FIRST FINANCIAL BANKSHARES ANNOUNCES FOURTH QUARTER 2022 EARNINGS AND 36TH YEAR OF CONSECUTIVE ANNUAL EARNINGS GROWTH

ABILENE, Texas, Jan. 19, 2023 /PRNewswire/ -- First Financial Bankshares, Inc. (the "Company," "we," "us" or "our") (NASDAQ: FFIN) today reported earnings of $58.67 million for the fourth quarter of 2022 compared to earnings of $55.34 million for the same quarter a year ago. Basic and diluted earnings per share were $0.41 for the fourth quarter of 2022 compared with $0.39 for the same quarter a year ago.

Earnings for the year ended December 31, 2022, totaled $234.48 million compared to $227.56 million for the year ended December 31, 2021, reflecting an increase of $6.91 million, or 3.04 percent. Basic and diluted earnings per share were $1.64 for the year ended December 31, 2022, compared with basic and diluted earnings per share of $1.60 and $1.59, respectively, for the year ended December 31, 2021. Included in earnings for the year ended December 31, 2022, when compared to the year ended December 31, 2021, were (i) an increase in net interest income of $31.05 million which included a decrease in PPP loan origination fees and interest income of $24.90 million when compared to the prior year; (ii) an increase in the provision for credit losses of $18.57 million; (iii) a decrease in mortgage revenues of $14.21 million; (iv) a decrease in debit card revenues of $5.63 million and (v) a decrease in profit sharing expenses of $5.90 million.

"We are extremely pleased with both our quarterly and annual results representing our 36^th consecutive year of annual earnings growth. We finished 2022 with growth in loans, excluding PPP and held-for-sale loans, of $1.11 billion and growth in deposits of $439.02 million which was primarily driven by an increase of over 10,500 net new accounts during the year. During the fourth quarter, we were able to take advantage of lower interest rates on the longer part of the curve and sell $273.83 million of securities with lower yields and redeploy those dollars into our higher earning loan portfolio," said F. Scott Dueser, Chairman, President and CEO of First Financial Bankshares, Inc. "As a result of the hard work and dedication of our board, officers and employees, we were able to overcome some significant headwinds in 2022 which included declines in PPP, mortgage and debit card revenues and increased provision expenses. In light of the continued increases in interest rates by the Federal Reserve, we continue to focus on loan and deposit pricing that better aligns with our competitive environment. As we enter 2023, we remain focused on serving our customers and delivering solid results while actively managing the impact of the current interest rate, regulatory and economic environments. We appreciate the continued support of our customers, shareholders and associates." Mr. Dueser added.

Net interest income for the fourth quarter of 2022 was $104.04 million compared to $94.81 million for the fourth quarter of 2021. The net interest margin, on a taxable equivalent basis, was 3.36 percent for the fourth quarter of 2022, compared to 3.32 percent for the third quarter of 2022, and 3.29 percent for the fourth quarter of 2021. The growth in net interest income was driven by higher average interest-earning assets which increased to $12.32 billion for the fourth quarter of 2022 compared to $11.89 billion in the same quarter a year ago, partially offset by lower PPP loan origination fees and interest income which totaled $16 thousand in the fourth quarter of 2022 compared to $4.57 million in the fourth quarter of 2021. PPP loan balances totaled $169 thousand at December 31, 2022 compared to $52.79 million at December 31, 2021.

The Company recorded a provision for credit losses of $4.08 million for the fourth quarter of 2022 compared to a provision for credit losses of $2.06 million for the fourth quarter of 2021. The Company's provision for credit losses the fourth quarter of 2022 continued to be driven by strong organic loan growth, increases in unfunded commitments and a slight decline in the projected economic forecast metrics. At December 31, 2022, the allowance for credit losses totaled $75.83 million, or 1.18 percent of loans held-for-investment ("Loans"), compared to $63.47 million at December 31, 2021, or 1.18 percent of loans. Additionally, the reserve for unfunded commitments totaled $12.32 million at December 31, 2022 compared to $6.44 million at December 31, 2021 due to the increase in unfunded commitments and a decline in the projected economic forecast in the Company's construction and development portfolio.

For the fourth quarter of 2022, net charge-offs totaled $905 thousand compared to net charge-offs of $2.28 million for the fourth quarter of 2021. Nonperforming assets as a percentage of Loans and foreclosed assets totaled 0.38 percent at December 31, 2022, compared with 0.63 percent at December 31, 2021.  Classified loans totaled $150.70 million at December 31, 2022, compared to $161.19 million at December 31, 2021.

