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<SEC-DOCUMENT>0000036029-04-000046.txt : 20040504
<SEC-HEADER>0000036029-04-000046.hdr.sgml : 20040504
<ACCEPTANCE-DATETIME>20040504124043
ACCESSION NUMBER:		0000036029-04-000046
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20040331
FILED AS OF DATE:		20040504

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			FIRST FINANCIAL BANKSHARES INC
		CENTRAL INDEX KEY:			0000036029
		STANDARD INDUSTRIAL CLASSIFICATION:	STATE COMMERCIAL BANKS [6022]
		IRS NUMBER:				750944023
		STATE OF INCORPORATION:			TX
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-07674
		FILM NUMBER:		04776462

	BUSINESS ADDRESS:	
		STREET 1:		400 PINE STREET
		STREET 2:		P.O. BOX 701
		CITY:			ABILENE
		STATE:			TX
		ZIP:			79601
		BUSINESS PHONE:		325.627.7167

	MAIL ADDRESS:	
		STREET 1:		P.O. BOX 701
		CITY:			ABILENE
		STATE:			TX
		ZIP:			79604
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>tenq3-04.txt
<DESCRIPTION>FIRST FINANCIAL BANKSHARES - 3/31/04 - 10Q
<TEXT>
                                  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, 2004

                          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                (I.R.S. Employer
          or organization)                                   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 .

     Indicate by checkmark  whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X No .

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of April 30, 2004:

         Class                                      Number of Shares Outstanding
         -----                                      ----------------------------
Common Stock, $10.00 par value                               15,488,778
         per share


<PAGE>


                                TABLE OF CONTENTS


                                     PART I

                              FINANCIAL INFORMATION

    Item                                                                 Page
    ----                                                                 ----


         Forward-Looking Statement Disclaimer                              3


      1.  Financial Statements                                             4


      2.  Management's Discussion and Analysis of Financial Condition and
          Results of Operations                                           10


      3.  Quantitative and Qualitative Disclosures About Market Risk      15

      4.  Controls and Procedures                                         15


                                     PART II

                                OTHER INFORMATION


      4.     Submission of Matters to a Vote of Security Holders          16

      6.     Exhibits and Reports on Form 8-K                             17

             Signatures                                                   18

                                       2


<PAGE>


                         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:

     o    general economic conditions;

     o    legislative and regulatory actions and reforms;

     o    competition from other financial  institutions  and financial  holding
          companies;

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

     o    changes in the demand for loans;

     o    fluctuations in the value of collateral and loan reserves;

     o    inflation, interest rate, market and monetary fluctuations;

     o    changes in consumer spending, borrowing and savings habits;

     o    our ability to attract deposits;

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

     o    acquisitions and integration of acquired businesses; and

     o    other factors  described in "Part I, Item 2 - Management's  Discussion
          and Analysis of Financial Condition and Results of Operations."

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,
2004 and 2003 and December 31, 2003, and the consolidated statements of earnings
and  comprehensive  earnings for the three months ended March 31, 2004 and 2003,
changes in  shareholders'  equity for the three  months ended March 31, 2004 and
the year ended  December  31,  2003,  and cash flows for the three  months ended
March 31, 2004 and 2003, follow on pages 4 through 8.

                                       3


<PAGE>


                FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                         March 31,                    December 31,
                                                                          -------------------------------------
                                                                                 2004                 2003                2003
                                                                          -----------------    ----------------    ----------------
<S>                                                                       <C>                  <C>                 <C>
ASSETS                                                                                  (Unaudited)
   Cash and due from banks                                                $      88,504,777    $     91,461,122    $    111,940,573
   Federal funds sold                                                            15,175,000          17,875,000           1,900,000
                                                                          -----------------    ----------------    ----------------
     Cash and cash equivalents                                                  103,679,777         109,336,122         113,840,573

   Interest-bearing deposits in banks                                               282,328           4,830,932             876,839

   Investment securities:
     Securities held-to-maturity (market value of $131,748,477,
        $188,678,415 and $138,594,081 at March 31, 2004 and
        2003 and December 31, 2003, respectively)                               124,326,152         178,714,336         131,326,111
     Securities available-for-sale, at fair value                               806,103,397         671,593,468         778,976,003
                                                                          -----------------    ----------------    ----------------
           Total investment securities                                          930,429,549         850,307,804         910,302,114

   Loans                                                                        965,731,085         955,650,393         987,523,103
     Less: Allowance for loan losses                                            (11,791,894)        (11,363,556)        (11,576,299)
                                                                          -----------------    ----------------    ----------------
   Net loans                                                                    953,939,191         944,286,837         975,946,804

   Bank premises and equipment, net                                              43,542,359          41,084,401          43,902,112
   Goodwill and intangible assets                                                24,683,882          24,836,999          24,717,671
   Other assets                                                                  21,136,926          21,721,426          22,985,321
                                                                          -----------------    ----------------    ----------------

TOTAL ASSETS                                                              $   2,077,694,012    $  1,996,404,521    $  2,092,571,434
                                                                          =================    ================    ================

