First Financial Bankshares(FFIN) - 2024 Q1 - Quarterly Results

First Quarter 2024 Earnings Release Highlights Executive Summary First Financial Bankshares reported a slight increase in first-quarter 2024 earnings to $53.40 million, up from $52.57 million in the prior year, with basic and diluted earnings per share remaining flat at $0.37 | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | Change (Millions) | | :----------------------- | :------------------- | :------------------- | :------------------ | | Earnings | $53.40 | $52.57 | +$0.83 | | Basic EPS | $0.37 | $0.37 | $0.00 | | Diluted EPS | $0.37 | $0.37 | $0.00 | - Key factors contributing to the Q1 2024 results compared to Q1 2023 included: * Increase in net interest income: $3.96 million * Decrease in provision for credit losses: $1.97 million * Increase in trust fees: $1.53 million * Offset by an increase in salary and employee benefits expenses: $5.22 million[3] CEO Commentary F. Scott Dueser, Chairman, President, and CEO, highlighted the increase in net interest income driven by organic loan and deposit growth, noting strategic use of bond portfolio maturities to fund growth and enhance liquidity - Net interest income increase was achieved through organic loan and deposit growth during the quarter[4] - Cash flow from maturing bond portfolio is being used to fund organic loan growth, bolster liquidity, and repurchase securities at higher rates[4] - The company maintains strong regulatory capital ratios, a diversified deposit base, and access to multiple liquidity sources, reflecting financial safety and security[4] Detailed Financial Performance Net Interest Income and Margin Net interest income for Q1 2024 increased year-over-year and quarter-over-quarter, reaching $100.24 million, with the net interest margin remaining stable at 3.34% as average interest-earning assets grew to $12.37 billion | Metric | Q1 2024 (Millions) | Q4 2023 (Millions) | Q1 2023 (Millions) | | :-------------------------- | :------------------- | :------------------- | :------------------- | | Net Interest Income | $100.24 | $97.51 | $96.29 | | Net Interest Margin (tax equivalent) | 3.34% | 3.33% | 3.34% | | Average Interest-Earning Assets | $12.37 billion | - | $12.07 billion | Credit Quality The provision for credit losses significantly decreased in Q1 2024 compared to the prior year, while the allowance for credit losses increased, net charge-offs were recorded, and nonperforming assets and classified loans saw an increase | Metric | Q1 2024 (Thousands) | Q1 2023 (Thousands) | Change (Thousands) | | :-------------------------- | :-------------------- | :-------------------- | :------------------- | | Provision for Credit Losses | $808 | $2,780 | -$1,972 | | Net Charge-offs (Recoveries) | $428 (charge-offs) | $277 (recoveries) | -$705 | | Metric | March 31, 2024 (Millions) | March 31, 2023 (Millions) | Change (Millions) | | :-------------------------------- | :-------------------------- | :-------------------------- | :------------------ | | Allowance for Credit Losses | $89.56 | $80.82 | +$8.74 | | Allowance for Credit Losses (% of loans) | 1.24% | 1.23% | +0.01% | | Reserve for Unfunded Commitments | $7.46 | $10.40 | -$2.94 | | Nonperforming Assets (% of loans & foreclosed assets) | 0.51% | 0.37% | +0.14% | | Classified Loans | $201.59 | $157.06 | +$44.53 | Noninterest Income Total noninterest income increased in Q1 2024, primarily driven by higher trust fees, service charges on deposits, and mortgage income, despite no gains on sales of assets, foreclosed assets, and securities | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | Change (Millions) | | :-------------------------------- | :------------------- | :------------------- | :------------------ | | Total Noninterest Income | $29.38 | $28.01 | +$1.37 | | Trust Fees | $11.38 | $9.85 | +$1.53 | | Service Charges on Deposits | $6.25 | $6.04 | +$0.21 | | Mortgage Income | $3.13 | $2.97 | +$0.16 | | Gains on Sales of Assets, Foreclosed Assets & Securities | $0.00 | $0.976 | -$0.976 | - Increase