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<SEC-DOCUMENT>0000036029-05-000043.txt : 20050325
<SEC-HEADER>0000036029-05-000043.hdr.sgml : 20050325
<ACCEPTANCE-DATETIME>20050325090731
ACCESSION NUMBER:		0000036029-05-000043
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20050325
FILED AS OF DATE:		20050325
DATE AS OF CHANGE:		20050325
EFFECTIVENESS DATE:		20050325

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:		DEF 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-07674
		FILM NUMBER:		05703565

	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>DEF 14A
<SEQUENCE>1
<FILENAME>proxy2005-14a.txt
<DESCRIPTION>FFIN 2005 PROXY STATEMENT
<TEXT>
                            SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant  [X]
Filed by a Party other than the Registrant  [ ]

Check the appropriate box:
[ ]      Preliminary Proxy Statement
[ ]      Confidential, for Use of the Commission Only (as permitted by
          Rule 14a-6(e)(2))
[X]      Definitive Proxy Statement
[ ]      Definitive Additional Materials
[ ]      Soliciting Material Pursuant to Rule 14a-12

                        First Financial Bankshares, Inc.
                (Name of Registrant As Specified in its Charter)

    ------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[X]      No fee required.
[ ]      Fee computed on table below per Exchange Act Rules 14a-6(i)(1)and 0-11.

          1)   Title of each class of securities to which transaction applies:
               ___________

          2)   Aggregate number of securities to which transaction applies:_____
               ___________

          3)   Per unit price or other underlying value of transaction  computed
               pursuant to Exchange Act Rule 0-11 (set forth the amount on which
               the filing fee is  calculated  and state how it was  determined):
               $___________

          4)   Proposed maximum aggregate value of transaction: $___________

          5)   Total fee paid: $___________

[ ]      Fee paid previously with preliminary materials:  $_____________

[ ]      Check box if any part of the fee is offset as provided by Exchange
         Act Rule 0-11(a)(2) and identify the filing for which the offsetting
         fee was paid previously. Identify the previous filing by registration
         statement number, or the Form or Schedule and the date of its filing.

         1) Amount Previously Paid: $_____________
         2) Form, Schedule or Registration Statement No.: _____________
         3) Filing Party: _____________________________________________
         4) Date Filed: __________________________


<PAGE>


                        FIRST FINANCIAL BANKSHARES, INC.
                                 400 Pine Street
                              Abilene, Texas 79601
                                  325.627.7155


                NOTICE OF THE 2005 ANNUAL MEETING OF SHAREHOLDERS
                            TO BE HELD APRIL 26, 2005

To our shareholders:

     We cordially  invite you to attend the annual meeting of our  shareholders,
which will be held in the Abilene Civic Center, 1100 North 6th Street,  Abilene,
Texas,  at 10:30  a.m.,  Central  time,  on  Tuesday,  April 26,  2005,  for the
following purposes:

     (1)  To elect 14 directors;

     (2)  To ratify the  appointment by our audit committee of Ernst & Young LLP
          as our independent auditors for the year ending December 31, 2005;

     (3)  To act on such other  business as may properly  come before the annual
          meeting or any adjournment thereof.

     Only shareholders of record at the close of business on March 15, 2005, are
entitled to notice of and to vote at the annual meeting or any  continuation  of
the meeting if it is adjourned.

     We have  included,  along with this  notice and proxy  statement,  our 2004
annual report, which describes our activities during 2004, and our Form 10-K for
the year ended  December 31, 2004.  The annual  report and Form 10-K do not form
any part of the material for solicitation of proxies.

     We hope that you will be present at the annual  meeting and the luncheon to
be held immediately afterward. We respectfully urge you, whether or not you plan
to attend the annual meeting,  to sign, date and mail the enclosed proxy card in
the  envelope  provided in order to  eliminate  any  question of your vote being
counted.  You can revoke  your  proxy in  writing at any time  before the annual
meeting,  so long as your written request is received by our corporate secretary
before your proxy is voted.  Alternatively,  if you submitted a proxy and attend
the annual meeting in person, you may revoke the proxy and vote in person on all
matters  submitted  at the  annual  meeting.  If you plan to attend  the  annual
meeting and  luncheon,  we request that you confirm your  attendance  by calling
325.627.7155.


                                       By order of the Board of Directors,



                                       KENNETH T. MURPHY, Chairman

March 25, 2005


<PAGE>


                        FIRST FINANCIAL BANKSHARES, INC.
                                 400 Pine Street
                              Abilene, Texas 79601
                                  325.627.7155

                                 PROXY STATEMENT

                       2005 ANNUAL MEETING OF SHAREHOLDERS
                            TO BE HELD APRIL 26, 2005


                                  INTRODUCTION

     Your  board of  directors  hereby  solicits  your proxy for use at the 2005
annual meeting of our shareholders and any continuation of this meeting if it is
adjourned.  The annual  meeting will be held in the Abilene Civic  Center,  1100
North 6th Street, Abilene, Texas, at 10:30 a.m., Central time, on Tuesday, April
26, 2005.

     Our  principal  executive  office is located at 400 Pine  Street,  Abilene,
Texas 79601. Our telephone number is 325.627.7155.

     We mailed this proxy statement and the accompanying proxy card on March 25,
2005. The date of this proxy statement is March 25, 2005.

                              VOTING OF SECURITIES

Record Date

     Your board of directors has  established the close of business on March 15,
2005, as the record date for determining the shareholders entitled to notice of,
and to vote at, the annual meeting. On the record date, we had 15,515,979 shares
of our common stock outstanding.

Quorum

     In order for any business to be conducted at the annual  meeting,  a quorum
consisting  of  shareholders  having voting rights with respect to a majority of
our outstanding  common stock on the record date must be present in person or by
proxy.  You may only vote if you hold your shares directly in your name. If your
shares are held in  "street  name" by your  broker,  your  broker  will send you
instructions  on how you can  instruct  your  broker to vote your  shares.  Your
broker  generally  cannot  vote  your  shares  on  non-routine  matters  without
instructions  from you.  Shares that are  represented  at the annual meeting but
abstain from voting on any or all matters and shares that are "broker non-votes"
will be  counted  in  determining  whether a quorum  is  present  at our  annual
meeting.  A "broker  non-vote"  occurs  when a broker or  nominee  votes on some
matters on the proxy card but not others  because he does not have  authority to
do so from the beneficial owner of the underlying shares.

Required Vote

     The  affirmative  vote of a  plurality  of the  shares  cast at the  annual
meeting is required to elect a nominee for director.  The affirmative  vote of a
majority of shares  entitled to vote is required to approve the  ratification of
Ernst & Young LLP as our  independent  accountants  or any other matter that may
come before the  meeting.  If you abstain  from voting or withhold  authority to
vote in the election of a director,  your abstention or withholding will have no
effect.  However, as to other matters,  your abstention or withholding authority
will have the effect of a vote against such matters because approval is premised
on the  affirmative  vote of a majority of all shares  entitled to vote.  Broker
non-votes  will have no effect on the  outcome of director  elections,  but will
count as negative votes for all other matters.


<PAGE>


Shareholder List

     A list of shareholders  entitled to vote at the annual meeting,  which will
show each  shareholder's  address and the number of shares  registered in his or
her name,  will be open to any shareholder to examine for any purpose related to
the annual  meeting.  Any  shareholder  may examine  this list  during  ordinary
business hours commencing March 25, 2005, and continuing through the date of the
annual meeting at our principal office, 400 Pine Street, Abilene, Texas 79601.

