with full power of substitution and resubstitution, our true and lawful attorney-in-fact with full power to execute in our name and behalf in the capacities indicated below any and all amendments to this report and to file the same, with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission and hereby ratify and confirm all that such attorney-in-fact or his substitute shall lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name
Title
Date
/s/ David W. Bailey
Chief Executive Officer (Principal
February 25, 2026
David W. Bailey
Executive Officer) and President
/s/ Michelle S. Hickox
Executive Vice President and Chief
February 25, 2026
Michelle S. Hickox
Financial Officer (Principal Financial Officer and Principal Accounting Officer)
/s/ F. Scott Dueser
Executive Chairman of the Board, Director
February 25, 2026
F. Scott Dueser
/s/ Vianei Lopez Braun
Director
February 25, 2026
Vianei Lopez Braun
/s/ David L. Copeland
Director
February 25, 2026
David L. Copeland
/s/ Sally Pope Davis
Director
February 25, 2026
Sally Pope Davis
/s/ Michael B. Denny
Director
February 25, 2026
Michael B. Denny
/s/ Murray H. Edwards
Director
February 25, 2026
Murray H. Edwards
/s/ Geoff Haney
Director
February 25, 2026
Geoff Haney
/s/ Eli Jones, Ph.D.
Director
February 25, 2026
Eli Jones, Ph.D.
/s/ I. Tim Lancaster
Director
February 25, 2026
I. Tim Lancaster
/s/ Kade L. Matthews
Director
February 25, 2026
Kade L. Matthews
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/s/ Robert C. Nickles
Director
February 25, 2026
Robert C. Nickles
/s/ Blake M. Poutra
Director
February 25, 2026
Blake M. Poutra
/s/ Johnny E. Trotter
Director
February 25, 2026
Johnny E. Trotter
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of First Financial Bankshares, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of First Financial Bankshares, Inc. and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of earnings, comprehensive earnings (loss), shareholders' equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 25, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Allowance for Credit Losses
Description of the Matter
As of December 31, 2025, the Company’s loan portfolio totaled $8.2 billion and the related allowance for credit losses (ACL) was $105.5 million. As discussed in Notes 1 and 3 of the consolidated financial statements, the ACL is an amount which represents management’s best estimate of expected credit losses over the contractual life of the Company’s loan portfolio as of the balance sheet date. The ACL includes credit loss estimates for loans evaluated using common risk characteristics such as financial asset type, collateral type, and industry of the borrower. The Company uses a discounted cash flow method, incorporating historical losses that are correlated to economic variables that are determined to be the most relevant indicators of expected losses. Those economic variables are forecasted over the reasonable and supportable forecast period to determine the current expected credit losses. Qualitative adjustments are then made to account for factors that management does not believe are captured within the CECL quantitative models.
Auditing management’s ACL estimate involved a high degree of subjectivity due to the judgment involved in determining the qualitative adjustments included in the estimate.
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How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s controls for estimating the allowance for credit losses, including the models used and the qualitative adjustments made to establish the ACL. We tested controls over the model methodology, including the qualitative adjustment methodology, the monitoring procedures performed over the models, the identification and the measurement of the qualitative adjustments, the reliability and accuracy of data used to estimate the qualitative adjustments, and management’s review and approval of the qualitative adjustments.
To test the models, with the support of specialists, we evaluated the model methodology and design. On a sample basis, we independently tested the key inputs used in the models by agreeing to internal and external sources. Additionally, on a sample basis, we performed an independent recalculation of the models’ output. To test the qualitative adjustments, we evaluated the identification and measurement of the adjustments, including the basis for concluding the adjustments were reasonable. We independently tested the completeness and accuracy of data used by the Company to estimate the qualitative adjustments by agreeing underlying data to relevant sources. On a sample basis, with the support of specialists, we recalculated the qualitative adjustments.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2002.
Dallas, Texas
February 25, 2026
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FIRST FINANCIAL BANKSHA RES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2025 and 2024
(Dollars in thousands, except share and per share amounts)
ASSETS
CASH AND DUE FROM BANKS
FEDERAL FUNDS SOLD
INTEREST-BEARING DEMAND DEPOSITS IN BANKS
Total cash and cash equivalents
SECURITIES AVAILABLE-FOR-SALE, at fair value (amortized cost of these
securities was $ 5,856,138 and $ 5,155,305 as of December 31, 2025 and
2024, respectively)
LOANS:
Held-for-investment
Less – allowance for credit losses
Net loans held-for-investment
Held-for-sale ($ 25,431 and $ 7,793 at fair value as of
December 31, 2025 and 2024, respectively)
BANK PREMISES AND EQUIPMENT, net
INTANGIBLE ASSETS, net
OTHER ASSETS
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
NONINTEREST-BEARING DEPOSITS
INTEREST-BEARING DEPOSITS
Total deposits
DIVIDENDS PAYABLE
REPURCHASE AGREEMENTS
BORROWINGS
OTHER LIABILITIES
Total liabilities
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
COMMON STOCK—$ 0.01 par value; authorized 200,000,000 shares; 143,213,102
and 142,944,704 shares issued at December 31, 2025 and 2024, respectively
CAPITAL SURPLUS
RETAINED EARNINGS
TREASURY STOCK (shares at cost: 936,268 and 929,735 at
December 31, 2025 and 2024, respectively)
DEFERRED COMPENSATION
ACCUMULATED OTHER COMPREHENSIVE EARNINGS (LOSS), net
Total shareholders’ equity
Total liabilities and shareholders’ equity
The accompanying notes are an integral part of these consolidated financial statements.
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FIRST FINANCIAL BANKSHA RES, INC. AND SUBSIDIARIES
Consolidated Statement of Earnings
December 31, 2025, 2024 and 2023
(Dollars in thousands, except share and per share amounts)
INTEREST INCOME:
Interest and fees on loans
Interest on investment securities:
Taxable
Exempt from federal income tax
Interest on federal funds sold and interest-bearing deposits in banks
Total interest income
INTEREST EXPENSE:
Interest on deposits
Interest on borrowings
Total interest expense
Net interest income
PROVISION FOR CREDIT LOSSES
Net interest income after provisions for credit losses
NONINTEREST INCOME:
Trust fees
Service charges on deposit accounts
Debit card fees
Credit card fees
Gain on sale and fees on mortgage loans
Net loss on sale of available-for-sale securities
Net gain (loss) on sale of foreclosed assets
Net gain on sale of assets
Interest on loan recoveries
Other
Total noninterest income
NONINTEREST EXPENSE:
Salaries, commissions and employee benefits
Net occupancy expense
Equipment expense
FDIC insurance premiums
Debit card expense
Professional and service fees
Printing, stationery and supplies
Operational and other losses
Software amortization and expense
Amortization of intangible assets
Other
Total noninterest expense
EARNINGS BEFORE INCOME TAXES
INCOME TAX EXPENSE
NET EARNINGS
NET EARNINGS PER SHARE, BASIC
NET EARNINGS PER SHARE, DILUTED
DIVIDENDS PER SHARE
The accompanying notes are an integral part of these consolidated financial statements.
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FIRST FINANCIAL BANKSHA RES, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Earnings (Loss)
Years Ended December 31, 2025, 2024 and 2023
(Dollars in thousands)
NET EARNINGS
OTHER ITEMS OF COMPREHENSIVE EARNINGS:
Change in unrealized gain (loss) on investment securities available-for-
sale, before income taxes
Reclassification adjustment for realized gains (loss) on investment
securities included in net earnings, before income taxes
Total other items of comprehensive earnings (losses)
Income tax benefit (expense) related to:
Change in unrealized gain (loss) on investment securities available-for-
sale
Reclassification adjustment for realized gains (loss) on investment
securities included in net earnings
Total income tax benefit (expense)
COMPREHENSIVE EARNINGS
The accompanying notes are an integral part of these consolidated financial statements.
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FIRST FINANCIAL BANKSHAR ES, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity
Years Ended December 31, 2025, 2024 and 2023
(Dollars in thousands)
Common Stock
Capital
Retained
Treasury Stock
Deferred
Accumulated
Other
Total
Comprehensive Earnings
Total
Shareholders’
Shares
Amounts
Surplus
Earnings
Shares
Amounts
Compensation
(Loss), net
Equity
BALANCE, December 31, 2022
Net earnings
Stock option exercises/stock unit conversions/restricted stock activity
Cash dividends declared, $ 0.71 per share
Change in unrealized gain (loss) in investment securities available-for-sale, net of related income taxes
Shares purchased in connection with directors’ deferred compensation plan, net
Stock-based compensation expense
Shares repurchased and retired under stock repurchase authorization
BALANCE, December 31, 2023
Net earnings
Stock option exercises/stock unit conversions/restricted stock activity
Cash dividends declared, $ 0.72 per share
Change in unrealized gain (loss) in investment securities available-for-sale, net of related income taxes
Shares purchased in connection with directors’ deferred compensation plan, net
Stock-based compensation expense
BALANCE, December 31, 2024
Net earnings
Stock option exercises/stock unit conversions/restricted stock activity
Cash dividends declared, $ 0.75 per share
Change in unrealized gain (loss) in investment securities available-for-sale, net of related income taxes
Shares purchased in connection with directors’ deferred compensation plan, net
Stock-based compensation expense
BALANCE, December 31, 2025
The accompanying notes are an integral part of these consolidated financial statements.
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FIRST FINANCIAL BANKSHA RES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 2025, 2024 and 2023
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization
Provision for credit losses
Securities premium amortization, net
(Gain) loss on sale of securities and other assets, net
Stock-based compensation
Net tax benefit from stock-based compensation
Deferred federal income tax benefit
Change in loans held-for-sale
Change in other assets
Change in other liabilities
Total adjustments
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Activity in available-for-sale securities and other investments:
Sales
Maturities
Purchases
Net increase in loans held-for-investment
Purchases of bank premises and equipment
Proceeds from sale of bank premises and equipment and other assets
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in noninterest-bearing deposits
Net increase in interest-bearing deposits
Net increase (decrease) in repurchase agreements and borrowings
Common stock transactions:
Proceeds from stock option exercises/stock unit conversions/restricted stock activity
Dividends paid
Repurchases of stock
Net cash provided by (used in) financing activities
NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, beginning of year
CASH AND CASH EQUIVALENTS, end of year
SUPPLEMENTAL INFORMATION AND NONCASH TRANSACTIONS:
Interest paid
Taxes paid
Schedule of noncash investing and financing activities:
Assets acquired through foreclosure
Net increase in capital commitments relating to low-income housing project investments
The accompanying notes are an integral part of these consolidated financial statements.