in trust fees was driven by an increase in the market value of trust assets managed to $10.15 billion at March 31, 2024, from $9.10 billion at March 31, 2023[8] - Service charges on deposits increased due to the growth of over 2,000 net new accounts opened during Q1 2024[12] Noninterest Expense and Efficiency Noninterest expense increased significantly in Q1 2024, primarily due to higher salary and employee benefits, profit sharing accruals, medical insurance, and officer incentive accruals, leading to an increase in the efficiency ratio | Metric | Q1 2024 (Millions) | Q1 2023 (Millions) | Change (Millions) | | :-------------------------- | :------------------- | :------------------- | :------------------ | | Total Noninterest Expense | $63.94 | $57.26 | +$6.68 | | Efficiency Ratio | 48.37% | 44.93% | +3.44% | - Salary, commissions, and employee benefit costs increased to $36.68 million (Q1 2024) from $31.46 million (Q1 2023), primarily due to merit-based and market-driven pay increases, a $1.65 million increase in profit sharing accruals, a $1.29 million increase in medical insurance expense, and a $1.18 million increase in officer incentive accruals[12] - Other noninterest expenses (excluding salary-related costs) increased by $1.46 million, largely due to increases in software amortization and FDIC insurance fees, including an additional $440 thousand for the FDIC special assessment[12] Balance Sheet and Capital Position Key Balance Sheet Items Consolidated total assets grew to $13.19 billion as of March 31, 2024, with loans increasing significantly year-over-year and showing annualized growth during the quarter, alongside an increase in deposits | Metric | March 31, 2024 (Billions) | March 31, 2023 (Billions) | Change (Billions) | | :---------------- | :-------------------------- | :-------------------------- | :------------------ | | Total Assets | $13.19 | $13.01 | +$0.18 | | Loans | $7.23 | $6.58 | +$0.65 | | Deposits | $11.29 | $10.94 | +$0.35 | - Loans grew by $80.62 million, or 4.51% annualized, during the first quarter of 2024 compared to December 31, 2023[10] Shareholders' Equity Shareholders' equity remained relatively stable quarter-over-quarter but increased year-over-year, while the unrealized loss on the securities portfolio, net of tax, increased slightly from the previous quarter | Metric | March 31, 2024 (Billions) | Dec 31, 2023 (Billions) | March 31, 2023 (Billions) | | :-------------------------------- | :-------------------------- | :------------------------ | :-------------------------- | | Shareholders' Equity | $1.49 | $1.50 | $1.37 | | Unrealized Loss on Securities (net of tax) | $441.23 million | $403.30 million | $458.25 million | Company Information & Disclosures About First Financial Bankshares, Inc. First Financial Bankshares, Inc. is a financial holding company headquartered in Abilene, Texas, operating through its subsidiary, First Financial Bank, N.A., with 79 locations across Texas, and also includes First Financial Trust & Asset Management Company, N.A., and First Technology Services, Inc - First Financial Bankshares, Inc. is a financial holding company operating through First Financial Bank, N.A., with 79 locations in Texas[13] - The company also operates First Financial Trust & Asset Management Company, N.A. (nine locations) and First Technology Services, Inc[13] - The company's stock is listed on The Nasdaq Global Select Market under the trading symbol FFIN[14] Forward-Looking Statements This section serves as a disclaimer, indicating that certain statements in the report are forward-looking and subject to risks and uncertainties, with actual results potentially differing materially due to various factors - Statements identified by words such as 'expect,' 'plan,' 'anticipate,' 'target,' 'forecast,' 'project,' and 'goal' are considered forward-looking statements[16] - Actual results may differ materially due to risks and uncertainties, including competition, changes in monetary and fiscal policies, interest rate policies, economic impact of oil