First Financial Bankshares, Inc. (FFIN) Earnings Call Transcript & Summary

Welcome to the First Financial Bankshares 50th Annual Meeting since the company was organized as a bank holding company in 1973. I'm so happy that all of you are here with us today. It will be our honor to visit with you about First Financial Bankshares as well as personally seeing you at the lunch. We also welcome those of you viewing the live stream of this meeting. I'm Scott Dueser, and as Chairman of the Board of Directors, it's my pleasure to preside at today's meeting. We are honored to have so many of our shareholders in person or on live video stream. Your interest and dedication to our company is very gratifying to us. Your continued support is greatly appreciated. All shareholders of record at the close of business on March 1, 1923, gosh -- 2023, okay, a few of you were around then -- are entitled to vote at this meeting. The Secretary has delivered an affidavit of mailing establishing that notice of this meeting was duly given, which will be incorporated into the minutes of this meeting. As set out in the proxy statement dated March 15, 2023, our directors, Murray Edwards and David Copeland, are serving as our proxies and are authorized to vote in accordance with your proxy which was completed and returned by mail, phone, online or in person. All proxies received prior to the meeting will be voted in accordance with instructions contained in those proxies or as provided in the proxy statement in the absence of instructions. Our first item of business is to determine the existence of a quorum at this meeting. Mr. Copeland, will you please give us the number of shares that are represented by proxy and in person. Here you are?

Thank you, Scott. Total number of shares voted was 126,403,273 shares, which represents 88.6% of the outstanding shares of the company.

That's outstanding. And so I thank all of you who voted -- that is for a publicly traded company that's a very high percentage. And we appreciate that just says how much support we have in this company. The number of shares represented constitutes a quorum. Therefore, this meeting is properly and duly convened. I'd like to introduce our senior management who truly are the ones that lead this company. I would ask each of them to stand and remain standing to be recognized as a group. I'd ask you to pay particular attention to the experience level of each 1 of these professionals as we call their names. Scott Dueser, Chairman of the Board, President and Chief Executive Officer; Ron Butler, Executive Vice President and Chief Administrative Officer and also CEO of the Abilene Region; Michelle Hickox, Executive Vice President and Chief Financial Officer; Kirk Thaxton, Chairman, President and CEO of First Financial Trust & Asset Management Company; Luke Longhofer, Executive Vice President, Chief Lending Officer; Randy Roewe, Executive Vice President, Chief Risk Officer; John Ruzicka, Executive Vice President and Chief Information Officer; Stephen Lee, South Texas area Banking Executive also CEO of Southeast Texas region; Kyle McVey, Executive Vice President, Chief Accounting Officer; David Bailey, Executive Vice President, Commercial Banking and also CEO of our Eastland Division; Marna Yerigan, Executive Vice President, Credit Administration; Rett Everett, Executive Vice President, Credit Administration; Michael Parker, Executive Vice President and Chief Compliance Officer; Troy Fore, President, First Financial Mortgage; Chris Cook, Executive Vice President, Advertising and Marketing; Monica Houston, Executive Vice President, Retail Banking and Training; Andrea Smiddy-Schlagel, Executive Vice President, Treasury Management; Maggie Tuschinski, Executive Vice President, Chief Digital Officer; Mike Wolverton, Executive Vice President, Consumer Lending; Frank Gioia, Senior Vice President, Customer Care Center, which is our call center; Brandon Harris, Senior Vice President, Appraisal Services; Josh Brown, Senior Vice President, Human Resources; and Gary Milliorn, Vice President, Property Management. And now our presidents and CEOs. Marelyn Shedd, President of our Abilene Region; Candi Kennedy, President of Eastland Division; Joseph Crouch, President of the Sweetwater Division; Jamie Esch, Chairman, President and CEO of Hereford; Chris Evatt, Chairman, President and CEO of the San Angelo region; Austin Elsner, Chairman, President and CEO of the Cleburne region; Trent Swearengin, Chairman, President and CEO of the Stephenville region; Justin Hooper, Chairman, President and CEO of our Weatherford region; Shelby Bruhn, Chairman, President and CEO, Southlake region; Stephen Lee, Chairman, President and CEO of our Southeast Texas region; and Chris Baughman, President and CEO of our Conroe region; Marcus Morris, President and CEO of our Fort Worth region; Shelley Dacus, President and CEO of our Kingwood region; and Nora Thompson, President and CEO of our Bryan/College Station region. Ladies and gentlemen, this is your management team who make up 1 of the top-performing banks in the country. Each of the bank regions as well as our trust and technology companies are guided by very capable boards. Altogether, we have 119 business and professional leaders, other than bank presidents and company representatives, who serve our 12 regions and our trust and technology companies. And I'd like for all those board members to stand. Okay. There we go. All right. Thank you. As we say, our boards are made up of the movers and shakers of the communities that we serve. Their guidance and counsel are greatly appreciated, and their influence in the markets we serve is vital to the ongoing success of this organization. We thank them for their time, direction and dedication. For the past 19 fiscal years, the accounting firm of Ernst & Young LLP has performed the