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FIRST FINANCIAL BANKSH ARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations
First Financial Bankshares, Inc. (a Texas corpor ation) (“Bankshares”, “Company”, “we” or “us”) is a financial holding company which owns all of the capital stock of one bank with 79 locations located in Texas as of December 31, 2025. The Company’s subsidiary bank is First Financial Bank. The Company’s primary source o f revenue is providing loans and banking services to consumers and commercial customers in the market area in which First Financial Bank is located. In addition, the Company also owns First Financial Trust & Asset Management Company, First Financial Insurance Agency, Inc. (inactive), First Technology Services, Inc., FFB Investment Paris Fund, LLC and FFB Portfolio Management, Inc.
Basis of Presentation
A summary of significant accounting policies of the Company and its subsidiaries applied in the preparation of the accompanying consolidated financial statements follows. The accounting principles followed by the Company and the methods of applying them are in conformity with both United States generally accepted accounting principles (“GAAP”) and prevailing practices of the banking industry.
The Company evaluated subsequent events for potential recognition through the date the consolidated financial statements were issued.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s significant estimates include its allowance for credit losses and its valuation of financial instruments.
Consolidation
The accompanying consolidated financial statements include the accounts of Bankshares and its subsidiaries, all of which are wholly-owned. All intercompany accounts and transactions have been eliminated.
Stock Repurchase
On July 22, 2025, the Company’s Board of Directors extended the authorization to repurchase up to 5,000,000 common shares through July 31, 2026. The prior authorization had been in place since July 27, 2021. The stock repurchase plan authorizes management to repurchase and retire the stock at such time as repurchases and retirements are considered beneficial to the Company and stockholders. Any repurchase of stock will be made through the open market, block trades, or in privately negotiated transactions in accordance with applicable laws and regulations. Under the repurchase plan, there is no minimum number of shares that the Company is required to repurchase. There were no repurchases during 2024 or 2025.
Trust Assets
Property held for customers in a fiduciary capacity, other than trust cash on deposit at the Bank, is not included in the accompanying consolidated financial statements since such items are not assets of the Company.
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
Investment Securities
Management classifies debt securities as held-to-maturity, available-for-sale, or trading based on its intent. Securities that management has the positive intent and ability to hold to maturity are classified as held-to-maturity and recorded at amortized cost, adjusted for amortization of premiums and accretion of discounts, which are recognized as adjustments to interest income using the interest method. Securities not classified as held-to-maturity or trading are classified as available-for-sale and recorded at fair value, with unrealized holding gains and losses (those for which no allowance for credit losses are recorded) reported as a component of other comprehensive income, net of tax. Management determines the appropriate classification of securities at the time of purchase.
Interest income includes amortization of purchase premiums and discounts over the period to maturity using a level-yield method, except for premiums on callable securities, which are amortized to their earliest call date. Realized gains and losses are recorded on the sale of securities in noninterest income.
The Company has made a policy election to exclude accrued interest from the amortized cost basis of securities and report accrued interest separately in other assets on the consolidated balance sheets. A security is placed on nonaccrual status at the time any principal or interest payments become more than 90 days delinquent or if full collection of interest or principal becomes uncertain. Accrued interest for a security placed on nonaccrual is reversed against interest income. There was no accrued interest related to securities reversed against interest income for the years ended December 31, 2025 or 2024.
The Company records its available-for-sale securities portfolio at fair value. Fair values of these securities are determined based on methodologies in accordance with current authoritative accounting guidance. Fair values are volatile and may be influenced by a number of factors, including market interest rates, prepayment speeds, discount rates, credit ratings and yield curves. Fair values for securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on the quoted prices of similar instruments or an estimate of fair value by using a range of fair value estimates in the market place as a result of the illiquid market specific to the type of security.
The Company’s investment portfolio currently consists of obligations of state and political subdivisions, mortgage pass-through securities, corporate bonds and general obligation or revenue based municipal bonds. Pricing for such securities is generally readily available and transparent in the market. The Company utilizes independent third-party pricing services to value its investment securities, which the Company reviews as well as the underlying pricing methodologies for reasonableness and to ensure such prices are aligned with pricing matrices. The Company validates prices supplied by the independent pricing services by comparison to prices obtained from other third-party sources on a quarterly basis.
Allowance for Credit Losses – Available-for-Sale Securities
For available-for-sale securities in an unrealized loss position, we first assess whether we intend to sell, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, any previously recognized allowances are charged-off and the security’s amortized cost basis is written down to fair value through income as a provision for credit losses. For available-for-sale securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.
Management has made the accounting policy election to exclude accrued interest receivable on available-for-sale securities from the estimate of credit losses. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit losses. Available-for-sale securities are charged-off against the allowance or, in the absence of any allowance, written down through income when deemed uncollectible by management or when either of the aforementioned criteria regarding intent or requirement to sell is met.
At December 31, 2025 and 2024 , no allowance for credit losses on available-for-sale securities was recorded.
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
Allowance for Credit Losses – Held-to-Maturity Securities
At December 31, 2025 and 2024 , the Company held no securities that were classified as held-to-maturity.
Loans Held-for-Investment
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost, net of the allowance for credit losses. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts, fair value hedge accounting adjustments, deferred loan fees and costs. The Company has made a policy election to exclude accrued interest from the amortized cost basis of loans and report accrued interest separately from the related loan balance in other assets on the condensed consolidated balance sheets.
Interest on loans is calculated by using the simple interest method on daily balances of the principal amounts outstanding. The Company defers and amortizes net loan origination fees and costs as an adjustment to yield.
Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. In determining whether or not a borrower may be unable to meet payment obligations for each class of loans, we consider the borrower’s debt service capacity through the analysis of current financial information, if available, and/or current information with regards to our collateral position. Regulatory provisions would typically require the placement of a loan on nonaccrual status if principal or interest has been in default for a period of 90 days or more unless the loan is both well secured and in the process of collection or full payment of principal and interest is not expected. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income on nonaccrual loans is recognized only to the extent that cash payments are received in excess of principal due. A loan may be returned to accrual status when all the principal and interest amounts contractually due are brought current and future principal and interest amounts contractually due are reasonably assured.
Further information regarding our accounting policies related to past due loans, nonaccrual loans and loan modifications is presented in Note 3.
Acquired Loans
Loans acquired in connection with acquisitions are recorded at their acquisition-date fair value. The allowance for credit losses related to the acquired loan portfolio is not carried over. Acquired loans are classified into two categories based on the credit risk characteristics of the underlying borrowers as either purchased credit deteriorated (“PCD”) loans, or loans with no evidence of credit deterioration (“non-PCD”).
PCD loans are defined as a loan or pool of loans that have experienced more-than-insignificant credit deterioration since the origination date. The Company uses a combination of individual and pooled review approaches to determine if acquired loans are PCD. At acquisition, the Company considers a number of factors to determine if an acquired loan or pool of loans has experienced more-than-insignificant credit deterioration.
The initial allowance related to PCD loans that share similar risk characteristics is established using a pooled approach. The Company uses either a discounted cash flow or weighted average remaining life method to determine the required level of the allowance. PCD loans that were classified as nonaccrual as of the acquisition date and are collateral dependent are assessed for allowance on an individual basis. For PCD loans, an initial allowance for credit losses is established on the acquisition date. Subsequent to the acquisition date, the initial allowance for credit losses on PCD loans will increase or decrease based on future evaluations, with changes recognized in the provision for credit losses.
Non-PCD loans are pooled into segments together with originated loans that share similar risk characteristics and have an allowance established on the acquisition date, which is recognized in the current period provision for credit losses as well as a fair value adjustment to the amortized cost of the loan and accreted into income over the life of the loan.
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
Determining the fair value of the acquired loans involves estimating the principal and interest payment cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest. Management considers a number of factors in evaluating the acquisition-date fair value including the remaining life, interest rate profile, market interest rate environment, payment schedules, risk ratings, probability of default and loss given default, and estimated prepayment rates. For PCD loans, the non-credit discount or premium is allocated to individual loans as determined by the difference between the loan’s unpaid principal balance and amortized cost basis. For non-PCD loans, the fair value discount or premium is allocated to individual loans and recognized into interest income on a level yield basis over the remaining expected life of the loan.
Allowance for Credit Losses—Loans
The allowance for credit losses (“allowance” or “ACL”) is a contra-asset valuation account, calculated in accordance with ASC 326, that is deducted from the amortized cost basis of loans. The ACL represents an amount which, in management’s judgment, is appropriate to absorb the lifetime expected credit losses that may be experienced on outstanding loans at the balance sheet date based on the evaluation of the size and current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions and prepayment experience. The allowance for credit losses is measured and recorded upon the initial recognition of a financial asset. Determination of the appropriateness of the allowance is inherently complex and requires the use of significant and highly subjective estimates. Loans are charged-off against the allowance when deemed uncollectible by management. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Adjustments to the allowance are reported in our income statement as a component of the provision for credit losses. Management has made the accounting policy election to exclude accrued interest receivable on loans from the estimate of credit losses.
The Company’s methodology for estimating the allowance includes: (1) a collective quantified reserve that reflects the Company’s historical default and loss experience adjusted for expected economic conditions throughout a reasonable and supportable period and the Company’s prepayment and curtailment rates; (2) collective qualitative factors based on the risk perceived in concentrations of the loan portfolio, changes in economic conditions, early delinquencies, and factors related to credit administrations, including, among others, underwriting standards, loan-to-value ratios, and borrowers’ risk rating; and (3) individual allowances on loans where borrowers are experiencing financial difficulty or when the Company determines that the foreclosure is probable.
In calculating the allowance for credit losses, most loans are segmented into pools based upon similar characteristics and risk profiles. Common characteristics and risk profiles include the type/purpose of loan, underlying collateral, geographical similarity and historical/expected credit loss patterns. In developing these loan pools for the purposes of modeling expected credit losses, we also analyzed the degree of correlation in how loans within each portfolio respond when subjected to varying economic conditions and scenarios as well as other portfolio stress factors. For modeling purposes, our loan portfolio segments include C&I, Municipal, Agricultural, Construction and Development, Farm, Non-Owner Occupied and Owner Occupied CRE, Residential, Consumer Auto and Consumer Non-Auto. We periodically reassess each pool to ensure the loans within the pool continue to share similar characteristics and risk profiles and to determine whether further segmentation is necessary. Refer to Note 3 for more details on the Company’s portfolio segments.
