10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2006

Commission file number 0-7674

FIRST FINANCIAL BANKSHARES, INC.

(Exact name of registrant as Specified in its charter)

Texas	75-0944023
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

400 Pine Street, Abilene, Texas 79601
(Address of principal executive offices)
(Zip Code)

(325) 627-7155
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer x Non-accelerated filer o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of May 2, 2006:

Class	Number of Shares Outstanding
Common Stock, $0.01 par value per share		20,717,872

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

Item			Page
		Forward-Looking Statement Disclaimer		3
	1.	Consolidated Financial Statements		3
	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
	3.	Quantitative and Qualitative Disclosures About Market Risk		16
	4.	Controls and Procedures		16
		PART II
		OTHER INFORMATION
	4.	Submission of Matters to a Vote of Security Holders		17
	6.	Exhibits		18
		Signatures		19

2

CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS

     This Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this Form 10-Q, words such as “anticipate”, “believe”, “estimate”, “expect”, “intend”, “predict”, “project”, and similar expressions, as they relate to us or management, identify forward-looking statements. These forward-looking statements are based on information currently available to our management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors, including but not limited to those listed in “Item 1A- Risk Factors” in our Annual Report on Form 10-K and the following:

• General economic conditions;

• Legislative and regulatory actions and reforms;

• Competition from other financial institutions and financial holding companies;

• The effects of and changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board;

• Changes in the demand for loans;

• Fluctuations in the value of collateral and in loan reserves;

• Inflation, interest rate, market and monetary fluctuations;

• Changes in consumer spending, borrowing and savings habits;

• Our ability to attract deposits;

• Consequences of continued bank mergers and acquisitions in our market area, resulting in fewer but much larger and stronger competitors; and

• Acquisitions and integration of acquired businesses.

Such statements reflect the current views of our management with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this paragraph. We undertake no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I

FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

The consolidated balance sheets of First Financial Bankshares, Inc. at March 31, 2006 and 2005 and December 31, 2005, and the consolidated statements of earnings and comprehensive earnings for the three months ended March 31, 2006 and 2005, changes in shareholders’ equity for the three months ended March 31, 2006 and the year ended December 31, 2005, and cash flows for the three months ended March 31, 2006 and 2005, follow on pages 4 through 8.

3

FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	March 31,						December 31,
	2006			2005			2005
ASSETS	(Unaudited)
Cash and due from banks	$	111,434,103		$	91,264,718		$	129,563,433
Federal funds sold		132,925,000			50,950,000			120,950,000
Cash and cash equivalents		244,359,103			142,214,718			250,513,433
Interest-bearing deposits in banks		5,755,087			669,787			795,427
Investment securities:
Securities held-to-maturity (market value of $45,158,962, $86,546,691 and $54,476,828 at March 31, 2006 and 2005 and December 31, 2005, respectively)		44,035,525			84,157,749			53,162,272
Securities available-for-sale, at fair value		1,061,780,329			863,187,972			992,958,988
Total investment securities		1,105,815,854			947,345,721			1,046,121,260
Loans		1,254,972,949			1,199,117,294			1,288,604,372
Less: Allowance for loan losses		(15,115,795	)		(14,409,141	)		(14,719,140	)
Net loans		1,239,857,154			1,184,708,153			1,273,885,232
Bank premises and equipment, net		60,932,858			53,997,309			60,093,497
Intangible assets		67,889,776			53,713,722			68,326,158
Other assets		33,508,409			25,691,741			34,092,096
TOTAL ASSETS	$	2,758,118,241		$	2,408,341,151		$	2,733,827,103
LIABILITIES
Noninterest-bearing deposits	$	608,160,815		$	521,453,171		$	623,155,842
Interest-bearing deposits		1,760,958,337			1,556,480,499			1,743,121,290
Total deposits		2,369,119,152			2,077,933,670			2,366,277,132
Dividends payable		4,972,372			5,275,433			4,964,781
Short-term borrowings		86,384,293			43,519,562			74,238,976
Other liabilities		17,014,054			15,047,196			12,070,407
Total liabilities		2,477,489,871			2,141,775,861			2,457,551,296
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Common stock — $10 par value; authorized 40,000,000 shares; 20,717,481, 20,688,642 and 20,714,401 shares issued at March 31, 2006 and 2005 and December 31, 2005, respectively		207,174,810			206,886,420			207,144,010
Capital surplus		58,793,238			58,575,387			58,712,508
Retained earnings		25,101,205			4,913,502			19,434,606
Treasury stock (shares at cost: 148,305, 137,008 and 145,322 at March 31, 2006 and 2005, and December 31, 2005, respectively)		(2,699,856	)		(2,343,079	)		(2,592,413	)
Deferred compensation		2,699,856			2,343,079			2,592,413
Accumulated other comprehensive income (loss)		(10,440,883	)		(3,810,019	)		(9,015,317	)
Total shareholders’ equity		280,628,370			266,565,290			276,275,807
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,758,118,241		$	2,408,341,151		$	2,733,827,103

See notes to consolidated financial statements.

-4-

FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS — (UNAUDITED)

	Three Months Ended March 31,
	2006		2005
INTEREST INCOME
Interest and fees on loans	$	23,443,927	$	18,716,027
Interest on investment securities:
Taxable		9,250,286		6,996,028
Exempt from federal income tax		2,526,205		2,381,131
Interest on federal funds sold and interest-bearing deposits in banks		1,180,486		440,806
Total interest income		36,400,904		28,533,992
INTEREST EXPENSE
Interest-bearing deposits		9,853,689		5,443,340
Other		896,235		233,881
Total interest expense		10,749,924		5,677,221
NET INTEREST INCOME		25,650,980		22,856,771
Provision for loan losses		333,251		410,167
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		25,317,729		22,446,604
NONINTEREST INCOME
Trust department income		1,847,453		1,714,809
Service fees on deposit accounts		5,287,802		5,017,912
ATM and credit card fees		1,439,509		1,123,419
Real estate mortgage fees		449,200		412,171
Net gain on sale of securities		—		40,806
Net gain on sale of student loans		1,409,501		1,309,229
Net gain on sale of real estate and other assets		1,068		12,021
Net gain on sale of PULSE ownership rights		—		2,979,579
Other		1,043,726		740,585
Total noninterest income		11,478,259		13,350,531
NONINTEREST EXPENSE
Salaries and employee benefits		11,388,173		9,878,781
Net occupancy expense		1,475,442		1,155,308
Equipment expense		1,705,468		1,485,738
Printing, stationery & supplies		498,156		521,085
Correspondent bank service charges		311,504		383,010
Amortization of intangible assets		226,315		102,665
Other expenses		4,905,916		5,015,094
Total noninterest expense		20,510,974		18,541,681
EARNINGS BEFORE INCOME TAXES		16,285,014		17,255,454
Income tax expense		4,817,687		5,179,455
NET EARNINGS	$	11,467,327	$	12,075,999
EARNINGS PER SHARE, BASIC	$	0.55	$	0.58
EARNINGS PER SHARE, ASSUMING DILUTION	$	0.55	$	0.58
DIVIDENDS PER SHARE	$	0.28	$	0.26

See notes to consolidated financial statements.