audit of our company. We appreciate their professionalism, and we are pleased to have representatives from the firm join us today for the meeting. Matt Whip, Partner; and Lee Branch, Senior Manager, are here today representing the firm and are available for questions. Matt and Lee, you want to stand. Now that I've had the opportunity to introduce our management team and auditors, we can move along with today's official business. It's our standard procedure not to read the minutes of last year's meeting. Michelle Hickox has in hand the minutes of that meeting, which was held April 26, 2022. That meeting had 3 official items of business, those being the election of directors, the ratification and appointment of independent auditors, the advisory vote on compensation of our named executives and all 3 items were approved by the shareholders. In accordance with the annual meeting notice and the proxy materials, there are 4 items that require the official vote of shareholders. Those were covered in detail in the proxy materials. However, as we present these items, if any of you have a question, please raise your hand and let us recognize you so that we may -- you may ask your question. Our first item is the election of directors to serve on the corporate board for the coming year. The nominating Corporate Governors Committee and the Board of Directors have recommended that 11 directors be elected, all of whom are currently serving as your Board of Directors. It is my pleasure to introduce the recommended slate of directors and ask them to stand and remain standing to be recognized as a group. The nominees and their primary businesses are as follows: April Anthony of Dallas, CEO of VitalCaring Group, Managing Partner of Anthony Family Investments Partners, Ltd., and Executive Chair of Homecare Homebase; Vianei Lopez Braun of Fort Worth, shareholder and Chief Development Officer, Decker Jones, PC; David L. Copeland of Abilene, President of SIPCO, Inc. and the Shelton Family Foundation; Mike Denny of Abilene, President of Batjer & Associates Inc.; Scott Dueser of Abilene, Chairman of the Board, President and Chief Executive Officer of First Financial Bankshares; Murray Edwards of Clyde, Principal, the Edwards Group; Dr. Eli Jones of Bryan/College Station, Professor of Marketing, Lowry and Peggy Mays Eminent Scholar and former Dean of the Mays School of Business at Texas A&M University; Tim Lancaster of Lubbock, former President and CEO of Hendrick Health System; Kate Matthews of Amarillo, Ranching and Investments. Robert Nickles, Jr. of Kingwood, Executive Chairman of Alegacy Group, LLC; and Johnny Trotter of Hereford, President and CEO of Livestock Investors, Limited. This is the recommended slate of directors for the coming year. Thank you. The second item of business is to ratify the Audit Committee of the Board of Directors' appointment of Ernst & Young, LLP as independent auditors for the fiscal year ending December 31, 2023. The Board of Directors has recommended the appointment of Ernst & Young LLP to be ratified. The third item of business is the advisory vote on compensation of our named executive officers pursuant to Securities and Exchange Commission rules, we again are conducting a shareholder advisory vote referred to say on pay to give shareholders the opportunity to express their views on compensation of our named executive officers and the executive compensation philosophies, policies and programs described in the proxy statement. The Board of Directors recommends approval of the resolution approving the compensation and named executive officers. The final item is the advisory vote on the frequency of the executive compensation vote. We are required to conduct this vote once every 6 years at the -- our 2017 shareholder meeting, which was the last time our shareholders voted on the frequency say-on-pay advisory vote, our shareholders selected every year as a preference by vote of 65.4% of votes cast. After consideration of this proposal, the Board has again determined that an advisory vote that occurs every year is the most appropriate. Therefore, the Board recommends that you vote for 1 year intervals for the advisory vote on executive compensation. If you intend to vote at this meeting, please mark your ballot, raise your hand and we will collect your ballot at this time to submit them to Mr. Copeland and Mr. Edwards to tabulate these votes with the proxies previously received. Does anyone have their ballots? No, because you all are very compliant and send those in early. We appreciate that. Mr. Copeland, have you tabulated the votes?

We have. With respect to Proposal 1, all nominees received in excess of 89% of the votes cast. With respect to Proposal 2, in excess of 98% of the votes cast, ratified the appointment of our independent auditors. With respect to Proposal 3, in excess of 97% of the vote cast, approved the compensation of named executives. And with respect to Proposal 4, in excess of 97% of the vote cast choose every year, less than 1% shows every 2 years and 2% shows every 3 years.

Thank you, Mr. Copeland. With these votes, I am pleased to report that -- the 11 directors are duly elected. The appointment of our independent auditors is ratified. The advisory resolution is approved, and the company will continue to conduct the say-on-pay vote every year. This concludes the official business, and we appreciate the strong approval of our 4 proposals recommended by the Board of Directors. There being no further official business to come before the meeting, the 2023 Annual Meeting of First Financial Bankshares is adjourned. Michelle Hickox will now present our financial results, and Kirk Thaxton will discuss highlights and activities of the Trust Company. Then it will be my pleasure to present the 2022 and current activities of the company. Michelle.

