First Financial Bankshares(FFIN) - 2021 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents the Company's unaudited consolidated financial statements, including balance sheets, statements of earnings, comprehensive earnings, shareholders' equity, and cash flows, along with detailed notes explaining significant accounting policies and financial instrument disclosures Consolidated Balance Sheets – Unaudited This section provides a snapshot of the Company's financial position, detailing assets, liabilities, and shareholders' equity at various reporting dates | Metric | March 31, 2021 (Unaudited) ($ thousands) | December 31, 2020 ($ thousands) | March 31, 2020 (Unaudited) ($ thousands) | | :-------------------------------- | :--------------------------------------- | :------------------------------ | :--------------------------------------- | | Total Assets | $12,102,887 | $10,904,500 | $9,701,091 | | Total Liabilities | $10,437,459 | $9,226,310 | $8,174,729 | | Total Shareholders' Equity | $1,665,428 | $1,678,190 | $1,526,362 | | Loans, net | $5,259,588 | $5,104,499 | $4,578,949 | | Available-for-sale securities | $5,109,631 | $4,393,029 | $4,107,069 | Consolidated Statements of Earnings – Unaudited This statement outlines the Company's financial performance over specific periods, presenting net earnings, earnings per share, and key components of interest and noninterest income and expense | Metric | Three-Months Ended March 31, 2021 ($ thousands) | Three-Months Ended March 31, 2020 ($ thousands) | | :--------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Net Earnings | $56,918 | $37,232 | | Net Earnings Per Share, Basic | $0.40 | $0.26 | | Total Interest Income | $90,610 | $88,100 | | Total Interest Expense | $1,786 | $7,198 | | Net Interest Income | $88,824 | $80,902 | | Provision for Credit Losses | $(1,997) | $9,850 | | Total Noninterest Income | $34,874 | $28,732 | | Total Noninterest Expense | $57,723 | $55,318 | Consolidated Statements of Comprehensive Earnings – Unaudited This statement presents the Company's net earnings and other comprehensive income items, such as unrealized gains or losses on available-for-sale securities, to arrive at total comprehensive earnings | Metric | Three-Months Ended March 31, 2021 ($ thousands) | Three-Months Ended March 31, 2020 ($ thousands) | | :-------------------------------------------------------------------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Net Earnings | $56,918 | $37,232 | | Change in unrealized gain on investment securities available-for-sale, before income taxes | $(66,770) | $73,037 | | Comprehensive Earnings | $3,532 | $93,302 | Consolidated Statements of Shareholders' Equity – Unaudited This statement details changes in the Company's equity components, including common stock, capital surplus, retained earnings, treasury stock, and accumulated other comprehensive earnings | Equity Component | Balance at March 31, 2021 ($ thousands) | Balance at December 31, 2020 ($ thousands) | Balance at March 31, 2020 ($ thousands) | | :-------------------------------- | :-------------------------------------- | :--------------------------------------- | :-------------------------------------- | | Common Stock | $1,423 | $1,422 | $1,423 | | Capital Surplus | $671,849 | $669,644 | $673,535 | | Retained Earnings | $875,147 | $836,729 | $727,828 | | Treasury Stock | $(9,385) | $(9,126) | $(8,437) | | Accumulated Other Comprehensive Earnings | $117,009 | $170,395 | $123,576 | | Total Shareholders' Equity | $1,665,428 | $1,678,190 | $1,526,362 | - Cash dividends declared for Q1 2021 were $0.13 per share, totaling $18.50 million[25] Consolidated Statements of Cash Flows – Unaudited This statement summarizes the Company's cash inflows and outflows from operating, investing, and financing activities over specific periods | Cash Flow Activity | Three-Months Ended March 31, 2021 ($ thousands) | Three-Months Ended March 31, 2020 ($ thousands) | | :---------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Net cash provided by operating activities | $96,769 | $31,232 | | Net cash used in investing activities | $(581,844) | $(566,650) | | Net cash provided by financing activities | $839,562 | $520,678 | | Cash and cash equivalents, end of period | $1,083,571 | $267,864 | Notes to Consolidated Financial Statements – Unaudited This section provides detailed explanations and disclosures supporting the consolidated financial statements, covering significant accounting policies, financial instruments, and other relevant financial information Note 1 – Summary of Significant Accounting Policies This note outlines the Company's nature of operations, basis of presentation, use of estimates, consolidation principles, stock repurchase program, acquisition details, and