LIABILITIES
   Noninterest-bearing deposits                                           $     455,106,813    $    431,520,958    $    472,574,590
   Interest-bearing deposits                                                  1,319,173,214       1,291,883,993       1,323,696,580
                                                                          -----------------    ----------------    ----------------
     Total deposits                                                           1,774,280,027       1,723,404,951       1,796,271,170

   Dividends payable                                                              4,800,760           4,328,601           4,798,948
   Securities sold under agreements to repurchase                                15,438,499          12,489,786          28,975,167
   Other liabilities                                                             19,799,989          15,983,244          11,039,392
                                                                          -----------------    ----------------    ----------------

     Total liabilities                                                        1,814,319,275       1,756,206,582       1,841,084,677
                                                                          -----------------    ----------------    ----------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
   Common stock - $10 par value; authorized 20,000,000 shares; 15,486,322,
     15,459,289 and 15,480,679 shares issued and outstanding
     at March 31, 2004 and 2003 and December 31, 2003, respectively             154,863,220         154,592,890         154,806,790
   Capital surplus                                                               58,293,285          58,103,956          58,253,180
   Retained earnings                                                             36,568,622          18,849,930          31,276,464
   Accumulated other comprehensive income                                        13,649,610           8,651,163           7,150,323
                                                                          -----------------    ----------------    ----------------

     Total shareholders' equity                                                 263,374,737         240,197,939         251,486,757
                                                                          -----------------    ----------------    ----------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                $   2,077,694,012    $  1,996,404,521    $  2,092,571,434
                                                                          =================    ================    ================

</TABLE>

See notes to consolidated financial statements.

                                       4


<PAGE>


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

<TABLE>
<CAPTION>

                                                            Three Months Ended March 31,
                                                        ----------------------------------
                                                             2004                2003
                                                        --------------     ---------------
<S>                                                     <C>                <C>
 INTEREST INCOME
      Interest and fees on loans                        $   14,018,537     $    14,786,550
      Interest on investment securities:
             Taxable                                         7,519,478           7,678,820
             Exempt from federal income tax                  2,403,116           1,745,746
      Interest on federal funds sold and
         interest-bearing deposits in banks                     69,677             141,695
                                                        --------------     ---------------
         Total interest income                              24,010,808          24,352,811

 INTEREST EXPENSE
      Interest-bearing deposits                              3,574,648           4,650,611
      Other                                                     52,335              67,728
                                                        --------------     ---------------
         Total interest expense                              3,626,983           4,718,339
                                                        --------------     ---------------

 NET INTEREST INCOME                                        20,383,825          19,634,472
      Provision for loan losses                                178,000             510,501
                                                        --------------     ---------------

 NET INTEREST INCOME AFTER
      PROVISION FOR LOAN LOSSES                             20,205,825          19,123,971

 NONINTEREST INCOME
      Trust department income                                1,575,522           1,433,806
      Service fees on deposit accounts                       4,270,655           3,807,820
      ATM fees                                                 674,034             665,656
      Real estate mortgage fees                                423,627             684,363
      Net gain (loss) on sale of securities                     18,426                   -
      Net gain on sale of student loans                      1,791,858             236,515
      Net gain on sale of real estate and other assets         114,374               3,963
      Other                                                  1,034,217           1,239,849
                                                        --------------     ---------------
             Total noninterest income                        9,902,713           8,071,972

 NONINTEREST EXPENSE
      Salaries and employee benefits                         8,790,528           8,221,387
      Net occupancy expense                                    998,538             942,580
      Equipment expense                                      1,415,112           1,187,966
      Printing, stationery & supplies                          346,074             346,025
      Correspondent bank service charges                       383,656             395,055
      Amortization of intangible assets                         33,789              33,789
      Other expenses                                         3,921,855           3,985,749
                                                        --------------     ---------------
             Total noninterest expense                      15,889,552          15,112,551
                                                        --------------     ---------------

 EARNINGS BEFORE INCOME TAXES                               14,218,986          12,083,392
      Income tax expense                                     4,126,068           3,633,803
                                                        --------------     ---------------

 NET EARNINGS                                           $   10,092,918     $     8,449,589
                                                        ==============     ===============

 EARNINGS PER SHARE, BASIC                              $         0.65     $          0.55
                                                        ==============     ===============

 EARNINGS PER SHARE, ASSUMING DILUTION                  $         0.65     $          0.54
                                                        ==============     ===============

 DIVIDENDS PER SHARE                                    $         0.31     $          0.28
                                                        ==============     ===============

</TABLE>

 See notes to consolidated financial statements.