-5-

FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS — (UNAUDITED)

	Three Months Ended March 31,
	2006			2005
NET EARNINGS	$	11,467,327		$	12,075,999
OTHER ITEMS OF COMPREHENSIVE EARNINGS:
Change in unrealized gain (loss) on investment securities available-for-sale, before income taxes		(2,193,178	)		(8,999,185	)
Reclassification adjustment for realized gains on investment securities included in net earnings, before income tax		—			(40,806	)
Total other items of comprehensive earnings (losses)		(2,193,178	)		(9,039,991	)
Income tax benefit related to other items of comprehensive earnings		767,612			3,163,997
	$	10,041,761		$	6,200,005

See notes to consolidated financial statements.

-6-

FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

																		Accumulated
																		Other			Total
	Common Stock				Capital		Retained			Treasury Stock						Deferred		Comprehensive			Shareholders'
	Shares		Amount		Surplus		Earnings			Shares			Amounts			Compensation		Earnings (Losses)			Equity
Balances at December 31, 2004		15,511,576	$	155,115,760	$	58,529,113	$	49,834,536			(100,189	)	$	(2,289,729	)	$	2,289,729	$	2,065,975		$	265,545,384
Four-for-three stock split in the form of a 33% stock dividend		5,172,871		51,728,710		—		(51,728,710	)		(35,298	)		—			—		—			—
Net Earnings		—		—		—		44,022,980			—			—			—		—			44,022,980
Stock issuances		29,954		299,540		128,636		—			—			—			—		—			428,176
Cash dividends declared, $1.10 per share		—		—		—		(22,694,200	)		—			—			—		—			(22,694,200	)
Change in unrealized gain (loss) in investment securities available- for-sale, net of related income taxes		—		—		—		—			—			—			—		(10,194,926	)		(10,194,926	)
Minimum liability pension adjustment, net of related income taxes		—		—		—		—			—			—			—		(886,366	)		(886,366	)
Shares purchased in connection with directors’ deferred compensation plan, net		—		—		—		—			(9,835	)		(302,684	)		302,684		—			—
Additional tax benefit related to directors’ deferred compensation plan		—		—		54,759		—			—			—			—		—			54,759
Balances at December 31, 2005		20,714,401		207,144,010		58,712,508		19,434,606			(145,322	)		(2,592,413	)		2,592,413		(9,015,317	)		276,275,807
Net Earnings (unaudited)		—		—		—		11,467,327			—			—			—		—			11,467,327
Stock issuances (unaudited)		3,080		30,800		22,781		—			—			—			—		—			53,581
Cash dividends declared, $0.28 per share (unaudited)		—		—		—		(5,800,728	)		—			—			—		—			(5,800,728	)
Change in unrealized gain (loss) in investment securities available- for-sale, net of related income taxes (unaudited)		—		—		—		—			—			—			—		(1,425,566	)		(1,425,566	)
Additional tax benefit related to directors’ deferred compensation plan (unaudited)		—		—		13,689		—			—			—			—		—			13,689
Stock option expense (unaudited)		—		—		44,260		—			—			—			—		—			44,260
Shares purchased in connection with directors’ deferred compensation plan, net (unaudited)		—		—		—		—			(2,983	)		(107,443	)		107,443		—			—
Balances at March 31, 2006 (unaudited)		20,717,481	$	207,174,810	$	58,793,238	$	25,101,205			(148,305	)	$	(2,699,856	)	$	2,699,856	$	(10,440,883	)	$	280,628,370

See notes to consolidated financial statements.

-7-

FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS — (UNAUDITED)

	Three Months Ended March 31,
	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings	$	11,467,327		$	12,075,999
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		1,808,386			1,418,895
Provision for loan losses		333,251			410,167
Premium amortization, net of discount accretion		401,560			819,005
Gain on sale of assets		(1,410,569	)		(4,341,635	)
Deferred federal income tax benefit (expense)		(292,774	)		694,581
Loans originated for resale		(48,156,759	)		(46,055,401	)
Proceeds from sales of loans held for resale		69,515,572			62,776,176
Decrease in other assets		1,806,908			3,026,765
Increase in other liabilities		5,001,596			90,556
Total adjustments		29,007,171			18,839,109
Net cash provided by operating activities		40,474,498			30,915,108
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) in interest-bearing deposits in banks		(4,959,660	)		(179,830	)
Cash paid in acquisition of common stock, net of cash acquired		—			(1,126,694	)
Activity in available-for-sale securities:
Sales		—			33,721,039
Maturities		37,004,793			26,501,980
Purchases		(108,419,477	)		(134,458,287	)
Activity in held-to-maturity securities:
Maturities		9,125,355			6,497,500
Purchases		—			(620,000	)
Net decrease in loans		13,467,204			5,641,937
Capital expenditures		(2,444,360	)		(3,102,902	)
Proceeds from sale of assets		349,536			3,286,406
Net cash used in investing activities		(55,876,609	)		(63,838,851	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in noninterest-bearing deposits		(14,995,027	)		(17,995,898	)
Net increase (decrease) in interest-bearing deposits		17,837,047			(3,773,286	)
Net increase in securities sold under agreements to repurchase		12,145,317			7,827,954
Proceeds from stock issuances		53,581			95,334
Dividends paid		(5,793,137	)		(5,273,808	)
Net cash used in financing activities		9,247,781			(19,119,704	)
Net decrease in cash and cash equivalents		(6,154,330	)		(52,043,447	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		250,513,433			194,258,165
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	244,359,103		$	142,214,718
SUPPLEMENTAL INFORMATION AND NONCASH TRANSACTIONS
Interest paid	$	10,453,053		$	5,291,361
Federal income tax paid		200,000			320,000
Assets acquired through foreclosure		278,311			482,377

See notes to consolidated financial statements.

-8-

FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 — Basis of Presentation

In the opinion of management, the unaudited consolidated financial statements reflect all adjustments necessary for a fair presentation of the Company’s financial position and unaudited results of operations. All adjustments were of a normal recurring nature. However, the results of operations for the three months ended March 31, 2006, are not necessarily indicative of the results to be expected for the year ending December 31, 2006, due to seasonality and other factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted under SEC rules and regulations.