the adoption of new accounting standards, particularly CECL - The Company operates as a financial holding company, owning First Financial Bank, N.A. (with 78 locations in Texas) and other financial service subsidiaries, with primary revenue from loans and banking services[33] - The Board authorized a stock repurchase of up to 4.00 million common shares through September 30, 2021, with 324,802 shares repurchased and retired for $8.01 million (all in March and April 2020)[38] - The Company adopted ASC 326 (CECL methodology) effective January 1, 2020, with a transition charge to retained earnings of $589 thousand ($466 thousand net of applicable income taxes), including a $619 thousand decrease in allowance for credit losses and a $1.21 million increase in the reserve for unfunded commitments[41] Note 2 - Securities This note details the Company's debt securities portfolio, including available-for-sale securities, their fair values, unrealized gains/losses, and credit loss assessment | Metric | March 31, 2021 ($ thousands) | December 31, 2020 ($ thousands) | March 31, 2020 ($ thousands) | | :--------------------------------------- | :--------------------------- | :-------------------------- | :--------------------------- | | Total Available-for-Sale Securities (Fair Value) | $5,109,631 | $4,393,029 | $4,107,069 | | Gross Unrealized Holding Gains | $166,558 | $216,048 | $159,486 | | Gross Unrealized Holding Losses | $(18,365) | $(198) | $(2,927) | - Unrealized losses on investment securities are primarily due to changes in interest rates, not credit-related events, and no allowance for credit losses was required for available-for-sale securities[104] | Metric | Three-Months Ended March 31, 2021 ($ thousands) | Three-Months Ended March 31, 2020 ($ thousands) | | :------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Sales of Available-for-Sale Securities | $10,631 | $95,437 | | Gross Realized Gains from Security Sales | $808 | $2,062 | Note 3 – Loans Held-for-Investment and Allowance for Loan Losses This note provides detailed information on the Company's loan portfolio, segmented by type, including nonaccrual loans, troubled debt restructurings, and the allowance for credit losses methodology | Metric | March 31, 2021 ($ thousands) | December 31, 2020 ($ thousands) | March 31, 2020 ($ thousands) | | :-------------------------------- | :--------------------------- | :------------------------------ | :--------------------------- | | Total Loans Held-for-Investment | $5,322,562 | $5,171,033 | $4,639,389 | | Less: Allowance for credit losses | $(62,974) | $(66,534) | $(60,440) | | Loans, net | $5,259,588 | $5,104,499 | $4,578,949 | | Metric | March 31, 2021 ($ thousands) | December 31, 2020 ($ thousands) | March 31, 2020 ($ thousands) | | :--------------------------------------- | :--------------------------- | :------------------------------ | :--------------------------- | | Non-accrual loans | $39,333 | $42,619 | $39,226 | | Loans still accruing and past due 90 days or more | $2 | $113 | $209 | | Troubled debt restructured loans still accruing | $23 | $24 | $26 | | Total Nonperforming Loans | $39,358 | $42,756 | $39,461 | - The provision for credit losses was a reversal of $1.997 million for the three-months ended March 31, 2021, which included a reversal of loan losses of $3.429 million net of a provision for unfunded commitments of $1.432 million[116] Note 4 - Loans Held-for-Sale This note details the Company's loans held-for-sale, their valuation methods, and related income recognition | Metric | March 31, 2021 ($ thousands) | December 31, 2020 ($ thousands) | March 31, 2020 ($ thousands) | | :-------------------- | :--------------------------- | :------------------------------ | :--------------------------- | | Loans held-for-sale | $65,405 | $83,969 | $42,034 | - At March 31, 2021, $3.894 million of loans held-for-sale were valued at the lower of cost or fair value, with the remaining amounts valued under the fair value option[159] Note 5 - Derivative Financial Instruments This note describes the Company's use of interest rate lock commitments (IRLCs) and forward mortgage-backed securities contracts to manage interest rate risk, and their fair value measurement | Derivative Type | March 31, 2021 Outstanding Notional Balance ($ thousands) | December 31, 2020 Outstanding Notional Balance ($ thousands) | March 31, 2020 Outstanding Notional Balance ($ thousands) | | :-------------------------------------- | :-------------------------------------------------------- | :--------------------------------------------------------- | :-------------------------------------------------------- | | IRLCs | $180,596 | $202,906 | $187,747 | | Forward mortgage-backed securities trades | $317,500 | $198,000 | $198,000 | - All derivatives are carried at fair value in either other assets or other liabilities, through earnings in the statement of earnings, and are classified as Level 2 in the fair value disclosures[163][164][165] Note 6 - Borrowings This note provides details on the Company's borrowings, including securities sold under repurchase agreements, federal funds purchased, and FHLB advances | Borrowing Type | March 31, 2021 ($ thousands) | December 31, 2020 ($ thousands) | March 31, 2020 ($ thousands) | | :---------------------------------------------------- | :--------------------------- | :------------------------------ | :--------------------------- | | Securities sold under agreements with customers to repurchase | $523,254 | $412,743 | $410,146 | | Federal funds purchased | $25,350 | $17,350 | $1,725 | | Advances from Federal Home Loan Bank of Dallas | $0 | $0 | $446,000 | | Total Borrowings | $548,604 | $430,093 | $857,871 | Note 7 – Income Taxes This note presents the Company's income tax expense and effective tax rates, explaining the differences from the statutory federal tax rate | Metric | Three-Months Ended March 31, 2021 ($ thousands) | Three-Months Ended March 31, 2020 ($ thousands) | | :--------------- | :---------------------------------------------- | :---------------------------------------------- | | Income tax expense | $11,054 | $7,234 | | Effective tax rate | 16.26% | 16.27% | - The effective tax rates differ from the statutory federal tax rate of 21% primarily due to tax-exempt interest income, deductibility of dividends paid to the ESOP, and excess tax benefits from the directors' deferred compensation plan[169] Note 8 - Stock Option Plan and Restricted Stock Plan This note details the Company's stock option and restricted stock plans, including activity, expense, and unrecognized compensation costs | Metric | Three-Months Ended March 31, 2021 ($ thousands) | Three-Months Ended March 31, 2020 ($ thousands) | | :--------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Stock option expense | $319 | $340 | | Restricted stock expense (employees) | $290 | $275 | | Restricted stock expense (directors) | $150 | $175 | - As of March 31, 2021, total unrecognized compensation cost related to unvested stock options was $3.753 million, expected to be recognized over a weighted-average period of 1.77 years[174] - As of March 31, 2021, total unrecognized compensation cost related to unvested restricted stock was $1.701 million, expected to be recognized over a weighted-average period of 1.44 years[179] Note 9 - Fair Value Disclosures This note explains the Company's fair value measurement methodologies and hierarchy (Level 1, 2, 3) for various financial instruments, including available-for-sale securities, loans held-for-sale, and derivatives - The fair value hierarchy categorizes inputs into Level 1 (unadjusted quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (significant unobservable inputs)[183] | Financial Instrument | March 31, 2021 Fair Value ($ thousands) | Fair Value Hierarchy | | :---------------------------------------------------- | :-------------------------------------- | :------------------- | | Available-for-sale securities | $5,109,631 | Levels 1 and 2 | | Loans held-for-investment, net of allowance for credit losses | $5,273,235 | Level 3 | | Loans held-for-sale | $65,273 | Level 2 | | IRLCs | $1,645 | Level 2 | | Forward mortgage-backed securities trades asset (liability) | $2,806 | Level 2 | | Metric | March 31, 2021 ($ thousands) | December 31, 2020 ($ thousands) | March 31, 2020 ($ thousands) | | :---------------------------------------- | :--------------------------- | :------------------------------ | :--------------------------- | | Net unrealized gains on loans held-for-sale | $784 | $2,983 | $1,096 | Note 10 – Acquisition This note provides details on the acquisition of TB&T Bancshares, Inc. on January 1, 2020, including the consideration paid, assets acquired, liabilities assumed, and resulting goodwill - The Company acquired 100% of TB&T Bancshares, Inc. on January 1, 2020, by issuing 6,275,574 shares of common stock valued at $220.273 million[205][207] - The acquisition resulted in $141.923 million in goodwill, which is not amortized but tested annually for impairment and is not deductible for federal income tax purposes[207] - The primary purpose of the acquisition was to expand the Company's market share near the Houston market[206] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations for the quarter ended March 31, 2021, including an overview of performance, impact of COVID-19, critical accounting policies, and detailed analysis of income, expenses, balance sheet items, capital, interest rate risk, and liquidity Forward-Looking Statements This section highlights