Regulatory Matters

12 Months Ended

Dec. 31, 2012

Regulatory Matters

15. REGULATORY MATTERS:

The Company is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, each of Bankshares’ subsidiaries must meet specific capital guidelines that involve quantitative measures of the subsidiaries’ assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The subsidiaries’ capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and each of its subsidiaries to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes as of December 31, 2012 and 2011, that Company and each of its subsidiaries meet all capital adequacy requirements to which they are subject.

As of December 31, 2012 and 2011, the most recent notification from each respective subsidiary’s primary regulator categorized each of the Company’s subsidiaries as well-capitalized. To be categorized as well-capitalized, the subsidiaries must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the following table.

There are no conditions or events since that notification that management believes have changed the institutions’ categories. Bankshares’ and its significant subsidiaries’ actual capital amounts and ratios are presented in the table below (in thousands):

											To Be Well
											Capitalized Under
						For Capital					Prompt Corrective
	Actual					Adequacy Purposes:					Action Provisions:
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2012:
Total Capital (to Risk-Weighted Assets):
Consolidated	$	475,442		19	%	³$	203,620	³	8	%		N/A
First Financial Bank - Abilene	$	376,106		15	%	³$	202,391	³	8	%	³$	252,988	³	10	%
Tier1 Capital (to Risk-Weighted Assets):
Consolidated	$	443,481		17	%	³$	101,810	³	4	%		N/A
First Financial Bank - Abilene	$	344,335		14	%	³$	101,195	³	4	%	³$	151,793	³	6	%
Tier1 Capital (to Average Assets):
Consolidated	$	443,481		11	%	³$	125,558	³	3	%		N/A
First Financial Bank - Abilene	$	344,335		8	%	³$	125,413	³	3	%	³$	209,021	³	5	%

											To Be Well
											Capitalized Under
						For Capital					Prompt Corrective
	Actual					Adequacy Purposes:					Action Provisions:
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2011:
Total Capital (to Risk-Weighted Assets):
Consolidated	$	426,532		19	%	³$	182,050	³	8	%		N/A
First Financial Bank - Abilene	$	110,120		15	%	³$	56,943	³	8	%	³$	71,179	³	10	%
First Financial Bank - San Angelo	$	38,744		18	%	³$	16,988	³	8	%	³$	21,235	³	10	%
First Financial Bank - Weatherford	$	33,975		16	%	³$	16,894	³	8	%	³$	21,117	³	10	%
First Financial Bank - Stephenville	$	33,062		14	%	³$	18,488	³	8	%	³$	23,109	³	10	%
First Financial Bank - Southlake	$	31,753		15	%	³$	16,570	³	8	%	³$	20,713	³	10	%
Tier1 Capital (to Risk-Weighted Assets):
Consolidated	$	397,916		17	%	³$	91,025	³	4	%		N/A
First Financial Bank - Abilene	$	103,002		14	%	³$	28,472	³	4	%	³$	42,707	³	6	%
First Financial Bank - San Angelo	$	36,237		17	%	³$	8,494	³	4	%	³$	12,741	³	6	%
First Financial Bank - Weatherford	$	31,309		15	%	³$	8,447	³	4	%	³$	12,670	³	6	%
First Financial Bank - Stephenville	$	30,143		13	%	³$	9,244	³	4	%	³$	13,866	³	6	%
First Financial Bank - Southlake	$	29,126		14	%	³$	8,285	³	4	%	³$	12,428	³	6	%
Tier1 Capital (to Average Assets):
Consolidated	$	397,916		10	%	³$	115,610	³	3	%		N/A
First Financial Bank - Abilene	$	103,002		8	%	³$	38,902	³	3	%	³$	64,837	³	5	%
First Financial Bank - San Angelo	$	36,237		9	%	³$	11,679	³	3	%	³$	19,465	³	5	%
First Financial Bank - Weatherford	$	31,309		8	%	³$	11,126	³	3	%	³$	18,544	³	5	%
First Financial Bank - Stephenville	$	30,143		9	%	³$	10,148	³	3	%	³$	16,914	³	5	%
First Financial Bank - Southlake	$	29,126		9	%	³$	9,225	³	3	%	³$	15,375	³	5	%

In connection with the First Financial Trust & Asset Management Company, N.A.’s (the “Trust Company”) application to obtain our trust charter, the Trust Company is required to maintain tangible net assets of $2,000,000 at all times. As of December 31, 2012, our Trust Company had tangible net assets totaling $5,099,000.

Our subsidiary bank may be required at times to maintain reserve balances with the Federal Reserve Bank. No such reserves were required at December 31, 2012 or December 31, 2011.