                    SOLICITATION AND REVOCABILITY OF PROXIES

Solicitation

     We  will  bear  the  expense  to  solicit   proxies,   which  will  include
reimbursement  of expenses  incurred by  brokerage  firms and other  custodians,
nominees and fiduciaries to forward solicitation  materials regarding the annual
meeting to beneficial  owners.  Our officers and  directors may further  solicit
proxies from shareholders and other persons by telephone or oral  communication.
We will not pay these officers any extra  compensation for participating in this
solicitation.

Proxies and Revocation

     Each  executed  and  returned  proxy  card will be voted  according  to the
directions indicated on that proxy card. If no direction is indicated, the proxy
will be voted  according to the board of directors'  recommendations,  which are
contained in this proxy  statement.  Your board of directors  does not intend to
present,  and has no information  that others will present,  any business at the
annual  meeting that  requires a vote on any other  matter.  If any other matter
requiring a vote properly comes before the annual  meeting,  the proxies will be
voted in the discretion of the proxyholders named on the proxy.

     Each  shareholder  giving a proxy  has the  power to  revoke it at any time
before the shares of our common stock it represents are voted.  This  revocation
is effective  upon receipt,  at any time before the annual  meeting is called to
order, by our corporate secretary of either (1) an instrument revoking the proxy
or (2) a duly  executed  proxy  bearing a later date than the  preceding  proxy.
Additionally,  a shareholder may change or revoke a previously executed proxy by
voting in person at the annual meeting.

                                   PROPOSAL 1

                              ELECTION OF DIRECTORS

General

     Your board of directors  currently consists of 14 directors.  At the annual
meeting, 14 directors are to be elected,  each for a term of one year. Under our
bylaws,  an  individual  may not stand for election or  reelection as a director
upon  attaining 72 years of age,  unless he owns at least 1% of the  outstanding
shares of our  common  stock and is less than 75 years of age.  While our bylaws
fix the  number of  directors  at a number not less than three nor more than 30,
the board of directors  has fixed the number of directors at 14.  Although we do
not  contemplate  that any of the  nominees  will be unable to serve,  if such a
situation  arises before the annual meeting,  the proxies will be voted to elect
any substitute nominee or nominees designated by your board of directors.

     Under Nasdaq rules, a majority of your board of directors must be comprised
of independent  directors.  The board has determined  that each director  except
Messrs. Dueser, Murphy and Parker is independent under applicable Nasdaq rules.

                                      -2-


<PAGE>


Nominees

     The names and  principal  occupations  of the  nominees,  together with the
length of  service as a  director  and the number of shares of our common  stock
beneficially  owned by each of them on  February  1, 2005,  are set forth in the
following table, except as otherwise  indicated,  the named beneficial owner has
sole voting and investment power with respect to shares held by him or her:

<TABLE>
<CAPTION>

                                                                                     Shares of
                                                                                     Bankshares      Percent
                                      Years as     Principal Occupation             Beneficially     of Shares
Name                           Age   Director(1)   During Last Five Years              Owned        Outstanding
- ----                           ---   ----------    ----------------------          -------------    -----------
<S>                             <C>       <C>                                      <C>                <C>
Joseph E. Canon                 62         9       Executive Director,                 8,885           0.06%
                                                     Dodge Jones Foundation, a
                                                     private charitable foundation

Mac A. Coalson                  65         9       Real Estate and Ranching          166,596           1.07%

David Copeland                  49         7       President, Shelton Family          85,412 (2)       0.55%
                                                     Foundation, a private
                                                     charitable foundation

F. Scott Dueser**               51        14       See "Executive Officers" on       181,589 (3)(4)    1.17%
                                                     page 6

Derrell E. Johnson              65         5       President, American Council        30,000           0.19%
                                                     of Engineering Companies
                                                     Life Health Trust

Kade L. Matthews                46         7       Ranching and Investments          142,216           0.92%

Raymond A. McDaniel, Jr.        71        13       Investments                        68,452 (5)       0.44%

Bynum Miers                     68        13       Ranching                           42,827 (6)       0.28%

Kenneth T. Murphy               67        34       See "Executive Officers" on       118,856           0.77%
                                                     page 6
James M. Parker**               74        33       President, Parker                 546,981 (7)       3.53%
                                                     Properties, Inc.

Jack D. Ramsey, M.D.            74         8       Physician                         155,732           1.00%

Dian Graves Stai                64        12       Investments                        54,445           0.35%

F. L. Stephens                  66         7       Retired Chairman and Chief         41,750           0.27%
                                                     Executive Officer, Town &
                                                     Country Food Stores, Inc.

Johnny E. Trotter               53         2       Ranching, Farming and Cattle       58,996           0.38%
                                                     Feeding

Shares beneficially owned by all executive officers and directors*                 1,726,293 (4)      11.13%

</TABLE>

* See "Security Ownership of Certain Beneficial Owners and Management."
** Mr.  Dueser is the son-in-law of Mr. Parker.
(1)  The years  indicated  are the  approximate  number of years each person has
     continuously  served as a director,  or, prior  thereto,  of First National
     Bank of Abilene,  which became our  wholly-owned  subsidiary in April 1973,
     when all the then  directors of First  National Bank of Abilene  became our
     directors.
(2)  Includes  77,411  shares  that are owned by trusts  for which Mr.  Copeland
     serves as trustee or co-trustee to which he disclaims beneficial ownership.
     Mr. Copeland is also a director of Harte-Hanks, Inc.
(3)  Includes 781 shares of our common stock  issuable  upon exercise of options
     presently  exercisable or  exercisable  within 60 days of February 1, 2005.
     Also  includes  30,274  shares  owned by his  wife of  which  he  disclaims
     beneficial ownership.
(4)  Includes  shares  indirectly  owned as of  February  1,  2005  through  the
     employee stock ownership plan portion of the profit sharing plan which each
     participant has sole voting powers, as follows: Mr. Dueser - 16,914 and all
     executive officers and directors as a group - 22,277.
(5)  Includes 2,475 shares of our common stock owned by Mr.  McDaniel's  spouse.
(6)  Includes 6,700 shares of our common stock owned by Mr. Miers' spouse.
(7)  Includes  200,702 shares of our common stock for which Mr. Parker serves as
     trustee.

                      THE BOARD OF DIRECTORS RECOMMENDS YOU
               VOTE "FOR" THE ELECTION OF EACH OF THESE NOMINEES.

                                      -3-

<PAGE>


                                   PROPOSAL 2

               RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

     The audit  committee of your board of directors has selected  Ernst & Young
LLP to serve as our  independent  auditors for the year ending December 31, 2005
and to serve until the next annual meeting in April 2006.  Ernst & Young LLP has
served as the Company's independent auditors since 2002. We have been advised by
Ernst & Young LLP that neither its firm nor any of its members has any financial
interest,  direct or indirect,  in us, nor has had any connection with us or any
of our subsidiaries in any capacity other than independent auditors.  Your board
of directors  recommends that you vote for the  ratification of the selection of
Ernst & Young LLP.  Shareholder  ratification  of the selection of Ernst & Young
LLP  as  our   independent   auditors  is  not   required  by  our  articles  of
incorporation,  bylaws or  otherwise.  Nevertheless,  your board of directors is
submitting  this  matter to the  shareholders  as what we believe is a matter of
good corporate  practice.  If the  shareholders do not ratify the appointment of
Ernst  & Young  LLP,  then  the  appointment  of  independent  auditors  will be
reconsidered by our audit  committee.  Even if the appointment is ratified,  the
audit  committee in its  discretion  may direct the  appointment  of a different
independent audit firm at any time during the year if it is determined that such
a change  would be in the best  interests  of the Company and its  shareholders.
Representatives  of Ernst & Young LLP are  expected  to be present at the annual
shareholders meeting, and they may have the opportunity to make a statement,  if
they desire to do so, and to respond to appropriate questions.

            THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
     RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
                     INDEPENDENT AUDITORS FOR THE YEAR 2005

                                      -4-


<PAGE>


Executive Officers

     Set forth in the following table are our executive officers, and the shares
of our common stock  beneficially  owned by each of them as of February 1, 2005,
except as otherwise  indicated,  the named executive officer has sole voting and
investment power with respect to the shares he holds:

<TABLE>
<CAPTION>

                                                    Years                                  Shares of
                                                    Served                                 Bankshares      Percent of
                                                   in Such    Principal Occupation        Beneficially       Shares
Name                     Age   Office               Office    During Past 5 Years            Owned         Outstanding
- ----                     ---   ------               ------    -------------------           -------        -----------
<S>                      <C>   <C>                    <C>     <C>                           <C>                <C>
Kenneth T. Murphy        67    Chairman               18      Chairman, First Financial     118,856            0.77%
                                                              Bankshares, Inc.;
                                                              Chairman, President and
                                                              Chief Executive Officer,
                                                              First Financial
                                                              Bankshares, Inc.
                                                              (1986-2000); Chairman,
                                                              First National Bank of
                                                              Abilene* (1993-2000)

F. Scott Dueser          51    President and           4      President and Chief           181,589 (1)(2)     1.17%
                               Chief Executive                Executive Officer of
                               Officer                        First Financial
                                                              Bankshares, Inc.;
                                                              Chairman, First National
                                                              Bank of Abilene*;
                                                              President and Chief
                                                              Executive Officer, First
                                                              National Bank of Abilene*
                                                              (1991-2001); Executive
                                                              Vice President of First
                                                              Financial Bankshares,
                                                              Inc. (1999-2001)

J. Bruce Hildebrand      49    Executive Vice          2      Executive Vice President        1,845 (1)        0.01%
                               President and                  and Chief Financial
                               Chief Financial                Officer of First
                               Officer                        Financial Bankshares,
                                                              Inc.; Partner, KPMG LLP
                                                              (1990-2002)

Gary L. Webb             47    Executive Vice          2      Executive Vice President        1,199 (1)        0.01%
                               President                      of First Financial
                                                              Bankshares, Inc.;
                                                              Managing Partner,
                                                              BearingPoint (2002);
                                                              Partner, Arthur Andersen
                                                              (2001-2002); Senior
                                                              Manager, Arthur Andersen
                                                              (1998-2001)

Robert S. Patterson      64    Senior Vice            11      Senior Vice President of       15,238 (1)(3)     0.10%
                               President                      First Financial
                                                              Bankshares, Inc.

</TABLE>

*A bank subsidiary.
(1)  Includes  shares  indirectly  owned as of  February  1,  2005  through  our
     employee stock  ownership  plan portion of the profit  sharing plan,  which
     each  participant has sole voting power,  as follows:  Mr. Dueser - 16,914,
     Mr. Hildebrand - 212, Mr. Patterson - 2,999, and Mr. Webb - 129.
(2)  Includes 3,099 shares of our common stock issuable upon exercise of options
     presently  exercisable or  exercisable  within 60 days of February 1, 2005.
     Also  includes  28,541  shares  owned by his  wife of  which  he  disclaims
     beneficial ownership.
(3)  Includes 4,350 shares of our common stock issuable upon exercise of options
     presently exercisable or exercisable within 60 days of February 1, 2005.

                                      -5-


<PAGE>


                                   MANAGEMENT

     Amounts and prices related to shares of our common stock have been adjusted
to give effect to all stock splits and stock dividends.

Executive Compensation

     The following  table provides  individual  compensation  information on our
chief  executive  officer and our most  highly  compensated  executive  officers
during 2004 whose total annual salary and bonus was in excess of $100,000.

                           Summary Compensation Table

<TABLE>
<CAPTION>

                                                                                        Long Term
                                                                                      Compensation
                                                                   Annual                Awards
                                                                Compensation       ------------------------     All Other
                                                                ------------           Securities             Compensation
 Name and Principal Position                        Year    Salary ($)  Bonus ($)  Underlying Options(#)(1)     ($)(2)
 ---------------------------                        ----    --------------------   ------------------------ -----------------
<S>                                                 <C>      <C>         <C>             <C>                     <C>
Kenneth T. Murphy, Chairman of the Board
     First Financial Bankshares, Inc.               2004            -          -             -                   $234,990 (3)
                                                    2003            -          -             -                    345,514 (3)
                                                    2002     $351,635          -             -                     24,445 (2)


F. Scott Dueser, President and Chief                2004      356,000    $19,758             -                     33,454 (2)
   Executive Officer                                2003      356,000          -         4,375                     14,659 (2)
     First Financial Bankshares, Inc.               2002      336,000     45,423             -                     28,647 (2)


J. Bruce Hildebrand, Executive Vice President       2004      212,000     11,766             -                     33,454 (2)
   and Chief Financial Officer                      2003      200,000          -         2,500                     13,459 (2)
    First Financial Bankshares, Inc.                2002       16,667          -             -                          -


Gary L. Webb, Executive Vice President              2004      208,000     11,544             -                     32,164 (2)
    First Financial Bankshares, Inc.                2003      166,667     15,000         2,500                          -
                                                    2002            -          -             -                          -


Robert S. Patterson, Senior Vice President          2004      165,000      9,158             -                     20,959 (2)
    First Financial Bankshares, Inc.                2003      158,333          -         1,875                     12,682 (2)
                                                    2002      154,167          -             -                     20,916 (2)

</TABLE>

(1)  Adjusted for stock splits and stock dividends.
(2)  Represents  the  contributions  we made to our profit  sharing plan for the
     benefit of such officer and country club dues.
(3)  Represents  amount paid under his  consulting  agreement,  pension plan and
     deferred compensation agreement.

Note:Amounts  have  been  reported  solely in  compliance  with  applicable  SEC
     regulations,  and may not  accurately  reflect wages or other  compensation
     under applicable IRS regulations.

     We also provide  liability  insurance for all of our directors and officers
at an annual cost of approximately $203,000 and have contractual indemnification
arrangements  with  directors  and  select  officers  which may,  under  certain
circumstance,  require us to compensate them for costs and liabilities  incurred
in actions  brought  against them while acting in their official  capacities for
the Company.

                                      -6-


<PAGE>


     The  following  table sets forth  certain  information  concerning  options
exercised during the last fiscal year by the named executive officers.

                 Aggregated Option Exercises in Last Fiscal Year
                        and Fiscal Year End Option Values

<TABLE>
<CAPTION>

                                                             Number of Securities           Value of Unexercised
                                                           Underlying Unexercised          In-the-Money Options
                             Shares                     Options at Fiscal Year End (#)     at Fiscal Year End ($)(1)
                            Acquired on      Value      ------------------------------  ----------------------------
Name                       Exercise (#)   Realized ($)  Exercisable   Unexercisable      Exercisable   Unexercisable
- ----                       ------------   ------------  -----------   -------------      -----------   -------------
<S>                            <C>        <C>               <C>            <C>           <C>           <C>
Kenneth T. Murphy                  -      $         -           -              -         $      -      $         -

F. Scott Dueser                3,099           81,987           -          5,938                -          105,324

J. Bruce Hildebrand                -                -           -          2,500                -           35,025

Robert S. Patterson              200            5,452       3,975          2,625          110,616           47,096

Gary L. Webb                       -                -           -          2,500                -           35,025

</TABLE>

(1)  Based upon the  closing  price per share of our  common  stock of $44.81 on
     December 31, 2004.