that the report contains forward-looking statements subject to various risks, including economic conditions, COVID-19, regulatory changes, market volatility, and cyber attacks - This section contains forward-looking statements based on current management information, subject to various risks including general economic conditions, the impact of COVID-19, government and regulatory responses, market volatility, and cyber attacks[210][211] - The Company does not undertake any obligation to publicly update or revise any forward-looking statements, except as required by law[212] Introduction This introduction outlines the Company's primary revenue sources, such as interest on loans and investments, and key performance metrics used to evaluate its financial health - The Company's primary revenue sources are interest on loans and investments, trust fees, gain on sale of mortgage loans, and service charges, with deposits from its subsidiary bank being the main funding source[215] - Performance is measured by return on average assets, return on average equity, regulatory capital ratios, net interest margin, and efficiency ratio[215] Recent Coronavirus Developments This section details the Company's involvement in the PPP loan program and the broader impact of government stimulus measures related to the COVID-19 pandemic - The Company assisted borrowers in the PPP loan program, funding approximately 8,500 loans totaling $920.13 million through March 31, 2021, with $531.81 million outstanding[217] - Government stimulus measures include extensions of moratoriums on evictions/foreclosures, student loan deferrals, mortgage forbearance programs, and the American Rescue Plan Act of 2021, which provided additional PPP funding and direct cash payments[218][220] - The PPP Extension Act of 2021 extended the Paycheck Protection Program to June 30, 2021[220] Critical Accounting Policies This section identifies the allowance for credit losses and the valuation of financial instruments as the Company's most critical accounting policies, requiring significant estimates - The Company identifies its allowance for credit losses and the valuation of financial instruments as its most critical accounting policies, requiring significant estimates and assumptions that could materially impact financial statements[224] Stock Repurchase This section details the Board's authorization for common share repurchases and the number of shares repurchased and retired to date - The Board of Directors authorized the repurchase of up to 4.00 million common shares through September 30, 2021, with 324,802 shares repurchased and retired for $8.01 million (all during March and April 2020)[226] Acquisition This section summarizes the acquisition of TB&T Bancshares, Inc., including the consideration paid and the resulting goodwill - The acquisition of TB&T Bancshares, Inc. was completed on January 1, 2020, for $220.27 million in common shares, resulting in $141.92 million in goodwill[227] Participation in PPP Loan Program This section provides a breakdown of the Company's participation in the PPP loan program, including loans originated, outstanding amounts, and recognized interest income | PPP Round | Number of Loans Originated | Dollars of Loans Originated ($ thousands) | Number of Loans Outstanding at March 31, 2021 | Dollars of Loans Outstanding at March 31, 2021 ($ thousands) | | :---------- | :------------------------- | :---------------------------------------- | :-------------------------------------------- | :----------------------------------------------------------- | | PPP Round 1 | 6,530 | $703,450 | 2,759 | $315,879 | | PPP Round 2 | 2,016 | $216,683 | 1,990 | $215,931 | | PPP Totals | 8,546 | $920,133 | 4,749 | $531,810 | - The Company recognized $6.25 million in interest income related to PPP loan fees during Q1 2021, with remaining deferred fees totaling approximately $16 million at March 31, 2021, including $11 million for 2021 originations[228] Implementation of New Accounting Standard for Allowance for Credit Losses This section discusses the Company's adoption of ASC 326 (CECL methodology) and the resulting transition adjustment to retained earnings - The Company adopted ASC 326 (CECL methodology) effective January 1, 2020, after electing to delay implementation under the CARES Act[232] - The transition adjustment to retained earnings was a charge of $589 thousand ($466 thousand net of applicable income taxes), comprising a $619 thousand decrease in allowance for credit losses and a $1.21 million increase in the reserve for unfunded commitments[232] Results of Operations This section analyzes the Company's financial performance, including net earnings, net interest income, noninterest income, and noninterest expense, for the reporting