Note 2 – Stock Split

On April 26, 2005, the Company’s Board of Directors declared a four-for-three stock split in the form of a 33% stock dividend effective for shareholders of record on May 16, 2005. All per share amounts in this report have been restated to reflect this stock split. An amount equal to the par value of the additional common shares to be issued pursuant to the stock split was reflected as a transfer from retained earnings to common stock on the consolidated financial statements as of and for the three months ended March 31, 2005.

Note 3 — Earnings Per Share

Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of shares outstanding during the periods. In computing diluted earnings per common share for the three months ended March 31, 2006 and 2005, the Company assumes that all outstanding options to purchase common stock have been exercised at the beginning of the year (or the time of issuance, if later). The dilutive effect of the outstanding options is reflected by application of the treasury stock method, whereby the proceeds from the exercised options are assumed to be used to purchase common stock at the average market price during the respective periods. The weighted average common shares outstanding used in computing basic earnings per common share for the three months ended March 31, 2006 and 2005, were 20,715,484 and 20,684,392 shares, respectively. The weighted average common shares outstanding used in computing fully diluted earnings per common share for the three months ended March 31, 2006 and 2005, were 20,773,616 and 20,772,559, respectively. See Note 2 above.

Note 4- Stock Based Compensation

The Company grants stock options for a fixed number of shares with an exercise price equal to the fair value of the shares at the date of grant to employees. Prior to 2006, the Company accounted for stock option grants using the intrinsic value method prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”). Under APB 25, because the exercise price of the Company’s employee stock options equaled the market price of the underlying stock on the date of grant, no compensation expense was recognized.

9

In December 2004, Statement of Financial Accounting Standards (SFAS) No. 123R, “Share-Based Payment,” was issued. SFAS No. 123R requires companies to recognize in the statement of earnings the grant-date fair value of stock options issued to employees. The statement was effective January 1, 2006. The Company recorded stock option expense totaling $44,000 for the three months ended March 31, 2006, using the modified prospective method for transition to the new rules whereby grants after the implementation date, as well as unvested awards granted prior to the implementation date, are measured and accounted for under SFAS No. 123R.

The additional disclosure requirements of SFAS No. 123R have been omitted due to immateriality.

Note 5 – Pension Plan

The Company’s defined benefit pension plan was frozen effective January 1, 2004 and no additional years of service will accrue to participants, unless the pension plan is reinstated at a future date. The pension plan covered substantially all of the Company’s employees. The benefits were based on years of service and a percentage of the employee’s qualifying compensation during the final years of employment. The Company’s funding policy was and is to contribute annually the amount necessary to satisfy the Internal Revenue Service’s funding standards. Contributions to the pension plan through December 31, 2003 were intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future. As a result of freezing the pension plan, we do not expect contributions or pension expense to be significant in future years. Accordingly, no amount of net periodic benefit cost was recorded in the three months ended March 31, 2006 and 2005 as the interest cost component is generally offset with the expected return on plan assets.

The Company did not make a contribution to the pension plan during the years ended December 31, 2004 or 2005 and does not expect to make a contribution during the year ending December 31, 2006, as required by the Internal Revenue Service’s funding standards.

Note 6 – Related Party Transactions

During the three months ended March 31, 2006 and 2005, the Company sold student loans totaling approximately $47 million and $44 million, respectively, recognizing a net profit of $1.4 million and $1.3 million, respectively, to a financial institution of which an executive officer of one of our wholly owned subsidiary banks is a board member. In the opinion of management, these loan sales are on substantially the same terms as those prevailing at the time for comparable transactions with unaffiliated persons.

Note 7 – Subsequent Event

The shareholders of the Company voted at the Annual Shareholders’ Meeting held April 25, 2006 to change the par value of stock from $10.00 to $0.01 per share. In the second quarter of 2006, the Company will transfer appropriate amounts from common stock to capital surplus to reflect this change in par value.

10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

As a multi-bank financial holding company, we generate most of our revenue from interest on loans and investments, trust fees, and service charges on deposits. Our primary source of funding for our loans is deposits we hold in our subsidiary banks. Our largest expenses are interest on these deposits and salaries and related employee benefits. We usually measure our performance by calculating our return on average assets, return on average equity, our regulatory leverage and risk based capital ratios, and our efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income on a tax equivalent basis and noninterest income.

The following discussion of operations and financial condition should be read in conjunction with the financial statements and accompanying footnotes included in Item 1 of this Form 10-Q as well as those included in the Company’s 2005 Annual Report on Form 10-K. On April 26, 2005, the Company’s Board of Directors declared a four-for-three stock split in the form of a 33% stock dividend effective for shareholders of record on May 16, 2005. All per share amounts in this report have been restated to reflect this stock split.

Critical Accounting Policies

We prepare consolidated financial statements based on the application of certain accounting policies, accounting principles generally accepted in the United States and customary practices in the banking industry. These policies, in certain areas, require us to make significant estimates and assumptions.

We deem a policy critical if (1) the accounting estimate required us to make assumptions about matters that are highly uncertain at the time we make the accounting estimate; and (2) different estimates that reasonably could have been used in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, would have a material impact on the financial statements.

The following discussion addresses our allowance for loan loss and our provision for loan losses, which we deem to be our most critical accounting policy. We have other significant accounting policies and continue to evaluate the materiality of their impact on our consolidated financial statements, but we believe that these other policies either do not generally require us to make estimates and judgments that are difficult or subjective, or it is less likely they would have a material impact on our reported results for a given period.

The allowance for loan losses is an amount we believe will be adequate to absorb inherent estimated losses on existing loans for which full collectibility is unlikely based upon our review and evaluation of the loan portfolio. The allowance for loan losses is increased by charges to income and decreased by charged off loans (net of recoveries).

Our methodology is based on guidance provided in SEC Staff Accounting Bulletin No. 102, “Selected Loan Loss Allowance Methodology and Documentation Issues” and includes allowance allocations calculated in accordance with Statement of Financial Accounting Standards (SFAS) No. 114, “Accounting by Creditors for Impairment of a Loan,” as amended by SFAS 118, and allowance allocations determined in accordance with SFAS No. 5, “Accounting for Contingencies”. We have developed a consistent, well- documented loan review methodology that includes allowances assigned to certain classified loans, allowances assigned based upon estimated loss factors and qualitative reserves.

11

The level of the allowance reflects our periodic evaluation of general economic conditions, the financial condition of our borrowers, the value and liquidity of collateral, delinquencies, prior loan loss experience, and the results of periodic reviews of the portfolio by our independent loan review staff and regulatory examiners.