The Company applies two methodologies to estimate the allowance on its pooled portfolio segments; discounted cash flows method and weighted average remaining life method. Allowance estimates on the following portfolio segments are calculated using the discounted cash flows method: C&I, Municipal, Construction and Development, Farm, Non-Owner Occupied and Owner Occupied CRE and Residential. Allowance estimates on the following portfolio segments are calculated using the remaining life method: Agriculture, Consumer Auto and Consumer Non-Auto. The models related to these methodologies utilize the Company’s historical default and loss experience adjusted for future economic forecasts. The reasonable and supportable forecast period represents a one-year economic outlook for the applicable economic variables. Following the end of the reasonable and supportable forecast period expected losses revert back to the historical mean over the next two years on a straight-line basis. Economic variables that have the most significant impact on the allowance include; Texas unemployment rate, Texas house price index and Texas retail sales index. Contractual loan level cash flows within the discounted cash flows methodology are adjusted for the Company’s historical prepayment and curtailment rate experience.
In some cases, management may determine that an individual loan exhibits unique risk characteristics which differentiate the loan from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the allowance for credit losses are determined by analyzing the borrower’s ability
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
to repay amounts owed, collateral deficiencies, the relative risk rating of the loan and economic conditions affecting the borrower’s industry, among other things. A loan is considered to be collateral dependent when, based upon management’s assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. We reevaluate the fair value of collateral supporting collateral dependent loans on an ongoing basis.
Management qualitatively adjusts model results for risk factors that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These qualitative factor (“Q-Factor”) adjustments may increase or decrease management’s estimate of expected credit losses based upon the estimated level of risk within the risk factor. The various risk factors that may be considered in making Q-Factor adjustments include, among other things, the impact of (i) changes in lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries, (ii) actual and expected changes in national, regional, and local economic and business conditions and developments that affect the collectability of the loan pools, (iii) changes in the nature, volume and size of a loan or the loan pools and in the terms of the underlying loans, (iv) changes in the experience, ability, and depth of our lending management and staff, (v) changes in volume and severity of past due financial assets, the volume of nonaccrual assets, and the volume and severity of adversely classified or graded assets, (vi) changes in the quality of our credit review function, (vii) changes in the value of the underlying collateral for loans that are non-collateral dependent, (viii) the existence, growth, and effect of any concentrations of credit, and (ix) other factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters or health pandemics.
Management believes it uses relevant information available to make determinations about the allowance and that it has established the existing allowance in accordance with GAAP. However, the determination of the allowance requires significant judgment, and estimates of expected lifetime losses in the loan portfolio can vary significantly from the amounts actually observed. While management uses available information to recognize expected losses, future additions to the allowance may be necessary based on changes in the loans comprising the portfolio, changes in the current and forecasted economic conditions, changes to the interest rate environment which may directly impact prepayment and curtailment rate assumptions, and changes in the financial condition of borrowers.
Allowance for Credit Losses—Off-Balance-Sheet/Reserve for Unfunded Commitments
The allowance for credit losses on off-balance-sheet credit exposures is a liability account, calculated in accordance with ASC 326, representing expected credit losses over the contractual period for which we are exposed to credit risk resulting from a contractual obligation to extend credit. These obligations include unfunded lines of credit, commitments to extend credit and federal funds sold to correspondent banks and standby letters of credit. No allowance is recognized if we have the unconditional right to cancel the obligation. The allowance is reported as a component of other liabilities in our consolidated balance sheets. Adjustments to the allowance are reported in our income statement as a component of the provision for credit losses. At December 31, 2025 and 2024, the Company’s reserve for unfunded commitments totaled $ 6,387,000 and $ 8,677,000 , respectively, which is included in other liabilities in the consolidated balance sheet.
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
Other Real Estate
Other real estate owned is foreclosed property held pending disposition and is initially recorded at fair value, less estimated costs to sell. At foreclosure, if the fair value of the real estate, less estimated costs to sell, is less than the Company’s recorded investment in the related loan, a write-down is recognized through a charge to the ACL. Any subsequent reduction in value is recognized by a charge to income. Operating and holding expenses of such properties, net of related income, and gains and losses on their disposition are included in net gain (loss) on sale of foreclosed assets as incurred.
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed principally on a straight-line basis over the estimated useful lives of the related assets. Leasehold improvements are amortized over the life of the respective lease or the estimated useful lives of the improvements, whichever is shorter.
Business Combinations, Goodwill and Other Intangible Assets
The Company accounts for all business combinations under the purchase method of accounting. Tangible and intangible assets and liabilities of the acquired entity are recorded at fair value. Intangible assets with finite useful lives represent the future benefit associated with the acquisition of the core deposits and are amortized over seven years , utilizing a method that approximates the expected attrition of the deposits. Goodwill with an indefinite life is not amortized, but rather tested annually for impairment as of June 30 each year and totaled $ 313,481,000 at both December 31, 2025 and 2024 , respectively. There was no impairment recorded for the years ended December 31, 2025, 2024 and 2023 .
Securities Sold Under Agreements To Repurchase
Securities sold under agreements to repurchase, which are classified as borrowings, generally mature within one to four days from the transaction date. Securities sold under agreements to repurchase are reflected at the amount of the cash received in connection with the transaction. The Company may be required to provide additional collateral based on the estimated fair value of the underlying securities.
Segment Reporting
The Company adopted Accounting Standards Update 2023-07 "Segment Reporting (Topic 280) - Improvement to Reportable Segment Disclosures" on January 1, 2024. The Company has determined that its banking regions meet the aggregation criteria of ASC 280, Segment Reporting, since each of its banking regions and subsidiaries offer similar products and services, operate in a similar manner, have similar customers and report to the same regulatory authority, and therefore operate one line of business (community banking) located in a single geographic area (Texas). The Company's Chief Executive Officer has been identified as the chief operating decision maker (“CODM”).
The CODM regularly assesses performance of the aggregated single operating and reporting segment and decides how to allocate resources based on the net income calculated on the same basis as the net income reported in the Company's consolidated statements of earnings and other comprehensive earnings. The CODM is also regularly provided with expense information at a level that is consistent with that disclosed in the Company's consolidated statements of earnings and other comprehensive earnings.
Statements of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents includes cash on hand, amounts due from banks, including interest-bearing deposits in banks with original maturity of 90 days or less , and federal funds sold.
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
Accumulated Other Comprehensive Income (Loss)
Unrealized net losses on the Company’s available-for-sale securities, net of applicable income taxes, totaled $ 269,940,000 and $ 424,289,000 at December 31, 2025 and December 31, 2024 , respectively, are included in accumulated other comprehensive earnings (loss) as a separate component of shareholders' equity.
Revenue from Contracts with Customers
The Company derives a portion of its revenue from loan and investment income which are excluded from the scope of FASB ASC 606, Revenue from Contracts with Customers ("Topic 606"). S ubstantially all sources of banking revenue are recognized either by transaction (ATM, interchange, wire transfer, card fees, etc.) or when the Company charges a customer for a service that has already been rendered (monthly service charges, account fees, monthly trust management fees, monthly premise rental income, etc.). Payment for such performance obligations are generally received at the time the performance obligations are satisfied. Other non-interest income primarily includes items such as gains on the sale of loans held for sale and servicing fees, none of which are subject to the requirements of Topic 606.
Income Taxes
The Company’s provision for income taxes is based on income before income taxes adjusted for permanent differences between financial reporting and taxable income. Deferred tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws. See note 9 for more information on deferred income taxes.
Stock Based Compensation
The Company grants stock options for a fixed number of shares to employees with an exercise price equal to the fair value using the Black-Scholes model of the shares at the grant date. The grant date fair value is amortized over the vesting period which generally is three, five or six years. The Company also grants restricted stock and/or units for a fixed number of shares which generally vests over periods of one to three years and performance stock units which vest over a three-year period based on Company performance metrics relative to a defined peer group. For stock option grants, the exercise price is established based on the closing trading price of the Company's common stock and for restricted grants, the fair value of the grant is also measured based on the closing trading price. No adjustments have been necessary to properly value the grant based on the terms or other conditions of the grants. Expense is recognized based on the fair value of the portion of stock-based payment awards that are ultimately expected to vest, reduced for forfeitures based on grant-date fair value. See Note 17 for further information.
Advertising Costs
Advertising costs are expensed as incurred.
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
Per Share Data
Net earnings per share (“EPS”) are computed by dividing net earnings by the weighted average number of common stock shares outstanding during the period. The Company calculates diluted EPS assuming all outstanding stock options to purchase common shares and unvested restricted stock shares have been exercised and/or vested at the beginning of the year (or the time of issuance, if later.) The dilutive effect of the outstanding options and restricted stock is determined by application of the treasury stock method, whereby the proceeds from the exercised options and unearned compensation for restricted stock are assumed to be used to purchase common shares at the average market price during the respective year. Anti-dilutive shares for the years ended December 31, 2025, 2024, and 2023 , were 448,000 , 503,000 and 473,000 , respectively, and were excluded from the computation of EPS. The following table reconciles the computation of basic EPS to diluted EPS:
For the Year Ended December 31, 2025:
Net Earnings
(in thousands)
Weighted
Average
Shares
Per Share
Amount
Net earnings per share, basic
Effect of stock options and stock grants
Net earnings per share, diluted
For the Year Ended December 31, 2024:
Net earnings per share, basic
Effect of stock options and stock grants
Net earnings per share, diluted
For the Year Ended December 31, 2023:
Net earnings per share, basic
Effect of stock options and stock grants
Net earnings per share, diluted
Other Recently Issued and Effective Authoritative Accounting Guidance
ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 requires entities to disclose more detailed information in their reconciliation of their statutory tax rate to their effective tax rate. Public business entities (PBEs) are required to provide this incremental detail in a numerical, tabular format. The ASU also requires entities to disclose more detailed information about income taxes paid, including by jurisdiction; pretax income (or loss) from continuing operations; and income tax expense (or benefit). ASU 2023-09 became effective for our annual financial statements in 2025. ASU 2023-09 did not have a significant effect on the financial statements and is included on a prospective basis in Note 9.
ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires new financial statement disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense caption. The prescribed categories include, among other things, employee compensation, depreciation, and intangible asset amortization. Additionally, entities must disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. ASU 2024-03 will be effective, on a prospective basis, for our 2027 annual report and interim periods thereafter. The Company is evaluating the impact of this ASU and does not believe it will have a significant impact on the Company's financial statements.
ASU 2025-08, "Financial Instruments - Credit Losses (Topic 326): Purchased Loans.” ASU 2025-08 amends the guidance on the accounting for certain purchased loans. The new guidance makes significant changes to the accounting for certain acquired seasoned loans subject to the current expected credit loss model. The amendments in ASU 2025-08 apply prospectively and will be effective for the Company beginning January 1, 2027, with early adoption permitted, and is not expected to have a significant impact on the Company’s financial statements.