and gas prices, changes in loan demand, fluctuations in collateral value, inflation, and acquisitions[16] - The company does not undertake any obligation to update publicly or revise any forward-looking statements due to new information, future events, or otherwise[16] Consolidated Financial Summary (Unaudited) Consolidated Balance Sheets The consolidated balance sheet provides a snapshot of the company's assets, liabilities, and shareholders' equity across multiple quarters, showing growth in total assets and loans held-for-investment, alongside an increase in total deposits | Metric (in thousands) | Mar. 31, 2024 | Dec. 31, 2023 | Sept. 30, 2023 | June 30, 2023 | Mar. 31, 2023 | | :-------------------------------- | :------------ | :------------ | :------------- | :------------ | :------------ | | ASSETS | | | | | | | Total assets | $13,191,158 | $13,105,594 | $12,777,418 | $12,825,437 | $13,007,986 | | Loans, held-for-investment | $7,229,410 | $7,148,791 | $6,994,696 | $6,777,570 | $6,576,215 | | Investment securities | $4,658,526 | $4,732,762 | $4,652,537 | $5,066,262 | $5,298,557 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | Total deposits | $11,289,808 | $11,138,300 | $10,716,523 | $10,807,560 | $10,936,418 | | Shareholders' equity | $1,491,367 | $1,498,900 | $1,240,110 | $1,367,233 | $1,372,853 | Consolidated Income Statements The consolidated income statement details the company's revenues and expenses, showing an increase in net interest income and total noninterest income, alongside a rise in noninterest expenses, resulting in a net income of $53.40 million for Q1 2024 | Metric (in thousands) | Mar. 31, 2024 | Dec. 31, 2023 | Sept. 30, 2023 | June 30, 2023 | Mar. 31, 2023 | | :-------------------------------- | :------------ | :------------ | :------------- | :------------ | :------------ | | Interest income | $149,495 | $142,207 | $135,351 | $129,005 | $121,508 | | Interest expense | $49,253 | $44,699 | $41,202 | $33,139 | $25,222 | | Net interest income | $100,242 | $97,508 | $94,149 | $95,866 | $96,286 | | Provision for credit losses | $808 | $0 | $2,276 | $5,573 | $2,781 | | Noninterest income | $29,383 | $21,979 | $28,070 | $29,947 | $28,007 | | Noninterest expense | $63,940 | $63,474 | $59,539 | $57,613 | $57,256 | | Net income | $53,397 | $45,982 | $49,556 | $50,873 | $52,568 | Per Common Share Data Per common share data shows stable basic and diluted net income per share at $0.37 for Q1 2024 and Q1 2023, with cash dividends declared increasing slightly year-over-year, while book value and tangible book value saw minor fluctuations | Metric | Mar. 31, 2024 | Dec. 31, 2023 | Sept. 30, 2023 | June 30, 2023 | Mar. 31, 2023 | | :---------------------- | :------------ | :------------ | :------------- | :------------ | :------------ | | Net income - basic | $0.37 | $0.32 | $0.35 | $0.36 | $0.37 | | Net income - diluted | $0.37 | $0.32 | $0.35 | $0.36 | $0.37 | | Cash dividends declared | $0.18 | $0.18 | $0.18 | $0.18 | $0.17 | | Book value | $10.44 | $10.50 | $8.69 | $9.58 | $9.62 | | Tangible book value | $8.24 | $8.30 | $6.48 | $7.37 | $7.41 | Performance Ratios Key performance ratios for Q1 2024 include a return on average assets of 1.62% and a return on average equity of 14.43%, with the net interest margin remaining at 3.34% and the efficiency ratio increasing to 48.37% | Metric | Mar. 31, 2024 | Dec. 31, 2023 | Sept. 30, 2023 | June 30, 2023 | Mar. 31, 2023 | | :-------------------------- | :------------ | :------------ | :------------- | :------------ | :------------ | | Return on average assets | 1.62% | 1.42% | 1.53% | 1.58% | 1.65% | | Return on average equity | 14.43% | 14.26% | 14.51% | 14.89% | 16.32% | | Return on average tangible equity | 18.29% | 18.92% | 18.90% | 19.33% | 21.51% | | Net interest margin (tax equivalent) | 3.34% | 3.33% | 3.22% | 3.29% | 3.34% | | Efficiency ratio | 48.37% | 51.97% | 47.62% | 44.74% | 44.93% | Selected Financial Data (Unaudited) Allowance for Credit Losses Details This section provides a detailed breakdown of the allowance