period Performance Summary This summary highlights key financial performance metrics, including net earnings, diluted EPS, return on average assets, and return on average equity | Metric | Three-Months Ended March 31, 2021 | Three-Months Ended March 31, 2020 | Change (%) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :--------- | | Net Earnings | $56.92 million | $37.23 million | 52.87% | | Diluted EPS | $0.40 | $0.26 | 53.85% | | Return on Average Assets | 2.05% | 1.63% | 0.42 pp | | Return on Average Equity | 13.83% | 10.11% | 3.72 pp | Net Interest Income This section analyzes the Company's net interest income, average earning assets, and net interest margin, explaining the factors influencing their changes | Metric | Three-Months Ended March 31, 2021 ($ millions) | Three-Months Ended March 31, 2020 ($ millions) | Change ($ millions) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------ | | Tax-equivalent Net Interest Income | $92.37 | $82.74 | $9.63 | | Average Earning Assets | $10.56 billion | $8.50 billion | $2.06 billion | | Net Interest Margin (tax equivalent) | 3.55% | 4.25% | (0.70 pp) | - The increase in net interest income was largely due to growth in investment securities and the impact of the PPP loan program, though net interest margin decreased due to historically low short-term interest rates, a flat/inverted yield curve, and $1.08 billion in excess liquidity[238][242] Noninterest Income This section details the components of the Company's noninterest income, including trust fees, service charges, ATM/interchange fees, and gains on mortgage loan sales | Noninterest Income Category | Three-Months Ended March 31, 2021 ($ thousands) | Three-Months Ended March 31, 2020 ($ thousands) | Increase (Decrease) ($ thousands) | | :------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------- | | Trust fees | $8,299 | $7,437 | $862 | | Service charges on deposit accounts | $4,793 | $5,915 | $(1,122) | | ATM, interchange and credit card fees | $8,677 | $7,400 | $1,277 | | Gain on sale and fees on mortgage loans | $9,894 | $3,852 | $6,042 | | Net gain on sale of available-for-sale securities | $808 | $2,062 | $(1,254) | | Total Noninterest Income | $34,874 | $28,732 | $6,142 | - The fair value of trust assets managed increased by 22.55% to $7.54 billion at March 31, 2021, compared to $6.15 billion at March 31, 2020[246] - Federal Reserve rules on interchange fees for institutions exceeding $10 billion in assets could result in an estimated $14.00 million annual (pre-tax) reduction in ATM and interchange fees, though temporary relief extends compliance until 2022[248] Noninterest Expense This section analyzes the Company's noninterest expenses, including salaries, occupancy, equipment, and FDIC assessment fees, and their impact on the efficiency ratio | Noninterest Expense Category | Three-Months Ended March 31, 2021 ($ thousands) | Three-Months Ended March 31, 2020 ($ thousands) | Increase (Decrease) ($ thousands) | | :--------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------- | | Total Salaries and Employee Benefits | $34,931 | $29,642 | $5,289 | | Net occupancy expense | $3,147 | $3,027 | $120 | | Equipment expense | $2,164 | $2,075 | $89 | | FDIC assessment fees | $701 | $45 | $656 | | Total Noninterest Expense | $57,723 | $55,318 | $2,405 | | Efficiency Ratio | 45.36% | 49.63% | (4.27 pp) | - The increase in salaries, commissions, and employee benefits was driven by annual merit-based pay increases, higher mortgage-related commission expenses, and increases in incentive compensation and profit-sharing expenses[253] - Other noninterest expense in Q1 2020 included $3.81 million in technology contract termination and conversion costs related to the TB&T Bancshares, Inc. acquisition[253] Balance Sheet Review This section provides a detailed review of key balance sheet components, including loans, asset quality, deposits, and borrowings, and their changes over time Loans This section details the Company's loan portfolio, including total loans held-for-investment and outstanding PPP loans, and changes in segmentation for credit risk assessment | Loan Category | March 31, 2021 ($ thousands) | December 31, 2020 ($ thousands) | March 31, 2020 ($ thousands) | | :-------------------------------- | :--------------------------- | :------------------------------ | :--------------------------- | | Total Loans Held-for-Investment | $5,322,562 | $5,171,033 | $4,639,389 | | PPP loans outstanding | $531,810 | N/A | N/A | - The Company expanded its loan portfolio segmentation from four to ten segments (C&I, Municipal, Agricultural, Construction & Development, Farm, Non-Owner Occupied CRE, Owner Occupied CRE, Residential, Consumer Auto, and Consumer Non-Auto) to improve credit risk assessment under ASC 