ASU 2025-11, "Interim Reporting (Topic 270): Narrow-Scope Improvements.” ASU 2025-11 is intended to provide clarity about the current interim reporting requirements, provides a list of the interim disclosures required by all other Codification topics and establishes a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASC 2025-11 will be effective for the Company beginning January 1, 2028, with early adoption permitted, and is not expected to have a significant impact on the Company’s financial statements.
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
2. SECURITIES:
Debt securities have been classified in the consolidated balance sheets according to management’s intent. The amortized cost, related gross unrealized gains and losses, allowance for credit losses and the fair value of available-for-sale securities are as follows (dollars in thousands):
December 31, 2025
Amortized
Cost Basis
Gross
Unrealized
Holding Gains
Gross
Unrealized
Holding Losses
Estimated
Fair Value
Securities available-for-sale:
U.S. Treasury securities
Obligations of state and political subdivisions
Residential mortgage-backed securities
Commercial mortgage-backed securities
Corporate bonds and other
Total securities available-for-sale
December 31, 2024
Amortized
Cost Basis
Gross
Unrealized
Holding Gains
Gross
Unrealized
Holding Losses
Estimated
Fair Value
Securities available-for-sale:
U.S. Treasury securities
Obligations of state and political subdivisions
Residential mortgage-backed securities
Commercial mortgage-backed securities
Corporate bonds and other
Total securities available-for-sale
The Company did no t hold any securities classified as held-to-maturity for the years ended December 31, 2025 and 2024.
The Company invests in mortgage-backed securities that have expected maturities that differ from their contractual maturities. These differences arise because borrowers may have the right to call or prepay obligations with or without a prepayment penalty. These securities include collateralized mortgage obligations (CMOs) and other asset backed securities. The expected maturities of these securities at December 31, 2025, were computed by using scheduled amortization of balances and historical prepayment rates.
The amortized cost and estimated fair value of available-for-sale securities at December 31, 2025, by contractual maturity, are shown below (in thousands):
Amortized
Cost Basis
Estimated
Fair Value
Due within one year
Due after one year through five years
Due after five years through ten years
Due after ten years
Total
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
The following tables disclose, as of December 31, 2025 and 2024 , the Company’s investment securities that have been in a continuous unrealized-loss position for less than 12 months and for 12 or more months (in thousands):
Less than 12 Months
12 Months or Longer
Total
December 31, 2025
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
U.S. Treasury Securities
Obligations of state and political
subdivisions
Residential mortgage-backed securities
Commercial mortgage-backed securities
Corporate bonds and other
Total
Less than 12 Months
12 Months or Longer
Total
December 31, 2024
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
U.S. Treasury Securities
Obligations of state and political
subdivisions
Residential mortgage-backed securities
Commercial mortgage-backed securities
Corporate bonds and other
Total
The number of investments in an unrealized loss position totaled 668 at December 31, 2025. Any unrealized losses in the U.S. treasuries and government agencies, state and municipal, mortgage-backed and asset-backed investment securities at December 31, 2025 are due to changes in interest rates and not credit-related events. As such, no allowance for credit losses is required at December 31, 2025. Unrealized losses on investment securities are expected to recover over time as these securities approach maturity. The Company does not intend to sell any impaired available for sale securities before fair value recovers to the current amortized cost, and it is more-likely-than-not that the Company will not be required to sell impaired securities before fair value recovers, which may be maturity. Our mortgage related securities are backed by GNMA, FNMA and FHLMC or are collateralized by securities backed by these agencies. At December 31, 2025 and 2024, 72.57 % and 67.17 % , respectively, of our available-for-sale securities that are obligations of states and political subdivisions were issued within the State of Texas, of which 55.25 % and 55.77 % , respectively, were guaranteed by the Texas Permanent School Fund.
Securities, carried at approximately $ 2,748,670,000 and $ 2,545,822,000 on December 31, 2025 and 2024, respectively, were pledged as collateral for public or trust fund deposits, repurchase agreements, borrowings and for other purposes required or permitted by law.
During 2025 and 2024 , there were no sales of investment securities that were classified as available-for-sale. During 2023, sales of investment securities that were classified as available-for-sale totaled $ 411,134,000 . There were no gross realized securities gains or losses from sales during 2025 and 2024. Gross realized gains from 2023 securities sales were $ 1,699,000 . Gross realized losses from securities sales during 2023 were $ 8,818,000 .
The specific identification method was used to determine cost in order to compute the realized gains and losses .
3. LOANS AND ALLOWANCE FOR CREDIT LOSSES:
For the year ended December 31, 2025, the tables to follow outline the Company’s loan portfolio by the ten portfolio segments where applicable.
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
Loans held-for-investment by portfolio segment are as follows (dollars in thousands):
December 31,
Commercial:
Municipal
Total Commercial
Agricultural
Real Estate:
Construction & Development
Farm
Non-Owner Occupied CRE
Owner Occupied CRE
Residential
Total Real Estate
Consumer:
Auto
Non-Auto
Total Consumer
Total Loans
Less: Allowance for credit losses
Loans, net
Outstanding loan balances at December 31, 2025 and 2024, are net of unearned income, including net deferred loan fees.
Our subsidiary bank has established a line of credit with the Federal Home Loan Bank of Dallas (“FHLB”) and the Federal Reserve Discount Window to provide liquidity and meet pledging requirements for those customers eligible to have securities pledged to secure certain uninsured deposits. At December 31, 2025 , these available lines of credit were $ 2,306,169,000 and $ 1,850,201,000 , respectively. At December 31, 2025 , there was $ 670,000,000 used on the FHLB line advance for undisbursed commitments (letters of credit) used to secure public funds. At December 31, 2025 , there were no borrowings against the Federal Reserve Discount Window. At December 31, 2025, $ 7,404,259,000 in loans held by our bank subsidiary were subject to blanket liens as security for these lines of credits.
The Company’s nonaccrual loans, loans still accruing and past due 90 days or more and restructured loans are as follows (dollars in thousands):
December 31,
Nonaccrual loans
Loans still accruing and past due 90 days or more
Total nonperforming loans
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
The Company had $ 56,492,000 and $ 63,096,000 in nonaccrual, past due 90 days or more and still accruing, and foreclosed assets at December 31, 2025 and 2024 , respectively. Nonaccrual loans by portfolio segment at December 31, 2025 and 2024, respectively, and consisted of the following (in thousands):
December 31,
Commercial:
Municipal
Total Commercial
Agricultural
Real Estate:
Construction & Development
Farm
Non-Owner Occupied CRE
Owner Occupied CRE
Residential
Total Real Estate
Consumer:
Auto
Non-Auto
Total Consumer
Total
The Company recognized interest income on nonaccrual loans of approximately $ 2,522,000 , $ 2,561,000 and $ 1,714,000 during the years ended December 31, 2025, 2024 and 2023, respectively.
No significant additional funds are committed to be advanced in connection with nonaccrual loans as of December 31, 2025.
Summary information on the allowance for credit losses for the years ended December 31, 2025 and 2024, are outlined by portfolio segment in the following tables (in thousands):
Year Ended December 31, 2025
Municipal
Agricultural
Construction &
Development
Farm
Beginning balance
Provision for loan losses
Recoveries
Charge-offs
Ending balance
Year Ended December 31, 2025 (continued)
Non-Owner
Occupied
CRE
Owner
Occupied
CRE
Residential
Auto
Non-Auto
Total
Beginning balance
Provision for loan losses
Recoveries
Charge-offs
Ending balance
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
Year Ended December 31, 2024
Municipal
Agricultural
Construction &
Development
Farm
Beginning balance
Provision for loan losses
Recoveries
Charge-offs
Ending balance
Year Ended December 31, 2024 (continued)
Non-Owner
Occupied
CRE
Owner
Occupied
CRE
Residential
Auto
Non-Auto
Total
Beginning balance
Provision for loan losses
Recoveries
Charge-offs
Ending balance
Additionally, the Company records a reserve for unfunded commitments in other liabilities which totaled $ 6,387,000 and $ 8,677,000 at December 31, 2025 and 2024 , respectively. The $ 30,899,000 provision for loan losses in 2025 above is combined with the reversal of provision for unfunded commitments of $ 2,290,000 and reported in the aggregate under the provision for credit losses in the statement of earnings for the year ended December 31, 2025. The provision for loan losses above of $ 13,049,000 in 2024 is combined with the provision for unfunded commitments of $ 774,000 and reported in the aggregate under the provision for credit losses in the statement of earnings for the year ended December 31, 2024.
The Company’s loans that are individually evaluated for credit losses (both collateral and non-collateral dependent) and their related allowances as of December 31, 2025 and December 31, 2024, are summarized in the following table by loan segment (in thousands):
December 31, 2025
Collateral
Dependent Loans
Individually
Evaluated for
Credit Losses
Without an
Allowance
Collateral
Dependent Loans
Individually
Evaluated for
Credit Losses
With an
Allowance
Non-Collateral
Dependent
Loans
Individually
Evaluated for
Credit Losses
Total Loans
Individually
Evaluated
for Credit
Losses
Related
Allowance
on Collateral
Dependent
Loans
Related
Allowance
on Non-
Collateral
Dependent
Loans
Total
Allowance for
Credit Losses
on Loans
Individually
Evaluated for
Credit Losses
Commercial:
Municipal
Total Commercial
Agricultural
Real Estate:
Construction & Development
Farm
Non-Owner Occupied CRE
Owner Occupied CRE
Residential
Total Real Estate
Consumer:
Auto
Non-Auto
Total Consumer
Total
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
December 31, 2024
Collateral
Dependent Loans
Individually
Evaluated for
Credit Losses
Without an
Allowance
Collateral
Dependent Loans
Individually
Evaluated for
Credit Losses
With an
Allowance
Non-Collateral
Dependent
Loans
Individually
Evaluated for
Credit Losses
Total Loans
Individually
Evaluated
for Credit
Losses
Related
Allowance
on Collateral
Dependent
Loans
Related
Allowance
on Non-
Collateral
Dependent
Loans
Total
Allowance for
Credit Losses
on Loans
Individually
Evaluated for
Credit Losses
Commercial:
Municipal
Total Commercial
Agricultural
Real Estate:
Construction & Development
Farm
Non-Owner Occupied CRE
Owner Occupied CRE
Residential
Total Real Estate
Consumer:
Auto
Non-Auto
Total Consumer
Total
The Company’s allowance for loans that are individually evaluated for credit losses and collectively evaluated for credit losses as of December 31, 2025 and December 31, 2024 , are summarized in the following table by loan segment (in thousands). Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
December 31, 2025
Municipal
Agricultural
Construction
Development
Farm
Loans individually evaluated for credit losses
Loans collectively evaluated for credit losses
Total
December 31, 2025 (continued)
Non-Owner
Occupied
CRE
Owner
Occupied
CRE
Residential
Auto
Non-Auto
Total
Loans individually evaluated for credit losses
Loans collectively evaluated for credit losses
Total
December 31, 2024
Municipal
Agricultural
Construction
Development
Farm
Loans individually evaluated for credit losses
Loans collectively evaluated for credit losses
Total
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
December 31, 2024 (continued)
Non-Owner
Occupied
CRE
Owner
Occupied
CRE
Residential
Auto
Non-Auto
Total
Loans individually evaluated for credit losses
Loans collectively evaluated for credit losses
Total
The Company’s recorded investment in loans as of December 31, 2025 and December 31, 2024, related to the balance in the allowance for credit losses follows below (in thousands).
