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What changed in FIRST FINANCIAL BANKSHARES INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of FIRST FINANCIAL BANKSHARES INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+215 added−216 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-26)

Top changes in FIRST FINANCIAL BANKSHARES INC's 2024 10-K

215 paragraphs added · 216 removed · 182 edited across 4 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

55 edited+7 added−5 removed182 unchanged
Biggest changeThe Federal Reserve Board began increasing interest rates by raising rates 25 basis points in March 2022, 50 basis points in May 2022, and 75 basis points in June, July, September and November 2022, respectively, 50 basis points in December 2022, and 25 basis points in February, March, May, and July 2023, respectively, resulting in a target rate range of 5.25% to 5.50% at December 31, 2023.
Biggest changeAfter 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 with increases of 25 basis points in February, March, May, and July 2023.
Hurricanes, 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.
Hurricanes, extended drought conditions, severe weather and natural disasters could significantly impact the Company's business. Hurricanes, 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.
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 or errors could lead to unauthorized release of confidential or otherwise protected information or corruption of data.
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.
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.
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 17 Table of Contents such deposits in our market area. Additionally, deposit balances can decrease if customers perceive alternative investments as providing a better risk/return tradeoff.
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 24 Table of Contents climate-related initiatives and lending to communities disproportionately impacted by the effects of climate change.
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.
A debit card issuer that adopts certain fraud prevention 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.
A debit card issuer that adopts certain fraud prevention 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. 26 Table of Contents Federal income tax reform could have unforeseen effects on our financial condition and results of operations.
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. 20 Table of Contents We depend on the accuracy and completeness of information about customers and counterparties.
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 about customers and counterparties.
Our ownership base has shifted over the past several years resulting in institutional investors and indexed funds holding approximately 56% of our shares as compared to shareholders located in our footprint and other retail individual investors.
Our ownership base has shifted over the past several years resulting in institutional investors and indexed funds holding approximately 59% of our shares as compared to shareholders located in our footprint and other retail individual investors.
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.
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 27 Table of Contents 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.
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.
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. 21 Table of Contents Our trust company subsidiary derives its revenues primarily from investment management fees based on assets under management.
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.
Such events may also cause reductions in 24 Table of Contents 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.
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. 28 Table of Contents
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. 29 Table of Contents
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.
In 18 Table of Contents 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.
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 25 Table of Contents have also increased across the banking and financial services sector.
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.
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. 21 Table of Contents Investment performance is one of the most important factors in retaining existing clients and competing for new wealth management clients.
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.
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.
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 23 Table of Contents additional efficiencies in our operations.
Additionally, the Company's trust revenues may be impacted by oil and gas prices which represented approximately 15% and 18% of total trust revenues in 2023 and 2022, 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.
Additionally, the Company's trust revenues may be impacted by oil and gas prices which represented approximately 16% and 15% of total trust revenues in 2024 and 2023, 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.
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. As of December 31, 2023, we had $314.62 million of goodwill and other intangible assets.
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. As of December 31, 2024, we had $314.00 million of goodwill and other intangible assets.
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, the OCC, the FDIC and the CFPB.
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.
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 $13.11 billion as of December 31, 2023.
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 $13.98 billion as of December 31, 2024.
While we consider our exposure to credits related to the oil and gas industry to not be significant, at approximately 2.79%, of total loans HFI as of December 31, 2023, 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, 22 Table of Contents which could have a material adverse effect on our business, financial condition and results of operations.
While we consider our exposure to credits related to the oil and gas industry to not be significant, at approximately 2.89%, of total loans HFI as of December 31, 2024, 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.
In addition, as approximately 15% of trust fees came from management of oil and gas properties in 2023, a decline in the prices of oil and gas could lead to a loss of material amounts of our trust income. Our reputation and business could be damaged by negative publicity.
In addition, as approximately 16% of trust fees came from management of oil and gas properties in 2024, a decline in the prices of oil and gas could lead to a loss of material amounts of our trust income. Our reputation and business could be damaged by negative publicity.
As of December 31, 2023, we met all of these new requirements, including the full capital conservation buffer.
As of December 31, 2024, we met all of these new requirements, including the full capital conservation buffer.
Any damage or failure that causes an interruption in our operations could have an adverse effect on our financial condition and results of operations.
Any damage or failure that causes an interruption in our operations could have 19 Table of Contents an adverse effect on our financial condition and results of operations.
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.
Such claims may increase 20 Table of Contents 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.
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. 15 Table of Contents Risks Related to Our Business Interest Rate Risk We are subject to interest rate risk.
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.
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.
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.
Our FDIC deposit insurance assessments could increase substantially resulting in higher operating costs. We have historically paid the lowest premium rate available 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 26 Table of Contents imposed.
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.
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.
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 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.
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.
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.
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 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.
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.
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.
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.
As of December 31, 2023, we had a net unrealized loss of $403.30 million on our available for-sale investment securities portfolio as a result of the rising interest rate environment. Our investment securities totaled $4.73 billion, or 36.11% of total assets, at December 31, 2023. The details of this portfolio are included in Note 2 to the consolidated financial statements.
As of December 31, 2024, we had a net unrealized loss of $424.29 million on our available for-sale investment securities portfolio as a result of the rising interest rate environment. Our investment securities totaled $4.62 billion, or 33.03% of total assets, at December 31, 2024. The details of this portfolio are included in Note 2 to the consolidated financial statements.
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.
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.
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.
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.
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.
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. 25 Table of Contents 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.
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.
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.
Difficult or changes in market conditions could adversely affect the financial services industry. 23 Table of Contents 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.
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.
In addition, a security breach could also subject us to additional regulatory scrutiny and expose us to civil litigation and possible financial liability. 19 Table of Contents 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.
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.
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.
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.
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.
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. 28 Table of Contents To achieve our past levels of growth, we have focused on both internal growth and acquisitions.
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.
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.
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. 17 Table of Contents 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.
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.
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, 18 Table of Contents or pay dividends on the Company’s common stock.
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.
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.
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.
Inflationary pressures and rising prices may affect our results of operations and financial conditions. Inflation rose in 2022 at levels not seen for over 40 years, and such inflationary pressures continued into 2023. 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.
Inflationary pressures and rising prices may affect our results of operations and financial conditions. Inflation rose in 2022 at levels not seen for over 40 years, and such inflationary pressures continued into 2023 and 2024.
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, an important component of our growth strategy may be lost.
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.
In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability.
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.
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.
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.
Certain banking laws may have an anti-takeover effect. 27 Table of Contents 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.
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.
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.
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.
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.
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.
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.
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.
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.
In the first quarter of 2024, the FDIC updated the special assessment to a total of $2.06 million. The special assessment will be paid over ten quarters beginning in the second quarter of 2024. Risks Related to Acquisition Activities To continue our growth, we are affected by our ability to identify and acquire other financial institutions.
Removed
The Federal Reserve Board increased rates 200 basis points through mid-2019 and as a response to the ongoing COVID pandemic decreased rates 75 basis points during the third and fourth quarters of 2019 and then an additional 150 basis points in the first quarter of 2020, resulting in a target rate range of zero to 25 basis points throughout the remainder of 2020 and 2021.
Added
Risks Related to Our Business Interest Rate Risk We are subject to interest rate risk.
Removed
If 16 Table of Contents 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.
Added
Most recently, the Federal Reserve Board decreased interest rates 50 basis points in September and 25 basis points in November and December 2024, respectively, resulting in a target rate range of 4.25% to 4.50% at December 31, 2024. Today, there continues to be uncertainty regarding future interest rates.
Removed
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, extended drought conditions, severe weather and natural disasters could significantly impact the Company's business.
Added
In determining the amount of the allowance, we rely on an analysis of our loan portfolio, 16 Table of Contents our experience and our evaluation of general economic conditions.