Our allowance for loan losses is comprised of three elements: (i) specific reserves determined in accordance with SFAS 114 based on probable losses on specific loans; (ii) general reserves determined in accordance with SFAS 5 that consider historical loss rates, loan classifications and other factors; and (iii) a qualitative reserve determined in accordance with SFAS 5 based upon general economic conditions and other qualitative risk factors both internal and external to the Company. We regularly evaluate our allowance for loan losses to maintain an adequate level to absorb estimated loan losses inherent in the loan portfolio. Factors contributing to the determination of the specific reserves include the credit worthiness of the borrower, changes in the value of pledged collateral, and general economic conditions. All nonaccrual loans rated substandard or worse and greater than $50,000 are specifically reviewed and a specific allocation is assigned based on the losses expected to be realized from those loans. For purposes of determining the general reserve, a certain portion of the loan portfolio is assigned a reserve allocation percentage. The reserve allocation percentage is multiplied by the outstanding loan principal balance, less cash secured loans, government guaranteed loans and classified loans to calculate the required general reserve. The general reserve allocation percentages assigned to groups of loans consider historical loss rates, loan classifications and other factors. The qualitative reserves are determined by evaluating such things as current economic conditions and trends, changes in lending staff, policies or procedures, changes in credit concentrations, changes in the trends and severity of problem loans and changes in trends in volume and terms of loans. The portion of the allowance that is not derived by the general reserve allocation percentages compensates for the uncertainty and complexity in estimating loan losses including factors and conditions that may not be fully reflected in the determination and application of the general reserve allocation percentages.

Although we believe we use the best information available to make loan loss allowance determinations, future adjustments could be necessary if circumstances or economic conditions differ substantially from the assumptions used in making our initial determinations. A downturn in the economy and employment could result in increased levels of nonperforming assets and charge-offs, increased loan loss provisions and reductions in income. Additionally, as an integral part of their examination process, bank regulatory agencies periodically review our allowance for loan losses. The bank regulatory agencies could require the recognition of additions to the loan loss allowance based on their judgment of information available to them at the time of their examination.

Accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions and collection efforts, the borrower’s financial condition is such that collection of interest is doubtful.

Our policy requires measurement of the allowance for an impaired collateral-dependent loan based on the fair value of the collateral. Other loan impairments are measured based on the present value of expected future cash flows or the loan’s observable market price.

12

Operating Results

Three-months ended March 31, 2006 and 2005

Net income for the first quarter of 2006 totaled $11.5 million, a decrease of $609 thousand or 5.0% from the same period last year. The earnings decline is the primary result of the special distribution of proceeds from the merger of PULSE EFT Association and Discover Financial Services, Inc., the first of which we received and recognized in income in the first quarter of 2005, in the amount of $1.9 million, net of related income tax. Excluding the gain on the special distribution in 2005, our earnings increased $1.3 million, or 13.1%, over the prior year. This increase is principally attributable to an increase in net interest income of $2.8 million, an increase in ATM and credit card fees of $316 thousand, higher service charges on deposits of $270 thousand, increased trust fees of $132 thousand and an increase in the gain on sale of student loans of $100 thousand. Offsetting these items were increases in salaries and employee benefits of $1.5 million, net occupancy expense of $320 thousand and equipment expense of $219 thousand, primarily attributable to our acquisitions. We sold approximately $47 million in student loans in the first quarter of 2006, recognizing a premium of $1.4 million. This compares to a sale of approximately $44 million in student loans, with premium recognition of $1.3 million in the first quarter of 2005. Fees from ATM and credit card transactions increased in the first quarter of 2006 over 2005 as a result of continued increased use of our debit cards.

On a basic earnings per share basis, earnings amounted to $0.55 per share for the first quarter of 2006, as compared to $0.58 per share for the first quarter of 2005. Return on average assets and return on average equity for the first quarter of 2006 amounted to 1.71% and 16.71%, respectively. For the same periods in 2005, return on average assets and return on average equity amounted to 2.04% and 18.19%, respectively.

Tax equivalent net interest income for the first quarter of 2006 amounted to $26.8 million as compared to $24.1 million for the same period last year. Our rates on interest earning assets increased approximately 59 basis points while our rates paid on deposits increased approximately 91 basis points. The increase in volume of average interest earning assets of $307.2 million together with the increase in rates to improve interest income. Average interest bearing liabilities increased $262.2 million, and coupled with the increase in rates, partially offset the increase in interest income. Average earning assets were $2.47 billion for the first quarter of 2006, which is 14.2% greater than for the first quarter of 2005. Average interest bearing liabilities were $1.85 billion for the first quarter of 2006, which is 16.6% greater than for the first quarter of 2005. The Company’s interest spread decreased to 3.81% for 2006 from 4.12% for 2005. The Company’s net interest margin was 4.41% for the first quarter of 2006, compared to 4.51% for the same period of 2005. Our net interest margin continued to decline primarily due to the proceeds from maturities of our investment securities being reinvested at lower interest rates, the overall flat interest rate curve and more aggressive pricing of our interest bearing deposits as a result of competitive pressures.

The provision for loan losses for the first quarter of 2006 totaled $333 thousand compared to $410 thousand for the same period in 2005. The decrease was due primarily to slower loan growth and overall good experience with chargeoffs. Gross chargeoffs for the quarter ended March 31, 2006 totaled $380 thousand compared to $390 thousand for the same period of 2005. Recoveries of previously charged-off loans totaling $444 thousand in the quarter ended March 31, 2006 (as compared to $187 thousand in the same period of 2005) offset the chargeoffs experienced and generated a net recovery for the quarter. On an annualized basis, net recoveries as a percentage of average loans were 0.02% for the first quarter of 2006, as compared to a

13

0.07% net chargeoff for the same period in 2005. The Company’s allowance for loan losses totaled $15.1 million at March 31, 2006, up $707 thousand from the balance of $14.4 million at March 31, 2005. The increased allowance is primarily due to additions from our acquisitions and changes in certain loan classifications. The Company’s allowance as a percentage of nonperforming loans amounted to 401.3% at March 31, 2006. As of March 31, 2006, management of the Company believes the Company’s balance in allowance for loan losses is adequate to provide for loans existing in its portfolio that are deemed uncollectible.

Total noninterest income for the first quarter of 2006 was $11.5 million, as compared to $13.4 million for the same period last year. The Company recognized a $3.0 million gain from the special distribution of proceeds from the merger of PULSE EFT Association and Discover Financial Services, Inc. in the first quarter of 2005. Trust fees totaled $1.8 million for 2006, up $132 thousand over the same period in 2005 due to increased volume of trust assets managed and improvement in overall equity markets. The market value of trust assets managed totaled $1.511 billion at March 31, 2006 compared to $1.357 billion at March 31, 2005. Service fees on deposits totaled $5.3 million for the first quarter of 2006, compared to $5.0 million for the same period of 2005, an improvement of $270 thousand. During the first quarter of 2006, the Company sold approximately $47 million in student loans, recognizing a premium of $1.4 million. In the first quarter of 2005, the Company sold approximately $44 million of its student loans, recognizing a premium of $1.3 million. The Company’s real estate mortgage fees of $449 thousand were slightly more than the $412 thousand recognized in the first quarter of 2005.