December 31, 2025
Municipal
Agriculture
Construction &
Development
Farm
Loans individually evaluated for credit losses
Loans collectively evaluated for credit losses
Total
December 31, 2025 (continued)
Non-Owner
Occupied
CRE
Owner
Occupied
CRE
Residential
Auto
Non-Auto
Total
Loans individually evaluated for credit losses
Loans collectively evaluated for credit losses
Total
December 31, 2024
Municipal
Agriculture
Construction &
Development
Farm
Loans individually evaluated for credit losses
Loans collectively evaluated for credit losses
Total
December 31, 2024 (continued)
Non-Owner
Occupied
CRE
Owner
Occupied
CRE
Residential
Auto
Non-Auto
Total
Loans individually evaluated for credit losses
Loans collectively evaluated for credit losses
Total
From a credit risk standpoint, the Company rates its loans in one of five categories: (i) pass, (ii) special mention, (iii) substandard, (iv) doubtful or (v) loss (which are charged-off).
The ratings of loans reflect a judgment about the risks of default and loss associated with the loan. The Company reviews the ratings on our credits as part of our on-going monitoring of the credit quality of our loan portfolio. Ratings are adjusted to reflect the degree of risk and loss that are felt to be inherent in each credit as of each reporting period. Our methodology is structured so that specific allocations are increased in accordance with deterioration in credit quality (and a corresponding increase in risk and loss) or decreased in accordance with improvement in credit quality (and a corresponding decrease in risk and loss).
Credits rated special mention show clear signs of financial weaknesses or deterioration in credit worthiness, however, such concerns are not so pronounced that the Company generally expects to experience significant loss within the short-term. Such credits typically maintain the ability to perform within standard credit terms and credit exposure is not as prominent as credits rated more harshly.
Credits rated substandard are those in which the normal repayment of principal and interest may be, or has been, jeopardized by reason of adverse trends or developments of a financial, managerial, economic or political nature, or important weaknesses exist in collateral. A protracted workout on these credits is a distinct possibility. Prompt corrective action is therefore required to strengthen the Company’s
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
position, and/or to reduce exposure and to assure that adequate remedial measures are taken by the borrower. Credit exposure becomes more likely in such credits and a serious evaluation of the secondary support to the credit is performed.
Credits rated doubtful are those in which full collection of principal appears highly questionable, and which some degree of loss is anticipated, even though the ultimate amount of loss may not yet be certain and/or other factors exist which could affect collection of debt. Based upon available information, positive action by the Company is required to avert or minimize loss. Credits rated doubtful are generally also placed on nonaccrual.
The following tables summarize the Company’s internal ratings of its loans held-for-investment, including the year of origination, by portfolio segments, at December 31, 2025 (in millions):
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Municipal
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Agricultural
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Construction & Development
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
December 31,
Prior
Revolving
Loans Amort
Cost Basis
Total
Farm
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Non-Owner Occupied CRE
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Owner Occupied CRE
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Residential
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Auto
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Non-Auto
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Total Loans
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
The following tables summarize the Company’s internal ratings of its loans held-for-investment, including the year of origination by portfolio segments, at December 31, 2024 (in millions):
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Municipal
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Agricultural
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Construction & Development
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
December 31,
Prior
Revolving
Loans Amort
Cost Basis
Total
Farm
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Non-Owner Occupied CRE
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Owner Occupied CRE
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Residential
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Auto
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Non-Auto
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
December 31,
Prior
Revolving
Loans
Amort
Cost Basis
Total
Total Loans
Risk rating:
Pass
Special mention
Substandard
Doubtful
Total
Year-to-Date Gross Charge-Offs
At December 31, 2025 and 2024, the Company’s past due loans are as follows (in thousands):
December 31, 2025
Days
Past
Due*
Days
Past
Due
Greater
Than
Days
Total
Past
Due
Current
Total Loans
90 Days
Past Due
Still
Accruing
Commercial:
Municipal
Total Commercial
Agricultural
Real Estate:
Construction & Development
Farm
Non-Owner Occupied CRE
Owner Occupied CRE
Residential
Total Real Estate
Consumer:
Auto
Non-Auto
Total Consumer
Total
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
December 31, 2024
Days
Past
Due*
Days
Past
Due
Greater
Than
Days
Total
Past
Due
Current
Total Loans
90 Days
Past Due
Still
Accruing
Commercial:
Municipal
Total Commercial
Agricultural
Real Estate:
Construction & Development
Farm
Non-Owner Occupied CRE
Owner Occupied CRE
Residential
Total Real Estate
Consumer:
Auto
Non-Auto
Total Consumer
Total
* The Company monitors commercial, agricultural and real estate loans after such loans are 15 days past due. Consumer loans are monitored after such loans are 30 days past due.
Modifications of receivables to debtors experiencing financial difficulty
The Company evaluates all loan restructurings according to the accounting guidance for loan modifications to determine if the restructuring results in a new loan or a continuation of the existing loan. Loan modifications to borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contractual cash flows include situations where there is principal forgiveness, term extensions, interest rate reduction, and combinations of the listed modifications. Therefore, the disclosures related to loan restructurings are only for modifications that directly affect cash flows.
An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses due to the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. During the years ended December 31, 2025 and 2024, respectively, loan modifications made to borrowers experiencing financial difficulty was insignificant.
An analysis of the changes in loans to officers, directors, principal shareholders, or associates of such persons for the year ended December 31, 2025 (determined as of each respective year-end) follows (in thousands):
Beginning
Balance
Additional
Loans
Payments
Ending
Balance
Year Ended December 31, 2025
In the opinion of management, those loans are on substantially the same terms, including interest rates and collateral requirements, as those prevailing at the time for comparable transactions with unaffiliated persons.
4. LOANS HELD-FOR-SALE:
Loans held-for-sale totaled $ 29,992,000 and $ 8,235,000 at December 31, 2025 and 2024, respectively. At December 31, 2025 and 2024, $ 4,561,000 and $ 442,000 , respectively, are valued at the lower of cost or fair value, and the remaining amount are valued under the fair value option.
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
These loans, which are sold on a servicing released basis, are valued using a market approach by utilizing either: (i) the fair value of the securities backed by similar mortgage loans, adjusted for certain factors to approximate the fair value of a whole mortgage loan, including the value attributable to mortgage servicing and credit risk, (ii) current commitments to purchase loans or (iii) recent observable market trades for similar loans, adjusted for credit risk and other individual loan characteristics. As these prices are derived from market observable inputs, the Company classifies these valuations as Level 2 in the fair value disclosures (see Note 10). Interest income on mortgage loans held-for-sale is recognized based on the contractual rates and reflected in interest income on loans in the consolidated statements of earnings. The Company has no continuing ownership in any of these residential mortgage loans sold.
The Company originates certain mortgage loans for sale in the secondary market. The mortgage loan sales contracts contain indemnification clauses should the loans default, generally in the first three to six months, or if documentation is determined not to be in compliance with regulations. The Company’s historic losses as a result of these indemnities have been insignificant.
5. DERIVATIVE FINANCIAL INSTRUMENTS :
The Company enters into IRLCs with customers to originate residential mortgage loans at a specific interest rate that are ultimately sold in the secondary market. These commitments, which contain fixed expiration dates, offer the borrower an interest rate guarantee provided the loan meets underwriting guidelines and closes within the timeframe established by the Company.
The Company purchases forward mortgage-backed securities contracts to manage the changes in fair value associated with changes in interest rates related to a portion of the IRLCs. These instruments are typically entered into at the time the IRLC is made in the aggregate.
The fair values of IRLCs are based on current secondary market prices for underlying loans and estimated servicing value with similar coupons, maturity and credit quality, subject to the anticipated loan funding probability (pull-through rate) net of estimated costs to originate the loan. The fair value of IRLCs is subject to change primarily due to changes in interest rates and the estimated pull-through rate. These commitments are classified as Level 3 in the fair value disclosures (see Note 10).
Forward mortgage-backed securities contracts are exchange-traded or traded within highly active dealer markets. In order to determine the fair value of these instruments, the Company utilizes the exchange price or dealer market price for the particular derivative contract and these instruments are therefore classified as Level 2 in the fair value disclosures (see Note 10). The estimated fair values are subject to change primarily due to changes in interest rates. The impact of these forward contracts is included in gain on sale and fees on mortgage loans in the statement of earnings.
These financial instruments are not designated as hedging instruments for accounting purposes. All derivatives are carried at fair value in either other assets or other liabilities, which changes in fair value recorded through earnings in the statement of earnings.
The following table provides the outstanding notional balances and fair values of outstanding derivative positions (in thousands):
December 31, 2025:
Outstanding
Notional
Balance
Asset
Derivative
Fair Value
Liability
Derivative
Fair Value
IRLCs
Forward mortgage-backed securities trades
December 31, 2024:
Outstanding
Notional
Balance
Asset
Derivative
Fair Value
Liability
Derivative
Fair Value
IRLCs
Forward mortgage-backed securities trades
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
6. BANK PREMISES AND EQUIPMENT :
The following is a summary of bank premises and equipment (in thousands):
Useful Life
December 31,
Land
Buildings and leasehold improvements
20 to 40 years
Lesser of lease term or 5 to 15 years
Furniture and equipment
3 to 10 years
Less: accumulated depreciation and amortization
Total bank premises and equipment
Depreciation expense for the years ended December 31, 2025, 2024 and 2023 amounted to $ 11,326,000 , $ 11,312,000 and $ 10,842,000 , respectively, and is included in the captions net occupancy expense and equipment expense in the accompanying consolidated statements of earnings.
The Company is lessor for portions of its banking premises. Total rental income for all leases included in net occupancy expense is approximately $ 2,862,000 , $ 2,702,000 and $ 2,742,000 , for the years ended December 31, 2025, 2024 and 2023 , respectively.