Removed
The volatility in oil and gas prices results in uncertainty about the Texas economy.
Added
Our business is concentrated in Texas and a downturn in the economy of Texas may adversely affect our business. 22 Table of Contents 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.
Removed
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.
Added
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.
Added
To the extent that we are unable to find suitable acquisition candidates, an important component of our growth strategy may be lost. Additionally, our completed acquisitions, or any future acquisitions, may not produce the revenue, earnings or synergies that we anticipated.
Added
As a result, if you acquire our common stock, you may lose some or all of your investment.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

1 edited+0 added−0 removed18 unchanged
Biggest changeOperational committees that manage risks associated with cybersecurity are Change Control Committee and Patch Management Committee. 29 Table of Contents We face a number of cybersecurity risks in connection with our business.
Biggest changeOperational committees that manage risks associated with cybersecurity are Change Control Committee and Patch Management Committee. 30 Table of Contents We face a number of cybersecurity risks in connection with our business.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed0 unchanged
Biggest changeAs of December 31, 2023, our subsidiaries collectively own 78 banking, trust and mortgage facilities, some of which are detached drive-ins, and also lease 12 banking facilities and 12 ATM locations. Our management considers all our existing locations to be well-suited for conducting the business of banking.
Biggest changeAs of December 31, 2024, our subsidiaries collectively own 79 banking, trust and mortgage facilities, some of which are detached drive-ins, and also lease 11 banking facilities and 11 ATM locations. Our management considers all our existing locations to be well-suited for conducting the business of banking.
ITEM 2. PROPERTIES Our principal office is located in the First Financial Bank Building at 400 Pine Street in downtown Abilene, Texas. We lease two spaces in buildings owned by First Financial Bank, N.A. totaling approximately 10,155 square feet.
ITEM 2. PROPERTIES Our principal office is located in the First Financial Bank Building at 400 Pine Street in downtown Abilene, Texas. We lease two spaces in buildings owned by First Financial Bank totaling approximately 10,155 square feet.
We are in the process of constructing a new branch location in our existing market in Bryan, Texas.
We are in the process of constructing a new branch location in our existing market in Franklin, Texas.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeNoninterest Expense (in thousands): 2023 Increase (Decrease) 2022 Increase (Decrease) 2021 Salaries, commissions and incentives (excluding mortgage) $ 97,155 $ 3,264 $ 93,891 $ 1,867 $ 92,024 Mortgage salaries and incentives 8,295 (2,395 ) 10,690 (4,942 ) 15,632 Medical 10,475 (710 ) 11,185 142 11,043 Profit sharing 1,373 (2,860 ) 4,233 (5,901 ) 10,134 401(k) match expense 3,750 75 3,675 85 3,590 Payroll taxes 7,278 146 7,132 158 6,974 Stock based compensation 3,589 262 3,327 682 2,645 Total salaries and employee benefits 131,915 (2,218 ) 134,133 (7,909 ) 142,042 Net occupancy expense 13,766 459 13,307 298 13,009 Equipment expense 8,545 (507 ) 9,052 (121 ) 9,173 FDIC assessment fees 7,749 4,038 3,711 581 3,130 Debit card expense 12,933 702 12,231 274 11,957 Professional and service fees 9,810 1,040 8,770 (564 ) 9,334 Printing, stationery and supplies 2,454 340 2,114 204 1,910 Operational and other losses 3,842 613 3,229 (64 ) 3,293 Software amortization and expense 10,288 325 9,963 (1,157 ) 11,120 Amortization of intangible assets 912 (333 ) 1,245 (368 ) 1,613 Other: Data processing fees 2,051 284 1,767 (15 ) 1,782 Postage 1,449 115 1,334 (205 ) 1,539 Advertising 2,779 (48 ) 2,827 (198 ) 3,025 Correspondent bank service charges 830 (191 ) 1,021 20 1,001 Telephone 3,340 273 3,067 (560 ) 3,627 Public relations and business development 3,252 (303 ) 3,555 212 3,343 Directors’ fees 2,546 10 2,536 162 2,374 Audit and accounting fees 2,241 441 1,800 41 1,759 Legal fees and other related costs 1,535 (335 ) 1,870 (381 ) 2,251 Regulatory exam fees 1,272 (314 ) 1,586 163 1,423 Travel 1,858 218 1,640 222 1,418 Courier expense 1,218 22 1,196 248 948 Other real estate owned 90 87 3 (46 ) 49 Other miscellaneous expense 11,207 (1,614 ) 12,821 2,233 10,588 Total other 35,668 (1,355 ) 37,023 1,896 35,127 Total Noninterest Expense $ 237,882 $ 3,104 $ 234,778 $ (6,930 ) $ 241,708 Income Taxes .
Biggest changeIncluded in noninterest expense during 2023, excluding salary and employee benefit related costs, were increases in FDIC insurance premiums of $4.04 million primarily due to the recognition of $1.75 million related to the special assessment in the fourth quarter of 2023. 41 Table of Contents Noninterest Expense (in thousands): 2024 Increase (Decrease) 2023 Increase (Decrease) 2022 Salaries, commissions and incentives (excluding mortgage) $ 106,608 $ 9,453 $ 97,155 $ 3,264 $ 93,891 Mortgage salaries and incentives 8,959 664 8,295 (2,395 ) 10,690 Medical 12,404 1,929 10,475 (710 ) 11,185 Profit sharing 9,466 8,093 1,373 (2,860 ) 4,233 401(k) match expense 3,924 174 3,750 75 3,675 Payroll taxes 7,730 452 7,278 146 7,132 Stock based compensation 4,205 616 3,589 262 3,327 Total salaries and employee benefits 153,296 21,381 131,915 (2,218 ) 134,133 Net occupancy expense 14,579 813 13,766 459 13,307 Equipment expense 9,065 520 8,545 (507 ) 9,052 FDIC assessment fees 6,498 (1,251 ) 7,749 4,038 3,711 Debit card expense 12,768 (165 ) 12,933 702 12,231 Professional and service fees 10,690 880 9,810 1,040 8,770 Printing, stationery and supplies 1,364 (1,090 ) 2,454 340 2,114 Operational and other losses 3,741 (101 ) 3,842 613 3,229 Software amortization and expense 13,523 3,235 10,288 325 9,963 Amortization of intangible assets 618 (294 ) 912 (333 ) 1,245 Other: Data processing fees 2,564 513 2,051 284 1,767 Postage 1,547 98 1,449 115 1,334 Advertising 2,874 95 2,779 (48 ) 2,827 Correspondent bank service charges 925 95 830 (191 ) 1,021 Telephone 2,980 (360 ) 3,340 273 3,067 Public relations and business development 3,154 (98 ) 3,252 (303 ) 3,555 Directors’ fees 2,901 355 2,546 10 2,536 Audit and accounting fees 1,793 (448 ) 2,241 441 1,800 Legal fees and other related costs 3,165 1,630 1,535 (335 ) 1,870 Regulatory exam fees 1,139 (133 ) 1,272 (314 ) 1,586 Travel 1,856 (2 ) 1,858 218 1,640 Courier expense 1,272 54 1,218 22 1,196 Other real estate owned 82 (8 ) 90 87 3 Other miscellaneous expense 12,669 1,462 11,207 (1,614 ) 12,821 Total other 38,921 3,253 35,668 (1,355 ) 37,023 Total Noninterest Expense $ 265,063 $ 27,181 $ 237,882 $ 3,104 $ 234,778 Income Taxes .
The decrease in debit card fees was due to the impact of becoming subject to regulations imposed by the Federal Reserve Board that limits debit card interchange revenue which became effective for the Company as of July 1, 2022, and is consistent with our previously disclosed expectations.