Noninterest expense for the first quarter of 2006 amounted to $20.5 million as compared to $18.5 million for the same period in 2005. Salaries and benefits expense, the Company’s largest noninterest expense item, increased 15.3% to $11.4 million in 2006, up $1.5 million over the same period in 2005. The primary causes of this increase were the increase in number of employees resulting from acquisitions, the opening of five new branches and overall pay increases effective during the first quarter. Net occupancy expense increased approximately $320 thousand, to $1.5 million, also attributable to facilities obtained through acquisitions, the opening of five new branches and to increased utility costs. Equipment expense increased $219 thousand in 2006 over 2005 due to the depreciation of new technology expenditures made in the latter part of 2005 and depreciation associated with acquisitions.

The Company’s other categories of expense decreased $80 thousand in the first quarter of 2006 compared to the first quarter of 2005. Several factors contributed to this decrease, including a decrease in printing and supplies of $23 thousand; a decrease in audit fees of $173 thousand; decreased legal, tax and professional fees of $191 thousand; and a $106 thousand decrease in advertising and public relations costs. These decreases were partially offset by a volume related increase in expenses related to ATMs and credit cards of $130 thousand (related income increased $316 thousand) and an increase in amortization of intangible assets resulting from our acquisitions of $124 thousand.

We believe a key indicator of our operating efficiency is expressed by the ratio that is calculated by dividing noninterest expense by the sum of net interest income (on a tax equivalent basis) and noninterest income. This ratio in effect measures the amount of funds expended to generate revenue. Our efficiency ratio was 49.54% for the first quarter of 2005 and 53.54% for the first quarter of 2006. Excluding the effect of the Gain on Sale of PULSE EFT ownership rights, our first quarter 2005 efficiency ratio was 53.82%.

Balance Sheet Review

Total assets at March 31, 2006 amounted to $2.8 billion as compared to $2.7 billion at December 31, 2005, and $2.4 billion at March 31, 2005. Deposits totaled $2.4 billion at March 31, 2006, up only slightly over December 31, 2005 amounts. Deposits at March 31, 2005 were $2.1 billion.

14

Loans totaled $1.3 billion, $1.3 billion and $1.2 billion at March 31, 2006, December 31, 2005 and March 31, 2005, respectively. As compared to March 31, 2005 amounts, loans at March 31, 2006 reflect (i) a $159 thousand increase in commercial, financial and agricultural loans; (ii) a $45.7 million increase in real estate loans; and (iii) a $10.0 million increase in consumer and student loans. Investment securities at March 31, 2006, totaled $1.1 billion as compared to $1.0 billion at year-end 2005 and $947 million at March 31, 2005. The unrealized loss in the investment portfolio at March 31, 2006, amounted to $10.4 million; the portfolio had an overall tax equivalent yield of 4.81% for the three months ended March 31, 2006. At March 31, 2006, the investment portfolio had a weighted average life of 3.55 years and modified duration of 3.05 years. At March 31, 2006, the Company did not hold any structured notes and management does not believe that their collateralized mortgage obligations have an interest, credit or other risk greater than their other investments.

Nonperforming assets at March 31, 2006, totaled $4.4 million as compared to $4.2 million at December 31, 2005. At 0.35% of loans plus foreclosed assets, management considers nonperforming assets to be at a manageable level and is unaware of any material classified credit not properly disclosed as nonperforming.

Liquidity and Capital

Liquidity is our ability to meet cash demands as they arise. Such needs can develop from loan demand, deposit withdrawals or acquisition opportunities. Potential obligations resulting from the issuance of standby letters of credit and commitments to fund future borrowings to our loan customers are other factors affecting our liquidity needs. Many of these obligations and commitments are expected to expire without being drawn upon; therefore the total commitment amounts do not necessarily represent future cash requirements affecting our liquidity position. The potential need for liquidity arising from these types of financial instruments is represented by the contractual notional amount of the instrument. Asset
liquidity is provided by cash and assets which are readily marketable or which will mature in the near future. Liquid assets include cash, federal funds sold, and short-term investments in time deposits in banks. Liquidity is also provided by access to funding sources, which include core depositors and correspondent banks that maintain accounts with, and sell federal funds to, our subsidiary banks. Other sources of funds include our ability to sell securities under agreements to repurchase, and an unfunded $50.0 million line of credit which matures December 31, 2006, established with a nonaffiliated bank.

Given the strong core deposit base and relatively low loan to deposit ratios maintained at our subsidiary banks, management considers the current liquidity position to be adequate to meet short- and long-term liquidity needs.

We anticipate that any future acquisitions of financial institutions and expansion of branch locations could place a demand on our cash resources. Available cash at our parent company, available dividends from subsidiary banks, utilization of available lines of credit, and future debt or equity offerings are expected to be the sources of funding for these potential acquisitions or expansions.

The Company’s consolidated statements of cash flows are presented on page 8 of this report. Total equity capital amounted to $280.6 million at March 31, 2006, which was up from $276.3 million at year-end 2005 and $266.6 million at March 31, 2005. The Company’s risk-based capital and leverage ratios at March 31, 2006 were 14.54% and 8.22%, respectively. The first quarter 2006 cash dividend of $0.28 per share totaled $5.8 million and represented 50.6% of first quarter earnings.

15

Interest Rate Risk

Interest rate risk results when the maturity or repricing intervals of interest-earning assets and interest bearing liabilities are different. The Company’s exposure to interest rate risk is managed primarily through the Company’s strategy of selecting the types and terms of interest-earning assets and interest-bearing liabilities which generate favorable earnings, while limiting the potential negative effects of changes in market interest rates. The Company uses no off-balance-sheet financial instruments to manage interest rate risk. The Company and each subsidiary bank have an asset/liability committee which monitors interest rate risk and compliance with investment policies. Interest-sensitivity gap and simulation analyses are among the ways that the subsidiary banks monitor interest rate risk. As of March 31, 2006, management estimates that, over the next twelve months, an upward shift of interest rates by 200 basis points would result in an increase in projected net interest income of 5.47% and a downward shift of interest rates by 200 basis points would result in a reduction in projected net interest income of 8.75%. These are good faith estimates and assume the composition of our interest sensitive assets and liabilities existing at March 31, 2006, will remain constant over the relevant twelve month measurement period and changes in market interest rates are instantaneous and sustained across the yield curve, regardless of duration or pricing characteristics of specific assets or liabilities. Also, this estimate does not contemplate any actions that we might undertake in response to changes in market interest rates. In management’s opinion, these estimates are not necessarily indicative of what actually could occur in the event of immediate interest rate increases or decreases of this magnitude. Because interest-bearing assets and liabilities reprice in different time frames and proportions to market interest rate movements, various assumptions must be made based on historical relationships of these variables in reaching any conclusion. Since these correlations are based on competitive and market conditions, our future results could, in management’s belief, be different from the foregoing estimates, and such changes in results could be material.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Management considers interest rate risk to be a significant market risk for the Company. See “Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” for disclosure regarding this market risk.

Item 4. Controls and Procedures

As of March 31, 2006, 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 pursuant to Securities Exchange Act Rule 15d-15. Our management, including the principal executive officer and principal financial officer, does not expect our disclosure controls and procedures will prevent all errors and all fraud.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints; additionally, the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based, in part, upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate due to changes in conditions; also the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Our principal executive officer and principal financial officer have concluded, based on our evaluation of our disclosure controls and procedures, our disclosure controls and procedures under Rule 13a — 15 and Rule 15d — 15 of the Securities Exchange Act of 1934 are effective at the reasonable assurance level as of March 31, 2006.

Subsequent to our evaluation, there were no significant changes in internal controls or other factors that could significantly affect these internal controls.

16

PART II

OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

On April 25, 2006, the annual meeting of shareholders was held in Abilene, Texas. The following directors were elected at this meeting and the respective number of votes cast for and withheld:

	Votes		Votes
Director	For		Withheld
Joseph E. Canon		16,344,613		13,052
Mac A. Coalson		16,351,001		6,664
David Copeland		16,344,841		12,824
F. Scott Dueser		16,328,064		29,601
Murray Edwards		16,336,777		20,888
Derrell E. Johnson		16,340,885		16,780
Kade L. Matthews		16,351,447		6,218
Bynum Miers		16,338,560		19,105
Kenneth T. Murphy		16,338,116		19,549
Dian Graves Stai		16,338,864		18,801
F. L. Stephens		16,350,559		7,106
Johnny E. Trotter		16,351,211		6,454

There were no votes against, abstentions or broker non-votes.

In addition, the shareholders voted to ratify the selection of Ernst & Young LLP to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2006 by a vote of 16,323,421 for, 8,516 against and 25,728 abstained.

Also, the shareholders voted to adopt an Amended and Restated Certificate of Formation and voluntarily elected to adopt and become subject to the Texas Business Organization Code by a vote of 16,256,248 for, 18,973 against and 82,444 abstained. The Amended and Restated Certificate of Formation, as filed, is included herein as Exhibit 3.1.

In addition, the shareholders voted to change the par value of our common stock from $10.00 to $0.01 per share by a vote of 15,996,226 for, 194,316 against and 167,123 abstained.

17

Item 6. Exhibits

     The following exhibits are filed as part of this report:

*3.1	—	Amended and Restated Certificate of Formation.
3.2	—	Amended and Restated Bylaws, and all amendments thereto, of the Registrant (incorporated by reference from Exhibit 2 of the Registrant’s Amendment No. 1 to Form 8-A filed on Form 8-A/A No. 1 on January 7, 1994).
3.3	—	Amendment to Amended and Restated Bylaws of the Registrant, dated April 27, 1994 (incorporated by reference from Exhibit 3.4 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 31, 2004).
3.4	—	Amendment to Amended and Restated Bylaws of the Registrant, dated October 23, 2001 (incorporated by reference from Exhibit 3.5 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 31 2004).
4.1	—	Specimen certificate of First Financial Common Stock (incorporated by reference from Exhibit 3 of the Registrant’s Amendment No. 1 to Form 8-A filed on Form 8-A/A No. 1 on January 7, 1994).
10.1	—	Deferred Compensation Agreement, dated October 28, 1992, between the Registrant and Kenneth T. Murphy (incorporated by reference from Exhibit 10.1 of the Registrant’s Form 10-K Annual Report for the year ended December 31, 2002).
10.2	—	Revised Deferred Compensation Agreement, dated December 28, 1995, between the Registrant and Kenneth T. Murphy (incorporated by reference from Exhibit 10.2 of the Registrant’s Form 10-K Annual Report for the year ended December 31, 2002).
10.3	—	Executive Recognition Plan (incorporated by reference from Exhibit 10.3 of the Registrant’s Form 10-K Annual Report for year ended December 31, 2002).
10.4	—	Form of Executive Recognition Agreement (incorporated by reference from Exhibit 10.4 of the Registrant’s Form 10-K Annual Report for the year ended December 31, 2002).
10.5	—	1992 Incentive Stock Option Plan (incorporated by reference from Exhibit 10.5 of the Registrant’s Form 10-K Annual Report for the fiscal year ended December 31, 1998).
10.6	—	2002 Incentive Stock Option Plan (incorporated by reference from Appendix A of the Registrant’s Schedule 14a Definitive Proxy Statement for the 2002 Annual Meeting of Shareholders)
10.7	—	Revised Consulting Agreement dated January 1, 2006 between the Registrant and Kenneth T. Murphy (incorporated by reference from Exhibit 10.7 of the Registrant’s Form 10-K Annual Report for the year ended December 31, 2005).
*31.1	—	Rule 13a-14(a) / 15(d)-14(a) Certification of Chief Executive Officer of First Financial Bankshares, Inc.
*31.2	—	Rule 13a-14(a) / 15(d)-14(a) Certification of Chief Financial Officer of First Financial Bankshares, Inc.
*32.1	—	Section 1350 Certification of Chief Executive Officer of First Financial Bankshares, Inc.
*32.2	—	Section 1350 Certification of Chief Financial Officer of First Financial Bankshares, Inc.

* Filed herewith

18

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	FIRST FINANCIAL BANKSHARES, INC.
Date: May 2, 2006	By:	/S/ F. Scott Dueser
		F. Scott Dueser President and Chief Executive Officer
Date: May 2, 2006	By:	/S/ J. Bruce Hildebrand
		J. Bruce Hildebrand Executive Vice President and Chief Financial Officer

19

EX-3.1

Exhibit 3.1

AMENDED AND RESTATED CERTIFICATE OF FORMATION

OF

FIRST FINANCIAL BANKSHARES, INC.

FIRST

     First Financial Bankshares, Inc. (the “Corporation”), pursuant to the provisions of Article 4.07 of the Texas Business Corporation Act and Section 3.059 of the Texas Business Organizations Code, hereby adopts this Amended and Restated Certificate of Formation, which accurately copies the Articles of Incorporation and all amendments thereto that are in effect to date. The prior Articles of Incorporation, as restated and amended by this Amended and Restated Certificate of Formation, are set forth below and contain no other changes in any provisions. For purposes of this document, the prior Articles of Incorporation, including all amendments thereto, will be referred to as the Certificate of Formation.

SECOND

     The shareholders of the Corporation adopted the following amendments to the Certificate of Formation on the 25th day of April, 2006:

1.	ARTICLE TWO of the Certificate of Formation is amended to read as follows:
	“The corporation is formed as a domestic for-profit corporation.”
2.	ARTICLE THREE of the Certificate of Formation is amended to read as follows:
	“ The purposes for which the corporation is organized are the transaction of any or all lawful business for which corporations may be incorporated under the Texas Business Organizations Code.”
3.	ARTICLE FOUR of the Certificate of Formation is amended to read as follows:
	“The aggregate number of shares which the corporation shall have authority to issue is FORTY MILLION (40,000,000) of the par value of ONE CENT ($0.01) each.”
4.	ARTICLE FIVE of the Certificate of Formation is deleted in its entirety.
5.	ARTICLE SIX of the Certificate of Formation is renumbered as ARTICLE FIVE, and is amended to read as follows:
	“The address of its registered office is 400 Pine Street, Abilene, Texas, USA 79601, and the name of its registered agent at such address is F. Scott Dueser.”
6.	ARTICLE SEVEN of the Certificate of Formation is renumbered as ARTICLE SIX, and is amended to read as follows:

     “The number of Directors constituting the current Board of Directors is twelve (12), and the names and addresses of the persons who are currently serving as Directors until the next annual meeting of the shareholders or until their successors are elected and qualified are:

Name	Address
Joseph E. Canon	P.O. Box 176, Abilene, TX 79604
Mac Coalson	7801 New Authon Road, Weatherford, TX 76088
David Copeland	273 Walnut St., Abilene, TX 79601
F. Scott Dueser	P.O. Box 701, Abilene, TX 79604
Murray Edwards	5423 FM 3217, Clyde, TX 79510
Derrell E. Johnson	2503 Hillside Court, Southlake, TX 76092
Kade Matthews	P.O. Box 1170, Clarendon, TX 79226
Bynum Miers	P.O. Box 468, Abilene, TX 79604
Kenneth T. Murphy	P.O. Box 701, Abilene, TX 79604
Dian Graves Stai	400 Pine Street, Suite 1000, Abilene, TX 79601
F. L. Stephens	3471 Knickerbocker Rd, #312, San Angelo, TX 76904
Johnny Trotter	3409 FM 1058, Hereford, TX 79045

7.	ARTICLE EIGHT of the Certificate of Formation is deleted in its entirety.
8.	ARTICLE NINE of the Certificate of Formation is renumbered as ARTICLE SEVEN, and is amended to read as follow:
	“The right of every shareholder to cumulatively vote shares is denied.”
9.	ARTICLE TEN of the Certificate of Formation is renumbered as ARTICLE EIGHT, and is amended to read as follows:
	“The preemptive rights of every shareholder to acquire unissued or treasury shares of the corporation are denied.”
10.	ARTICLE ELEVEN of the Certificate of Formation is renumbered as ARTICLE NINE, and is amended to read as follows:

     “To the fullest extent not prohibited by applicable laws as presently or hereafter in effect, no person shall be liable to the corporation or its shareholders for monetary damages for or with respect to any acts or omissions in his or her capacity as a Director of the corporation, except liability for (i) a breach of a Director’s duty of loyalty to the corporation or its shareholders, (ii) an act or omission not in good faith or that involves intentional misconduct or a knowing violation of the law, (iii) a transaction from which a Director received an improper benefit, whether or not the benefit resulted from an action taken within the scope of the Director’s office, (iv) an act or omission for which the liability of a Director is expressly provided by statute, or (v) an act related to an unlawful stock repurchase or payment of a dividend.

     Each person, his or her heirs, executors, personal representatives and estate, shall be indemnified by the corporation for all expenses incurred in connection with any action, suit, proceeding or claim to which he or she shall be named a party or otherwise be a participant by virtue of being or having been or agreeing to become (i) a Director, officer, employee or agent of the corporation and/or (ii) a Director, officer, employee or agent of any corporation or organization at the request of the corporation. Such indemnity shall be provided to the fullest extent not prohibited by applicable laws presently in effect or as may hereafter be amended. Indemnity shall include, but not be limited to, the advancement of expenses and payment of all loss, liability and expenses. Provided, however, that no person shall be indemnified for amounts paid in settlement unless the terms and

conditions of said settlement have been consented to by the corporation. Further, no indemnification of employees or agents of the corporation (other than Directors and officers) will be made without express authorization of the corporation’s Board of Directors.

     The corporation may, upon the affirmative vote of the majority of its Board of Directors, purchase insurance for the purpose of securing the indemnification of its Directors, officers and other employees to the extent that such indemnification is allowed in this Article. Such insurance may, but need not, be for the benefit of all Directors, officers or employees, and the purchase of any such insurance shall in no way limit the indemnification provisions of the preceding paragraph. Provided, however, that such insurance shall not include coverage for a formal order assessing civil money penalties against a Director or employee of the corporation arising out of an administrative proceeding or action by an appropriate bank regulatory agency.

     No repeal of or amendment to this Article Nine shall have any effect with respect to the liability or alleged liability of any Director occurring prior to such amendment or to the acts or omissions or rights to indemnity of any person occurring prior to such repeal or amendment.”

     The term “Director” in this Article Nine shall include Advisory Directors and Directors Emeritus and Inside Directors serving in a post retirement capacity, as such terms are or may hereafter be defined in the Bylaws of the Company.

THIRD

     Each statement made by this Amended and Restated Certificate of Formation has been effected in conformity with the Texas Business Corporation Act and the Texas Business Organizations Code. This Amended and Restated Certificate of Formation and all amendments made by this Amended and Restated Certificate of Formation were adopted by the shareholders of the Corporation on April 25, 2006 and in accordance with the Texas Business Corporation Act, the Texas Business Organizations Code and the constituent documents of the Corporation.

FOURTH

     The Certificate of Formation and all amendments and supplements thereto are superseded by the following Amended and Restated Certificate of Formation, which accurately copies the entire text of the Certificate of Formation as well as incorporates the amendments set forth above:

ARTICLE ONE

     The name of the corporation is FIRST FINANCIAL BANKSHARES, INC.

ARTICLE TWO

     The corporation is formed as a domestic for-profit corporation.

ARTICLE THREE

     The purposes for which the corporation is organized are the transaction of any or all lawful business for which corporations may be incorporated under the Texas Business Organizations Code.

ARTICLE FOUR

     The aggregate number of shares which the corporation shall have authority to issue is FORTY MILLION (40,000,000) of the par value of ONE CENT ($0.01) each.

ARTICLE FIVE

     The address of its registered office is 400 Pine Street, Abilene, Texas, USA 79601, and the name of its registered agent at such address is F. Scott Dueser.

ARTICLE SIX

     The number of Directors constituting the current Board of Directors is twelve (12), and the names and addresses of the persons who are currently serving as Directors until the next annual meeting of the shareholders or until their successors are elected and qualified are:

Name	Address
Joseph E. Canon	P.O. Box 176, Abilene, TX 79604
Mac Coalson	7801 New Authon Road, Weatherford, TX 76088
David Copeland	273 Walnut St., Abilene, TX 79601
F. Scott Dueser	P.O. Box 701, Abilene, TX 79604
Murray Edwards	5423 FM 3217, Clyde, TX 79510
Derrell E. Johnson	2503 Hillside Court, Southlake, TX 76092
Kade Matthews	P.O. Box 1170, Clarendon, TX 79226
Bynum Miers	P.O. Box 468, Abilene, TX 79604
Kenneth T. Murphy	P.O. Box 701, Abilene, TX 79604
Dian Graves Stai	400 Pine Street, Suite 1000, Abilene, TX 79601
F. L. Stephens	3471 Knickerbocker Rd, #312, San Angelo, TX 76904
Johnny Trotter	3409 FM 1058, Hereford, TX 79045

ARTICLE SEVEN

     The right of every shareholder to cumulatively vote shares is denied.

ARTICLE EIGHT

     The preemptive rights of every shareholder to acquire unissued or treasury shares of the corporation is denied.

ARTICLE NINE

     To the fullest extent not prohibited by applicable laws as presently or hereafter in effect, no person shall be liable to the corporation or its shareholders for monetary damages for or with respect to any acts or omissions in his or her capacity as a Director of the corporation, except liability for (i) a breach of a Director’s duty of loyalty to the corporation or its shareholders, (ii) an act or omission not in good faith or that involves intentional misconduct or a knowing violation of the law, (iii) a transaction from which a Director received an improper benefit, whether or not the benefit resulted from an action taken within the scope of the Director’s office, (iv) an act or omission for which the liability of a Director is expressly provided by statute, or (v) an act related to an unlawful stock repurchase or payment of a dividend.

     Each person, his or her heirs, executors, personal representatives and estate, shall be indemnified by

the corporation for all expenses incurred in connection with any action, suit, proceeding or claim to which he or she shall be named a party or otherwise be a participant by virtue of being or having been or agreeing to become (i) a Director, officer, employee or agent of the corporation and/or (ii) a Director, officer, employee or agent of any corporation or organization at the request of the corporation. Such indemnity shall be provided to the fullest extent not prohibited by applicable laws presently in effect or as may hereafter be amended. Indemnity shall include, but not be limited to, the advancement of expenses and payment of all loss, liability and expenses. Provided, however, that no person shall be indemnified for amounts paid in settlement unless the terms and conditions of said settlement have been consented to by the corporation. Further, no indemnification of employees or agents of the corporation (other than Directors and officers) will be made without express authorization of the corporation’s Board of Directors.

     The corporation may, upon the affirmative vote of the majority of its Board of Directors, purchase insurance for the purpose of securing the indemnification of its Directors, officers and other employees to the extent that such indemnification is allowed in this Article. Such insurance may, but need not, be for the benefit of all Directors, officers or employees, and the purchase of any such insurance shall in no way limit the indemnification provisions of the preceding paragraph. Provided, however, that such insurance shall not include coverage for a formal order assessing civil money penalties against a Director or employee of the corporation arising out of an administrative proceeding or action by an appropriate bank regulatory agency.

     No repeal of or amendment to this Article Nine shall have any effect with respect to the liability or alleged liability of any Director occurring prior to such amendment or to the acts or omissions or rights to indemnity of any person occurring prior to such repeal or amendment.

     The term “Director” in this Article Nine shall include Advisory Directors and Directors Emeritus and Inside Directors serving in a post retirement capacity, as such terms are or may hereafter be defined in the Bylaws of the Company.

	FIRST FINANCIAL BANKSHARES, INC.
	By:	/s/  F. Scott Dueser
		F. Scott Dueser, President
Dated: May 2, 2006

EX-31.1

Exhibit 31.1

Certification of
Chief Executive Officer
of First Financial Bankshares, Inc.

     I, F. Scott Dueser, President and Chief Executive Officer of First Financial Bankshares, Inc., certify that:

     1. I have reviewed this Form 10-Q of First Financial Bankshares, Inc.;

     2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

     3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for the periods presented in this quarterly report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectives of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 2, 2006
	By:	/s/ F. SCOTT DUESER
		F. Scott Dueser President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of
Chief Financial Officer
of First Financial Bankshares, Inc.

     I, J. Bruce Hildebrand, Executive Vice President and Chief Financial Officer of First Financial Bankshares, Inc., certify that:

     1. I have reviewed this Form 10-Q of First Financial Bankshares, Inc.;

     2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

     3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for the periods presented in this quarterly report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectives of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 2, 2006	By:	/s/ J. Bruce Hildebrand
		J. Bruce Hildebrand Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of
Chief Executive Officer
of First Financial Bankshares, Inc.

This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States code) and accompanies the quarterly report on Form 10-Q (the “Form 10-Q”) for the quarter ended March 31, 2006 of First Financial Bankshares, Inc.

I, F. Scott Dueser, the President and Chief Executive Officer of the Issuer certify that:

1. the Form 10-Q fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

2. the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 2, 2006
	By:	/s/ F. SCOTT DUESER
		F. Scott Dueser Chief Executive Officer
Subscribed and sworn to before me this 2nd of May 2006.
/s/ Gaila N. Kilpatrick
Gaila N. Kilpatrick Notary Public
My commission expires: April 15, 2009

EX-32.2

Exhibit 32.2

Certification of
Chief Financial Officer
of First Financial Bankshares, Inc.

This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States code) and accompanies the quarterly report on Form 10-Q (the “Form 10-Q”) for the quarter ended March 31, 2006 of First Financial Bankshares, Inc.

I, J. Bruce Hildebrand, the Executive Vice President and Chief Financial Officer of the Issuer certify that:

1. the Form 10-Q fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

2. the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 2, 2006
	By:	/s/ J. Bruce Hildebrand
		J. Bruce Hildebrand Chief Financial Officer
Subscribed and sworn to before me this 2nd of May 2006.
/s/ Gaila N. Kilpatrick
Gaila N. Kilpatrick Notary Public
My commission expires: April 15, 2009