7. DEPOSITS AND BORROWINGS:
Time deposits of $ 250,000 or more totaled approximately $ 352,986,000 and $ 360,985,000 at December 31, 2025 and 2024, respectively.
At December 31, 2025, the scheduled maturities of time deposits (in thousands) were, as follows:
Year ending December 31,
Thereafter
Deposits received from related parties at December 31, 2025 and 2024 totaled $ 212,528,000 and $ 100,493,000 , respectively.
Borrowings at December 31, 2025 and 2024 consisted of the following (in thousands):
December 31,
Securities sold under agreements with customers to
repurchase
Federal funds purchased
Other borrowings
Total
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
Securities sold under repurchase agreements are generally with significant customers of the Company that require short-term liquidity for their funds for which the Company pledges certain securities that have a fair value equal to at least the amount of the borrowings. The agreements mature daily and therefore the risk arising from a decline in the fair value of the collateral pledged is minimal. The securities pledged are mortgage-backed securities. These agreements do not include “right of set-off” provisions and therefore the Company does not offset such agreements for financial reporting purposes. The weighted average interest rate on federal funds purchased, securities sold under repurchase agreements and advances from the FHLB was 1.46 % and 2.01 % at December 31, 2025 and 2024, respectively.
During 2021, the Company invested in qualifying Community Development Entities ("CDE") under the federal New Market Tax Credits ("NMTC") program. See Note 9 for further discussion of our activity and related balances on the consolidated balance sheets, including $ 21,053,000 within other borrowings shown above.
8. LINE OF CREDIT:
The Company renewed and amended its loan agreement, effective June 30, 2025, with Frost Bank. Under the loan agreement, as renewed and amended, we are permitted to draw up to $ 50,000,000 on a revolving line of credit. Prior to June 30, 2027, interest is paid quarterly at the U.S. prime rate as quoted in the Money Rates section of The Wall Street Journal , and the line of credit matures June 30, 2027 . If a balance exists at July 1, 2027, the principal balance converts to a term facility payable quarterly over five years and interest is paid quarterly at the U.S. prime rate as quoted in the Money Rates section of The Wall Street Journal . The line of credit is unsecured. Among other provisions in the Loan Agreement, the Company must satisfy certain financial covenants during the term of the Loan Agreement, including without limitation, covenants that require the Company to maintain certain capital, profitability, loan loss reserve, non-performing asset and debt service coverage ratios. In addition, the Loan Agreement contains certain operational covenants that, among others, restricts the payment of dividends above 55 % of consolidated net income, limits the incurrence of debt (excluding any amounts acquired in an acquisition) and prohibits the disposal of assets except in the ordinary course of business. Since 1995, the Company has declared dividends as a percentage of its consolidated net income in a range of 36 % (low) in 2021 and 2020 to 53 % (high) in 2003 and 2006. The Company was in compliance with the financial and operational covenants at December 31, 2025 . There was no outstanding balance under the line of credit as of December 31, 2025 or 2024 .
9. INCOME TAXES:
Earnings before income taxes for the year ended December 31, 2025 is $ 309,603,000 with income tax expense of $ 56,024,000 resulting in an effective tax rate of 18.1 %.
The Company files a consolidated federal income tax return. Income tax expense is comprised of the following (in thousands):
Year Ended December 31,
Current federal income tax
Current state income tax
Deferred federal income tax expense (benefit)
Income tax expense
A reconciliation between reported income tax expense and the amounts computed by applying the U.S. federal statutory income tax rate of 21 % to income before income taxes is presented in the following table. There were no activities or transactions that had foreign income taxes or cross-border tax effects during the reported periods. State income/franchise taxes are primarily related to the State of Texas, while amounts related to other jurisdictions were not significant, in the aggregate, during the reported periods (dollars in thousands).
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
Amount
Percent
U.S. federal income tax expense computed at the statutory rate
State income/franchise taxes, net of U.S. federal income tax effects
Tax credits
Non-taxable or non-deductible items:
Tax exempt interest
Other
Effective income tax rate
Statutory federal income tax rate
Reductions in tax rate resulting from interest income
exempt from federal income tax
Other
Effective income tax rate
The approximate effects of each type of difference that gave rise to the Company’s deferred tax assets and liabilities at December 31, 2025 and 2024 are as follows (in thousands):
Deferred tax assets:
Tax basis of loans in excess of financial statement basis
Recognized for financial reporting purposes but not yet
for tax purposes - deferred compensation
Net unrealized loss on investment securities available-for-
sale
Other deferred tax assets
Total deferred tax assets
Deferred tax liabilities:
Financial statement basis of fixed assets in excess of tax
basis
Intangible asset amortization deductible for tax purposes,
but not for financial reporting purposes
Recognized for financial reporting purposes but not yet
for tax purposes - accretion on investment securities
Other deferred tax liabilities
Total deferred tax liabilities
Net deferred tax asset (liability)
At December 31, 2025 and 2024 , management believes that it is more likely than not that all of the deferred tax assets shown above will be realized and therefore no valuation allowance was recorded.
Income taxes paid (net of refunds received) disaggregated by federal and state for the year ended December 31, 2025 was as follows (in thousands):
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
Amount
Federal
State
Total
Low Income Housing Tax Credit Investments - During 2021, the Company began investing in an affordable housing fund that will invest in real estate projects that qualify for the federal low income housing tax credit (“LIHTC”) program designed to promote private development of low income housing. The investments made by the fund will generate a return to the Company primarily through the realization of LIHTCs, and also through federal tax deductions generated from the ongoing operating losses from the investees of the fund. The Company’s investment in the fund will be amortized through income tax expense using the proportional amortization method as related tax credits are utilized by the Company. The total committed investment in these partnerships at December 31, 2025 was $ 27,500,000 , of which $ 6,386,000 has been funded.
New Market Tax Credits - During 2021, the Company began investing in qualifying CDEs under the federal NMTC program. NMTC investments are made through the third-party CDEs which are qualified through the U.S. Department of the Treasury and receive periodic allocation of amounts under the NMTC program. NMTCs are generated from qualified investments by the CDEs utilizing equity investments made by a taxpayer, like the Company. Through these equity investments, the Company will receive the tax benefits from the NMTCs equal to 39 % of the qualified investment from the CDE to qualifying eligible projects over a seven year period. The Company’s equity investments in the CDEs is amortized using the proportional amortization method and related tax credits are allocated to the Company. At December 31, 2025 and 2024 , the consolidated balance sheet of the Company included an $ 18,000,000 loan to the investee in loans. At December 31, 2025 and 2024, the balance of the of the leverage loan from the investee of $ 21,053,000 is included in other borrowings (see Note 7). At December 31, 2025 and 2024 , the consolidated balance sheets of the Company included CDE investments in other assets of $ 23,128,000 and $ 24,433,000 , respectively.
Current authoritative accounting guidance prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of cumulative benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. Current authoritative accounting guidance also provides guidance on the accounting for and disclosure of unrecognized tax benefits, interest and penalties. The Company concluded the tax benefits of positions taken and expected to be taken on its tax returns should be recognized in the financial statements under this guidance. The Company files income tax returns in the U.S. federal jurisdiction and state margin tax returns in the state of Texas. We are no longer subject to U.S. federal income tax examinations by tax authorities for years before 2022 or Texas state tax examinations by tax authorities for years before 2021. As of December 31, 2025 and 2024 , the Company believes that there are no uncertain tax positions.
10. FAIR VALUE DISCLOSURES:
The authoritative accounting guidance for fair value measurements defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact.
The authoritative accounting guidance requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement costs). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, the authoritative guidance establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (for example, interest rates, volatilities, prepayment speeds, lossseverities, credit risks and default rates) or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 Inputs – Significant unobservable inputs that reflect an entity’s own assumptions that market participants would use in pricing the assets or liabilities.
A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.
In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
Securities classified as available-for-sale and trading are reported at fair value utilizing Level 1 and Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include market spreads, cash flows, the United States Treasury yield curve, live trading levels, trade execution data, dealer quotes, market consensus prepayments speeds, credit information and the security’s terms and conditions, among other items.
See Notes 4 and 5 related to the determination of fair value for loans held-for-sale, IRLCs and forward mortgage-backed securities trades.
There were no transfers between Level 2 and Level 3 during the years ended December 31, 2025, 2024 and 2023.
The following table summarizes the Company’s available-for-sale securities, loans held-for-sale, and derivatives which are measured at fair value on a recurring basis as of December 31, 2025 and 2024 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
December 31, 2025
Level 1
Inputs
Level 2
Inputs
Level 3
Inputs
Total Fair
Value
Available-for-sale investment securities:
U.S. Treasury securities
Obligations of state and political subdivisions
Corporate bonds
Residential mortgage-backed securities
Commercial mortgage-backed securities
Other securities
Total
Loans held-for-sale
IRLCs
Forward mortgage-backed securities traded
December 31, 2024
Level 1
Inputs
Level 2
Inputs
Level 3
Inputs
Total Fair
Value
Available-for-sale investment securities:
U.S. Treasury securities
Obligations of state and political subdivisions
Corporate bonds
Residential mortgage-backed securities
Commercial mortgage-backed securities
Other securities
Total
Loans held-for-sale
IRLCs
Forward mortgage-backed securities traded
The following table summarizes the Company’s loans held-for-sale at fair value and the net unrealized gains as of the balance sheet dates shown below (in thousands):
December 31,
Unpaid principal balance on loans held-for-sale
Net unrealized gains on loans held-for-sale
Loans held-for-sale at fair value
The following table summarizes the Company’s gains on sale and fees of mortgage loans for the years ended December 31, 2025, 2024 and 2023 (in thousands):
Years ended December 31,
Realized gain on sale and fees on mortgage loans*
Change in fair value on loans held-for-sale and IRLCs
Change in forward mortgage-backed securities trades
Total gain on sale of mortgage loans
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
* This includes gain on loans held-for-sale carried under the fair value method and lower of cost or market.
No residential mortgage loans held-for-sale were 90 days or more past due or considered nonaccrual as of December 31, 2025 or 2024 . No credit losses were recognized on mortgage loans held-for-sale for the years ended December 31, 2025, 2024 and 2023.