The decrease in debit card fees was due to the impact of becoming subject to regulations imposed by the Federal Reserve Board that limits debit card interchange revenue which became effective for the Company July 1, 2022, and is consistent with our previously disclosed expectations.
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, N.A.
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.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 30 Table of Contents PART II IT EM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock, par value $0.01 per share, is traded on the Nasdaq Global Select Market under the trading symbol "FFIN".
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 31 Table of Contents PART II IT EM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock, par value $0.01 per share, is traded on the Nasdaq Global Select Market under the trading symbol "FFIN".
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, 2023.
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, 2024.
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. 50 Table of Contents Liquidity. Liquidity is our ability to meet cash demands as they arise.
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. 51 Table of Contents Liquidity. Liquidity is our ability to meet cash demands as they arise.
Based on our assessment we believe that, as of December 31, 2023, 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, Fort Worth, Texas, (U.S.
Based on our assessment we believe that, as of December 31, 2024, 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, Fort Worth, Texas, (U.S.
Our subsidiary bank also has (i) an available line of credit with the FHLB totaling $1.86 billion at December 31, 2023, secured by portions of our loan portfolio and certain investment securities; and (ii) access to the Federal Reserve Bank of Dallas lending program, including the Bank Term Funding Program, secured by portions of certain investment securities.
Our subsidiary bank also has (i) an available line of credit with the FHLB totaling $1.86 billion at December 31, 2024, secured by portions of our loan portfolio and certain investment securities; and (ii) access to the Federal Reserve Bank of Dallas lending program, including the Bank Term Funding Program, secured by portions of certain investment securities.
CONTROLS AND PROCEDURES As of December 31, 2023, 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).
CONTROLS AND PROCEDURES As of December 31, 2024, 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).
The following discussion and analysis of the major elements of our consolidated balance sheets as of December 31, 2023 and 2022, and consolidated statements of earnings for the years 2021 through 2023 should be read in conjunction with our consolidated financial statements, accompanying notes, and selected financial data presented elsewhere in this Form 10-K.
The following discussion and analysis of the major elements of our consolidated balance sheets as of December 31, 2024 and 2023, and consolidated statements of earnings for the years 2022 through 2024 should be read in conjunction with our consolidated financial statements, accompanying notes, and selected financial data presented elsewhere in this Form 10-K.
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, 2023.
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, 2024.
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, 2023.
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, 2024.
Collateral held varies but may include accounts receivable, inventory, property, plant, and equipment and income-producing commercial properties. 51 Table of Contents Standby letters of credit are conditional commitments we issue to guarantee the performance of a customer to a third-party.
Collateral held varies but may include accounts receivable, inventory, property, plant, and equipment and income-producing commercial properties. 52 Table of Contents Standby letters of credit are conditional commitments we issue to guarantee the performance of a customer to a third-party.
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, 2023, 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).
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, 2024, 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).
The performance graph assumes $100 invested in our common stock at its closing price on December 31, 2018, and in each of the Russell 3000 Index and the S&P U.S. BMI Banks Index on the same date. The performance graph also assumes the reinvestment of all dividends.
The performance graph assumes $100 invested in our common stock at its closing price on December 31, 2019, and in each of the Russell 3000 Index and the S&P U.S. BMI Banks Index on the same date. The performance graph also assumes the reinvestment of all dividends.
Refer to the accompanying notes to consolidated financial statements for the expected timing of such payments as of December 31, 2023. These payments related to time deposits with stated maturity dates (Note 7 - Deposits and Borrowings) and operating leases (Note 11 - Commitments and Contingencies).
Refer to the accompanying notes to consolidated financial statements for the expected timing of such payments as of December 31, 2024. These payments related to time deposits with stated maturity dates (Note 7 - Deposits and Borrowings) and operating leases (Note 11 - Commitments and Contingencies).
The allowance for credit losses as a percent of loans HFI was 1.24% as of December 31, 2023, as compared to 1.18% as of December 31, 2022, and 1.18% as of December 31, 2021. Included in the following tables are further analysis of our allowance for credit losses.
The allowance for credit losses as a percent of loans HFI was 1.24% as of December 31, 2024, as compared to 1.24% as of December 31, 2023, and 1.18% as of December 31, 2022. Included in the following tables are further analysis of our allowance for credit losses.
Maturities and Yields of Available-for-Sale Held at December 31, 2023 (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.
Maturities and Yields of Available-for-Sale Held at December 31, 2024 (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.
Our subsidiary bank also has federal funds purchased lines of credit with two non-affiliated banks totaling $130.00 million. At December 31, 2023, there were no amounts drawn on these lines of credit.
Our subsidiary bank also has federal funds purchased lines of credit with two non-affiliated banks totaling $130.00 million. At December 31, 2024, there were no amounts drawn on these lines of credit.
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, 2023, based on 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, 2024, based on the COSO criteria.
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 repurchase, and to pay discretionary bonuses to executive officers.
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.
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, 2023 and 2022, 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, 2023 and the related notes and our report dated February 23, 2024 expressed an unqualified opinion thereon.
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, 2024 and 2023, 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, 2024 and the related notes and our report dated February 20, 2025 expressed an unqualified opinion thereon.
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, 2023 and 2022.
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, 2024 and 2023.
ASU 2023-02 allows entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. Previously, this method was only available for qualifying tax equity investments in low-income housing tax credit structures.
ASU 2023-02 allows entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. Previously, this method was only available for qualifying tax equity 35 Table of Contents investments in low-income housing tax credit structures.
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.
The Company’s loan policy addresses types of consumer loans that may be originated and the collateral, if secured, which must be 43 Table of Contents perfected. The relatively smaller individual dollar amounts of consumer loans that are spread over numerous individual borrowers also minimize the Company’s risk.
Maturity Distribution and Interest Sensitivity of Loans at December 31, 2023 (in thousands): The following tables summarize maturity information of our loan portfolio as of December 31, 2023.
Maturity Distribution and Interest Sensitivity of Loans at December 31, 2024 (in thousands): The following tables summarize maturity information of our loan portfolio as of December 31, 2024.
In addition, we have construction contracts with remaining future minimum contractual obligations of approximately $624 thousand in 2024. 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.
In addition, we have construction contracts with remaining future minimum contractual obligations of approximately $358 thousand in 2025. 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.
The Federal Reserve Board, the FDIC 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 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 report, which expresses an opinion on the effectiveness of our internal control over financial reporting as of December 31, 2023, is included below. 54 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of First Financial Bankshares, Inc.
The report, which expresses an opinion on the effectiveness of our internal control over financial reporting as of December 31, 2024, is included below. 55 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of First Financial Bankshares, Inc.
Record Holders As of February 1, 2024, we had 874 registered shareholders of record with our stock transfer agent. Dividends See “Item 8—Financial Statements and Supplementary Data—Quarterly Results of Operations” for the frequency and amount of cash dividends paid by us.
Record Holders As of February 1, 2025, we had 827 registered shareholders of record with our stock transfer agent. Dividends See “Item 8—Financial Statements and Supplementary Data—Quarterly Results of Operations” for the frequency and amount of cash dividends paid by us.
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 $404.08 million at December 31, 2023, and an unfunded $25.00 million revolving line of credit established with Frost Bank, a nonaffiliated bank, which matures on June 30, 2025 (see next paragraph).
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 $197.02 at December 31, 2024, and an unfunded $25.00 million revolving line of credit established with Frost Bank, a nonaffiliated bank, which matures on June 30, 2025 (see next paragraph).
The regulatory capital ratios as of December 31, 2023 and 2022 were calculated under Basel III Rules.
The regulatory capital ratios as of December 31, 2024 and 2023 were calculated under Basel III Rules.
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, and New Market Tax Credit ("NMTC") benefits. 41 Table of Contents Balance Sheet Review Loans .