                                       5


<PAGE>


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

<TABLE>
<CAPTION>

                                                         Three Months Ended March 31,
                                                       --------------------------------
                                                            2004              2003
                                                       --------------    --------------
<S>                                                    <C>               <C>
NET EARNINGS                                           $   10,092,918    $    8,449,589

   OTHER ITEMS OF COMPREHENSIVE EARNINGS:
    Change in unrealized gain on
      investment securities available-for-sale             10,017,329        (4,214,251)

    Reclassification adjustment for realized
     gains on investment securities
     included in net earnings, before income tax              (18,426)                -
                                                       --------------    --------------
                                                            9,998,903        (4,214,251)
          Total other items of comprehensive earnings

    Income tax expense related to other
     items of comprehensive earnings                       (3,499,616)        1,474,988
                                                       --------------    --------------


COMPREHENSIVE EARNINGS                                 $   16,592,205    $    5,710,326
                                                       ==============    ==============

</TABLE>

See notes to consolidated financial statements.

                                       6


<PAGE>


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

<TABLE>
<CAPTION>

                                                                                                   Accumulated
                                                                                           Other Comprehensive Income
                                                                                            -------------------------
                                                                                           Unrealized Gain
                                             Common Stock                                   on Securities  Minimum        Total
                                       -------------------------    Capital    Retained       Available-   Pension     Shareholders'
                                         Shares        Amount       Surplus    Earnings       for-sale     Liability      Equity
                                       ----------  ------------- ------------ ------------  ------------ ------------ -------------
<S>                                    <C>         <C>           <C>          <C>           <C>          <C>          <C>
Balances at December 31, 2002          12,364,201  $ 123,642,010 $ 58,087,687 $ 45,647,522  $ 12,830,709 $ (1,440,283)$ 238,767,645

     Net earnings                               -              -            -   35,304,800             -            -    35,304,800

     Five for four stock split,
          effected in the
          form of a 25% stock dividend  3,092,995     30,929,950            -  (30,929,950)            -            -             -

     Stock issuances                       23,483        234,830      165,493            -             -            -       400,323

     Cash dividends declared,
          $1.21 per share                       -              -            -  (18,745,908)            -            -   (18,745,908)

     Minimum liability pension
         adjustment, net of
         related taxes                          -              -            -            -             -      438,507       438,507

     Change in unrealized gain in
      investment securities
      available-for-sale,
      net of related income taxes               -              -            -            -    (4,678,610)           -    (4,678,610)
                                       ----------  ------------- ------------ ------------  ------------ ------------ -------------

Balances at December 31, 2003          15,480,679    154,806,790   58,253,180   31,276,464     8,152,099   (1,001,776)  251,486,757

     Net earnings (unaudited)                   -              -            -   10,092,918             -            -    10,092,918

     Stock issuances (unaudited)            5,643         56,430       40,105            -             -            -        96,535

     Cash dividends declared,
         $0.31 per share (unaudited)            -              -            -   (4,800,760)            -            -    (4,800,760)

     Change in unrealized gain in
       investment securities available-
       for-sale, net of related income
       taxes (unaudited)                        -              -            -            -     6,499,287            -     6,499,287
                                       ----------  ------------- ------------ ------------  ------------ ------------ -------------


Balances at March 31, 2004 (unaudited) 15,486,322  $ 154,863,220 $ 58,293,285 $ 36,568,622  $ 14,651,386 $ (1,001,776)$ 263,374,737
                                       ==========  ============= ============ ============  ============ ============ =============

</TABLE>

See notes to consolidated financial statements.

                                       7


<PAGE>


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

<TABLE>
<CAPTION>

                                                                                                   Three Months Ended March 31,
                                                                                            ---------------------------------------
                                                                                                   2004                 2003
                                                                                            -----------------   -------------------
<S>                                                                                         <C>                 <C>
 CASH FLOWS FROM OPERATING ACTIVITIES
      Net earnings                                                                          $      10,092,918   $         8,449,589
      Adjustments to reconcile net earnings to
          net cash provided by operating activities:
              Depreciation and amortization                                                         1,231,057             1,053,539
              Provision for loan losses                                                               178,000               510,501
              Premium amortization, net of discount accretion                                         778,647             1,101,460
              Gain on sale of assets                                                               (1,924,658)               (4,488)
              Deferred federal income tax benefit                                                     (79,691)             (128,602)
              Decrease (increase) in other assets                                                   1,367,840             2,452,801
              Increase in other liabilities                                                         5,340,674             4,295,139
                                                                                            -----------------   -------------------
                  Total adjustments                                                                 6,891,869             9,280,350
                                                                                            -----------------   -------------------
          Net cash provided by operating activities                                                16,984,787            17,729,939
                                                                                            -----------------   -------------------

 CASH FLOWS FROM INVESTING ACTIVITIES
      Net decrease in interest-bearing deposits in banks                                              594,511            (2,506,507)
      Activity in available-for-sale securities:
          Sales                                                                                     6,462,322                     -
          Maturities                                                                               21,459,429            44,314,517
          Purchases                                                                               (46,943,370)         (149,554,799)
      Activity in held-to-maturity securities:
          Maturities                                                                                8,132,865            23,373,180
          Purchases                                                                                         -            (1,500,000)
      Net decrease (increase) in loans                                                            (35,244,064)            7,177,902
      Capital expenditures                                                                           (883,298)           (1,544,904)
      Proceeds from sale of assets                                                                 59,506,246                65,427
                                                                                            -----------------   -------------------
          Net cash used in investing activities                                                    13,084,641           (80,175,184)
                                                                                            -----------------   -------------------