Good morning, everyone. Having just joined the bank in January, this is my very first shareholders' meeting to participate in, and I am honored to be here with all of you here in Abilene as well as through our live stream webcast. And hopefully, I'll get a chance to meet many of you later this morning. First Financial Bankshares finished 2022 with its 36th consecutive year of our increased earnings. Net income was $234.5 million compared to $227.6 million in 2021. The increase was driven by $31 million increase in net interest income and a $6.9 million decrease in noninterest expense. We were also able to overcome headwinds, including a decrease of $24.9 million in PPP fee income, an increase in loan loss provision of $19 million and decreases in debit card and mortgage fee income totaling $19.8 million from 2021. Our Trust Company continued its growth with total fees of $40 million, up 10.7% for the year, with $8.75 billion in fair value of assets managed. Kirk will have all the details later on their outstanding year. Diluted earnings per share was $1.64 for 2022 compared to $1.59 in 2021, reflecting the increase in net earnings for the year. Return on average assets is a key measure of financial performance in the banking industry, calculated as net income as a percent of average assets which was 1.76% in 2022. This compares extremely well to our peer group average of 1.11% and places us in the 93rd percentile of our peer group of 131 bank holding companies with assets greater than $10 billion. Another important measure for shareholders is our return on average equity, which is our net income as a percentage of average shareholders' equity, which was 16.72% for 2022 compared to peers of 1.16%, and this places us in the 90th percentile of our peer group. Our primary revenue comes from our net interest income, which is measured by net interest earned on average earning assets. Our net interest margin was 3.35% for 2022 compared to 3.40% in 2021, but it had risen to 3.47% in the fourth quarter of 2022. Managing the margin has been a challenge with the historical increases in the federal funds rate this past year. And although the margin had a small decline year-over-year, we compared favorably to our peer group average, which was 2.86% in 2022. In simple terms, the efficiency ratio reflects how much each dollar of revenue is spent on operating expenses. The lower this ratio, the better. In 2022, our efficiency ratio was 42.77% which improved from 45.84% in 2021 and is significantly lower than our peer group of 57.36%. As you can see, our capital ratios are significantly higher than required to be considered well capitalized for regulatory purposes and are well above the average of our peer group. This level of capital provides for strong safety and soundness as well as a base for our continued growth. From a balance sheet perspective, we had total assets at end of 2022 of $13 billion, which is slightly lower than assets of $13.1 billion at the end of 2021. Assets increased significantly during the pandemic due to tremendous deposit growth, which slowed during 2022. Total loans were $6.5 billion at the end of 2022 compared to $5.4 billion at the end of 2021, an increase of $1.1 billion or 20.72%. Our loan-to-deposit ratio was 58.5% at the end of the year. This growth is driven by the strength of our economies across Texas and the work of our lenders to serve our communities and our footprint. While our total assets did not increase in 2022, we were able to utilize cash flows from the bond portfolio to fund much of this loan growth. Our nonperforming assets totaled $24.3 million, and as a percentage of loans and foreclosed assets was 38 basis points at December 31, 2022, which compares favorably to our peer group of 59 basis points. Our allowance for credit losses totaled $75.8 million, or 1.18% of total loans with the increased balance in 2022, reflective of the loan growth for the year. Total deposits increased to $11 billion, up $439 million during the year. Noninterest demand deposits remained strong at $4.1 billion or 36.9% of total deposits, which positively supports our net interest margin. Because of our continued focus on customer service excellence, our team members opened over 10,500 new accounts during the year. Now let me briefly highlight you on our first quarter results that were released to the public on Thursday afternoon. Net earnings of $52.6 million for the first quarter of 2023 compared to $56 million for the first quarter of 2022. While we are always working to increase earnings year-over-year, there were certain items that impacted our results in the quarter. Net interest income increased $847,000 with our net interest margin increasing from 3.22% in first quarter 2022 to 3.34% in 2023. Fees from debit card transactions decreased $3.99 million from 2022. The company became subject to regulations that limit debit card interchange income for banks over $10 billion in total assets in July of '22. Mortgage revenues declined $3.4 million, which is due to lower volumes from the continued volatility in mortgage loan rates. And while total revenues were down in the first quarter compared to last year, we were able to reduce noninterest expenses to $57.3 million compared to $59.2 million in 2022, which offset some of the revenue declines. Our diluted earnings per share was $0.37 for the first quarter of 2023 compared to $0.39 for the same period in 2022. We ended the first quarter with assets totaling $13 billion, which was stable from the end of the year in 2022. Loan growth continued in 2023 with loans increasing to $6.6 billion at March 31, 2023, up $134 million from the end of the year. Deposits have remained stable in the first quarter 2023, being down only $70 million since year-end. Deposit activity has been good as we opened 4,380 net new accounts since December 31. That's all I have this morning for the review of our 2022 and year-to-date 2023 financial results. I want to thank you all for your support of First Financial as both shareholders and customers, and I'm going to turn it over to Kirk now to review the results for Financial Trust and Asset Management. Thank you.