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, and New Market Tax Credit ("NMTC") benefits.
The highest amount of federal funds purchased, securities sold under repurchase agreements and advances from the FHLB at any month-end during 2023, 2022 and 2021 was $822.98 million, $1.04 billion and $674.88 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.
The highest amount of federal funds purchased, securities sold under repurchase agreements and advances from the FHLB at any month-end during 2024, 2023 and 2022 was $563.28 million, $822.98 million and $1.04 billion, respectively. Interest Rate Risk Interest rate risk results when the maturity or repricing intervals of interest-earning assets and interest-bearing liabilities are different.
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 Fort Worth, Texas February 23, 2024 55 Table of Contents IT EM 9B. OTHER INFORMATION None.
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 Fort Worth, Texas February 21, 2025 56 Table of Contents IT EM 9B. OTHER INFORMATION None .
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 50.96%, 40.18% and 36.30% of net earnings, respectively, in 2023, 2022 and 2021.
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 46.06%, 50.96% and 40.18% of net earnings, respectively, in 2024, 2023 and 2022.
Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and include personal guarantees. 42 Table of Contents Agricultural loans are subject to underwriting standards and processes similar to commercial loans.
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.
At December 31, 2023 and 2022, $3.18 million and $1.47 million 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.
At December 31, 2024 and 2023, $442 thousand and $3.18 million 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.
If interest on these loans had been recognized on a full accrual basis during the year ended December 31, 2023, such income would have approximated $3.22 million. Included in our loan portfolio are certain other loans not included in the table above that are deemed to be potential problem loans.
If interest on these loans had been recognized on a full accrual basis during the year ended December 31, 2024, such income would have approximated $5.35 million. Included in our loan portfolio are certain other loans not included in the table above that are deemed to be potential problem loans.
Of this amount, approximately $1.37 billion will reprice immediately upon changes in the underlying index rate (primarily U.S. prime rate) with the remaining $287 million being subject to floors above or ceilings below the current index. Asset Quality .
Of this amount, approximately $1.90 billion will reprice immediately upon changes in the underlying index rate (primarily U.S. prime rate) with the remaining $173.43 million being subject to floors above or ceilings below the current index. Asset Quality .
BMI Banks Index, which is a banking index prepared by S&P Global Market Intelligence and is comprised of all U.S. domiciled banks, for a five-year period (December 31, 2018 to December 31, 2023).
BMI Banks Index, which is a banking index prepared by S&P Global Market Intelligence and is comprised of all U.S. domiciled banks, for a five-year period (December 31, 2019 to December 31, 2024).
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.
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 42 Table of Contents (“CRE”), Residential, Consumer Auto, and Consumer Non-Auto.
At December 31, 2023, the Company’s reserve for unfunded commitments totaled $7.90 million 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.
At December 31, 2024, the Company’s reserve for unfunded commitments totaled $8.68 million 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.
These potential problem loans totaled $5.46 million as of December 31, 2023. 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.
These potential problem loans totaled $11.25 million as of December 31, 2024. 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.
Deposits held by our subsidiary bank represent our primary source of funding. Total deposits were $11.14 billion as of December 31, 2023, as compared to $11.01 billion as of December 31, 2022 and $10.57 billion as of December 31, 2021.
Deposits held by our subsidiary bank represent our primary source of funding. Total deposits were $12.10 billion as of December 31, 2024, as compared to $11.14 billion as of December 31, 2023 and $11.01 billion as of December 31, 2022.
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, 2023. 44 Table of Contents Nonaccrual, Past Due 90 Days or More and Still Accruing, Restructured Loans and Foreclosed Assets (in thousands, except percentages): At December 31, 2023 2022 2021 2020 2019 Nonaccrual loans $ 33,609 $ 24,325 $ 31,673 $ 42,643 $ 24,608 Loans still accruing and past due 90 days or more 1,004 — 8 113 153 Nonperforming loans (1) 34,613 24,325 31,681 42,756 24,761 Foreclosed assets 483 — 2,477 142 1,009 Total nonperforming assets $ 35,096 $ 24,325 $ 34,158 $ 42,898 $ 25,770 As a % of loans held-for-investment and foreclosed assets 0.49 % 0.38 % 0.63 % 0.83 % 0.61 % As a % of total assets 0.27 0.19 0.26 0.39 0.31 (1) With the adoption of ASU 2022-02, effective January 1, 2023, TDR accounting has been eliminated.
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, 2024. 45 Table of Contents Nonaccrual, Past Due 90 Days or More and Still Accruing, Restructured Loans and Foreclosed Assets (in thousands, except percentages): At December 31, 2024 2023 2022 2021 2020 Nonaccrual loans $ 61,938 $ 33,609 $ 24,325 $ 31,673 $ 42,643 Loans still accruing and past due 90 days or more 287 1,004 — 8 113 Nonperforming loans (1) 62,225 34,613 24,325 31,681 42,756 Foreclosed assets 871 483 — 2,477 142 Total nonperforming assets $ 63,096 $ 35,096 $ 24,325 $ 34,158 $ 42,898 As a % of loans held-for-investment and foreclosed assets 0.80 % 0.49 % 0.38 % 0.63 % 0.83 % As a % of total assets 0.45 0.27 0.19 0.26 0.39 (1) With the adoption of ASU 2022-02, effective January 1, 2023, TDR accounting has been eliminated.
Average municipal and related deposits totaled $1.46 billion and $1.48 billion for the years ended December 31, 2023 and 2022, respectively, with an average rate paid of 3.13% and 1.01%, for the respective years then ended. 38 Table of Contents 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 2021 through 2023.
Average municipal and related deposits totaled $1.46 billion for both years ended December 31, 2024 and 2023, respectively, with an average rate paid of 3.94% and 3.13%, for the respective years then ended. 39 Table of Contents 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 2022 through 2024.
Changes in certain categories of noninterest income included (1) a decline in gains on sales of AFS securities of $9.26 million, (2) a decrease in debit card fees of $8.56 million, and (3) a decrease in gain on sale and fees of mortgage loans of $7.15 million when compared to 2022.
Changes in certain categories of noninterest income included (i) a decline in gains on sales of AFS securities of $9.26 million, (ii) a decrease in debit card fees of $8.56 million, and (iii) a decrease in gain on sale and fees of mortgage loans of $7.15 million when compared to 2022.
Nonaccrual, past due 90 days or more and still accruing, and restructured loans plus foreclosed assets were $35.10 million at December 31, 2023, as compared to $24.33 million at December 31, 2022 and $34.16 million at December 31, 2021.
Nonaccrual, past due 90 days or more and still accruing, and restructured loans plus foreclosed assets were $63.10 million at December 31, 2024, as compared to $35.10 million at December 31, 2023 and $24.33 million at December 31, 2022.
Mortgage income declined due to lower overall origination volumes and declining margins on loan sales as a result of the increase in interest rates.
Mortgage income declined due to lower overall origination volumes and declining margins on loan sales as a result of the increases in mortgage interest rates during 2023.
The yield on earning assets increased 15 basis points in 2022 when compared to 2021 while the rate paid on interest-bearing liabilities increased 32 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.
The yield on earning assets increased 90 basis points in 2023 when compared to 2022 while the rate paid on interest-bearing liabilities increased 143 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.
During the year ended December 31, 2023, the corresponding unrealized loss before taxes on the portfolio of $677.99 million at December 31, 2022, changed to an unrealized loss before taxes of $510.92 million at December 31, 2023, which is recorded net of taxes in accumulated other comprehensive earnings (loss) in shareholders' equity.
During the year ended December 31, 2024, the corresponding unrealized loss before taxes on the portfolio of $510.92 million at December 31, 2023, changed to an unrealized loss before taxes of $537.55 million at December 31, 2024, which is recorded net of taxes in accumulated other comprehensive earnings (loss) in shareholders' equity.