for loan losses and unfunded commitments, including movements from charge-offs, recoveries, and provisions, along with key related ratios | Metric (in thousands) | Mar. 31, 2024 | Dec. 31, 2023 | Sept. 30, 2023 | June 30, 2023 | Mar. 31, 2023 | | :-------------------------------- | :------------ | :------------ | :------------- | :------------ | :------------ | | Balance at beginning of period (ALL) | $88,734 | $89,714 | $86,541 | $80,818 | $75,834 | | Net recoveries (charge-offs) | $(428) | $(980) | $(648) | $(799) | $277 | | Provision for loan losses | $1,256 | $0 | $3,821 | $6,522 | $4,707 | | Balance at end of period (ALL) | $89,562 | $88,734 | $89,714 | $86,541 | $80,818 | | Balance at end of period (AFUC) | $7,455 | $7,903 | $7,903 | $9,448 | $10,397 | | ALL / period-end loans held-for-investment | 1.24% | 1.24% | 1.28% | 1.28% | 1.23% | | ALL / nonperforming loans | 247.48% | 256.36% | 229.44% | 296.13% | 334.06% | | Net charge-offs (recoveries) / average total loans (annualized) | 0.02% | 0.06% | 0.04% | 0.05% | (0.02)% | Loan Portfolio Composition The loan portfolio held-for-investment is categorized into Commercial, Agricultural, Real Estate, and Consumer loans, with Real Estate loans constituting the largest segment, including significant Residential and Owner Occupied CRE components | Loan Category (in thousands) | Mar. 31, 2024 | Dec. 31, 2023 | Sept. 30, 2023 | June 30, 2023 | Mar. 31, 2023 | | :-------------------------------- | :------------ | :------------ | :------------- | :------------ | :------------ | | Total Commercial | $1,402,529 | $1,379,661 | $1,326,598 | $1,237,840 | $1,176,065 | | Agricultural | $87,882 | $84,890 | $81,876 | $82,032 | $77,017 | | Total Real Estate | $5,037,914 | $5,007,955 | $4,891,348 | $4,772,402 | $4,637,872 | | - Residential | $1,918,573 | $1,834,593 | $1,788,913 | $1,698,679 | $1,628,841 | | - Owner Occupied CRE | $1,032,845 | $1,037,281 | $1,002,913 | $1,011,511 | $1,043,018 | | Total Consumer | $701,085 | $676,285 | $694,874 | $685,296 | $685,261 | | Total loans held-for-investment | $7,229,410 | $7,148,791 | $6,994,696 | $6,777,570 | $6,576,215 | Asset Quality Metrics This section details the summary of loan classifications and nonperforming assets, showing an increase in total classified loans and nonperforming assets as a percentage of loans and total assets | Metric (in thousands) | Mar. 31, 2024 | Dec. 31, 2023 | Sept. 30, 2023 | June 30, 2023 | Mar. 31, 2023 | | :-------------------------------- | :------------ | :------------ | :------------- | :------------ | :------------ | | Total classified loans | $201,587 | $176,213 | $179,105 | $175,139 | $157,056 | | Total nonperforming loans | $36,190 | $34,613 | $39,101 | $29,224 | $24,193 | | Foreclosed assets | $1,014 | $483 | $597 | $25 | $196 | | Total nonperforming assets | $37,204 | $35,096 | $39,698 | $29,249 | $24,389 | | As a % of loans held-for-investment and foreclosed assets | 0.51% | 0.49% | 0.57% | 0.43% | 0.37% | | As a % of end of period total assets | 0.28% | 0.27% | 0.31% | 0.23% | 0.19% | Capital Ratios The company's capital ratios remain strong, with Common Equity Tier 1, Tier 1, and Total Capital ratios all above 18% as of March 31, 2024, indicating a robust capital position | Capital Ratio | Mar. 31, 2024 | Dec. 31, 2023 | Sept. 30, 2023 | June 30, 2023 | Mar. 31, 2023 | | :-------------------- | :------------ | :------------ | :------------- | :------------ | :------------ | | Common equity Tier 1 capital ratio | 18.60% | 18.50% | 18.35% | 18.48% | 18.68% | | Tier 1 capital ratio | 18.60% | 18.50% | 18.35% | 18.48% | 18.68% | | Total capital ratio | 19.70% | 19.62% | 19.49% | 19.62% | 19.79% | | Tier 1 leverage ratio | 12.12% | 12.06% | 12.00% | 11.81% | 11.53% | | Tangible common equity ratio | 9.14% | 9.26% | 7.42% | 8.41% | 8.33% | | Equity/Assets ratio | 11.31% | 11.44% | 9.71% | 10.66% | 10.55% | Detailed Noninterest Income Breakdown This section provides a comprehensive breakdown of noninterest income sources, showing increases in trust fees, service