     Stock options were issued to Mr. Dueser, Mr. Hildebrand,  Mr. Patterson and
Mr.  Webb in  January  2005,  totaling  4,000,  2,000,  1,500 and 2,000  shares,
respectively. These amounts are not included in the above table.

Compensation pursuant to Employee Benefit Plans

General

     We have both a defined  benefit  pension plan and a profit sharing plan. An
employee is eligible to become a participant  in the profit  sharing plan on the
January 1  coincident  with or  immediately  following  the date his  employment
begins.  The pension plan was frozen effective January 1, 2004 and new employees
hired after that date are not eligible to  participate  in the plan. See changes
made to these plans  described  below.  With our subsidiary  banks, we adopted a
flexible  spending  account benefit plan for all employees that became effective
in 1988. First Financial Bank,  National  Association,  Cleburne,  adopted these
plans  effective  in  1991.   First  Financial   Bank,   National   Association,
Stephenville  adopted these plans  effective in 1993.  San Angelo  National Bank
adopted the pension and flexible spending account benefit plan effective in 1994
and profit  sharing plan  effective in 1995.  Weatherford  National Bank adopted
these plans  effective in 1996.  First  Financial  Bank,  National  Association,
Southlake,  adopted all benefit  plans  effective in 1998.  City  National  Bank
adopted all benefit plans effective in 2002. First Technology Services, Inc. and
First Financial Trust & Asset Management Company, National Association,  adopted
all benefit plans effective in 2003.

Profit Sharing Plan

     We, and each of our  subsidiaries  that  participates in the profit sharing
plan,  determine  on an annual basis the  contribution  that it will make to the
profit sharing plan from such employer's operating profits.  Contributions under
the  profit  sharing  plan  are  administered  by  the  Compensation  Committee.
Effective  January 1, 2002, we added a 401(k) feature to our profit sharing plan
which  allows  the  participants  to make  pre-tax  contributions  to the  plan.
Effective  January 1, 2004,  the plan includes a safe harbor Company match equal
to 100% of each  Participant's  deferral  contributions  not exceeding 3% of the
participant's   compensation,   plus   50%  of   each   participant's   deferral
contributions  in  excess  of 3% but not in  excess  of 5% of the  participant's
compensation.  Prior to January 1, 2004,  the plan did not  include a  mandatory
Company match but did provide a safe harbor profit sharing contribution equal to
3% of the qualifying participant's compensation.  Under the profit sharing plan,
contributions  by employees  are not  required as a condition of  participation.
Each  participating  employer's  annual  contribution  is  allocated  among  the
accounts of the active plan participants employed by such employer, in the ratio
that each  participant's  compensation  bears to the total  compensation  of all
participants of such employer.  Compensation is defined as the total amount paid
to an employee during the year,  including  bonuses,  commissions,  and overtime
pay, but excluding reimbursed expenses, group insurance benefits and pension and
profit sharing  contributions.  However, the Internal Revenue Service limits the

                                      -7-


<PAGE>


compensation  amount used to calculate a  participant's  benefit to a maximum of
$205,000.  Additionally,  the annual  addition amount (which is the aggregate of
employer and employee  contributions)  that may be allocated to a participant is
limited to $41,000.

     Effective  July 1, 2003, we added an employee  stock  ownership plan (ESOP)
feature  to our profit  sharing  plan.  Shares of our  common  stock held by the
profit sharing plan were allocated to participants  generally based on the ratio
that each  participant's  balance  bears to the  total  balances  in the  profit
sharing  plan.  Participants  are given the option to receive cash  dividends on
these shares in cash or reinvest the dividends in additional shares.

     The  profit  sharing  plan  provides  for  benefits  to vest  in  graduated
percentages for the first six years of participation,  with benefits being fully
vested after seven years of credited  service except for amounts  contributed to
an employee's account under the safe harbor provisions and shares resulting from
the  reinvestment of dividends in the ESOP which are  immediately  fully vested.
Generally,  an employee's benefit at normal retirement will be the contributions
allocated to his account while a  participant,  increased by gains and decreased
by losses  from  investments  of the trust,  and  increased  by any  forfeitures
allocated to his account. An employee is always fully vested with respect to any
voluntary  contributions he makes. The plan also provides for immediate  vesting
upon  attainment of normal  retirement  age and upon death or  disability.  If a
participant  terminates employment for any other reason, the total amount of his
employee   contribution   account  and  the  vested   portion  of  his  employer
contribution account are distributed to him.

     Effective  January 2005, the Company adopted a "make whole" program whereby
executives  whose Company  contributions to the profit sharing plan and employer
match under the 401(k)  feature  were  limited due to Internal  Revenue  Service
limitations will now have  contributions  made to a non-qualified  plan equal to
the amount under  qualified  plans as if there were no Internal  Revenue Service
limitations.  For 2005, the maximum additional contribution that may be made for
Mr. Dueser would  approximate  $33,000 and for Mr.  Hildebrand would approximate
$3,000.

Pension Plan

     The pension plan requires  annual  contributions  sufficient to provide the
pension  benefits  accruing  to  employees  under the pension  plan.  The annual
benefit  for a  participant  in the  pension  plan  who  retires  on his  normal
retirement  date is the accrued  benefit  (as  defined in the  pension  plan) at
December 31, 1988,  plus 1.25% of average  compensation  multiplied  by years of
service from January 1, 1989. "Average compensation" is the average compensation
during  the  10  years   immediately   preceding  the  date  of   determination.
Compensation  means  the  total  amount  paid to an  employee  during  the  year
including  bonuses,  commissions,  and overtime  pay, but  excluding  reimbursed
expenses, group insurance benefits and pension and profit sharing contributions.
There are  provisions  in the pension  plan for early  retirement  with  reduced
benefits.  There is no vesting of benefits until a participant  has five or more
years of credited  service or upon  reaching  age 65 without  regard to credited
service.  Effective  January  1,  2004,  the  pension  plan  was  frozen  and no
additional  benefits  accrue  under the plan after  this date.  New hires to the
Company are not eligible to participate in the frozen pension plan.

     The pension  plan is subject to the  minimum  funding  requirements  of the
Employee  Retirement Income Security Act of 1974, or ERISA. Our contributions to
the pension plan,  including those of our  participating  subsidiary banks, have
been $754,416 in 2000;  $742,923 in 2001;  $726,989 in 2002;  and  $1,038,031 in
2003. No contribution was made in 2004.

     The following table  illustrates  estimated  retirement  benefits under the
pension  plan for  persons  in  specified  remuneration  and  years  of  service
categories,  which benefits are payable  annually for life (but in no event less
than 10 years).  The  benefits  listed in the table below are not subject to any
deduction  for social  security  or other  offset  amounts.  This table does not
reflect any benefit that a participant may have accrued at December 31, 1988.