At December 31, 2023, there was $813 million used on the FHLB line advance for undisbursed commitments (letters of credit) used to secure public funds. The Company renewed its loan agreement, effective June 30, 2023, with Frost Bank.
At December 31, 2024, there was $1.05 billion used on the FHLB line advance for undisbursed commitments (letters of credit) used to secure public funds. The Company renewed its loan agreement, effective June 30, 2023, with Frost Bank.
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. 45 Table of Contents Loan Loss Experience and Allowance for Credit Losses (in thousands, except percentages): 2023 2022 2021 2020 2019 Balance at January 1, $ 75,834 $ 63,465 $ 66,534 $ 52,499 $ 51,202 Impact of adopting ASC 326 — — — (619 ) — Initial allowance on acquired TB&T PCD loans — — — 1,678 — Charge-offs: Commercial: C&I (1,816 ) (589 ) (1,600 ) (2,516 ) N/A Municipal — — — — N/A Total Commercial (1,816 ) (589 ) (1,600 ) (2,516 ) (1,545 ) Agricultural (9 ) (9 ) (2,683 ) (372 ) (319 ) Real estate: Construction & Development — (100 ) — — N/A Farm — — — — N/A Non-Owner Occupied CRE — — (6 ) (563 ) N/A Owner Occupied CRE (10 ) (537 ) (231 ) (567 ) N/A Residential real estate (258 ) (186 ) (93 ) (373 ) N/A Total real estate (268 ) (823 ) (330 ) (1,503 ) (1,335 ) Consumer: Auto (1,006 ) (596 ) (610 ) (548 ) N/A Non-Auto (600 ) (435 ) (285 ) (375 ) N/A Total Consumer (1,606 ) (1,031 ) (895 ) (923 ) (927 ) Total charge-offs (3,699 ) (2,452 ) (5,508 ) (5,314 ) (4,126 ) Recoveries: Commercial: C&I 267 953 2,150 1,315 N/A Municipal — — — — N/A Total Commercial 267 953 2,150 1,315 1,364 Agricultural 286 155 36 31 158 Real estate: Construction & Development 106 — 1 — N/A Farm — — 110 157 N/A Non-Owner Occupied CRE 71 852 702 131 N/A Owner Occupied CRE 227 699 821 17 N/A Residential real estate 24 114 96 151 N/A Total Real Estate 428 1,665 1,730 456 404 Consumer: Auto 398 293 401 269 N/A Non-Auto 170 215 211 171 N/A Total Consumer 568 508 612 440 532 Total recoveries 1,549 3,281 4,528 2,242 2,458 Net recoveries (charge-offs) (2,150 ) 829 (980 ) (3,072 ) (1,668 ) Provision for credit losses (excluding provision for unfunded commitment) 15,050 11,540 (2,089 ) 16,048 2,965 Balance at December 31, $ 88,734 $ 75,834 $ 63,465 $ 66,534 $ 52,499 Loans, held-for-investment at year-end $ 7,148,791 $ 6,441,868 $ 5,388,972 $ 5,171,033 $ 4,194,969 Average loans 6,784,352 5,923,594 5,341,332 5,152,531 4,074,667 Net (recoveries) charge-offs/average loans 0.03 % (0.01 )% 0.02 % 0.06 % 0.04 % Allowance for credit losses/year-end loans held-for-investment 1.24 % 1.18 % 1.18 % 1.29 % 1.25 % Allowance for credit losses/nonaccrual, past due 90 days still accruing and restructured loans 256.36 311.75 200.33 155.61 212.02 46 Table of Contents Allocation of Allowance for Credit Losses (in thousands): At December 31, 2023 2022 2021 2020 2019 Allocation Amount Allocation Amount Allocation Amount Allocation Amount Allocation Amount Commercial: C&I $ 15,698 $ 16,129 $ 12,280 $ 13,609 $ N/A Municipal 195 1,026 348 1,552 N/A Total Commercial 15,893 17,155 12,628 15,161 12,122 Agricultural 1,281 1,041 1,597 1,255 1,206 Real estate: Construction & Development 28,553 26,443 17,627 13,512 N/A Farm 2,914 1,957 663 1,876 N/A Non-Owner Occupied CRE 13,425 9,075 10,722 8,391 N/A Owner Occupied CRE 13,813 9,928 10,828 12,347 N/A Residential real estate 11,654 9,075 8,133 12,601 N/A Total Real Estate 70,359 56,478 47,973 48,727 33,974 Consumer: Auto 810 845 896 1,020 N/A Non-Auto 391 315 371 371 N/A Total Consumer 1,201 1,160 1,267 1,391 5,197 Total $ 88,734 $ 75,834 $ 63,465 $ 66,534 $ 52,499 Percent of Loans in Each Category of Total Loans: At December 31, 2023 2022 2021 2020 2019 Commercial: C&I 16.29 % 14.24 % 15.53 % 21.88 % N/A% Municipal 3.01 3.43 3.30 3.51 N/A Total Commercial 19.30 % 17.67 18.83 25.39 20.41 Agricultural 1.19 1.19 1.83 1.83 2.47 Real estate: Construction & Development 13.47 14.89 13.91 10.71 N/A Farm 4.83 4.76 4.03 2.94 N/A Non-Owner Occupied CRE 11.58 11.36 11.57 11.95 N/A Owner Occupied CRE 14.51 14.82 15.25 14.45 N/A Residential real estate 25.66 24.46 24.76 24.14 N/A Total Real Estate 70.05 70.29 69.52 64.19 67.31 Consumer: Auto 7.30 8.55 7.52 6.84 N/A Non-Auto 2.16 2.30 2.30 1.75 N/A Total Consumer 9.46 10.85 9.82 8.59 9.81 Total 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % Interest-Bearing Demand Deposits in Banks.