Good morning. First Financial Trust enjoyed another successful year in 2022, producing outstanding growth in both assets under management and earnings. Our total assets increased $1.05 billion to finish the year with a book value of $6.93 billion, an increase of 17.8%. The market value of our assets under management finished the year at $8.75 billion, an increase of $55 million. The Trust Company experienced excellent earnings growth in 2022. Trust fee revenue increased $3.85 million or 10.7% from $36.15 million in 2021 to $40 million in 2022. Our earnings growth in 2022 was positively impacted by our oil and gas fee revenue, which increased $2.74 million or 59% from $4.64 million in 2021 to $7.38 million in 2022. The increase was due primarily to additional assets under management, increased production and higher oil and gas prices. As you can see from the slide, our oil and gas revenue continues to vary from year-to-year based upon market conditions, and it remains an important line of business for us, representing approximately 18% of our total revenue in 2022 compared to 13% in 2021. Our after-tax net income contribution to First Financial Bankshares increased $3.13 million or 17.6%, from $17.72 million in 2021 to $20.86 million in 2022. Almost all of our offices experienced double-digit net income growth. Our Houston office led the way with net income growth of 232%, followed by our Stephenville office at 31.6%, our Fort Worth office at 22.9% and our Abilene office at 22.7%. The equity markets were extremely volatile in 2022 with the S&P 500 finishing the year down 18.13%. Our best-performing portfolio for the year was our equity income portfolio, which was down only 5.97%. All of our portfolios have impressive long-term returns. Our core portfolio has a 10-year average return of 11.83%, while our equity income portfolio has a 10-year average return of 13.11%, which is 283 basis points per year higher than the Lipper equity income benchmark. Our portfolio managers, led by Chris Montoya, currently manage approximately $3.3 billion in equity assets, utilizing 5 different equity styles, allowing us to provide the appropriate equity strategy to meet each customers' needs and risk tolerance. 2022 was an extremely challenging year for fixed income markets. During the year, the Federal Reserve raised interest rates from 0 to 4.5%, which was the largest rate increase in history. These rate increases put significant pressure on bond values. Bill Rowe continues to do an excellent job of managing our bond portfolios and currently manages approximately $2.9 billion in fixed income assets in addition to the $5.5 billion managed for First Financial Bank. We continue to be excited about our newest markets. We are pleased to announce that our Bryan/College Station office attained profitability in 2022. Additionally, the office grew over $95 million in assets and currently has over $112 million in assets under management. Our Houston office now has over $150 million in assets under management and produced net income for the company of $286,000. We're also pleased to announce that we have added to our Board leadership this year with the election of Susie Stalcup. This is a return to First Financial for Susie as she previously served as our Senior Vice President and Investment Officer from 1983 to 1991. Susie's career has been centered in higher education philanthropy, most recently serving as Vice Chancellor for development and alumni relations at Vanderbilt University for 11 years before retiring in 2020. Susie has also served as the Vice President of Development at Columbia University Medical Center, Baylor College of Medicine in Houston as well as Rice University. Susie's extensive background and experience will be an invaluable addition to our Board. Susie, please stand and be recognized. We are pleased to announce that the first quarter of 2023 has produced outstanding results. The book value of our assets under management has increased over $281 million since year-end, surpassing the $7 billion milestone to reach $7.21 billion while the market value of our assets under management surpassed the $9 billion milestone and is currently at $9.1 billion. Against the backdrop of rising interest rates and market volatility, our net income for the first quarter of $5.31 million was an increase of $171,000 or 3.3% when compared to the first quarter of 2022. These first quarter results have us excited about the opportunities that lie before us in 2023. The foundation of our business has always been based upon relationships. We are fortunate to have worked with many families for generations. Whether it's our experience in investments, mineral management, property management, employee benefit management or trust and estate administration, our highly talented and experienced team remains dedicated on providing unparalleled customer service to and your families for generations to come. Thanks to each and every customer First Financial Trust for allowing us to serve your trust and investment needs. And for those of you who are not yet our customers, we look forward to the opportunity to serve you. Thank you for your attention this morning, and I'll turn the podium to Scott.

Okay. You guys on the back that are standing. If you have -- there are plenty of seats if you want to come sit, you're not going to interrupt me at all. But if you want to continue staying back there, that's fine, too. Okay. This comes to the fun part. And we get to talk about the company, kind of what's going on. We want you to leave this meeting knowing what we do and how we do it and why we do it. So that's really important. Thank you to Kirk and Michelle, as you see the bank and the Trust Company are doing very well. We're very pleased. Especially in light of the economy and everything going on in the world today, we're just an anomaly of banks. We're not like anybody else. We like that because that's what makes us different. And so I think you'll see that as I go through this presentation, we're different from anybody else, and we want to be. And we work very hard at that. There's not many banks. I don't know, there's not another bank that has Horst Schulze, the founder of Ritz-Carlton, come and teach their customer service. Our customer service across the board in every location we're in, is trained by Horst Schulze. And Horst comes and spends a week with us. He's 83 years' old, and I will tell you, he's amazing. By the end of the week, I am so glad to get him on that plane and gone because he wears me out totally. So -- but we all love him. He's been working with our company. Horst only consults for 4 companies, that's Lexus, Cancer Centers of America, Chick-fil-A, and us. Now there's a lot of speeches across the country, across the world. And he is -- but he has considered the top customer service person in the world. And to have that type of expertise at our fingertips is just amazing. But that's just 1 of the many ways we're so different. As you'll remember, in the 2022 annual report, was titled Momentum, which is exactly what we gained over the 2 years of our pandemic. The fact that we stayed open executed the Paycheck Protection Program extremely well and served our customers with excellent customer service throughout the pandemic made a big difference. During those years, we achieved