                                      -8-


<PAGE>


                               PENSION PLAN TABLE


                                         Years of Service
                     ----------------------------------------------------------
 Remuneration            15          20          25          30          35
 ------------        ----------  ----------  ----------  ----------  ----------
 $   25,000          $   4,688   $   6,250   $   7,813   $   9,375   $  10,938
     50,000              9,375      12,500      15,625      18,750      21,875
     75,000             14,063      18,750      23,438      28,125      32,813
    100,000             18,750      25,000      31,250      37,500      43,750
    125,000             23,438      31,250      39,063      46,875      54,688
    150,000             28,125      37,500      46,875      56,250      65,625
    175,000             32,813      43,750      54,688      65,625      76,563
    200,000             37,500      50,000      62,500      75,000      87,500

     As of December 31, 2002,  Mr. Murphy was credited with 32 years of service,
at which time he began receiving payments under the pension plan. As of December
31, 2003, Mr. Dueser was credited with 27 years of service,  Mr.  Hildebrand was
credited with one year of service and Mr. Patterson was credited with nine years
of service.  The covered  compensation of Mr. Dueser and Mr.  Hildebrand  during
2003 was  $200,000,  and for Mr.  Patterson was  $158,333.  The maximum  covered
compensation  was $200,000 in 2003. Mr. Webb began  employment in March 2003 and
was not  credited  with any years of  service.  As the  pension  plan was frozen
effective  January 1, 2004,  no  additional  years of service  accrued from that
date.

Flexible Spending Account Benefit Plan

     With our subsidiaries, we have a flexible spending account benefit plan. An
employee is eligible  to become a  participant  in this plan on the first day of
the month following  completion of two months of service.  The flexible spending
account  benefit plan allows each  participant  to redirect a portion of his/her
salary, before taxes, to pay certain medical and/or dependent care expenses.

Deferred Compensation Agreement

     In  1992,  your  board  of  directors  approved  a  deferred   compensation
agreement, which was amended in 1995, between Mr. Murphy and us. We entered into
this agreement in recognition of Mr. Murphy's contribution to our success and as
an  inducement  to him to  remain,  subject to the  discretion  of your board of
directors, in our employ. This agreement provided that, following his retirement
in December  2002, we would pay him, or his  beneficiary,  the sum of $8,750 per
month for a period of 84 months.  The  monthly  amount was  considered  to be an
appropriate  level of  supplemental  income to  partially  offset  Mr.  Murphy's
reduction in personal income  following  retirement and was based on an analysis
of  the  difference  in  projected  final  year   compensation   and  retirement
compensation.  Effective  January 1, 2003,  Mr. Murphy began  receiving  monthly
payments  of  $8,750 as  provided  under  the  terms of this  agreement  through
December 1, 2009.

Executive Recognition Plan

     In April 1996, our outside  directors,  who  constituted a majority of your
board of directors,  unanimously  approved an executive  recognition  plan. This
plan enables us, upon approval of the compensation  committee,  to offer our key
executive  officers  and  those of our  subsidiaries  an  executive  recognition
agreement.  Mr. Dueser,  Mr. Hildebrand,  Mr. Patterson,  Mr. Webb and our other
senior officers have entered into executive recognition agreements with us. Each
executive  recognition  agreement provides severance benefits for each executive
officer  if,  within two years  following a change in control (as defined in the
executive recognition agreements), his employment with us or our subsidiaries is
terminated by us or the subsidiary  bank for any reason other than for cause (as
defined in the executive  recognition  agreements) (except for terminations as a
result of the  officer's  death,  disability  or  retirement  (as such terms are
defined in the executive  recognition  agreements)) or by the executive  officer
for good  reason (as  defined in the  executive  recognition  agreements).  Such
severance  benefits  provide that the  executive  officer will receive a payment
equal  to a  certain  percentage  (as set  forth  in his  executive  recognition
agreement)  of  his  annual  base  salary  immediately  preceding  the  date  of
termination  and,  for  two  years  following  the  date  of  termination,   the
continuation  of all medical,  life and  disability  benefit plans  covering the
officer at no cost to the officer.  The  percentage  of annual base salary to be
received  upon  a  change  in  control  pursuant  to his  executive  recognition
agreement is 200%. The total severance payment for the executive officer cannot,

                                      -9-


<PAGE>


however,  exceed  the  amount  that  would  cause  such  payment  to be deemed a
"parachute payment" under Section 280G of the Internal Revenue Code.

     Each executive recognition agreement has a term of two years. However, if a
change in control  occurs during the original term of the executive  recognition
agreements,  then the executive  recognition  agreements will continue in effect
for  an  additional  period  of two  years  following  the  change  in  control.
Similarly,  if a second change in control  occurs within two years from the date
of the first change in control, then the executive  recognition  agreements will
continue in effect for a period of two years from the date of the second  change
in control.

Stock Option Plan

     At the 2002 annual meeting of shareholders, our 2002 incentive stock option
plan was  approved  and  adopted.  The  purposes of the stock option plan are to
attract  and retain key  employees  and to  encourage  employee  performance  by
providing  them with a proprietary  interest in us through the granting of stock
options.  The maximum aggregate number of shares of our common stock that may be
issued  under  the 2002  incentive  stock  option  plan is  625,000  subject  to
adjustment  for stock  dividends  and similar  events.  The stock option plan is
administered  by our  compensation  committee.  Only incentive stock options (as
defined in the  Internal  Revenue  Code) may be granted  under the stock  option
plan.  Incentive  stock  options  granted  under  the stock  option  plan may be
exercised  solely  by the  grantee,  or in the  case of the  grantee's  death or
incapacity, by the grantee's executors, administrators, guardians or other legal
representatives  and are not  assignable or  transferable  by a grantee.  In May
2003, 71,560 stock options were issued to certain of our officers under the 2002
incentive  stock option plan. In January 2005,  75,800 stock options were issued
to certain officers under the 2002 incentive stock option plan.

     Our 1992 incentive stock plan expired in 2002 and no additional options may
be granted  under this  plan.  Options  totaling  54,503 are  exercisable  as of
December  31,  2004,  under the 1992  incentive  stock  option  plan and will be
exercisable through 2012 under the terms of the plan.

Consulting Agreement

     Effective January 1, 2003, we entered into a consulting  agreement with Mr.
Murphy whereby Mr. Murphy provided  various  services to us and our subsidiaries
with  respect to  strategic  planning  and  potential  acquisitions  among other
things.  The term of the  agreement  was one year and  compensation  payable was
$14,583 per month.  The agreement was renewed for one year effective  January 1,
2004, under similar terms except the monthly  compensation was reduced to $8,333
per month.  The agreement was again  renewed for one year  effective  January 1,
2005, under similar terms except the monthly  compensation was reduced to $5,000
per month.

Meetings of the Board of Directors

     Your board of directors has four  regularly  scheduled  meetings each year.
Each of the  directors  attended  at least 75% of the  meetings  of the board of
directors  and the  committees  of the board of directors on which such director
served.

     Although we do not have a formal policy regarding  attendance by members of
the board of  directors  at our annual  meeting of  shareholders,  we  encourage
directors  to attend and  historically  more than a  majority  have done so. For
example, 100% of the directors attended the 2004 annual meeting of shareholders.

Committees of the Board of Directors

     Your board of directors  has four  committees.  The  functions  and current
members of each committee are as follows:

     Executive  Committee.  The  executive  committee  acts  for  your  board of
directors between board meetings,  except to the extent limited by our bylaws or
Texas law. The current members are Messrs. Coalson,  Copeland, Dueser, McDaniel,
Murphy,  Parker,  Ramsey and Stephens.  The  Executive  Committee met four times
during 2004.

                                      -10-


<PAGE>


     Nominating Committee. The nominating committee was formed in 2004 to follow
the  guidelines  of the  nominating  committee  charter that was approved by the
executive  committee  of your  board  of  directors.  Among  other  things,  the
nominating  committee selects and recommends director candidates to the board of
directors.  The  nominating  committee  members are Messrs.  Coalson,  Copeland,
McDaniel,  Ramsey and Stephens.  All current  directors are being  nominated for
election as directors for 2005. During 2004, the committee met one time.