 CASH FLOWS FROM FINANCING ACTIVITIES
      Net increase (decrease) in noninterest-bearing deposits                                     (17,467,777)            6,047,605
      Net increase (decrease) in interest-bearing deposits                                         (4,523,366)            5,795,130
      Net decrease  in securities sold under agreements to repurchase                             (13,536,668)          (14,219,208)
      Proceeds from stock issuances                                                                    96,535                48,569
      Dividends paid                                                                               (4,798,948)           (4,327,374)
                                                                                            -----------------   -------------------
          Net cash provided by (used in) financing activities                                     (40,230,224)           (6,655,278)
                                                                                            -----------------   -------------------

      Net decrease in cash and cash equivalents                                                   (10,160,796)          (69,100,523)

 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                                   113,840,573           178,436,645
                                                                                            -----------------   -------------------

 CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                 $     103,679,777   $       109,336,122
                                                                                            =================   ===================

 SUPPLEMENTAL INFORMATION AND NONCASH TRANSACTIONS
      Interest paid                                                                         $       4,052,268   $         4,860,537
      Federal income tax paid                                                                         140,000                     -
      Assets acquired through foreclosure                                                              94,808               845,804
      Loans to finance the sale of other real estate                                                  507,800                     -

</TABLE>

 See notes to consolidated financial statements.

                                       8

<PAGE>


                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, 2004, are not necessarily indicative of the results to be
expected for the year ending  December 31, 2004,  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 - 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, 2004 and 2003, 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, 2004 and 2003,  were  15,483,756 and 15,456,529
shares,  respectively.  The weighted  average common shares  outstanding used in
computing  fully  diluted  earnings  per common share for the three months ended
March 31, 2004 and 2003, were 15,558,525 and 15,512,345, respectively.

Note 3 - Stock Based Compensation

The Company  grants stock options for a fixed number of shares to employees with
an  exercise  price  equal to the fair value of the shares at the date of grant.
The Company  accounts 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 equals the market price of the underlying stock on the date of grant, no
compensation  expense is  recognized.  Had  compensation  cost for the plan been
determined  consistent with Statement of Financial  Accounting Standard No. 123,
Accounting for Stock-Based Compensation, the Company's net earnings and earnings
per share would have been reduced by insignificant  amounts on a pro forma basis
for the three months ended March 31, 2004 and 2003.

Note 4 - Pension Plan

The Company has a defined benefit pension plan covering substantially all of its
employees.  The benefits  are 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 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. Effective January 1, 2004, the pension plan was frozen whereby no
additional years of service accrue to  participants,  unless the pension plan is
subsequently reinstated.  Under current accounting principles generally accepted
in the United States and  utilizing  current  assumptions,  we do not expect any
significant  pension  costs  in 2004 and  beyond  as a  result  of this  action.
Accordingly,  no amount of net  periodic  benefit cost was recorded in the three
months ended March 31, 2004 as the interest cost  component is generally  offset
with the expected return on plan assets.

                                       9


<PAGE>


The Company  does not expect to make a  contribution  to the pension plan during
the year ending December 31, 2004 as required by IRS funding standards.

Note 5 - Acquisition Announcement

On March 4, 2004, we entered into a stock purchase  agreement with the principal
shareholders of Liberty National Bank, Granbury, Texas. Pursuant to the purchase
agreement  and provided all of the shares of Liberty  National Bank are tendered
for purchase by the Company,  the Company will pay  approximately  $12.8 million
for all of the  outstanding  shares of Liberty  National  Bank.  Acquisition  of
Liberty  National Bank by the Company is subject to the approval of the Board of
Governors of the Federal  Reserve System and other federal and state  regulatory
authorities,  as well as, subject to satisfaction of the conditions contained in
the  purchase  agreement.  If the  transaction  is approved by federal and state
regulatory  authorities,  it is  anticipated  that the  acquisition  of  Liberty
National Bank by the Company will close in mid 2004. Conditioned upon completion
of the above described transactions,  Liberty National Bank will become a direct
subsidiary of First  Financial  Bankshares of Delaware,  Inc.,  our wholly owned
Delaware bank holding company.

Liberty  National Bank is located in the City of Granbury,  Hood County,  Texas,
approximately 40 miles southwest of Fort Worth, Texas. Liberty National Bank was
chartered in 1997 and as of March 31, 2004,  had assets  totaling  approximately
$60 million and shareholders' equity of $6.2 million.

Note 6 - Reclassifications

Certain prior period balances have been reclassified to conform with the current
period presentation.

Note 7 - Increase in Authorized Shares

On  April  27,  2004,  the  shareholders  of the  Company  voted  at the  annual
shareholder  meeting to increase the number of authorized shares of common stock
from 20,000,000 to 40,000,000.

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. Our primary
source of funding for our loans are  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 noninterset 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 2003 Annual
Report on Form 10-K.

Critical Accounting Policies
- ----------------------------

We prepare  consolidated  financial statements based on the selection 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.

                                       10


<PAGE>


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 its 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
that they would  have a  material  impact on our  reported  results  for a given
period.

The  allowance  for loan losses is an amount that we believe will be adequate to
absorb inherent estimated losses on existing loans in which full  collectibility
is  unlikely  based  upon our  review  and  evaluation  of the  loan  portfolio,
including letters of credit,  lines of credit and unused  commitments to provide
financing.

The allowance for loan losses is increased by charges to income and decreased by
charge-offs (net of recoveries).

Our periodic  evaluation  of the  adequacy of the  allowance is based on general
economic  conditions,  the financial  condition of the  borrower,  the value and
liquidity  of  collateral,  delinquency,  prior  loan loss  experience,  and the
results of periodic  reviews of the  portfolio  by our  independent  loan review
department   and   regulatory   examiners.   We  have  developed  a  consistent,
well-documented  loan review  methodology that includes  allowances  assigned to
specific loans and nonspecific allowances,  which are based on the factors noted
in the  prior  sentence.  While  each  subsidiary  bank is  responsible  for the
adequacy of its allowance, our independent loan review department is responsible
for  reviewing  this  evaluation  for  all of our  subsidiary  banks  to  ensure
consistent methodology and overall adequacy.

Although we believe that 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,  that 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.

Operating Results
- -----------------

Three-months ended March 31, 2004 and 2003
- ------------------------------------------

Net income for the third quarter of 2004 totaled $10.1  million,  an increase of
$1.6 million or 19.4% for the same period last year.  The  earnings  improvement
over the same period for the prior year resulted primarily

                                       11


<PAGE>


from an increase in the gain from sale of student  loans of $1.6  million and an
increase in net interest  income of $749 thousand.  We  accelerated  the sale of
approximately $60 million in student loans in the 2004 first quarter recognizing
a premium of $1.8 million,  compared to a sale of  approximately  $16 million in
student  loans  recognizing  a premium of $237  thousand in the first quarter of
2003. We similarly accelerated the sale of approximately $53 million in loans in
the 2003  second  quarter  recognizing  a premium  of $1.6  million.  On a basic
earnings  per share  basis,  earnings  amounted to $0.65 per share for the first
quarter of 2004 as  compared  to $0.55 per share for the first  quarter of 2003.
Return on average  assets and return on average  equity for the first quarter of
2004 amounted to 1.96% and 15.85%,  respectively.  For the same periods in 2003,
return on average  assets and return on  average  equity  amounted  to 1.72% and
14.49%, respectively.

Tax  equivalent  net interest  income for the first  quarter of 2004 amounted to
$21.6  million as compared to $20.6  million for the same period last year.  Our
rates on interest  earning assets declined  approximately  29 basis points while
our rates paid on deposits  declined 38 basis points.  The increase in volume of
average  interest  earning assets of $83.1 million offset the declines caused by
the decline in interest rates.  Average interest bearing  liabilities  increased
$30.8  million,  which only  partially  offset the decreased  cost of funds from
declines in interest  rates.  Average  earning  assets were $1.9 billion for the
first  quarter of 2004  which is 4.6%  greater  than the first  quarter of 2003.
Average interest bearing  liabilities were $1.4 billion for the first quarter of
2004  which is 2.3%  greater  than the  first  quarter  of 2003.  The  Company's
interest  spread  increased  to 4.26% for 2004  compared to 4.19% for 2003.  The
Company's  net interest  margin was 4.57% for the first quarter of 2004 compared
to 4.58% for the same period of 2003.

The  provision  for loan  losses  for the first  quarter  of 2004  totaled  $178
thousand compared to $511 thousand for the same period in 2003. Gross chargeoffs
for the quarter  ended March 31, 2004  totaled  $241  thousand  compared to $902
thousand for the same period of 2003. Recoveries of previously charged-off loans
totaling  $279 thousand in the quarter ended March 31, 2004 (as compared to $535
thousand in 2003) offset the chargeoffs experienced. On an annualized basis, net
chargeoffs  (recoveries)  as a percentage  of average  loans was (0.02%) for the
first  quarter of 2004 as  compared  to 0.15% for the same  period in 2003.  The
Company's  allowance  for loan losses  totaled  $11.8 million at March 31, 2004,
virtually  unchanged  from the balance of $11.4  million at March 31, 2003. As a
percentage of nonperforming loans, the Company's allowance amounted to 767.0% at
March 31, 2004. As of March 31, 2004,  management  of the Company  believes that
the  Company's  balance in allowance  for loan losses is adequate to provide for
losses existing in its portfolio that are deemed uncollectible.

Total  noninterest  income for the first  quarter of 2004 was $9.9  million,  as
compared to $8.1 million for the same period last year.  Trust fees totaled $1.6
million for 2004, up $142 thousand over the same period in 2003 due to increased
volume of trust  assets  managed  and  improvement  in overall  equity  markets.
Service  fees on deposits  totaled  $4.3  million for the first  quarter of 2004
compared to $3.8  million for the same period of 2003,  an  improvement  of $463
thousand,  due to increased fees from  enhancements  to the Company's  overdraft
privilege products. During the first quarter, the Company sold approximately $60
million in student  loans  recognizing  a premium of $1.8  million.  The Company
capitalized  on the  opportunity to accelerate the sale of its student loans and
receive a higher premium than normally  received.  We similarly  accelerated the
sale  of  approximately  $53  million  in  loans  in  the  2003  second  quarter
recognizing a premium of $1.6 million.  The Company's real estate  mortgage fees
declined from $684  thousand to $424 thousand as the Company  experienced a slow
down in the volume of refinancing.

Noninterest  expense for the first  quarter of 2004 amounted to $15.9 million as
compared to $15.1  million for the same period in 2003.  Salaries  and  benefits
expense,  the Company's largest noninterest expense item, increased 6.9% to $8.8
million in 2004,  up $569  thousand  over the same  period in 2003.  The primary
cause of this increase was $270 thousand in additional  profit  sharing  expense
due to the overall  increased net income.  Net occupancy  expense was relatively
flat in the  first  quarter  of 2004  compared  to the  first  quarter  of 2003.
Equipment  expense  increased  $227  thousand  in  2004  over  2003  due  to the
depreciation of new technology expenditures in the latter part of 2003 and first
quarter of 2004 as the Company improved its technology infrastructure.

                                       12


<PAGE>


The Company's other expense  decreased $64 thousand in the first quarter of 2004
compared to the first quarter of 2003.  This is a result of Company wide efforts
to curtail such expenses. 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.  We decreased  this ratio from 52.77% for the first  quarter of 2003 to
50.40% for the first quarter of 2004.

Balance Sheet Review
- --------------------

Total assets at March 31, 2004 amounted to $2.078  billion as compared to $2.093
billion at  December  31,  2003,  and $1.996  billion at March 31,  2003.  Since
December 31, 2003,  loans decreased  $21.8 million  primarily as a result of the
student loan sales  referenced  above.  Deposits totaled $1.774 billion at March
31, 2004 compared to $1.796 billion at December 31, 2003, down 1.2%.

Loans at March 31, 2004, totaled $965.7 million as compared to $987.5 million at
year-end  2003 and $955.7  million at March 31,  2003.  As compared to March 31,
2003 amounts,  loans at March 31, 2004 reflects (i) a $21.4 million  increase in
commercial,  financial and agricultural  loans; (ii) a $66.6 million increase in
real estate loans;  and (iii) a $78.8  million  decrease in consumer and student
loans.  Investment  securities  at March 31,  2004,  totaled  $930.4  million as
compared  to $910.3  million at  year-end  2003 and $850.3  million at March 31,
2003. The net unrealized gain, net of income tax in the investment  portfolio at
March 31,  2004,  amounted to $14.7  million  and had an overall tax  equivalent
yield of 4.87%.  Since  March 31,  2004,  the bond  market  has  experienced  an
increase in interest rates which as a result, although not yet quantified, could
decrease our unrealized gain on our investment portfolio. At March 31, 2004, 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. Total deposits at March 31, 2004, amounted
to $1.774 billion as compared to $1.723 billion at March 31, 2003.

Nonperforming assets at March 31, 2004, totaled $2.5 million as compared to $3.2
million  at  December  31,  2003.  The  decrease  resulted  primarily  from  the
collection of certain loans previously included in nonperforming loans. At 0.26%
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.

Acquisition Announcement
- ------------------------

On March 4, 2004, we entered into a stock purchase  agreement with the principal
shareholders of Liberty National Bank, Granbury, Texas. Pursuant to the purchase
agreement  and provided all of the shares of Liberty  National Bank are tendered
for purchase by the Company,  the Company will pay  approximately  $12.8 million
for all of the  outstanding  shares of Liberty  National  Bank.  Acquisition  of
Liberty  National Bank by the Company is subject to the approval of the Board of
Governors of the Federal  Reserve System and other federal and state  regulatory
authorities,  as well as, subject to satisfaction of the conditions contained in
the  purchase  agreement.  If the  transaction  is approved by federal and state
regulatory  authorities,  it is  anticipated  that the  acquisition  of  Liberty
National Bank by the Company will close in mid 2004. Conditioned upon completion
of the above described transactions,  Liberty National Bank will become a direct
subsidiary of First  Financial  Bankshares of Delaware,  Inc.,  our wholly owned
Delaware bank holding company.

Liberty  National Bank is located in the City of Granbury,  Hood County,  Texas,
approximately 40 miles southwest of Fort Worth, Texas. Liberty National Bank was
chartered in 1997 and as of March 31, 2004,  had assets  totaling  approximately
$60 million and shareholders' equity of $6.2 million.

                                       13


<PAGE>


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  includes 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  agreement to repurchase,  and an unfunded $20.0 million
line of credit  established with a nonaffiliated  bank which matures on June 30,
2004. We expect to renew this line of credit at maturity under similar terms for
another year.

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

We plan to fund the  acquisition  of Liberty  National  Bank with  internal cash
funds.  In addition,  we anticipate that any future  additional  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 source 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 $263.4 million at March 31, 2004,
which was up from $251.5  million at year-end  2003 and $240.2  million at March
31, 2003. The Company's risk-based capital and leverage ratios at March 31, 2004
were 19.31% and 10.79%,  respectively.  The first  quarter 2004 cash dividend of
$0.31 per share  totaled $4.8  million and  represented  47.6% of first  quarter
earnings.

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  analysis  are among the ways that the
subsidiary  banks track  interest  rate risk.  As of March 31, 2004,  management
estimates that,  over the next twelve months,  an upward shift of interest rates
by 150 basis points would result in an increase in projected net interest income
of 3.63% and a downward shift of interest rates by 100 basis points would result
in a reduction in projected net interest  income of 7.06%.  These are good faith
estimates and assume that the composition of our interest  sensitive  assets and
liabilities  existing at March 31, 2004,  will remain constant over the relevant
twelve month  measurement  period and that changes in market  interest rates are
instantaneous  and  sustained  across the yield curve  regardless of duration of
pricing  characteristics of specific assets or liabilities.  Also, this analysis
does not  contemplate any actions that we might undertake in response to changes
in market  interest  rates.  In  management's  belief,  these  estimates are not
necessarily indicative of what actually could occur in the

                                       14


<PAGE>


event of immediate  interest rate increases or decreases of this  magnitude.  As
interest-bearing  assets and  liabilities  reprice at 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 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, 2004, 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 that 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,  and 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 control.  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
because of changes in conditions,  or the degree of compliance with the 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,  that our disclosure  controls and procedures  under Rule 13a-14 (c)
and Rule 15d - 14 (c) of the Securities Exchange Act of 1934 are effective.

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

                                       15


<PAGE>


                                     PART II

                                OTHER INFORMATION

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

On April 27,  2004,  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                   12,938,099                 151,113
          Mac A. Coalson                    12,981,256                 107,956
          David Copeland                    12,978,689                 110,523
          F. Scott Dueser                   12,714,700                 374,512
          Derrell E. Johnson                12,982,107                 107,105
          Kade L. Matthews                  12,982,147                 107,065
          Raymond A. McDaniel, Jr.          12,981,495                 107,717
          Bynum Miers                       12,981,433                 107,779
          Kenneth T. Murphy                 12,715,637                 373,575
          James M. Parker                   12,715,537                 373,675
          Jack D. Ramsey, M.D.              12,982,047                 107,165
          Dian Graves Stai                  12,981,527                 107,685
          F. L. Stephens                    12,982,147                 107,065
          Johnny E. Trotter                 12,978,427                 110,785

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  public  accountants  for the year ending
December  31,  2004  by a vote of  13,018,069  for,  7,176  against  and  63,967
abstained.  Also,  the  shareholders  approved  an  amendment  to the  Company's
articles of  incorporation  to increase the number of  authorized  shares of the
Company's stock to 40,000,000 by a vote of 12,560,044  for,  492,728 against and
36,440 abstained.

There were no other matters voted upon at the meeting.

                                       16


<PAGE>


Item 6.   Exhibits and Reports on Form 8-K

(a)  The following exhibits are filed as part of this report:

3.1  Articles of Incorporation,  and all amendments  thereto,  of the Registrant
     (incorporated by reference from Exhibit 1 of the Registrant's Amendment No.
     2 to Form 8-A filed on Form 8-A/A No. 2 on November 21, 1995).
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 the Articles of Incorporation  of the Registrant,  dated April
     27, 2004.
*3.4 Amendment to Amended and Restated Bylaws of the Registrant, dated April 27,
     1994.
*3.5 Amendment to Amended and Restated Bylaws of the  Registrant,  dated October
     23,  2001.
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 the 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, 2004 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, 2003).
*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


(b)  On April  20,  2004,  we  furnished  a report on Form 8-K  relating  to our
     earnings release for the quarter ended March 31, 2004. On March 4, 2004, we
     furnished  a report on Form 8-K  relating  to our  signing of a  definitive
     agreement to acquire 100% of outstanding  shares of Liberty  National Bank,
     Granbury, Texas.

                                       17


<PAGE>


                                   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 3, 2004                      By:/S/ F. Scott Dueser
                                          -------------------------------------
                                          F. Scott Dueser
                                          President and Chief Executive Officer



Date: May 3, 2004                      By:/S/ J. Bruce Hildebrand
                                          -------------------------------------
                                          J. Bruce Hildebrand
                                          Executive Vice President and
                                          Chief Financial Officer

                                       18


<PAGE>




                                                                    Exhibit 3.3
                                                                    -----------

                                    AMENDMENT
                        TO THE ARTICLES OF INCORPORATION
                                       OF
                        FIRST FINANCIAL BANKSHARES, INC.

     Pursuant  to  the   provisions  of  Article  4.04  of  the  Texas  Business
Corporation  Act,  the  undersigned  Corporation  hereby  adopts  the  following
Articles of Amendment to its Articles of Incorporation:

                                    ARTICLE I
                                    ---------

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

                                   ARTICLE II
                                   ----------

     The following amendment to the Articles of Incorporation was adopted by the
Shareholders of the Corporation on the 27th of April, 2004:

     Article Four of the Articles of  Incorporation is hereby 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
          TEN DOLLARS ($10.00) each."

                                   ARTICLE III
                                   -----------

     The  date of the  adoption  of the  amendment  by the  shareholders  of the
Corporation is April 27, 2004.

                                   ARTICLE IV
                                   ----------

     The  amendment to the Articles of  Incorporation  has been  approved in the
manner  required by the Texas Business  Corporation  Act and by the  constituent
documents of the Corporation.

     DATED this 27th day of April, 2004.

                                           FIRST FINANCIAL BANKSHARES, INC.


                                           By:      /s/ J. Bruce Hildebrand
                                                    ---------------------------
                                                    J. Bruce Hildebrand
                                                    Executive Vice President
                                                    and Chief Financial Officer


<PAGE>


                                                                    Exhibit 3.4
                                                                    -----------


                               AMENDMENT TO BYLAWS
                               -------------------


Upon motion being duly made,  seconded and  unanimously  carried,  the following
Amendment to the Amended and Restated Bylaws of First Financial Bankshares, Inc.
was approved and adopted at the regular  meeting of the Board of  Directors,  at
which a quorum was present, held on April 26, 1994:

     "Section A
     ----------

     The name of this corporation shall be First Financial Bankshares, Inc."

     SIGNED AND CERTIFIED this 27th day of April, 1994.


                                                    /s/ Curtis R. Harvey
                                                   ----------------------------
                                                   CURTIS R. HARVEY
                                                   Executive Vice President and
                                                   Chief Financial Officer


ATTEST:


/s/ Sandy Lester
- ----------------
SANDY LESTER
Secretary


<PAGE>


                                                                    Exhibit 3.5
                                                                    -----------



                              AMENDMENTS TO BY-LAWS
                              ---------------------


     Upon  motion  being  duly  made,  seconded  and  unanimously  carried,  the
following  Amendments  to the Amended and  Restated  By-Laws of First  Financial
Bankshares,  Inc. were approved and adopted at the regular  meeting of the Board
of Directors, at which a quorum was present, held on October 23, 2001:

     Article II, Section B shall be amended to read as follows:

     "Section B
     ----------

     All certificates of stock shall be signed by the Chairman of the Board, the
     President or the Executive Vice President/Chief  Financial Officer, and the
     Secretary,  and  shall be  sealed  with the  corporate  seal.  A  facsimile
     signature may be used for either or both of such required signatures."


     The following Section G shall be added to Article II:

     "Section G
     ----------

     A  facsimile  signature  may be used by the  corporation's  duly  appointed
     Transfer  Agent and Registrar in  connection  with the  countersigning  and
     registering  of  certificates  of  stock  representing  the  shares  of the
     corporation."


          SIGNED AND CERTIFIED this 23rd day of October, 2001.



ATTEST:


/s/ Sandy Lester                                 /s/ F. Scott Dueser
- ------------------------                         ------------------------------
Sandy Lester, Secretary                          F. Scott Dueser, President and
                                                 Chief Executive Officer


<PAGE>


                                                                   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. [Intentionally omitted];

     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 3, 2004
                                 By:      /s/ F. SCOTT DUESER
                                          -------------------------------------
                                          F. Scott Dueser
                                          President and Chief Executive Officer


<PAGE>


                                                                   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. [Intentionally omitted];

     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 3, 2004                By:      /s/ J. Bruce Hildebrand
                                             ----------------------------------
                                             J. Bruce Hildebrand
                                             Executive Vice President and Chief
                                             Financial Officer


<PAGE>


                                                                   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, 2004 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 3, 2004

                                               By:      /s/ F. SCOTT DUESER
                                                        -----------------------
                                                        F. Scott Dueser
                                                        Chief Executive Officer


Subscribed and sworn to before me this 3rd of May 2004.

/s/ Gaila N. Kilpatrick
- -----------------------
Gaila N. Kilpatrick
Notary Public

My commission expires:  April 15, 2005


<PAGE>


                                                                   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 annual  report on Form 10-Q (the "Form 10-Q")
for the quarter ended March 31, 2004 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 3, 2004

                                               By:      /s/ J. Bruce Hildebrand
                                                        -----------------------
                                                        J. Bruce Hildebrand
                                                        Chief Financial Officer


Subscribed and sworn to before me this 3rd of May, 2004.

/s/ Gaila N. Kilpatrick
- -----------------------
Gaila N. Kilpatrick
Notary Public

My commission expires:  April 15, 2005

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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