charges on deposits, and mortgage loan gains, while gains on sales of securities and assets were absent in Q1 2024 | Noninterest Income (in thousands) | Mar. 31, 2024 | Dec. 31, 2023 | Sept. 30, 2023 | June 30, 2023 | Mar. 31, 2023 | | :-------------------------------- | :------------ | :------------ | :------------- | :------------ | :------------ | | Trust fees | $11,379 | $10,678 | $10,050 | $9,883 | $9,845 | | Service charges on deposits | $6,246 | $6,523 | $6,509 | $6,310 | $6,036 | | Debit card fees | $4,891 | $5,024 | $5,041 | $6,720 | $4,936 | | Credit card fees | $631 | $631 | $694 | $711 | $609 | | Gain on sale and fees on mortgage loans | $3,128 | $1,940 | $3,442 | $3,534 | $2,974 | | Net gain (loss) on sale of available-for-sale securities | $0 | $(6,205) | $(972) | $46 | $12 | | Net gain (loss) on sale of foreclosed assets | $0 | $23 | $(10) | $(1) | $34 | | Net gain (loss) on sale of assets | $0 | $(101) | $696 | $0 | $930 | | Interest on loan recoveries | $555 | $536 | $698 | $475 | $346 | | Other noninterest income | $2,553 | $2,930 | $1,922 | $2,269 | $2,285 | | Total noninterest income | $29,383 | $21,979 | $28,070 | $29,947 | $28,007 | Detailed Noninterest Expense Breakdown This section provides a detailed breakdown of noninterest expenses, highlighting increases in salaries, commissions, and employee benefits, profit sharing, and software amortization and expense, contributing to the overall rise in expenses | Noninterest Expense (in thousands) | Mar. 31, 2024 | Dec. 31, 2023 | Sept. 30, 2023 | June 30, 2023 | Mar. 31, 2023 | | :-------------------------------- | :------------ | :------------ | :------------- | :------------ | :------------ | | Salaries, commissions and employee benefits, excluding profit sharing | $35,003 | $34,560 | $32,755 | $31,796 | $31,431 | | Profit sharing expense | $1,680 | $1,193 | $180 | $(30) | $30 | | Net occupancy expense | $3,470 | $3,348 | $3,565 | $3,423 | $3,430 | | Equipment expense | $2,237 | $2,020 | $2,200 | $2,198 | $2,127 | | FDIC insurance premiums | $1,965 | $3,105 | $1,573 | $1,417 | $1,654 | | Debit card expense | $3,058 | $3,229 | $3,284 | $3,221 | $3,199 | | Legal, tax and professional fees | $2,734 | $3,125 | $3,007 | $2,847 | $2,687 | | Audit fees | $333 | $587 | $551 | $563 | $540 | | Printing, stationery and supplies | $447 | $492 | $512 | $740 | $710 | | Amortization of intangible assets | $157 | $228 | $228 | $228 | $228 | | Advertising, meals and public relations | $1,455 | $1,146 | $1,622 | $1,789 | $1,475 | | Operational and other losses | $1,154 | $1,096 | $959 | $856 | $931 | | Software amortization and expense | $3,005 | $3,017 | $2,441 | $2,519 | $2,311 | | Other noninterest expense | $7,242 | $6,328 | $6,662 | $6,046 | $6,503 | | Total noninterest expense | $63,940 | $63,474 | $59,539 | $57,613 | $57,256 | Net Interest Income and Margin Analysis This analysis provides a detailed breakdown of average balances, interest income/expense, and corresponding yields/rates for interest-earning assets and interest-bearing liabilities over several quarters, illustrating the components contributing to the net interest income and margin | Metric | Mar. 31, 2024 | Dec. 31, 2023 | Sept. 30, 2023 | June 30, 2023 | Mar. 31, 2023 | | :-------------------------------- | :------------ | :------------ | :------------- | :------------ | :------------ | | Interest-earning assets: | | | | | | | Average Balance (Total) | $12,365,145 | $11,927,332 | $11,959,628 | $12,047,485 | $12,069,171 | | Interest (Total) | $152,068 | $144,856 | $138,174 | $131,955 | $124,639 | | Yield / Rate (Total) | 4.95% | 4.82% | 4.58% | 4.39% | 4.19% | | Interest-bearing liabilities: | | | | | | | Average Balance (Total) | $8,328,496 | $8,007,918 | $7,880,440 | $7,752,748 | $7,705,655 | | Interest (Total) | $49,253 | $44,699 | $41,202 | $33,139 | $25,222 | | Yield / Rate (Total) | 2.38% | 2.21% | 2.07% | 1.71% | 1.33% | | Net interest income and margin (tax equivalent) | $102,815 (3.34%) | $100,157 (3.33%) | $96,972 (3.22%) | $98,816 (3.29%) | $99,417 (3.34%) |