     Historically,  our goal  has been to  assemble  a board of  directors  that
brings to us a variety of  perspectives  and skills  derived  from high  quality
business and professional  experience to provide sound and prudent guidance with
respect to our operations and interests.  Potential directors should possess the
highest personal and professional ethics, integrity and values, and be committed
to representing the interests of all of our shareholders.  It is also our policy
that at all  times at least a  majority  of your  board of  directors  meets the
independence  standards promulgated by Nasdaq and the SEC. We also require board
members to be able to dedicate  sufficient time and resources to ensure diligent
performance of their duties,  including attending board and applicable committee
meetings. The committee has also generally considered factors such as:

     o    representation of a major business, profession, industry or segment of
          the economy;

     o    our needs with respect to the particular talents and experience of our
          directors;

     o    the knowledge,  skills and experience of nominees,  particularly  with
          respect to the  community  banking  business in North Central and West
          Texas;

     o    a nominee's  experience with accounting rules and practices,  finance,
          management and leadership opportunities;

     o    leader in the  community  and  possession  of an  appreciation  of the
          relationship of our banking business to the communities we serve; and

     o    other  requirements  that  may  be  imposed  by  the  bank  regulatory
          agencies.

     Under our bylaws, an individual may not stand for election or reelection as
a director upon attaining age 72 years of age, unless he owns at least 1% of the
outstanding  shares  of our  common  stock  and is less  than 75  years  of age.
Otherwise,  there are no stated minimum criteria for director nominees. Based on
the age  limitations,  Messrs.  Parker and McDaniel  and Dr.  Ramsey will not be
eligible to stand for reelection in 2006.

     We expect that the  nominating  committee  will identify  nominees by first
evaluating the current members of your board of directors willing to continue in
service.  Current  members of the board  with  skills  and  experience  that are
relevant to our  business  and who are  willing to  continue in service  will be
considered  for  re-nomination,  balancing the value of continuity of service by
existing members of the board with that of obtaining a new  perspective.  If any
member of the board does not wish to  continue  in service or if the  nominating
committee or the board decides not to re-nominate a member for  re-election,  we
anticipate  that the  nominating  committee will identify the desired skills and
experience  of a new nominee in light of the  criteria  above and begin a search
for  appropriately  qualified  individuals.  To date,  we have not engaged third
parties to identify or evaluate  or assist in  identifying  potential  nominees,
although we reserve the right in the future to retain a third party search firm,
if necessary.

     The  nominating  committee  will  consider  qualified  director  candidates
recommended  by  shareholders.  To date,  no  shareholder  has ever  made such a
recommendation.  For the  2006  Annual  Shareholders  Meeting,  any  shareholder
wishing to propose a nominee  should submit a  recommendation  in writing to Dr.
Jack Ramsey,  Chairman of the Nominating  Committee,  at 400 Pine Street,  Suite
300,  Abilene,  Texas  79601 at least 90 days in advance of the annual  meeting,
including the nominee's resume,  qualifications and other relevant  biographical
information and providing  confirmation  of the nominee's  consent to serve as a
director. Qualified candidates recommended by our shareholders will be evaluated
on the same basis as candidates recommended by our officers, directors and other
sources.

                                      -11-


<PAGE>


     Audit Committee.  The audit committee  reviews the scope and results of the
annual audit by our independent auditors,  and receives and reviews internal and
external  audit  reports.   The  committee  also  monitors  the  qualifications,
independence and performance of our independent  auditor and internal  auditors.
Its members include Messrs. Copeland,  Johnson,  McDaniel, Miers and Trotter. We
believe that each member of the audit committee is independent  under The Nasdaq
National  Market listing  standards.  During 2004, the audit  committee met four
times.  The  board of  directors  has  determined  that it  believes  all  audit
committee  members are financially  literate under the current listing standards
of Nasdaq.  The board also determined that it believes Mr. Copeland qualifies as
an "audit  committee  financial  expert"  as  defined  by the SEC rules  adopted
pursuant to the Sarbanes-Oxley Act of 2002.

     Compensation  Committee.  The  compensation  committee is  responsible  for
compensation  matters  for  the  Company  as well as  administering  our  profit
sharing,  pension and flexible spending plans and overseeing our incentive stock
option plan for key  employees.  The current  members are Mrs. Stai, Dr. Ramsey,
Messrs.  Canon,  Coalson,  Matthews and  Stephens.  The committee met four times
during 2004.

Director Compensation

     Directors  who  are  our  executive   officers  or  employees   receive  no
compensation  as such for service as members of either the board of directors or
committees  thereof.  Directors who are not our officers receive $2,000 for each
board meeting  attended.  The directors who serve on committees  and who are not
our officers receive $1,000 for each committee meeting attended.

Compensation Committee Interlocks and Insider Participation

     No person who served as a member of the compensation  committee was, during
2004,  an  officer  or  employee  of us or any of our  subsidiaries,  or had any
relationship  requiring disclosure in this proxy statement.  However,  committee
member Mr. Coalson  maintained  loans from  subsidiaries  during 2004. The loans
were made in the ordinary course of business,  on substantially  the same terms,
including  interest rates and  collateral,  as those  prevailing at the time for
comparable  transactions  on an arms-length  basis and did not involve more than
the normal risk of collectibility  or present other unfavorable  features to the
subsidiary  bank.  None of our  executive  officers  served  as a member  of the
compensation committee (or other board committee performing equivalent functions
or, in the absence of any such  committee,  the entire  board of  directors)  or
director of another entity,  one of whose executive  officers served as a member
of our board of directors.

Corporate Governance

     We have long believed that good corporate governance is important to ensure
that the  Company  is managed  for the  long-term  benefit of our  shareholders.
During the past year, we have been reviewing our corporate  governance  policies
and practices and comparing  them to those  suggested by various  authorities in
corporate  governance  and the  practices  of other  public  companies.  We also
monitor new and proposed rules of the Securities  and Exchange  Commission,  the
Nasdaq  National  Market  and the  bank  regulatory  guidelines.  Our  corporate
governance  policies,  including  our  code  of  conduct  applicable  to all our
employees,  officers  and  directors,  as well as the  charters of our audit and
nominating  committees,  are  available  at  www.ffin.com  under the  "Corporate
Governance" caption.

                                      -12-


<PAGE>


                      REPORT OF THE COMPENSATION COMMITTEE
                            ON EXECUTIVE COMPENSATION

     The compensation  committee reviews the compensation  program for the Chief
Executive  Officer and other members of senior  management,  including the named
executive officers listed on the Summary Compensation Table appearing on page 6,
and  determines and  administers  their  compensation.  In the case of the Chief
Executive  Officer,  the  compensation  determination  made by the  compensation
committee  is also  subject to approval by the entire  board of  directors.  The
compensation committee also oversees the administration of employee benefits and
benefit plans for the Company and its  subsidiaries.  The committee has retained
an  independent  consultant,  from time to time,  to  assist  the  Committee  in
fulfilling its responsibilities.

     The  compensation  committee's  philosophy  is to  provide  a  compensation
package that attracts and retains  executive  talent and delivers higher rewards
for superior performance and consequences for  underperformance.  It is also the
compensation  committee's  practice  to  provide  a  balanced  mix of  cash  and
equity-based  compensation that the committee believes  appropriate to align the
short- and  long-term  interests of the  Company's  executives  with that of its
shareholders and to encourage executives to act as equity owners of the Company.