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. 46 Table of Contents Loan Loss Experience and Allowance for Credit Losses (in thousands, except percentages): 2024 2023 2022 2021 2020 Balance at January 1, $ 88,734 $ 75,834 $ 63,465 $ 66,534 $ 52,499 Impact of adopting ASC 326 — — — — (619 ) Initial allowance on acquired TB&T PCD loans — — — — 1,678 Charge-offs: Commercial: C&I (1,392 ) (1,816 ) (589 ) (1,600 ) (2,516 ) Municipal — — — — — Total Commercial (1,392 ) (1,816 ) (589 ) (1,600 ) (2,516 ) Agricultural (67 ) (9 ) (9 ) (2,683 ) (372 ) Real estate: Construction & Development (205 ) — (100 ) — — Farm — — — — — Non-Owner Occupied CRE (763 ) — — (6 ) (563 ) Owner Occupied CRE — (10 ) (537 ) (231 ) (567 ) Residential real estate (13 ) (258 ) (186 ) (93 ) (373 ) Total real estate (981 ) (268 ) (823 ) (330 ) (1,503 ) Consumer: Auto (1,680 ) (1,006 ) (596 ) (610 ) (548 ) Non-Auto (895 ) (600 ) (435 ) (285 ) (375 ) Total Consumer (2,575 ) (1,606 ) (1,031 ) (895 ) (923 ) Total charge-offs (5,015 ) (3,699 ) (2,452 ) (5,508 ) (5,314 ) Recoveries: Commercial: C&I 576 267 953 2,150 1,315 Municipal — — — — — Total Commercial 576 267 953 2,150 1,315 Agricultural 111 286 155 36 31 Real estate: Construction & Development 4 106 — 1 — Farm — — — 110 157 Non-Owner Occupied CRE 37 71 852 702 131 Owner Occupied CRE 122 227 699 821 17 Residential real estate 98 24 114 96 151 Total Real Estate 261 428 1,665 1,730 456 Consumer: Auto 448 398 293 401 269 Non-Auto 161 170 215 211 171 Total Consumer 609 568 508 612 440 Total recoveries 1,557 1,549 3,281 4,528 2,242 Net recoveries (charge-offs) (3,458 ) (2,150 ) 829 (980 ) (3,072 ) Provision for credit losses (excluding provision for unfunded commitment) 13,049 15,050 11,540 (2,089 ) 16,048 Balance at December 31, $ 98,325 $ 88,734 $ 75,834 $ 63,465 $ 66,534 2024 2023 2022 2021 2020 Loans, held-for-investment at year-end $ 7,913,098 $ 7,148,791 $ 6,441,868 $ 5,388,972 $ 5,171,033 Average loans 7,516,352 6,784,352 5,923,594 5,341,332 5,152,531 Net (recoveries) charge-offs/average loans 0.05 % 0.03 % (0.01 )% 0.02 % 0.06 % Allowance for credit losses/year-end loans held-for-investment 1.24 % 1.24 % 1.18 % 1.18 % 1.29 % Allowance for credit losses/nonaccrual, past due 90 days still accruing and restructured loans 158.02 256.36 311.75 200.33 155.61 47 Table of Contents Allocation of Allowance for Credit Losses (in thousands): At December 31, 2024 2023 2022 2021 2020 Allocation Amount Allocation Amount Allocation Amount Allocation Amount Allocation Amount Commercial: C&I $ 15,436 $ 15,698 $ 16,129 $ 12,280 $ 13,609 Municipal 200 195 1,026 348 1,552 Total Commercial 15,636 15,893 17,155 12,628 15,161 Agricultural 1,653 1,281 1,041 1,597 1,255 Real estate: Construction & Development 19,861 28,553 26,443 17,627 13,512 Farm 2,871 2,914 1,957 663 1,876 Non-Owner Occupied CRE 14,664 13,425 9,075 10,722 8,391 Owner Occupied CRE 21,413 13,813 9,928 10,828 12,347 Residential real estate 20,488 11,654 9,075 8,133 12,601 Total Real Estate 79,297 70,359 56,478 47,973 48,727 Consumer: Auto 1,186 810 845 896 1,020 Non-Auto 553 391 315 371 371 Total Consumer 1,739 1,201 1,160 1,267 1,391 Total $ 98,325 $ 88,734 $ 75,834 $ 63,465 $ 66,534 Percent of Loans in Each Category of Total Loans: At December 31, 2024 2023 2022 2021 2020 Commercial: C&I 14.87 % 16.29 % 14.24 % 15.53 % 21.88 % Municipal 4.67 3.01 3.43 3.30 3.51 Total Commercial 19.54 19.30 17.67 18.83 25.39 Agricultural 1.21 1.19 1.19 1.83 1.83 Real estate: Construction & Development 13.33 13.47 14.89 13.91 10.71 Farm 4.29 4.83 4.76 4.03 2.94 Non-Owner Occupied CRE 10.18 11.58 11.36 11.57 11.95 Owner Occupied CRE 13.69 14.51 14.82 15.25 14.45 Residential real estate 27.76 25.66 24.46 24.76 24.14 Total Real Estate 69.25 70.05 70.29 69.52 64.19 Consumer: Auto 8.07 7.30 8.55 7.52 6.84 Non-Auto 1.93 2.16 2.30 2.30 1.75 Total Consumer 10.00 9.46 10.85 9.82 8.59 Total 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % Interest-Bearing Demand Deposits in Banks.
ASU 2022-06, "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848." ASU 2022-06 extends the period of time preparers can utilize the reference rate reform relief guidance provided by ASU 2020-04 and ASU 2021-01, which are discussed above.
Other Recently Issued and Effective Authoritative Accounting Guidance ASU 2022-06, "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848." ASU 2022-06 extends the period of time preparers can utilize the reference rate reform relief guidance provided by ASU 2020-04 and ASU 2021-01, which are discussed above.
(2) Average balances include unrealized gains and losses on AFS securities. (3) Includes tax-equivalent yield adjustment of approximately $11.55 million, $15.42 million and $14.69 million for the years ended December 31, 2023, 2022 and 2021, respectively, using an effective tax rate of 21%. (4) Includes nonaccrual loans.
(2) Average balances include unrealized gains and losses on AFS securities. (3) Includes tax-equivalent yield adjustment of approximately $10.45 million, $11.55 million and $15.42 million for the years ended December 31, 2024, 2023 and 2022, respectively, using an effective tax rate of 21%. (4) Includes nonaccrual loans. Noninterest Income .
We anticipate that our recurring cash sources will continue to include dividends and management fees from our subsidiaries. At December 31, 2023, $387.33 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 $133.50 million in 2023 and $67.50 million in 2022.
We anticipate that our recurring cash sources will continue to include dividends and management fees from our subsidiaries. At December 31, 2024, $428.66 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 $55.50 million in 2024 and $133.50 million in 2023.
Unrealized gains and losses on investment securities AFS are excluded from and do not impact regulatory capital. During 2023, total shareholders’ equity averaged $1.33 billion, or 10.32% of average assets, as compared to $1.40 billion, or 10.55% of average assets during 2022.
Unrealized gains and losses on investment securities AFS are excluded from and do not impact regulatory capital. During 2024, total shareholders’ equity averaged $1.54 billion, or 11.56% of average assets, as compared to $1.33 billion, or 10.32% of average assets during 2023.
The Federal Reserve Board, the OCC and the FDIC have issued policy statements that recommend that bank holding companies and insured banks should generally only pay dividends out of current operating earnings. IT EM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Management considers interest rate risk to be a significant market risk for the Company.
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. IT EM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Management considers interest rate risk to be a significant market risk for the Company.
The fair value of our investment securities classified as available-for-sale totaled $4.73 billion at December 31, 2023.
The fair value of our investment securities classified as available-for-sale totaled $4.62 billion at December 31, 2024.
As of December 31, 2023, the investment portfolio had an overall tax equivalent yield of 2.23%, a weighted average life of 6.07 years and modified duration of 5.30 years. At December 31, 2022, the investment portfolio had an overall tax equivalent yield of 2.31%, a weighted average life of 7.76 years and modified duration of 6.33 years. Deposits .
As of 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. At December 31, 2023, the investment portfolio had an overall tax equivalent yield of 2.23%, a weighted average life of 6.07 years and modified duration of 5.30 years. Deposits .
Securities-AFS included an unrealized loss fair value adjustment of $510.92 million and $677.99 million at December 31, 2023 and 2022, respectively, and an unrealized gain fair value adjustments of $125.67 million at December 31, 2021. Our mortgage related securities are backed by GNMA, FNMA or FHLMC or are collateralized by securities backed by these agencies.
Securities AFS included an unrealized loss fair value adjustment of $537.55 million, $510.92 million and $677.99 million at December 31, 2024, 2023, and 2022, respectively. Our mortgage related securities are backed by GNMA, FNMA or FHLMC or are collateralized by securities backed by these agencies.
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. Stock Repurchase On July 27, 2021, the Company’s Board of Directors authorized the repurchase of up to 5,000,000 common shares through July 31, 2023.
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. Stock Repurchase On July 23, 2024, the Company’s Board of Directors extended the authorization to repurchase up to 5,000,000 common shares through July 31, 2025.