326[257] Asset Quality This section assesses the Company's asset quality, including nonperforming assets, provision for credit losses, and allowance for credit losses, along with industry exposure | Metric | March 31, 2021 ($ thousands) | December 31, 2020 ($ thousands) | March 31, 2020 ($ thousands) | | :---------------------------------------------------- | :--------------------------- | :------------------------------ | :--------------------------- | | Total Nonperforming Assets | $39,658 | $42,898 | $40,444 | | Nonperforming Assets as % of Loans Held-for-Investment and Foreclosed Assets | 0.75% | 0.83% | 0.87% | | Provision for Credit Losses (Reversal) | $(2,000) | N/A | $9,850 | | Allowance for Credit Losses as % of Loans Held-for-Investment | 1.18% | 1.29% | 1.30% | | Allowance for Credit Losses as % of Loans Held-for-Investment (excluding PPP loans) | 1.31% | 1.42% | 1.30% | - The net reversal of provision for credit losses in Q1 2021 reflects continued improvement in the economic outlook for Texas markets and overall improvements in asset quality[267] | Industry Exposure (excluding PPP loans) | March 31, 2021 ($ thousands) | % of Total Loans Held-for-Investment (excluding PPP) | Classified Loans ($ thousands) | Nonaccrual Loans ($ thousands) | | :-------------------------------------- | :--------------------------- | :--------------------------------------------------- | :----------------------------- | :----------------------------- | | Oil and Gas | $105,261 | 2.20% | $10,079 | $4,759 | | Retail/Restaurant/Hospitality | $430,195 | 8.98% | $45,214 | $6,575 | Interest-Bearing Demand Deposits in Banks This section reports the Company's interest-bearing deposits in banks, primarily held at the Federal Reserve Bank of Dallas | Metric | March 31, 2021 ($ thousands) | December 31, 2020 ($ thousands) | March 31, 2020 ($ thousands) | | :------------------------------------ | :--------------------------- | :------------------------------ | :--------------------------- | | Interest-bearing deposits in banks | $893,221 | $517,971 | $76,378 | - At March 31, 2021, $892.82 million of these deposits were maintained at the Federal Reserve Bank of Dallas[268] Available-for-Sale Securities This section provides details on the Company's available-for-sale securities portfolio, including fair value, yield, weighted average life, and modified duration | Metric | March 31, 2021 ($ thousands) | December 31, 2020 ($ thousands) | | :-------------------------------- | :--------------------------- | :------------------------------ | | Available-for-Sale Securities (Fair Value) | $5,109,631 | $4,393,029 | | Overall Tax Equivalent Yield | 2.53% | N/A | | Weighted Average Life | 5.13 years | N/A | | Modified Duration | 4.55 years | N/A | Deposits This section presents the Company's total deposits and the overall cost of deposits for the reporting period | Metric | March 31, 2021 ($ thousands) | December 31, 2020 ($ thousands) | March 31, 2020 ($ thousands) | | :----------- | :--------------------------- | :------------------------------ | :--------------------------- | | Total Deposits | $9,413,447 | $8,675,817 | $7,210,466 | | Total Cost of Deposits (Q1) | 0.08% | N/A | 0.37% | Borrowings This section details the Company's total borrowings and the weighted average interest rate paid on these borrowings | Metric | March 31, 2021 ($ thousands) | December 31, 2020 ($ thousands) | March 31, 2020 ($ thousands) | | :--------------- | :--------------------------- | :------------------------------ | :--------------------------- | | Total Borrowings | $548,604 | $430,093 | $857,871 | | Weighted Average Interest Rate Paid (Q1) | 0.08% | N/A | 0.45% | Capital Resources This section reviews the Company's capital resources, including shareholders' equity and various regulatory capital ratios, ensuring compliance with Basel III requirements | Metric | March 31, 2021 | December 31, 2020 | March 31, 2020 | | :------------------------------------------ | :------------- | :---------------- | :------------- | | Total Shareholders' Equity | $1.67 billion | $1.68 billion | $1.53 billion | | Total Capital to Risk-Weighted Assets | 21.47% | 22.03% | 20.65% | | Tier 1 Capital to Risk-Weighted Assets | 20.32% | 20.79% | 19.55% | | Common Equity Tier 1 to Risk-Weighted Assets | 20.32% | 20.79% | 19.55% | | Leverage Ratio | 11.55% | 11.86% | 12.49% | - All regulatory capital ratios for the Company and its subsidiary bank exceeded the minimum required levels under the Basel III regulatory capital framework, including the fully phased-in capital conservation buffer[282][284] Interest Rate Risk This section describes the Company's approach to managing interest rate risk through asset-liability management and earnings simulation, assessing the impact of rate