     The  compensation  committee seeks to attract  executive talent by offering
competitive base salaries,  annual performance incentive opportunities,  and the
potential  long-term rewards under the Company's  long-term  incentive  programs
(including our profit sharing,  pension,  flexible  spending and incentive stock
option plans). It is the committee's practice to provide incentives that promote
both the short- and long-term financial  objectives of the Company.  Achievement
of  short-term  objectives is rewarded  through base salary and annual  bonuses,
while  long-term  incentive  programs  encourage  executives  to  focus  on  the
Company's  long-term  goals as well.  These  incentives  are based on  financial
objectives of importance to the Company,  including revenue and earnings growth,
return on assets, and creation of shareholder value. The Company's  compensation
program also accounts for individual performance, which enables the compensation
committee to  differentiate  among  executives  and  emphasize  the link between
personal performance and compensation.

     The  compensation   committee  compares  the  Company's  senior  management
compensation levels with those of a group of peer companies and competitors. The
committee  periodically  reviews the  effectiveness and  competitiveness  of the
Company's   executive   compensation   structure  with  the  assistance  of  its
independent consultant.  This consultant is engaged by, and reports directly to,
the committee.

     The key elements of executive  compensation are base salary, profit sharing
contributions,  and incentive stock options. In setting Mr. Dueser's base salary
and eligibility for stock options, the compensation committee considered,  among
other things:

     o    the  scope  of the  Chief  Executive  Officer's  responsibilities  and
          experience;

     o    base salary compared to several compensation surveys;

     o    the overall performance of the Company and a subjective  evaluation of
          Mr. Dueser's contribution to its overall success; and

     o    tenure with the Company.

     Mr. Dueser's compensation program also includes a bonus plan that calls for
Mr. Dueser to receive a cash bonus based on a sliding scale. The scale considers
net income growth times the Company's  return on average  assets.  Applying this
methodology,  Mr. Dueser received a bonus of $19,758 for 2004. The maximum to be
earned approximated $64,000 and the minimum amount was zero.

     The annual base  salaries,  bonuses and stock  option  grants for the other
named executive  officers and subsidiary bank presidents and senior officers are
adjusted  annually by the committee.  The compensation  committee  considers the
following  factors when approving annual base salaries,  bonuses and eligibility
for stock options:

                                      -13-


<PAGE>


     o    attainment of planned goals and objectives;

     o    scope of  responsibility  (asset size of subsidiary bank and/or degree
          of influence on our profitability and operations);

     o    tenure with the Company;

     o    evaluation input from subsidiary directors; and

     o    relationship  of base salary to the base  salaries of other members of
          the executive officer group.

     During the course of the year,  the  compensation  committee has at various
times reviewed the different  components of the Chief Executive  Officer and the
named executive officers'  compensation,  including salary,  bonus,  accumulated
realized and  unrealized  stock option gains,  the dollar value to the executive
and cost to the Company of all perquisites and other personal  benefits,  payout
obligations  under the Company's new  non-qualified  "make whole"  program,  the
actual projected payout  obligations  under the Company's pension plan and under
potential  change-in-control  scenarios. Based on this review, the committee has
found  the  Chief  Executive  Officer's  and  named  executive  officers'  total
compensation in the aggregate to be reasonable and not excessive.

     The  committee  believes  that the  relative  difference  between the Chief
Executive  Officer's  compensation  and the  compensation of the Company's other
executives has not increased  significantly  over the years.  The comparisons in
the  Company's  internal  pay equity  study go back to the early  1980's and the
percentage differences are not significantly different today from then. Over the
period reviewed,  the Chief Executive Officer's total compensation has generally
been in the range of 1.5 to 2 times the  compensation  of the next  highest paid
executive officer.

     Section  162(m) of the Internal  Revenue Code  generally  limits the annual
corporate tax deduction for compensation paid to the chief executive officer and
the  four  other  most  highly   compensated   executive   officers  unless  the
compensation  is  performance-based.  One condition to qualify  compensation  as
performance-based  is to  establish  the  amount  of the  award on an  objective
formula that precludes any discretion.  The compensation  committee continues to
review  the  impact  of  this  tax  provision  on our  incentive  plans  and has
determined  that  Section  162(m) is  currently  inapplicable  because  no named
executive officer receives compensation in excess of $1 million.

                                                  COMPENSATION COMMITTEE


                                                  F. L. Stephens, Chairman
                                                  Joseph E. Canon
                                                  Mac A. Coalson
                                                  Kade L. Matthews
                                                  Jack D. Ramsey, M.D.
                                                  Dian Graves Stai

                                      -14-


<PAGE>


                          REPORT OF THE AUDIT COMMITTEE

     The audit committee  oversees our financial  reporting process on behalf of
your board of  directors.  Management  has the  primary  responsibility  for the
financial  statements and the reporting process including the system of internal
controls. In fulfilling its oversight responsibilities,  the committee, which is
composed of independent  directors in compliance  with Rule 4200 of the National
Association of Securities Dealers' listing standards, reviewed and discussed the
audited financial statements in the Annual Report with management. The committee
also discussed with management the quality,  not just the acceptability,  of the
accounting  principles,  the  reasonableness of significant  judgments,  and the
clarity of disclosures in the financial statements.

     The committee reviewed with Ernst & Young LLP, our independent auditors for
2004, who were  responsible for expressing an opinion on the conformity of those
audited  financial  statements with generally  accepted  accounting  principles,
their judgments as to the quality, not just the acceptability, of our accounting
principles  and such other  matters as are  required  to be  discussed  with the
committee under generally  accepted auditing  standards and, as applicable,  the
standards of the Public Company  Accounting  Oversight Board. The Committee also
discussed with the independent  auditors their audit of management's  assessment
that the Company maintained  effective internal control over financial reporting
as  of  December  31,   2004,   based  on  criteria   established   in  Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway  Commission.  In addition,  the committee has discussed with the
independent auditors the auditors' independence from management and the company,
including the matters  required by the  Statement on Auditing  Standards No. 61,
Communication with Audit Committees,  as amended, and the matters in the written
disclosures  required by the  Independence  Standards  Board, and considered the
compatibility of non-audit services with the auditors'  independence.  The audit
committee  has  received  the  written  disclosures  and  the  letter  from  our
independent  auditors  required by  Independence  Standards Board Standard No. 1
concerning the independence of the independent auditors.

     The committee discussed with our independent auditors the overall scope and
plans for their audit. The committee meets with the independent  auditors,  with
and without management  present,  to discuss the results of their  examinations,
their  evaluations  of our  internal  controls,  and the overall  quality of our
financial  reporting.  The committee  held four  meetings  during the year ended
December 31, 2004.

     The committee has relied, without independent verification, on management's
representation  that the financial  statements have been prepared with integrity
and objectivity and in conformity with generally accepted accounting principles.
The  committee's  oversight  does not  provide it with an  independent  basis to
determine that  management  has in fact  maintained  appropriate  accounting and
financial  reporting  principles  or  policies.   Furthermore,  the  committee's
considerations  and discussions with management and the independent  auditors do
not ensure that our company's  financial  statements are presented in accordance
with generally accepted accounting  principles,  that the audit of our company's
financial  statements has been carried out in accordance with generally accepted
auditing  standards or that our company's  independent  accountants  are in fact
independent.

     In reliance on the reviews  and  discussions  referred to above,  the audit
committee  recommended to the executive committee of the board of directors that
the audited  financial  statements be included in the annual report on Form 10-K
for the year ended  December  31,  2004,  for  filing  with the  Securities  and
Exchange Commission.  Acting on behalf of the board of directors,  the executive
committee approved the audit committee's recommendation. Your board of directors
has  adopted a charter for the audit  committee,  a copy of which is filed as an
appendix  to this  definitive  proxy  statement  filed with the  Securities  and
Exchange  Commission.  The members of the committee are  considered  independent
because  we  believe  they  satisfy  the  independence  requirements  for  audit
committee members prescribed by Nasdaq and the SEC.