Certain non-financial assets and non-financial liabilities measured at fair value on a nonrecurring basis include other real estate owned, goodwill and other intangible assets and other non-financial long-lived assets. Non-financial assets measured at fair value on a nonrecurring basis during the years ended December 31, 2025 and 2024 include other real estate owned which, subsequent to their initial transfer to other real estate owned from loans, were re-measured at fair value through a write-down included in gain (loss) on sale of foreclosed assets. During the reported periods, all fair value measurements for foreclosed assets utilized Level 2 inputs based on observable market data, generally third-party appraisals, or Level 3 inputs based on customized discounting criteria. These appraisals are evaluated individually and discounted as necessary due to the age of the appraisal, lack of comparable sales, expected holding periods of property or special use type of the property. Such discounts vary by appraisal based on the above factors but generally range from 5 % to 25 % of the appraised value. Re-evaluation of other real estate owned is performed at least annually as required by regulatory guidelines or more often if particular circumstances arise. There were no significant other real estate owned properties that were re-measured subsequent to their initial transfer to other real estate owned during the years ended December 31, 2025 and 2024.
At December 31, 2025, 2024, and 2023 , other real estate owned totaled $ 280,000, $ 811,000 , and $ 483,000 , respectively.
The Company is required under current authoritative accounting guidance to disclose the estimated fair value of their financial instrument assets and liabilities including those subject to the requirements discussed above. For the Company, as for most financial institutions, substantially all of its assets and liabilities are considered financial instruments. Many of the Company’s financial instruments, however, lack an available trading market as characterized by a willing buyer and willing seller engaging in an exchange transaction.
The estimated fair value amounts of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
In addition, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates that must be made given the absence of active secondary markets for many of the financial instruments. This lack of uniform valuation methodologies also introduces a greater degree of subjectivity to these estimated fair values.
Cash and due from banks, federal funds sold, interest-bearing deposits in banks and accrued interest receivable and payable are liquid in nature and considered Levels 1 or 2 of the fair value hierarchy.
Financial instruments with stated maturities have been valued using a present value discounted cash flow with a discount rate approximating current market for similar assets and liabilities and are considered Levels 2 and 3 of the fair value hierarchy. Financial instrument liabilities with no stated maturities have an estimated fair value equal to both the amount payable on demand and the carrying value and are considered Level 1 of the fair value hierarchy.
The carrying value and the estimated fair value of the Company’s contractual off-balance-sheet unfunded lines of credit, loan commitments and letters of credit, which are generally priced at market at the time of funding, are not material.
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
The estimated fair values and carrying values of all financial instruments under current authoritative guidance at December 31, 2025 and 2024, were as follows (in thousands):
Carrying
Estimated
Carrying
Estimated
Fair Value
Value
Fair Value
Value
Fair Value
Hierarchy
Cash and due from banks
Level 1
Federal funds sold
Level 1
Interest-bearing demand deposits in banks
Level 1
Available-for-sale securities
Levels 1 and 2
Loans held-for-investment, net of allowance for
credit losses
Level 3
Loans held-for-sale
Level 2
Accrued interest receivable
Level 2
Deposits with stated maturities
Level 2
Deposits with no stated maturities
Level 1
Repurchase Agreements
Level 2
Borrowings
Level 2
Accrued interest payable
Level 2
IRLCs
Level 3
Forward mortgage-backed securities trades
Level 2
11. COMMITMENTS AND CONTINGENCIES:
The Company is engaged in legal actions arising from the normal course of business. In management’s opinion, the Company has adequate legal defenses with respect to these actions, and as of December 31, 2025 the resolution of these matters is not expected to have material adverse effects upon the results of operations, financial condition, or cash flows of the Company.
The Company leases a portion of its bank premises and equipment under operating leases with third parties. At December 31, 2025, future minimum lease commitments were: 2026 - $ 378,000 , 2027 - $ 358,000 , 2028 - $ 282,000 , 2029 - $ 153,000 and 2030 - $ 116,000 and $ 121,000 thereafter.
12. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK:
We are a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include unfunded lines of credit, commitments to extend credit and federal funds sold to correspondent banks and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. At December 31, 2025 and 2024, the Company’s reserve for unfunded commitments totaled $ 6,387,000 and $ 8,677,000 , respectively, which is recorded in other liabilities.
Our exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for unfunded lines of credit, commitments to extend credit and standby letters of credit is represented by the contractual notional amount of these instruments. We generally use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments. Commitments as of December 31, 2025 and 2024, are shown below (dollars in thousands):
The above table also does not include balances related to the Company’s forward mortgage-backed security trades. At December 31, 2025, credit exposures for mortgage loans sold with recourse approximated $ 25,540,000 .
Unfunded lines of credit and commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. These commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, as we deem necessary upon extension of credit, is based on our credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant, and equipment and income-producing commercial properties.
Standby letters of credit are conditional commitments we issue to guarantee the performance of a customer to a third-party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The average collateral value held on letters of credit usually exceeds the contract amount.
We believe we have no other off-balance sheet arrangements or transactions with unconsolidated, special purpose entities that would expose us to liability that is not reflected in the financial statements.
13. CONCENTRATION OF CREDIT RISK:
The Company grants commercial, retail, agriculture and residential real estate loans to customers primarily in North Central, Southeastern and West Texas. Although the Company has a diversified loan portfolio, a substantial portion of its borrowers’ ability to honor their commitments is dependent upon each local economic sector. In addition, the Company holds mortgage related securities which are guaranteed by GNMA, FNMA or FHLMC or are collateralized by loans backed by these agencies.
14. EMPLOYEE BENEFIT PLANS:
The Company also provides a 401(k) plan and profit sharing plan, a qualified defined contribution plan, which covers substantially all full-time employees. The 401(k) feature allows employees to contribute a percentage of their base annual salary with a corresponding employer match. The profit sharing feature includes an employee stock ownership feature (“ESOP”). Employees are fully vested to the extent of their contributions and become fully vested in the Company’s profit sharing contributions over a six-year vesting period.
The Company matches a maximum of 4 % on employee deferrals of 5 % of their employee compensation. Total expense for this match in 2025, 2024 and 2023 was $ 4,363,000 , $ 3,924,000 and $ 3,750,000 , respectively, and is included in salaries and employee benefits in the statements of earnings.
Costs related to the Company’s profit sharing plan totaled approximately $ 12,469,000 , $ 9,466,000 and $ 1,373,000 in 2025, 2024 and 2023, respectively, and are included in salaries and employee benefits in the accompanying consolidated statements of earnings. As of December 31, 2025 and 2024, the profit sharing plan’s ESOP assets included First Financial Bankshares, Inc. common stock of 1,922,865 and 1,972,996 shares valued at approximately $ 57,436,000 and $ 71,584,000 , respectively.
The Company has a non-qualified “excess benefit” plan where executives, whose Company contributions to the profit sharing plan and employer match under the 401(k) feature are curtailed due to Internal Revenue Service limitations, received contributions from the Company equal to the amount under qualified plans as if there had been no Internal Revenue Service limitations. This plan used the same contribution formula and vesting requirements as the 401(k) and profit sharing plan. This "Make Whole Plan" was frozen to new participants and contributions effective December 31, 2018. As of December 31, 2025 and 2024, the Make Whole Plan held 115,086 and 114,495 shares, respectively, in trust for the Company’s executives. There were no contributions to this plan during the years ended December 31, 2025, 2024 and 2023.
The Company adopted a Supplemental Executive Retirement Plan (“SERP”), effective January 1, 2019, which was amended effective January 1, 2022. The SERP benefits certain key senior executives of the Company who are selected by the Board to participate. The SERP is intended to provide a benefit from the Company upon retirement, death, disability or voluntary or involuntarytermination of
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
services (other than “for cause”). Under the SERP, the Company may, but is not required to, make discretionary contributions to the executive’s accounts from time to time. The contributions may be fully vested or subject to vesting conditions imposed by the Board of Directors with respect to the contributions; provided, however, that all unvested amounts credited to an executive’s account will become fully vested upon the executive’s death or disability or upon the occurrence of a change of control (as defined in the SERP). Company contributions to the SERP on behalf of an executive are credited with earnings and losses based on the executive’s investment elections. The investment options under the SERP are currently the same as those offered under the Company’s profit sharing plan, except that Company stock can not be purchased as an investment option under the SERP. An executive’s vested account is payable to the participant following his or her termination in a single lump sum or installments, as elected by the participant. The SERP as amended allows selected participants to defer base and incentive compensation as well as the receipt of shares from vested restricted and performance stock units into the plan. At December 31, 2025 and 2024, other assets on the consolidated balance sheet include $ 8,615,000 and $ 5,230,000 of SERP balances, respectively. The Company made contributions totaling $ 905,000 , $ 391,000 and $ 198,000 to the SERP for the years ended December 31, 2025, 2024 and 2023, subsequent to the respective year ends, for certain executive officers.
The Company has a directors’ deferred compensation plan whereby the directors may elect to defer up to 100 % of their directors’ fees. All deferred compensation is invested in the Company’s common stock held in a rabbi trust wherein the funds are used to purchase Company common shares on the open market. The stock is held in nominee name of the trustee, and the principal and earnings of the trust are held separate and apart from other funds of the Company and are used exclusively for the uses and purposes of the deferred compensation agreement. The accounts of the trust have been consolidated in the financial statements of the Company. As of December 31, 2025 and 2024, the rabbi trust held 936,268 and 929,735 shares, respectively, in trust for the Company’s directors and are reflected as treasury shares on the consolidated financial statements.
The Company has acquired life insurance policies on certain current and former executives and directors of acquired entities. At December 31, 2025 and 2024, other assets on the consolidated balance sheet include $ 34,885,000 and $ 33,895,000 and reported cash value income (net of related insurance premium expenses) of $ 990,000 , $ 1,810,000 and $ 891,000 in 2025, 2024 and 2023 , respectively.
15. DIVIDENDS FROM SUBSIDIARIES:
At December 31, 2025, $ 366,540,000 was available for the declaration of dividends by the Company’s subsidiaries without the prior approval of regulatory agencies.
16. REGULATORY MATTERS:
Banking regulators measure capital adequacy by means of the risk-based capital ratios and the leverage ratio under the Basel III regulatory capital framework and prompt corrective action regulations. The risk-based capital rules provide for the weighting of assets and off-balance-sheet commitments and contingencies according to prescribed risk categories. Regulatory capital is then divided by risk-weighted assets to determine the risk-adjusted capital ratios. The leverage ratio is computed by dividing shareholders’ equity less intangible assets by quarter-to-date average assets less intangible assets.
As of January 1, 2019, a 2.5 % capital conservation buffer Basel III was fully phased in. The capital conservation buffer is designed to absorb losses during periods of economic stress and requires increased capital levels for the purpose of capital distributions and other payments. Failure to meet the amount of the buffer will result in restrictions on the Company’s ability to make capital distributions, including dividend payments and stock repurchases, and to pay discretionary bonuses to executive officers.