organic growth of approximately $4 billion, which was similar to buying a $4 billion bank and not paying for it, okay? That's amazing. And just to tell you the story, we didn't plan to grow $4 billion. We plan to stay under the $10 billion range and hover there for a while so that we didn't have to go into all the regulatory requirements of being a $10 billion bank and then go buy a big bank, and we plan to have a little time to get ready for that. Well, that's not what happened. When so many other banks closed and locked their doors during the pandemic, when customers went to those banks and they were not open and they wouldn't answer the phone to talk about their PPP loans that they need it to keep their employees paid, they came to us because across the state, we were known as the bank that was executing that PPP program well. When they came to our bank, we said, not only will we make you the PPP loan, but we want all your business. and almost every one of them brought all their accounts to us. And that's the next slide here that I want to show you. This is really interesting. It didn't take us long to figure out that people were moving their accounts to us, which created a large number of net new accounts as well as new depository dollars. Historically, we would open approximately 5,000 net new accounts a year, okay? Then in 2020, the first year of the pandemic, we opened just under 12,000 net new accounts. That's how many people were moving their accounts from other banks. Then next year, it went to 16,000 net new accounts. Again, more and more people. In this last year, we still had the momentum of twice of what we had done before, 10,500. First quarter of this year, we've opened 4,300 net new accounts, which is 1,000 accounts more than what we opened last year at the same quarter. So we see this momentum that's continuing to go. People are wanting to bank with us. They want to move their business. And I will tell you, being 1 of the safest banks in the country is something that really makes a big difference today. We're going to take advantage of the situation today and continue to grow the bank. We always seem to do better when there's disruption out in the market. When there's something going on, we always seem to be able to take advantage of that. We are seeing today that many banks cannot fund loans because they don't have liquidity. We have lots of liquidity, and we can fund loans. And that makes a big difference. Because now we're seeing people from those other banks coming to us saying, "I need a loan because my bank can't make a loan to me." And so that is going to continue to be that situation. When they come, and we're dealing with loans right now, we also get their accounts. And so that makes a big difference. This is something that we're going to capitalize on this year. So be prepared. So that momentum continues to go. And we've not seen a decline in our deposits like many other banks say. Again, because safe, sound, secure. People know that we're 1 of the safest banks in the country. It's interesting being a publicly traded bank, and we go to all these investment conferences. And I get -- we get criticized for having so much capital. They go, "Why do you have so much capital?" And I say, "You know what, that doesn't bother me because it's times like these that people migrate to you because you have that much capital and where they can see how safe, sound and secure we are because of that capital. And that's so important. This year's annual report is titled Community. Because throughout this year -- throughout the years, the bank has always achieved and adhered to the philosophy that we're only as successful as the communities we serve. To become a better bank, we strive to improve the quality of life in the communities in our footprint. Besides providing the latest in financial services, we serve on local, nonprofit and church boards, volunteer our time and help those nonprofits raise money. The community volunteer work our team does daily amazes me, especially on the annual day of service, which you saw a video before we started the meeting, which took place on August October 10, Columbus Day holiday. All our employees come to work that day, on their own time, give that day, that holiday that they have and we had 1,056 employees serving 80 agencies across our whole footprint. We also have designed our banking products and services to serve all neighborhoods from lowest to the highest income. In this year's annual report, we selected 8 customers across our footprint, many of whom we help start their business and work with them to become successful entrepreneurs. If you have not read these stories, I certainly invite you to enjoy them because they are outstanding stories about successful businessmen and women and the imports of community banks across the country. Just remember, community banks are the fiber of the banking industry across this country. We can't -- you can't look at the 4 big banks and think they're going to do it. It's these community banks that make it happen, and we're 1 of those community banks. I am especially proud of our ongoing contributions to the low-income neighborhoods where we teach classes of financial literacy and fraud prevention, among other topics. We also offer classes on how to utilize our products and services such as free checking, savings, affordable home loans and individual taxpayer identification numbers, mortgage program. That's what we call the ITIN program. And you go, okay, what's the ITIN program? ITIN, if you don't have a social security number, okay? This is going to be for refugees, people with green cards that have been here a long time, that are working. They're the people that you see out working, they're paying taxes, but they don't have a social security number. They have a ITIN number. Most banks will not make them home loans. But these are people that are working on their citizenship, want to be Americans and want to be United States citizens. And so we do make them loans. And it's very gratifying because this is the way that we bring people out of the low income areas and bring them into higher income. And it's a really great program because education and home ownership are the 2 of the best ways to start someone on a path to better financial stability and we want to be involved in that journey. Within our company, we hire applicants from low-income areas, train them for specific jobs and nurture them as they take steps toward new careers and higher income. These actions are all part of our mission of making a difference in people's lives. One difference maker in our company is Marcus Morris, President of the Fort Worth region. Marcus has done a very impressive work in building relationships with the developers, builders, realtors and nonprofit organizations in low-income, high minority in Fort Worth. Through these efforts, we are helping to redevelop this low income area and because of his demonstrated leadership and commitment to involving -- to improving his community, Marcus has been selected to receive the Walter Johnson Award today at our luncheon. In February 2023 Forbes Magazine named First Financial Bankshares, Inc., the #2 bank in the country out of the 100 largest publicly traded banks and [indiscernible]. This includes Bank of America, Wells Fargo, every publicly traded bank in America, the top 100. Then Forbes is being -- the Forbes ranking is being based on 9 metrics measuring bank's growth, credit quality and profitability. In April 2023, First Financial Bank was named -- was ranked #7 in S&P Global Market Intelligence ranking, which assesses community banks based on returns, growth, efficiency, while placing a premium on the strength and risk profile of the balance sheet. Just yesterday, KBW selected us for the Honor Roll. This is 14 banks throughout all banks across the country, just 4% of the industry as outperforming peers receiving premium, stock prices, and they do -- and we have been selected in this group every year that they've had the Honor Roll. Every year, we've been in the top banks in the country. So that tells you your banking and you own 1 of the top banks in the country. No question about it. Over the last 6 years, we have increased earnings from $120 million to $234 million, an increase of $114 million. Last year marked the 36th consecutive year of increased earnings. Net income for 2022 grew 3.04% to $234.5 million from $227.6 million in 2021. We were very pleased with this increase since we had 4 distinct hurdles totaling $63 million that we had to get over in 2022. Let me tell you, we stood here last year and thought how are we going to do that? Okay, let me tell you what those hurdles we had to do. First 1 was $24.9 million decrease in PPP fees. We didn't -- 2021, we had all those PPP fees that we made. We didn't have them in 2022. So all of a sudden, there's -- right at $25 million that we've got to go make up. Then secondly, we grew our loans. And so we had to put additional funds into our loan loss reserve of $18.6 million, another big hurdle to get over. Third was a $14.2 million decrease in mortgage revenue because the housing market cooled, okay? In the -- the fourth 1 and final 1 was a $5.6 million decrease in debit card revenue because of the Durbin Amendment, okay? Let me tell you about the Durbin Amendment. The Durbin Amendment was passed in Congress in 2010 as part of the Dodd-Frank financial reform legislation, and we require the Federal Reserve when a bank gets over $10 billion, they cut your income from debit cards in half, okay? For the -- and that started last July for us. And that -- for half a year, that was $5.6 million that's gone. And it's never going to come back. And every year after that, all our income is cut in half in debit card. So that's something we got to live with. We got to go on. And we did great. We made up the difference. Despite these hurdles, we were still were able to increase net income. Very, very pleased. And I will tell you that happened with a lot of work. That just didn't happen. The management team and every 1 of our people work toward making that happen, just like we will this year. As you saw on Michelle's presentation, our first quarter earnings were down by $3.4 million, primarily due to a decrease in the debit card fees from the Durbin Amendment of right at $4 million, okay? And a decrease in mortgage revenues, a continued decrease of $3.37 million, again, slower housing market. Like last year, we feel that we can overcome these headwinds with the hope that the housing market will improve this spring, and it already has started improving. And we think as people get used to these rates, these higher rates, they'll go, okay, this is the average that it's been over the last 50 years is where we are today, okay? We all got spoiled with 3% rates on houses. Well, that's not the market today. People still have to buy houses. And across Texas, there's a lack of housing. We have so many people moving to Texas. So we're going to see that number start increasing as the year goes on. Another big opportunity is to improve earnings is that we will have $599 million of bonds maturing every year along with the occasional opportunities to sell bonds at breakeven, which is an average book value. These bonds are earning us 3.15%, okay? Think about that, when we can take these bonds out of the bond portfolio and move them into loans earning around 8%, that makes a big difference in our margin. So that's what we're doing. Bill has been able to continue to sell bonds, which helps not only what's maturing on a monthly basis, but to sell more bonds at a breakeven. And so we're not taking a loss in bonds, but we're moving those out to higher rates. So that's happening on a daily basis. The cash flow, we either flow into loans or to Fed funds, which is 4.75%. So it's all an improvement. This will certainly help our net interest margin and our net interest income. Okay. As we -- I've always said, we can't control the stock price, but we can work hard to increase earnings, which ultimately drives stock price. As you know, with inflation and higher interest rates, the stock market has been down, which is not unusual. As you can see, we compare well with the indices, and we continue to be the same outstanding company we have been in the past, not just with a lower stock price, okay? Whether with stock price is $45 or $30 we're the same bank. It's not us, it's the market. And so we can't control that. But long term, it's going to return to where it should be because of earnings. And we continue to outperform our peer group, as you saw, Michelle's presentation. Okay. Let's talk about our footprint. Nobody else wants to talk about stock price anymore. Okay. We love our footprint. Our footprint reflects our philosophy of continuing to be the community bank that doesn't focus on the big cities but the smaller communities around the major metropolitan areas where we are not finding the big banks in the big city, but we have the growth factor of the -- of being around a larger city. This philosophy has worked very well for us and being spread across the state has created diversity in the types of customers and the economies that make up our bank. Our footprint spans from Hereford in the Panhandle, the Orange and Southeast Texas, all way down to the coast at Palacios. If you walk out our branch in Palacios, you see the ocean a block away. That's how close we are. Okay, that's 79 locations spread across Texas. That's a lot of strength. And that's the strength I made a point if you saw my e-mail that went out to all our customers about why we're 1 of the strongest banks in the country. That was 1 of the points I made. We have 330,000 accounts spread across all of Texas, 79 locations. That's huge. That we're not in 1 industry, we're not in 1 area. This is very good. Okay. Let's talk about our new locations. In our business, we are always updating and improving our locations to meet the needs of our fast-paced technology-driven customers today. We got to be out there, always out there. Okay, here's what we've done the last year in October 2022. First Financial Bankshares; Bryan/College Station region purchased a 1.69 acre site adjacent to its existing branch at 1,622 North Earl Rudder Freeway in Bryan. In the next couple of months, we will build this building, which is 3,300 square foot bank building to replace the lease space that we have in a convenience store, okay, in a convenience store. This location happens to be our busiest in the [indiscernible] City. And this new location will certainly serve our customers more efficiently and certainly with greater technology. We have 1 drive-in on that convenience store. This is going to add 4 drive-ins and an ATM. So it's going to be in a bigger teller line and an office to make loans. So it's going to make a big difference. Okay, in November 2022, First Financial Bank, Southeast Texas region opened its new location in Lumberton. Now we've not been in Lumberton before, which is a 3,300 square foot facility, 3 motor bank lanes and an ATM lane. Lumberton has an excellent school district and is a fast-growing city, 10 miles from Beaumont. We're excited to open this new branch and become part of the city's growth. Okay, in Huntsville. In March, 2023, just this last month, we opened our new location in Huntsville to replace 2 buildings we had across the street, which was very dysfunctional. If you went in the bank to make a deposit, but you wanted to make a loan, you had to go to another building. That doesn't work very well. And so we threw those things out. we've sold 1 of the buildings and the other 1 is contracted for. So those are going to be gone. This -- we built a 8,850 square feet building in Huntsville, put all our employees in it, it will better serve our customers with the latest technology and state-of-the-art. Okay. Here's our kingpin for the year. Also on March 2023, First Financial Bank's Bryan/College Station region opened its new location in 2045 Harvey Mitchell Parkway South of the Northwest corner of Harvey Mitchell Parkway and Earl Rudder Freeway. This is the new state-of-the-art branch, is 16,000 square feet. This features a large lobby, offices for our lending, mortgage and trust officers. Also has -- we didn't have -- at our other facility, we had all these people, no teller line, no drive in, okay? This new building has teller lines, drive-ins, and it's 1 of the best locations in Bryan/College Station and it gives our customers easier access to our people and services. Since we've opened that every day, the volume continues to get better at this branch, and it will be our most popular branch in Bryan/College Station. No question. Okay. So that kind of gives you what we've done to enhance the ability to people to bank with us. Okay. Let's talk about regional board and management changes. As you will see, we have made a good number of changes in management, which includes many of our younger professional bankers moving up the ladder to replace our people that are retiring. Others are coming from $10 billion banks to strengthen our management team to fit the growth that we have had and will have as well as meet the requirements that expected of us growing past the $10 billion threshold. All of a sudden, you meet a new threshold that the examiners want you to be a much more professional bank with a lot of different -- with a lot of new positions. So that's what we've started on. Okay, in January 2022, the Board's First Financial Bank Fort Worth region elected Vianei Lopez Braun as the Chair of the Board. Vianei has been an advocate for our First Financial Bank since we financed her law practice in 1998, and she has served as our employment attorney for 25 years. She leads the Labor and Employment section of Decker Jones P.C., a first service law firm based in Fort Worth and serves as the Chief Development Officer for the firm. She has been practicing the employment law for 31 years with previous tenures in Houston and Abilene. She's the honors graduate of Princeton University and earned her law degree from University of Texas Law School. Okay. Also in January 2022, the Board of Directors of First Financial Bankshares included -- Inc. announced the promotion of Luke Longhofer to Executive Vice President and Chief Lending Officer, upon Gary Gragg’s retirement after 30 years, and Gary is here today, and he's -- he's glad to be retired. He's enjoying it a lot. Way too much. As Chief Credit Officer, Luke has worked in tandem with Gary for 11 years. Luke has played an integral role in the credit oversight of our bank acquisitions. He also oversaw that execution of the PPP program, the Main Stream Lending program and was instrumental in implementing our adoption of the CECL accounting standard. He was a bachelor degree from West Texas State -- sorry, West Texas A&M University, a bachelor of finance degree from A&M and is a valedictorian of SMU's Southwestern Graduate School of Banking. Okay. Kyle McVey, in addition, in its January '22 meeting, the Board of Directors of First Financial Bankshares announced the promotion of Kyle McVey to Executive Vice President, Chief Accounting Officer. He joined First Financial Bankshares in 2011 following 2 years with KPMG in Jacksonville, Florida. Kyle holds a bachelor's degree in accounting and finance and a Masters in Accounting from Abilene Christian University. He is a licensed CPA and a graduate in SMU's Southwestern Graduate School of Banking, and he is valedictorian of his class. Okay. In February 2022, the Board First Financial Bank South Lake region elected Shelby Bruhn, as President and CEO of the region succeeding Mark Jones. Shelby recently served as Executive Vice President and Chief Lending Officer of the Fort Worth Bank. Shelby is a graduate of the University of Texas in Dallas, and a bachelor's degree in accounting and information management. He also is a 2017 graduate at the University of Colorado Graduate School of Banking. Then in April 2022, the Board of First Financial Bank Hereford region elected Jamie Esch as Chairman and CEO of First Financial Bank Hereford. Jamie is a native of the area and has 25-year history of working for banks from Bank of America to Happy State Bank. He received a degree in Business Administration from West Texas A&M University. Then in April 2022, First Financial Bankshares Inc. elected Rett Everett, Executive Vice President, Credit Administration. Rett will be a valued member of a credit administration team with a daily responsibility of Lending Oversight in Dallas-Fort Worth area. He experienced his experience as Chief Credit Officer, at the National Bank of Texas in Fort Worth as well as a 14-year tenure at Capital One Bank in Fort Worth and Dallas. He received a bachelor's degree from Business Administration and Finance degree from Tarleton State University and a Masters from Texas Tech. Then in January 2023, First Financial Bank's Board of Directors elected Mike Parker as Executive Vice President and Chief Compliance Officer. Mike brings more than 15 years of compliance experience to First Financial, including his most recent post as a Director of Compliance Governance with USAA Federal Savings Bank, which is the largest bank in Texas, okay? You see now we're bringing that expertise from these big banks to have this expertise so we can grow into that size. He is a native of Western New York and earned a bachelor of Science degree in economics from Virginia Commonwealth University. He holds a Certified Regulatory Compliance Manager designation. Okay. Also in January 2023, a First Financial Bankshares Inc. announced the election of Michelle Hickox as Executive Vice President and Chief Financial Officer to replace James Gordon. Michelle recently served as Chief Financial Officer of Independent Bank Group, IBTX and its subsidiary independent bank, an $18 billion publicly traded bank holding company based in McKinney, Texas. At IBTX, she led the company