Year Ended December 31, 2023 2022 2021 2020 2019 (dollars in thousands, except per share data) Summary Income Statement Information: Interest income $ 528,070 $ 432,854 $ 376,405 $ 364,128 $ 319,192 Interest expense 144,261 31,440 6,042 14,243 30,102 Net interest income 383,809 401,414 370,363 349,885 289,090 Provision for credit losses 10,631 17,427 (1,139 ) 19,517 2,965 Noninterest income 108,003 131,665 142,176 139,935 108,428 Noninterest expense 237,882 234,778 241,708 227,938 196,521 Earnings before income taxes 243,299 280,874 271,970 242,365 198,032 Income tax expense 44,322 46,399 44,408 40,331 33,220 Net earnings $ 198,977 $ 234,475 $ 227,562 $ 202,034 $ 164,812 Per Share Data: Earnings per share, basic $ 1.39 $ 1.64 $ 1.60 $ 1.42 $ 1.22 Earnings per share, diluted 1.39 1.64 1.59 1.42 1.21 Cash dividends declared 0.71 0.66 0.58 0.51 0.47 Book value at period-end 10.50 8.87 12.34 11.80 9.03 Earnings performance ratios: Return on average assets 1.55 % 1.76 % 1.89 % 1.98 % 2.08 % Return on average equity 14.99 16.72 13.31 12.93 14.37 Dividend payout ratio 50.96 40.18 36.30 35.88 38.31 Summary Balance Sheet Data (Period-end): Securities $ 4,732,762 $ 5,474,359 $ 6,573,179 $ 4,393,029 $ 3,413,317 Loans, held-for-investment 7,148,791 6,441,868 5,388,972 5,171,033 4,194,969 Total assets 13,105,594 12,974,066 13,102,461 10,904,500 8,262,227 Deposits 11,138,300 11,005,507 10,566,488 8,675,817 6,603,806 Total liabilities 11,606,694 11,708,329 11,343,237 9,226,310 7,035,030 Total shareholders’ equity 1,498,900 1,265,737 1,759,224 1,678,190 1,227,197 Asset quality ratios: Allowance for credit losses/period-end loans held-for-investment 1.24 % 1.18 % 1.18 % 1.29 % 1.25 % Nonperforming assets/period-end loans held- for-investment plus foreclosed assets 0.49 0.38 0.63 0.83 0.61 Net charge offs (recoveries)/average loans 0.03 (0.01 ) 0.02 0.06 0.04 Capital ratios: Average shareholders’ equity/average assets 10.32 % 10.55 % 14.20 % 15.32 % 14.44 % Leverage ratio (1) 12.06 10.96 11.13 11.86 12.60 Tier 1 risk-based capital (2) 18.50 18.22 19.35 20.79 20.06 Common equity tier 1 capital (3) 18.50 18.22 19.35 20.79 20.06 Total risk-based capital (4) 19.62 19.29 20.34 22.03 21.13 (1) 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.
Year Ended December 31, 2024 2023 2022 2021 2020 (dollars in thousands, except per share data) Summary Income Statement Information: Interest income $ 628,918 $ 528,070 $ 432,854 $ 376,405 $ 364,128 Interest expense 202,177 144,261 31,440 6,042 14,243 Net interest income 426,741 383,809 401,414 370,363 349,885 Provision for credit losses 13,821 10,631 17,427 (1,139 ) 19,517 Noninterest income 123,989 108,003 131,665 142,176 139,935 Noninterest expense 265,063 237,882 234,778 241,708 227,938 Earnings before income taxes 271,846 243,299 280,874 271,970 242,365 Income tax expense 48,335 44,322 46,399 44,408 40,331 Net earnings $ 223,511 $ 198,977 $ 234,475 $ 227,562 $ 202,034 Per Share Data: Earnings per share, basic $ 1.56 $ 1.39 $ 1.64 $ 1.60 $ 1.42 Earnings per share, diluted 1.56 1.39 1.64 1.59 1.42 Cash dividends declared 0.72 0.71 0.66 0.58 0.51 Book value at period-end 11.24 10.50 8.87 12.34 11.80 Earnings performance ratios: Return on average assets 1.68 % 1.55 % 1.76 % 1.89 % 1.98 % Return on average equity 14.51 14.99 16.72 13.31 12.93 Dividend payout ratio 46.06 50.96 40.18 36.30 35.88 Summary Balance Sheet Data (Period-end): Securities $ 4,617,759 $ 4,732,762 $ 5,474,359 $ 6,573,179 $ 4,393,029 Loans, held-for-investment 7,913,098 7,148,791 6,441,868 5,388,972 5,171,033 Total assets 13,979,418 13,105,594 12,974,066 13,102,461 10,904,500 Deposits 12,099,174 11,138,300 11,005,507 10,566,488 8,675,817 Total liabilities 12,372,858 11,606,694 11,708,329 11,343,237 9,226,310 Total shareholders’ equity 1,606,560 1,498,900 1,265,737 1,759,224 1,678,190 Asset quality ratios: Allowance for credit losses/period-end loans held-for-investment 1.24 % 1.24 % 1.18 % 1.18 % 1.29 % Nonperforming assets/period-end loans held- for-investment plus foreclosed assets 0.80 0.49 0.38 0.63 0.83 Net charge offs (recoveries)/average loans 0.05 0.03 (0.01 ) 0.02 0.06 Capital ratios: Average shareholders’ equity/average assets 11.56 % 10.32 % 10.55 % 14.20 % 15.32 % Leverage ratio (1) 12.49 12.06 10.96 11.13 11.86 Tier 1 risk-based capital (2) 18.83 18.50 18.22 19.35 20.79 Common equity tier 1 capital (3) 18.83 18.50 18.22 19.35 20.79 Total risk-based capital (4) 20.00 19.62 19.29 20.34 22.03 (1) 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.
As a percent of loans HFI and foreclosed assets, these assets were 0.49% at December 31, 2023, as compared to 0.38% at December 31, 2022 and 0.63% at December 31, 2021. As a percent of total assets, these assets were 0.27% at December 31, 2023, as compared to 0.19% at December 31, 2022 and 0.26% at December 31, 2021.
As a percent of loans HFI and foreclosed assets, these assets were 0.80% at December 31, 2024, as compared to 0.49% at December 31, 2023 and 0.38% at December 31, 2022. As a percent of total assets, these assets were 0.45% at December 31, 2024, as compared to 0.27% at December 31, 2023 and 0.19% at December 31, 2022.
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, 2023, total loans HFI were $7.15 billion, an increase of $706.92 million as compared to December 31, 2022.
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, 2024, total loans HFI were $7.91 billion, an increase of $764.31 million as compared to December 31, 2023.
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, 2023 of approximately $913 thousand during the year ended December 31, 2023.
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, 2024 of approximately $1.11 million during the year ended December 31, 2024.
Income tax expense was $44.32 million for 2023, as compared to $46.40 million for 2022 and $44.41 million for 2021. Our effective tax rates on pretax income were 18.22%, 16.52% and 16.33%, respectively, for the years 2023, 2022 and 2021.
Income tax expense was $48.34 million for 2024, as compared to $44.32 million for 2023 and $46.40 million for 2022. Our effective tax rates on pretax income were 17.78%, 18.22% and 16.52%, respectively, for the years 2024, 2023 and 2022.
Composition of Loans Held-For-Investment (in thousands): December 31, 2023 2022 2021 2020 2019 Commercial: C&I $ 1,164,811 $ 917,317 $ 837,075 $ 1,131,382 $ N/A Municipal 214,850 221,090 177,905 181,325 N/A Total Commercial 1,379,661 1,138,407 1,014,980 1,312,707 856,326 Agricultural 84,890 76,947 98,089 94,864 103,640 Real Estate: Construction & Development 963,158 959,426 749,793 553,959 N/A Farm 344,954 306,322 217,220 152,237 N/A Non-Owner Occupied CRE 827,969 732,089 623,434 617,686 N/A Owner Occupied CRE 1,037,281 954,400 821,653 746,974 N/A Residential 1,834,593 1,575,758 1,334,419 1,248,409 N/A Total Real Estate 5,007,955 4,527,995 3,746,519 3,319,265 2,823,372 Consumer: Auto 521,859 550,635 405,416 353,595 N/A Non-Auto 154,426 147,884 123,968 90,602 N/A Total Consumer 676,285 698,519 529,384 444,197 411,631 Total $ 7,148,791 $ 6,441,868 $ 5,388,972 $ 5,171,033 $ 4,194,969 Loans HFS, consisting of secondary market mortgage loans, totaled $14.25 million and $11.97 million at December 31, 2023 and 2022, respectively.