As of December 31, 2025 and 2024, we had a total risk-based capital ratio of 21.17 % and 20.00 %, a Tier 1 capital to risk-weighted assets ratio of 19.99 % and 18.83 %; a common equity Tier 1 capital to risk-weighted assets ratio of 19.99 % and 18.83 %, and a Tier 1 leverage ratio of 12.55 % and 12.49 %, respectively. The regulatory capital ratios as of December 31, 2025 and 2024 were calculated under Basel III rules.
As of December 31, 2025 and 2024, the regulatory capital ratios of the Company and Bank under the Basel III regulatory capital framework are as follows (dollars in thousands):
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
Actual
Minimum Capital
Required-Basel III
Fully Phased-In*
Required to be
Considered Well-
Capitalized
As of December 31, 2025:
Amount
Ratio
Amount
Ratio
Amount
Ratio
Total Capital to Risk-Weighted Assets:
Consolidated
First Financial Bank
Tier 1 Capital to Risk-Weighted Assets:
Consolidated
First Financial Bank
Common Equity Tier 1 Capital to Risk-Weighted Assets:
Consolidated
First Financial Bank
Leverage Ratio:
Consolidated
First Financial Bank
Actual
Minimum Capital
Required-Basel III
Fully Phased-In*
Required to be
Considered Well-
Capitalized
As of December 31, 2024:
Amount
Ratio
Amount
Ratio
Amount
Ratio
Total Capital to Risk-Weighted Assets:
Consolidated
First Financial Bank
Tier 1 Capital to Risk-Weighted Assets:
Consolidated
First Financial Bank
Common Equity Tier 1 Capital to Risk-Weighted Assets:
Consolidated
First Financial Bank
Leverage Ratio:
Consolidated
First Financial Bank
In connection with the adoption of the Basel III regulatory capital framework, our subsidiary bank made the election to continue to exclude accumulated other comprehensive income from available-for-sale securities (“AOCI”) from capital in connection with its quarterly financial filing and, in effect, to retain the AOCI treatment under the prior capital rules.
In connection with the First Financial Trust & Asset Management Company's (the “Trust Company”) application to obtain our trust charter, the Trust Company is required to maintain tangible net assets of $ 2,000,000 at all times. As of December 31, 2025, our Trust Company had tangible net assets totaling $ 67,653,000 .
Our subsidiary bank may be required at times to maintain reserve balances with the Federal Reserve Bank. At December 31, 2025 and 2024 , there was no subsidiary bank’s reserve balance required, respectively.
17. STOCK BASED COMPENSATION:
On April 27, 2021, the Company's shareholders approved the 2021 Omnibus Stock and Incentive Plan ("2021 Plan") and reserved 2,500,000 shares of the Company's common stock for issuance under this plan. At December 31, 2025, the Company had 901,862 shares of stock available for issuance under the 2021 Plan. The 2021 Plan supersedes all prior stock option and restricted stock plans with shares previously reserved for issuance under such plans cancelled.
Restricted Stock Units
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
Under the 2021 Plan, the Company grants restricted stock units under compensation agreements for the benefit of employees, executive officers and directors. Restricted stock unit grants are subject to time-based vesting. The total number of restricted stock units granted represents the maximum number of restricted stock units eligible to vest based upon the service conditions set forth in the grant agreements. The following table summarizes information about the changes in restricted stock units for the years ended December 31, 2025, 2024 and 2023, respectively.
For the year ended
For the year ended
For the year ended
December 31, 2025
December 31, 2024
December 31, 2023
Restricted
Stock Units
Outstanding
Weighted
Average
Grant Date
Fair Value
Restricted
Stock Units
Outstanding
Weighted
Average
Grant Date
Fair Value
Restricted
Stock Units
Outstanding
Weighted
Average
Grant Date
Fair Value
Balance at beginning of period
Grants
Vesting
Forfeited/expired
Balance at end of period
Performance Stock Units
Also under the 2021 Plan, the Company awards performance-based restricted stock units ("PSUs") to executive officers and other officers and employees. Under the terms of the award, the number of units that will vest and convert to shares of common stock will be based on the extent to which the Company achieves specific performance criteria during the fixed three-year performance period. The number of shares issued upon vesting will range from 0 % to 200 % of the PSUs granted. The PSUs vest at the end of a three-year period based on either 50 % each on average adjusted earnings per share growth and return on average assets, or 100 % return on average assets, as reported, adjusted for unusual gains/losses, merger expenses, and other items as approved by the compensation committee of the Company's board of directors. Performance for each period is measured relative to other U.S. publicly traded banks with $ 10 billion to $ 50 billion in assets. Compensation expense for the PSUs will be estimated each period based on the fair value of the stock at the grant date and the probable outcome of the performance condition, adjusted for passage of time within the vesting period of the awards.
The following table summarizes information about the changes in PSUs as of and for the years ended December 31, 2025, 2024 and 2023, respectively.
For the year ended
For the year ended
For the year ended
December 31, 2025
December 31, 2024
December 31, 2023
Performance-Based Restricted
Stock Units
Outstanding
Weighted
Average
Grant Date
Fair Value
Performance-Based Restricted
Stock Units
Outstanding
Weighted
Average
Grant Date
Fair Value
Performance-Based Restricted
Stock Units
Outstanding
Weighted
Average
Grant Date
Fair Value
Balance at beginning of period
Grants
Performance adjustment (1)
Vesting
Forfeited/expired
Balance at end of period
(1) PSUs are presented as outstanding, granted, and forfeited in the table above assuming targets are met and the awards pay out at 100 %. PSU awards are settled with payouts ranging from 0 % to 200 % of the target award value based on the Company's performance
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
relative to a predefined peer group over a fixed three-year performance period. The performance adjustment represents the difference in shares ultimately awarded due to performance attainment above or below target.
At December 31, 2025, the vesting period for the PSUs that were granted in 2023 had been satisfied. These shares will not be reflected in the shares vested until the outcome of the peer performance condition is determined and the vesting is settled in the first quarter of 2026.
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
Restricted Stock Awards
Under the 2021 Plan, the Company grants restricted stock awards under compensation agreements for the benefit of directors. Restricted stock awards are subject to time-based vesting.
The following table summarizes information about vested and unvested restricted stock.
For the year ended
For the year ended
For the year ended
December 31, 2025
December 31, 2024
December 31, 2023
Restricted
Stock
Outstanding
Weighted
Average
Grant Date
Fair Value
Restricted
Stock
Outstanding
Weighted
Average
Grant Date
Fair Value
Restricted
Stock
Outstanding
Weighted
Average
Grant Date
Fair Value
Balance at beginning of period
Grants
Vesting
Forfeited/expired
Balance at end of period
The total fair value of restricted stock vested was $ 2,808,000 , $ 2,276,000 and $ 1,082,000 for the years ended December 31, 2025, 2024 and 2023, respectively.
The Company recorded restricted stock unit and performance-based restricted stock unit expense for employees of $ 3,372,000 , $ 2,021,000 and $ 1,826,000 , respectively, for the years ended December 31, 2025, 2024 and 2023. The Company recorded director expense related to these restricted stock grants of $ 817,000 , $ 729,000 and $ 667,000 for the years ended December 31, 2025, 2024, and 2023, respectively.
As of December 31, 2025 and 2024, there were $ 4,752,000 and $ 4,025,000 , respectively, of total unrecognized compensation cost related to consolidated unvested restricted stock units, performance-based restricted stock units and restricted stock awards, which is expected to be recognized over a weighted-average period of 1.39 years and 0.96 years, respectively. At December 31, 2025 and 2024, there was $ 199,000 and $ 141,000 , respectively, accrued in other liabilities related to dividends declared to be paid upon vesting.
Stock Option Plan
Prior to approval of the 2021 Plan, the 2012 Incentive Stock Option Plan (the "2012 Plan") provided for the granting of options to employees of the Company at prices not less than market value at the date of the grant. The 2012 Plan provided that options granted vest and are exercisable after two years from the date of grant and vest at a rate of 20 % each year thereafter and have a 10-year term. The most recent grants from the 2021 Plan provided that 20 % of the options granted vest and are exercisable after one year from the date of grant and the remaining options vest and are exercisable at a rate of 20 % each year thereafter, or 33.3 % of the options granted are vested and exercisable after one year from the date of the grant and the remaining options are vested and exercisable at a rate of 33.3 % each year thereafter, and have a 10-year term. Shares are issued under the 2012 Plan and the 2021 Plan from available authorized shares. An analysis of stock option activity for the year ended December 31, 2025 is presented in the table and narrative below:
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FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2025, 2024 and 2023
For the year ended
December 31, 2025
Shares
Weighted-
Average Ex. Price
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value ($000)
Outstanding, beginning of year
Granted
Exercised
Cancelled
Outstanding, end of year
Exercisable at end of year
The options outstanding at December 31, 2025 had exercise prices ranging between $ 21.18 and $ 48.91 . Stock options have been adjusted retroactively for the effects of stock dividends and splits.
The following table summarizes information concerning outstanding and vested stock options as of December 31, 2025:
Exercise
Price
Number
Outstanding
Remaining
Contracted
Life (Years)
Number Vested
The fair value of the options granted during 2025 were estimated using the Black-Scholes options pricing model with the following weighted-average assumptions: risk-free interest rate of 3.90 % ; expected dividend yield of 2.09 % ; expected life of 5.61 years; and expected volatility of 32.75 % . The fair value of the options granted during 2024 were estimated using the Black-Scholes options pricing model with the following weighted-average assumptions: risk-free interest rate of 3.69 % ; expected dividend yield of 2.09 % ; expected life of 5.70 years; and expected volatility of 31.65 % . The fair value of options granted during 2023 were estimated using the Black-Scholes options pricing model with the following weighted-average assumptions: risk-free interest rate of 4.39 % ; expected dividend yield of 2.44 % ; expected life of 5.81 years; and expected volatility of 30.58 % .
The weighted-average grant-date fair value of options granted during 2025, 2024 and 2023 was $ 10.85 , $ 9.96 and $ 8.41 , respectively. The total intrinsic value of options exercised during the years ended December 31, 2025, 2024 and 2023, was $ 2,060,000 , $ 2,338,000 and $ 1,585,000 , respectively. The Company recorded stock option expense totaling $ 2,730,000 , $ 2,184,000 and $ 1,763,000 for the years ended December 31, 2025, 2024 and 2023, respectively.
As of December 31, 2025, there was $ 4,622,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans. That cost is expected to be recognized over a weighted-average period of 1.10 years. The total fair value of shares vested during the years ended December 31, 2025, 2024 and 2023 was $ 2,791,000 , $ 2,131,000 and $ 2,121,000 .