changes on net interest income - The Company manages interest rate risk through its asset-liability management strategy and uses an earnings simulation model to quantify the effects of various interest rate scenarios on projected net interest income[287][288] - The balance sheet was in an asset-sensitive position as of March 31, 2021, and December 31, 2020, indicating that net interest income would generally benefit from rising interest rates[291] | Change in Interest Rates (basis points) | Percentage change in net interest income (March 31, 2021) | | :-------------------------------------- | :-------------------------------------------------------- | | +400 | 17.54% | | +300 | 13.39% | | +200 | 9.05% | | +100 | 4.51% | | -100 | (4.72)% | | -200 | (7.21)% | Liquidity This section outlines the Company's liquidity position, including cash, marketable assets, core deposits, and access to various funding sources and credit lines - The Company maintains strong liquidity through cash, marketable assets, core deposits, and access to funding sources including FHLB lines of credit ($1.53 billion available at March 31, 2021) and a $25.00 million revolving line of credit with Frost Bank[293][294] - Parent company cash and cash equivalents totaled $121.79 million at March 31, 2021, with subsidiaries having $260.95 million available for intercompany dividends without prior regulatory approval[297][305] | Commitment Type | Total Notional Amounts Committed (March 31, 2021, $ thousands) | | :-------------------------------- | :----------------------------------------------------------- | | Unfunded lines of credit | $886,274 | | Unfunded commitments to extend credit | $788,842 | | Standby letters of credit | $41,202 | | Total commercial commitments | $1,716,318 | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section refers to the discussion on interest rate risk within Item 2, identifying it as a significant market risk for the Company - Management considers interest rate risk to be a significant market risk for the Company, with further disclosure provided in the 'Interest Rate Risk' section of Item 2[309] Item 4. Controls and Procedures Management, including the principal executive and financial officers, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2021, concluding they were effective at a reasonable assurance level. No significant changes in internal controls were reported - The Company's disclosure controls and procedures were evaluated and concluded to be effective at the reasonable assurance level as of March 31, 2021[311] - There were no significant changes in internal controls over financial reporting or other factors that materially affected these controls subsequent to the evaluation[312] PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company and its subsidiaries are involved in routine lawsuits in the ordinary course of business, but there are no material pending legal proceedings or contemplated governmental actions - There are no material pending legal proceedings to which the Company or its subsidiaries are currently subject[314] - No proceedings are pending or known to be contemplated by any governmental authorities, other than regular, routine examinations[314] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 - There has been no material change in the risk factors previously disclosed under Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2020[315] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable to the Company for the reporting period - Not Applicable[316] Item 3. Defaults Upon Senior Securities This item is not applicable to the Company for the reporting period - Not Applicable[316] Item 4. Mine Safety Disclosures This item is not applicable to the Company for the reporting period - Not Applicable[316] Item 5. Other Information This item is not applicable to the Company for the reporting period - Not Applicable[316] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including various agreements, corporate documents, stock plans, and certifications - The exhibits include agreements (e.g., acquisition, loan), corporate documents (e.g., Certificate of Formation, Bylaws), stock and incentive plans (e.g., 2021 Omnibus Stock and Incentive Plan), and certifications (CEO, CFO)[317] Signatures The report is duly signed on behalf of First Financial Bankshares, Inc. by F. Scott Dueser (Chairman of the Board, President and CEO) and James R. Gordon (Executive Vice President and CFO, Secretary and Treasurer) on May 5, 2021 - The report was signed by F. Scott Dueser, Chairman of the Board, President and Chief Executive Officer, and James R. Gordon, Executive Vice President and Chief Financial Officer, Secretary and Treasurer[322] - The signing date for the report was May 5, 2021[323]