Composition of Loans Held-For-Investment (in thousands): December 31, 2024 2023 2022 2021 2020 Commercial: C&I $ 1,176,993 $ 1,164,811 $ 917,317 $ 837,075 $ 1,131,382 Municipal 369,246 214,850 221,090 177,905 181,325 Total Commercial 1,546,239 1,379,661 1,138,407 1,014,980 1,312,707 Agricultural 95,543 84,890 76,947 98,089 94,864 Real Estate: Construction & Development 1,054,603 963,158 959,426 749,793 553,959 Farm 339,665 344,954 306,322 217,220 152,237 Non-Owner Occupied CRE 805,566 827,969 732,089 623,434 617,686 Owner Occupied CRE 1,083,100 1,037,281 954,400 821,653 746,974 Residential 2,196,767 1,834,593 1,575,758 1,334,419 1,248,409 Total Real Estate 5,479,701 5,007,955 4,527,995 3,746,519 3,319,265 Consumer: Auto 638,560 521,859 550,635 405,416 353,595 Non-Auto 153,055 154,426 147,884 123,968 90,602 Total Consumer 791,615 676,285 698,519 529,384 444,197 Total $ 7,913,098 $ 7,148,791 $ 6,441,868 $ 5,388,972 $ 5,171,033 Loans HFS, consisting of secondary market mortgage loans, totaled $8.24 million and $14.25 million at December 31, 2024 and 2023, respectively.
The return on average assets was 1.55% for 2023, as compared to 1.76% for 2022 and 1.89% for 2021. The return on average equity was 14.99% for 2023, as compared to 16.72% for 2022 and to 13.31% for 2021. Net Interest Income .
The return on average assets was 1.68% for 2024, as compared to 1.55% for 2023 and 1.76% for 2022. The return on average equity was 14.51% for 2024, as compared to 14.99% for 2023 and to 16.72% for 2022. Net Interest Income .
Total shareholders’ equity was $1.50 billion, or 11.44% of total assets at December 31, 2023, as compared to $1.27 billion, or 9.76% of total assets at December 31, 2022. Included in shareholders’ equity were $403.30 million and $535.23 million at December 31, 2023 and 2022, respectively, in unrealized losses on investment securities AFS, net of related income taxes.
Total shareholders’ equity was $1.61 billion, or 11.49% of total assets at December 31, 2024, as compared to $1.50 billion, or 11.44% of total assets at December 31, 2023. Included in shareholders’ equity were $424.29 million and $403.30 million at December 31, 2024 and 2023, respectively, in unrealized losses on investment securities AFS, net of related income taxes.
(4) 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. 36 Table of Contents Results of Operations Performance Summary . Net earnings for 2023 were $198.98 million compared to net earnings of $234.48 million for 2022.
(4) 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. 37 Table of Contents Results of Operations Performance Summary .
Available cash and cash equivalents at the Company, which totaled $143.32 million at December 31, 2023, investment securities which totaled $2.20 million at December 31, 2023 with maturities over 6 to 7 years, available dividends from our subsidiaries which totaled $387.33 million at December 31, 2023, 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.
Available cash and cash equivalents at the Company, which totaled $94.59 million at December 31, 2024, investment securities which totaled $2.12 million at December 31, 2024 with maturities over 5 to 6 years, available dividends from our subsidiaries which totaled $428.66 million at December 31, 2024, 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.
Under the prior authorization, 244,559 shares were repurchased and retired (all during the months of June and July 2022) at an average price of $38.61 per share. Under the current authorization, the Company has repurchased and retired 101,337 shares (all during September 2023) at an average price of $26.99 per share.
Under the previous authorization effective through July 31, 2024, 244,559 shares were repurchased and retired (during the months of June and July 2022) at an average price of $38.61 per share. Additionally, 101,337 shares (all during September 2023) were repurchased and retired at an average price of $26.99 per share.
The unrealized gains or losses, net of taxes, on the portfolio are excluded from the calculation of all regulatory capital ratios. The changes in the fair value were driven by sales of securities and changes in interest rates based on expected actions by the Federal Reserve Board and other market conditions.
The unrealized gains or losses, net of taxes, on the portfolio are excluded from the calculation of all regulatory capital ratios. The changes in the fair value were 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.
Percentage change in net interest income: Change in interest rates: December 31, (in basis points) 2023 2022 +400 7.17 % 5.13 % +300 5.36 % 3.86 % +200 3.87 % 3.13 % +100 2.11 % 2.09 % -100 (2.72 )% (2.66 )% -200 (5.54 )% (5.47 )% -300 (8.70 )% (8.54 )% -400 (9.65 )% (10.31 )% 49 Table of Contents The results for the net interest income simulations as of December 31, 2023 and December 31, 2022 resulted in an asset sensitive position.
Percentage change in net interest income: Change in interest rates: December 31, (in basis points) 2024 2023 +400 0.92 % 7.17 % +300 0.70 % 5.36 % +200 0.64 % 3.87 % +100 0.42 % 2.11 % -100 (3.08 )% (2.72 )% -200 (6.50 )% (5.54 )% -300 (8.10 )% (8.70 )% -400 (7.42 )% (9.65 )% 50 Table of Contents The results for the net interest income simulations as of December 31, 2024 and December 31, 2023 resulted in an asset sensitive position.
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 $466.25 million in less than one year, $868.47 million in more than one year but less than three years and $588.37 million thereafter.
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 $1.04 billion in less than one year, $601.28 million in more than one year but less than three years and $525.41 million thereafter.
Treasury securities; (2) a decrease of $401.45 million in obligations of states and political subdivisions; (3) an increase of $3.19 million in corporate bonds and other securities; and (4) a decrease of $343.02 million in mortgage-backed securities. As compared to December 31, 2021, the AFS portfolio at December 31, 2022, reflected (1) an increase of $355.71 million in U.S.
As compared to December 31, 2022, the AFS portfolio at December 31, 2023, reflected (i) a decrease of $401.45 million in obligations of states and political subdivisions; (ii) a decrease of $343.02 million in mortgage-backed securities; (iii) a decrease of $315 thousand in U.S. Treasury securities; and (iv) an increase of $3.19 million in corporate bonds and other securities.
As of December 31, 2023 and 2022, we had a total risk-based capital ratio of 19.62% and 19.29%, a Tier 1 capital to risk-weighted assets ratio of 18.50% and 18.22%, a common equity Tier 1 capital to risk-weighted ratio of 18.50% and 18.22% and a Tier 1 leverage ratio of 12.06% and 10.96%, respectively.
As of December 31, 2024 and 2023, we had a total risk-based capital ratio of 20.00% and 19.62%, a Tier 1 capital to risk-weighted assets ratio of 18.83% and 18.50%, a common equity Tier 1 capital to risk-weighted ratio of 18.83% and 18.50% and a Tier 1 leverage ratio of 12.49% and 12.06%, respectively.
Tax-equivalent net interest income was $395.36 million in 2023, as compared to $416.84 million in 2022, and $385.05 million in 2021. Average earning assets were $12.00 billion in 2023, as compared to $12.46 billion in 2022 and $11.34 billion in 2021.
Tax-equivalent net interest income was $437.19 million in 2024, as compared to $395.36 million in 2023, and $416.84 million in 2022. Average earning assets were $12.48 billion in 2024, as compared to $12.00 billion in 2023 and $12.46 billion in 2022.

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