Noninterest income for the fourth quarter of 2022 was $28.52 million compared to $34.90 million for the fourth quarter of 2021, as a result of the following:

• Trust fees increased to $10.12 million for the fourth quarter of 2022 compared to $9.67 million for the fourth quarter of 2021, driven by the continued increase in oil and gas revenue. At December 31, 2022, the fair value of trust assets managed was $8.75 billion.
• Service charges on deposits increased to $6.40 million for the fourth quarter of 2022 compared with $5.76 million for the fourth quarter of 2021, driven by more than 10,500 net new accounts opened in 2022.
• Debit card fees decreased by $3.45 million for the fourth quarter of 2022 compared to the same quarter a year ago. The decrease was due the impact of becoming subject to regulations imposed by the Federal Reserve that limits debit card interchange revenue ("Durbin Amendment") which became effective for the Company as of July 1, 2022, and is consistent with our prior disclosures.
• Mortgage income declined to $2.90 million for the fourth quarter of 2022 compared to $6.27 million for the fourth quarter of 2021 due to lower overall origination volumes and margins as a result of the changes in interest rates.
• Recoveries of interest on previously charged-off or nonaccrual loans totaled $244 thousand for the fourth quarter of 2022 compared to $1.21 million for the fourth quarter of 2021.
• Gains on sales of securities and other assets were $129 thousand during the fourth quarter of 2022 compared to $105 thousand for the fourth quarter of 2021.

Noninterest expense for the fourth quarter of 2022 totaled $57.78 million compared to $61.67 million for the fourth quarter of 2021, as a result of the following:

• Salary, commissions and employee benefit costs totaled $32.96 million for the fourth quarter of 2022, compared to $34.98 million in the fourth quarter of 2021 reflecting annual merit-based and market driven pay increases offset by lower mortgage compensation expenses of $1.22 million and a decrease of $2.53 million in profit sharing expenses.

The Company's efficiency ratio improved to 43.30 percent for the year ended December 31, 2022 compared to 45.84 percent for the year ended December 31, 2021.

As of December 31, 2022, consolidated assets for the Company totaled $12.97 billion compared to $13.10 billion at December 31, 2021. Loans totaled $6.44 billion at December 31, 2022, compared with Loans of $5.39 billion at December 31, 2021. Excluding PPP and held-for-sale loans, Loans grew $186.41 million, or 11.82 percent during the fourth quarter of 2022, and $1.11 billion, or 20.72 percent when compared to December 31, 2021 balances. Deposits totaled $11.01 billion at December 31, 2022, compared to $10.57 billion at December 31, 2021.

During the fourth quarter of 2022, the Company sold $273.83 million of securities classified as available-for-sale with an average book yield of 3.16 percent. The proceeds from the sales of these securities were largely used to fund organic loan growth during the quarter. As of December 31, 2022, cash flows from the security portfolio of $540.28 million are projected over the next twelve months.

Shareholders' equity was $1.27 billion as of December 31, 2022, compared to $1.76 billion at December 31, 2021, as a result of changes in other comprehensive income ("OCI") due to increasing interest rates over the last year. The unrealized loss on the available-for-sale investment securities portfolio, net of applicable tax, totaled $535.23 million at December 31, 2022, compared to an unrealized loss of $632.42 million at September 30, 2022, and an unrealized gain of $99.25 million at December 31, 2021.

About First Financial Bankshares, Inc.

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

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

Certain statements contained herein may be considered "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These statements are based upon the belief of the Company's management, as well as assumptions made beyond information currently available to the Company's management, and may be, but not necessarily are, identified by such words as "expect," "plan," "anticipate," "target," "forecast," and "goal". Because such "forward-looking statements" are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from the Company's expectations include competition from other financial institutions and financial holding companies; the effects of and changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board; economic impact of oil and gas prices and the pandemic, changes in the demand for loans; fluctuations in value of collateral and loan reserves; inflation, interest rate, market and monetary fluctuations; changes in consumer spending, borrowing and savings habits; and  acquisitions and integration of acquired businesses, and similar variables.   Other key risks are described in the Company's reports filed with the Securities and Exchange Commission, which may be obtained under "Investor Relations-Documents and Filings" on the Company's Website or by writing or calling the Company at 325.627.7155. Except as otherwise stated in this news announcement, the Company does not undertake any obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise.