8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 8-K

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

Date of Report (Date of Earliest Event Reported): October 19, 2006

FIRST FINANCIAL BANKSHARES, INC.

(Exact Name of Registrant as Specified in its Charter)

Texas	0-7674	75-0944023
(State or other Jurisdiction	(Commission File No.)	(IRS Employer
of Incorporation)		Identification No.)

400 Pine Street, Abilene, Texas 79601
(Address of Principal Executive Offices and Zip Code)

Registrant’s Telephone Number (325) 627-7155

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 203.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2 (b))

o Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13 e-4 (c))

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     Attached as an exhibit to this Form 8-K is the earnings release for the quarter ended September 30, 2006 of First Financial Bankshares, Inc.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

99.1 Press Release dated October 19, 2006

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 hereunto duly authorized.

	FIRST FINANCIAL BANKSHARES, INC.
	(Registrant)
DATE: October 19, 2006	By:	/S/ F. Scott Dueser
		F. SCOTT DUESER
		President and Chief Executive Officer

EX-99.1

EXHIBIT 99.1

For immediate release

For More Information:
J. Bruce Hildebrand, Executive Vice President
325.627.7155

FIRST FINANCIAL BANKSHARES ANNOUNCES
THIRD QUARTER EARNINGS RESULTS

ABILENE, Texas, October 19, 2006 – First Financial Bankshares, Inc. today reported earnings for the third quarter of 2006 of $11.40 million, a 6.0 percent increase compared with $10.76 million in the same quarter last year. Basic earnings per share increased 5.8 percent to $0.55 in the third quarter of 2006 from $0.52 in the same period last year. The 2005 third-quarter results included a $402,000 before income tax special distribution of proceeds to the Company from the merger of PULSE EFT Association and Discover Financial Services, Inc. Excluding these special proceeds, the Company’s net income in the third quarter of 2006 would have increased 8.6 percent and basic earnings per share would have increased 7.8 percent.

Net interest income for the third quarter of 2006 increased 12.1 percent to $26.70 million compared with $23.82 million in the same quarter last year, due to companywide growth in the loan portfolio and an increase in interest-earning assets from the acquisition in December 2005 of The First National Bank of Bridgeport. The net interest margin, on a taxable equivalent basis, was 4.49 percent for the third quarter of 2006, unchanged from the same period a year ago and down one basis point from the second quarter of 2006. The provision for loan losses was $1.09 million in the third quarter of 2006, compared with $317,000 in the same quarter last year. This increase in the provision for loan losses is due to overall loan growth, changes in classification of certain loans and in recognition of general economic conditions, including concerns about a slowing real estate market.

Noninterest income in the third quarter was $11.19 million, an increase of 8.3 percent compared with $10.33 million in the same quarter a year earlier. However, excluding the proceeds from the PULSE/Discover transaction, noninterest income in the third quarter of 2005 would have been $9.92 million, which would have resulted in a 12.7 percent increase in the third quarter of 2006 compared to a year ago. Trust fees increased 9.4 percent to $1.89 million compared with $1.73 million in the same quarter last year. Revenue from service charges on deposits increased 6.6 percent to $5.84 million compared with $5.48 million a year ago due primarily to the Bridgeport acquisition and an increase in net new accounts.

Noninterest expense increased 10.3 percent in the third quarter of 2006 to $20.65 million from $18.73 million in the same quarter last year. The increase was due primarily to additional salary, employee benefits and facilities expenses resulting from the acquisition of the Bridgeport bank and from the opening of new bank branches in late 2005 in Midlothian and Granbury. The Company’s efficiency ratio in the third quarter of 2006 stood at 52.89 percent compared with 52.99 percent in the same quarter a year ago. Without the PULSE/Discover proceeds described above, the third quarter 2005 efficiency ratio was 53.60 percent.

“We are pleased with our bank’s performance during the third quarter, including good progress on the growth of our loan portfolio, increases in noninterest income and control over our expenses,” said F. Scott Dueser, President and Chief Executive Officer. “We were able to maintain a steady net interest margin during the quarter, despite pressures on deposit rates and the highly competitive banking environment in Texas.”

For the first nine months of 2006, net income was $34.32 million compared with $33.44 million in the first nine months of 2005, an increase of 2.6 percent. Excluding PULSE after tax proceeds of $2.5 million received during the first nine months of 2005, net income for the nine months ended September 30, 2006 would have increased 11.0 percent over the same period last year. Basic earnings per share for the first nine months of 2006 were $1.66 compared with $1.62 a year ago. Net interest income increased 12.1 percent in the first nine months of 2006 to $78.90 million from $70.40 million in the same period last year.

As of September 30, 2006, consolidated assets for the Company totaled $2.71 billion compared with $2.48 billion a year ago. Loans increased 10.8 percent to $1.34 billion at quarter end, compared with loans of $1.21 billion at the end of the third quarter of 2005. Total deposits rose 7.5 percent as of September 30, 2006, to $2.28 billion from $2.12 billion a year earlier. The acquisition of The First National Bank of Bridgeport accounted for $65.9 million of the loan growth and $132.0 million of the deposit growth. Shareholders’ equity rose to $293.12 million as of September 30, 2006, compared with $276.32 million the prior year.

Headquartered in Abilene, Texas, First Financial Bankshares is a financial holding company that operates ten separately chartered banks with 44 locations in Texas, a trust company and a technology operating company. These subsidiaries are First Financial Bank, N.A., Abilene, Clyde and Moran; First Financial Bank, N.A., Eastland, Ranger and Rising Star; First Financial Bank, N.A., Cleburne, Burleson, Alvarado and Midlothian; Hereford State Bank, Hereford; City National Bank, Mineral Wells; San Angelo National Bank, San Angelo; First Financial Bank, N.A., Southlake, Trophy Club, Keller, Bridgeport, Decatur and Boyd; First Financial Bank, N.A., Stephenville, Granbury and Glen Rose; First National Bank, Sweetwater, Roby and Trent; Weatherford National Bank, Weatherford, Willow Park and Aledo; First Financial Trust & Asset Management Company, N.A.; and First Technology Services, Inc.

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

*****

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

FIRST FINANCIAL BANKSHARES, INC.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except share and per share data)

	Sept. 30,
	2006			2005
ASSETS:
Cash and due from banks	$	105,076		$	95,296
Fed funds sold		13,700			103,500
Investment securities		1,106,665			950,714
Loans		1,337,315			1,206,973
Allowance for loan losses		(16,498	)		(14,375	)
Net loans		1,320,817			1,192,598
Premises and equipment		61,066			56,357
Goodwill		62,113			49,907
Other intangible assets		5,022			3,914
Other assets		36,878			25,975
Total assets	$	2,711,337		$	2,478,261
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Noninterest-bearing deposits	$	631,958		$	543,478
Interest-bearing deposits		1,648,577			1,577,732
Total deposits		2,280,535			2,121,210
Short-term borrowings		118,045			63,374
Other liabilities		19,634			17,359
Shareholders’ equity		293,123			276,318
Total liabilities and shareholders’ equity	$	2,711,337		$	2,478,261

	Three Months Ended						Nine Months Ended
	Sept. 30,						Sept. 30,
	2006			2005			2006			2005
INCOME STATEMENTS
Interest income	$	39,388		$	31,305		$	113,930		$	90,133
Interest expense		12,685			7,488			35,034			19,734
Net interest income		26,703			23,817			78,896			70,399
Provision for loan losses		1,091			317			1,814			1,051
Net interest income after provision for loan losses		25,612			23,500			77,082			69,348
Noninterest income		11,188			10,325			33,621			34,215
Noninterest expense		20,653			18,725			62,004			56,128
Net income before income taxes		16,147			15,100			48,699			47,435
Income tax expense		4,742			4,338			14,379			13,993
Net income	$	11,405		$	10,762		$	34,320		$	33,442
PER COMMON SHARE DATA
Net income — basic	$	0.55		$	0.52		$	1.66		$	1.62
Net income — diluted		0.55			0.52			1.65			1.61
Cash dividends		0.30			0.28			0.88			0.82
Book value								14.14			13.35
Market value								38.15			34.83
Shares outstanding — end of period		20,731,455			20,704,527			20,731,455			20,704,527
Average outstanding shares — basic		20,729,287			20,700,760			20,722,310			20,692,722
Average outstanding shares — diluted		20,788,068			20,782,051			20,780,598			20,772,503
PERFORMANCE RATIOS
Return on average assets		1.67	%		1.76	%		1.68	%		1.86	%
Return on average equity		15.93			15.61			16.36			16.46
Net interest margin (tax equivalent)		4.49			4.49			4.47			4.51
Efficiency ratio		52.89			52.99			53.45			51.87

Note: 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 June 1, 2005. All share and per share amounts in this earnings release have been restated to reflect this stock split.

	Three Months Ended					Nine Months Ended
	Sept. 30,					Sept. 30,
	2006		2005			2006		2005
RECONCILIATION OF NET INCOME
Net Income	$	11,405	$	10,762		$	34,320	$	33,442
Gain on sale of Pulse ownership rights		—		402			—		3,895
Less Tax Effect		—		(141	)		—		(1,363	)
Net gain on sale of Pulse ownership rights		—		261			—		2,532
Net Income excluding gain on sale of Pulse Ownership rights	$	11,405	$	10,501		$	34,320	$	30,910

FIRST FINANCIAL BANKSHARES, INC.
SELECTED FINANCIAL DATA (UNAUDITED)
(In thousands)

	Quarter Ended
	2006									2005
	Sept. 30,			June 30,			March 31,			Dec. 31,			Sept. 30,
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period	$	15,473		$	15,116		$	14,719		$	14,375		$	14,323
Loans charged off		(272	)		(379	)		(380	)		(529	)		(486	)
Loan recoveries		206			347			444			175			221
Net (charge-offs) recoveries		(66	)		(32	)		64			(354	)		(265	)
Allowance established at acquisition		—			—			—			429			—
Provision for loan losses		1,091			389			333			269			317
Balance at end of period	$	16,498		$	15,473		$	15,116		$	14,719		$	14,375
Allowance for loan losses / period-end loans		1.23	%		1.20	%		1.20	%		1.14	%		1.19	%
Allowance for loan losses / nonperforming loans		401.6			370.0			401.3			415.9			475.1
Net charge-offs (recoveries) / average loans (annualized)		0.02			0.01			(0.02	)		0.11			0.09
NONPERFORMING ASSETS
Nonaccrual loans	$	3,907		$	4,088		$	3,570		$	3,524		$	2,989
Accruing loans 90 days past due		201			94			197			15			37
Total nonperforming loans		4,108			4,182			3,767			3,539			3,026
Foreclosed assets		543			545			588			705			796
Total nonperforming assets	$	4,651		$	4,727		$	4,355		$	4,244		$	3,822
As a % of loans and foreclosed assets		0.35	%		0.37	%		0.35	%		0.33	%		0.32	%
CAPITAL RATIOS
Tier 1 Risk-based		14.72	%		14.51	%		14.54	%		14.17	%		15.90	%
Total Risk-based		15.75			15.49			15.52			15.13			16.92
Tier 1 Leverage		8.91			8.39			8.22			8.56			9.30
Equity to assets		10.81			10.30			10.17			10.11			11.15

	Three Months Ended				Nine Months Ended
	Sept. 30,				Sept. 30,
	2006		2005		2006			2005
NONINTEREST INCOME
Gain on sale of student loans, net	$	187	$	95	$	2,099		$	1,754
Gain on sale of PULSE ownership rights		—		402		—			3,895
Gain on securities transactions, net		60		46		60			230
Trust fees		1,891		1,728		5,572			5,152
Service charges on deposits		5,843		5,482		16,789			15,888
Real estate mortgage fees		771		684		1,780			1,607
Net gain (loss) on sale of foreclosed assets		—		19		(12	)		64
ATM and credit card fees		1,577		1,283		4,559			3,630
Other noninterest income		859		586		2,774			1,995
Total Noninterest Income	$	11,188	$	10,325	$	33,621		$	34,215
NONINTEREST EXPENSE
Salaries and employee benefits	$	10,964	$	10,058	$	33,389		$	30,050
Net occupancy expense		1,508		1,278		4,498			3,690
Equipment expense		1,786		1,543		5,281			4,516
Printing, stationery and supplies		536		475		1,548			1,491
ATM and credit card expenses		865		770		2,538			2,161
Audit fees		200		204		638			793
Legal, tax and professional fees		567		527		1,728			1,823
Correspondent bank service charges		384		350		986			1,096
Advertising and public relations		586		615		1,768			1,892
Amortization of intangible assets		448		187		1,059			466
Other noninterest expense		2,809		2,718		8,571			8,150
Total Noninterest Expense	$	20,653	$	18,725	$	62,004		$	56,128
TAX EQUIVALENT YIELD ADJUSTMENT	$	1,156	$	1,194	$	3,495		$	3,599

FIRST FINANCIAL BANKSHARES, INC.
SELECTED FINANCIAL DATA (UNAUDITED)
(In thousands)

	Three Months Ended
	Sept. 30, 2006
	Average		Tax Equivalent		Yield /
	Balance		Interest		Rate
Interest earning assets:
Fed funds sold	$	26,664	$	342		5.03	%
Interest bearing deposits in nonaffiliated banks		2,468		34		5.41	%
Taxable securities		882,187		10,003		4.54	%
Tax exempt securities		236,723		3,678		6.21	%
Loans		1,315,598		26,487		7.99	%
Total interest earning assets		2,463,640		40,544		6.54	%
Noninterest earning assets		253,520
Total assets	$	2,717,160
Interest bearing liabilities:
Deposits	$	1,660,306	$	10,968		2.62	%
Fed funds purchased and other short term borrowings		137,883		1,717		4.92	%
Total interest bearing liabilities		1,798,189		12,685		2.80	%
Noninterest bearing liabilities		634,861
Shareholders’ equity		284,110
Total liabilities and shareholders’ equity	$	2,717,160
Net interest income and margin (tax equivalent)			$	27,859		4.49	%

	Nine Months Ended
	Sept. 30, 2006
	Average		Tax Equivalent		Yield /
	Balance		Interest		Rate
Interest earning assets:
Fed funds sold	$	66,013	$	2,245		4.48	%
Interest bearing deposits in nonaffiliated banks		4,767		170		4.78	%
Taxable securities		874,451		29,342		4.47	%
Tax exempt securities		232,129		10,903		6.26	%
Loans		1,291,831		74,764		7.74	%
Total interest earning assets		2,469,191		117,424		6.36	%
Noninterest earning assets		255,731
Total assets	$	2,724,922
Interest bearing liabilities:
Deposits	$	1,709,746	$	31,218		2.44	%
Fed funds purchased and other short term borrowings		110,626		3,816		4.61	%
Total interest bearing liabilities		1,820,372		35,034		2.57	%
Noninterest bearing liabilities		624,144
Shareholders’ equity		280,406
Total liabilities and shareholders’ equity	$	2,724,922
Net interest income and margin (tax equivalent)			$	82,390		4.47	%