through its initial public offering in 2013 and played a key role in 10 acquisitions during her tenure. Prior to joining IBTX, Michelle was an audit partner at RSM US LLP in Dallas, serving financial institutions throughout Texas. She is a certified public accountant and a graduate of Texas A&M University, where she currently serves as trustee for the 12th Man board. So you can see we're bringing that expertise in, and it makes a big difference. The management team is so glad to have Michelle as part of our team. She's been such a great addition and -- we're welcoming she and Rob here to today to Abilene, and we're so glad to have them as Abilenians. Okay. Let's talk about diversity and inclusion. First Financial Bankshares embraces and promotes a culture of diversity and inclusion. We continue our efforts to attract, recruit and retain employees who bring to our company diverse backgrounds, orientations, beliefs, cultures and interest. We believe that having a diverse team strengthens our company by bringing together people of different ideas, skills and experiences. And by enabling all of our customers regardless of their race or other characteristics, to feel at home when they visit 1 of our locations. We also continue to refresh and diversify our regionals and subsidiary boards, which have 32 women and minorities as members. These boards are made up of the movers and shakers of each of the communities we serve, which is interesting, 72% of our workforce are women and 42.5% are minorities. And this has created what -- a new employee orientation, I talk about diversity not being just color and gender, but it's what college you went to, it's what country you're from, it's what state you're from. There's a lot of things about diversity. But it's bringing all those people together and learning from each other because you have a greater process of carrying problems and coming up with solutions. And it's really worked very well. And then our FFI and Board changes this year, the January Board of Directors meeting, Eli Jones, Ph.D. was elected to the company's Board of Directors. Eli also was appointed to the First Financial Bank Board of Directors, and he currently serves in the Board of First Financial Bank, Bryan/College Station. Eli is a nationally known academic speaker, author and has worked with major publicly traded companies. He is a Professor of Marketing and the Lowry and Peggy Mays Eminent Scholar at Texas A&M University. He recently served for 6 years as Dean of Texas A&M's prestigious Mays School of Business, 1 of the nation's top 20 business programs. He was recently selected as an outstanding alumnus at Texas A&M University. He is a Bryan/College Station native and holds a bachelor's degree in journalism and both a master's and doctorate degree in business administration from Texas A&M University. We are delighted to have a Board member of Eli's caliber, experience and education on our Board. Then in April 2022, the Board of Directors of First Financial Bankshares announced the appointment of Murray Edwards as Lead Independent Director following the retirement of Tucker Bridwell. Murray has served as a Director of the company since 2006. He serves as Chair of the Nominating Corporate Governance Committee and is a member of the Risk and Executive Committees. He is also a Director of the bank, serving as Chairman of the Directors Loan Committee and as an Advisory Director of the bank's Abilene and Fort Worth regions. In addition, he is the principal of Edwards Group, a privately-owned investment company. Murray received an undergraduate degree from Texas A&M University and a Masters of Business Administration degree from Harvard Business School. In 2018, he received the Texas A&M University Outstanding Agribusiness Entrepreneur Award. And in 2019 was awarded Outstanding Alumnus awarded by the College of Agriculture and Life Sciences at Texas A&M. Okay, let's talk about the things you're most interested in. As you can see from this slide, over the past 5 years, our annual dividends have increased from $0.41 to $0.66, an increase of 61%. Due to our strong capital position and historical earnings increase, the Board has voted to increase our cash dividend $0.01 to $0.18 per quarter, which is a 5.9% increase. This will be paid to shareholders of record as of June 15, 2023, with a dividend payable on July 3, 2023. We hope you're pleased with this decision. You always like leaving with a raise, don't you. We do too. Having achieved the largest growth in the company's history over the last 3 years and with it, vigorous momentum. Our goal is now to maintain the trajectory and velocity of that momentum to overcome the fast, robust increases in interest rates that we have been seeing and the slowing of the national economy. Luckily, the Texas economy continues to be strong, and there is a lack of housing in most of our markets across the state. As we reviewed earlier, I could not be more pleased with the people who have taken on new positions across our company over the past 3 years and have accepted more responsibilities to support our growth past the $10 billion mark in such a short period of time. Our priorities are to achieve organic growth in loans, deposits trust accounts, improve our noninterest income and control our expenses. With the economy slowing and with banks trying to adjust to the rapid rises in interest rates and losses in their bond portfolios, which will take a time to roll off just like ours, we do not see many banks choosing to sell at this time. There's nobody who visited with us. And if somebody was out there to sell were the first ones they come to. So there's just not anything going on right now. But there will be, the time will come, and so we will be prepared. That is why our organic growth to us right now continues to be so important. And there are always benefits to be had from improving our operations and becoming more efficient at this point. We're in the process of implementing new systems for accounts opening lending, and trust services. Each of these will bring a state-of-the-art technology and will enhance our efficiency. Our accomplishments and strong performance over these past 3 years, especially our ability to get over the $63 billion hurdles last year, we have been amazing. These things do not just happen on our own, but rather come from the dedication and hard work of a very professional team of Board members, officers and employees with whom I have the honor of working. They continue to go well beyond the call of duty to provide -- providing our customers and communities with exceptional service, and I thank each 1 of them, thank you also to our shareholders who are so loyal and supportive of our company, and we never forget that we work to put you first. In 2023, the 2023 Annual Meeting of First Financial Bankshares, Inc. is now adjourned. And we invite each of you to join us for the famous [indiscernible] luncheon in the exhibit hall. Please turn right as you exit the conference room, and there are plenty of buffet lines to serve you quickly. However, for those of you who may not feel comfortable going through the buffet lines, you may find a seat and our servers will graciously bring your lunch to you. Thank you for coming today, and we look forward to seeing you at the luncheon. We are adjourned.