                                                  AUDIT COMMITTEE


                                                  David Copeland, Chairman
                                                  Raymond A. McDaniel, Jr.
                                                  Bynum Miers
                                                  Derrell E. Johnson
                                                  Johnny E. Trotter

                                      -15-


<PAGE>


PERFORMANCE GRAPH

     The following  performance  graph  compares  cumulative  total  shareholder
return for our common stock,  the S&P 500 Index, the Russell 3000 Index, and the
SNL Banks  Index,  which is a banking  index  prepared by SNL  Financial  and is
comprised  of  banks  with $1  billion  to $5  billion  in total  assets,  for a
five-year period (December 31, 1999 to December 31, 2004). The performance graph
assumes $100  invested in our common stock at its closing  price on December 31,
1999, and in each of the S&P 500 Index, the Russell 3000 Index and the SNL Banks
Index on the same date. The performance  graph also assumes the  reinvestment of
all dividends. The dates on the performance graph represent the last trading day
of each year  indicated.  The amounts noted on the  performance  graph have been
adjusted to give  effect to all stock  splits and stock  dividends.  The Russell
3000  Index  has  been  added to the  Company's  Performance  Graph  for 2004 in
anticipation of replacing the S&P 500 Index in the future.

                           Corporate Performance Chart

[GRAPHIC OMITTED]

<TABLE>
<CAPTION>


                                                                      Year Ended
                                         ----------------------------------------------------------------------
Index                                      12/31/99   12/31/00    12/31/01   12/31/02    12/31/03   12/31/04
- ---------------------------------------------------------------------------------------------------------------
<S>                                         <C>        <C>         <C>        <C>         <C>        <C>
First Financial Bankshares, Inc.            100.00     106.87      133.18     174.38      244.01     274.73
S&P 500 *                                   100.00      91.20       80.42      62.64       80.62      89.47
Russell 3000                                100.00      92.54       81.94      64.29       84.25      94.32
SNL $1B-$5B Bank Index                      100.00     113.48      137.88     159.16      216.44     267.12

</TABLE>

*Source:  CRSP,  Center for  Research in  Security  Prices,  Graduate  School of
Business,  the  University of Chicago  2005.  Used with  permission.  All rights
reserved. crsp.com.

                                      -16-


<PAGE>


         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     As of  February  1, 2005,  we were not aware of any person  (including  any
"group" as that term is used in Section 13(d)(3) of the Securities  Exchange Act
of 1934)  who is the  beneficial  owner  of more  than 5% of our  common  stock.
However,  as of  February  1, 2005,  First  Financial  Trust & Asset  Management
Company,  National Association held of record in various fiduciary capacities an
aggregate of  2,625,012  shares of our common  stock.  Of the total shares held,
First Financial Trust & Asset Management Company,  National Association had sole
power to vote  1,305,824  shares  (8.42%),  shared with others the power to vote
46,357 shares (0.30%) and had no authority to vote 1,272,831 shares (8.21%). All
the shares held by this subsidiary  entity,  which are registered in its name as
fiduciary or in the name of its nominee,  are owned by many different  accounts,
each of which is governed by a separate instrument that sets forth the powers of
the fiduciary with regard to the securities held in such accounts.  The board of
directors  historically  has not attempted to, and does not intend to attempt to
in the future, exercise any power to vote such shares. See "Proposal 1--Election
of Directors--Nominees"  and "--Executive Officers" for information with respect
to the  beneficial  ownership of our common stock by each  director  nominee and
named executive officers as of February 1, 2005. In the aggregate,  all director
nominees and executive  officers as a group (17 individuals)  beneficially owned
1,726,293 shares of our common stock, or 11.13%, as of February 1, 2005.

             SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Exchange Act requires our directors and officers,  and
persons who own more than 10% of our common stock,  to file with the  Securities
and  Exchange  Commission  initial  reports of our common  stock  ownership  and
reports of changes in such  ownership.  A  reporting  person must file a Form 3,
Initial  Statement of Beneficial  Ownership of Securities,  within 10 days after
such person becomes a reporting  person.  A reporting person must file a Form 4,
Statement of Changes of Beneficial Ownership of Securities,  within two business
days after such person's beneficial ownership of securities changes,  except for
certain  changes exempt from the reporting  requirements  of Form 4. A reporting
person  must  file a  Form  5,  Annual  Statement  of  Beneficial  Ownership  of
Securities,  within 45 days after the end of the issuer's  fiscal year to report
any changes in ownership  during such year not  reported on a Form 4,  including
changes exempt from the reporting requirements of Form 4.

     The  Securities  and  Exchange  Commission's  rules  require our  reporting
persons to furnish us with copies of all Section  16(a)  reports that they file.
Based  solely upon a review of the copies of such  reports  furnished  to us, we
believe that the reporting  persons have complied  with all  applicable  Section
16(a)  filing  requirements  for  2004 on a  timely  basis  with  the  following
exceptions:  Mr.  McDaniel  filed a Form 4 in 2004 and 2005 to amend  previously
filed reports and Messrs. Parker (1 report - 3 transactions), Canon (2 reports -
3  transactions),  Patterson (1 report - 1 transaction),  Matthews (1 report - 1
transaction),  Ramsey (2  reports  - 5  transactions)  and  Murphy (1 report - 2
transactions) filed Forms 4 during 2004 and 2005 past the required  two-business
day deadline.

     During the last year,  the  Company  conducted  a review of its  Section 16
reporting process to determine whether  transactions in the Company's stock were
timely reported and to evaluate proper reporting of all beneficial holdings. Mr.
McDaniel's  amendment was filed to correct a  mathematical  error in calculating
the  number of shares  held after  giving  effect to the 2003  stock  split.  As
disclosed  above,  the review also  revealed  transactions  that were not timely
reported and, as these  transactions  were identified,  the Company undertook to
file  corrected  forms  throughout the year. In most of these cases there was no
purchase or sale involved,  but rather  non-market  transactions  such as gifts,
interfamily transfers and distributions from employee benefit plans and deferred
directors'  compensation  plans. The Company is in the process of developing new
reporting  procedures  with the objective of improving  compliance on an ongoing
basis.

                              INDEPENDENT AUDITORS

     We  retained  Ernst & Young LLP to serve as our  independent  auditors  for
2004, 2003 and 2002.

     The  aggregate  fees  billed  for  each of the last two  fiscal  years  for
professional services rendered by Ernst & Young, LLP, the principal auditors who
performed the audit of our annual financial statements,  review of the quarterly
financial statements and audit of internal controls (2004), follows:

                                      -17-


<PAGE>


                                                  Year ended December 31,
                                                  -----------------------
                                             2004                        2003
                                             ----                        ----
         Audit Fees                        $302,000                    $191,878
         Audit Related Fees                   8,458                       1,495
         Tax Fees                             None                        None
         All Other Fees                       None                        None


     Audit-related fees for 2004 totaling $8,458 related to research  assistance
related to new accounting  pronouncements,  and purchase accounting inquiries in
addition  to  issuance  of a  consent  related  to  the  Company's  registration
statement on Form S-8 filed in April 2004.  Audit-related fees for 2003 totaling
$1,495 were for research  regarding the  accounting  treatment of termination of
contract regarding a proposed acquisition.

     Our audit committee has adopted a policy that requires  advance approval of
all audit,  audit-related,  tax services,  and other  services  performed by the
independent auditor. The policy provides for pre-approval by the audit committee
of specifically defined audit and non-audit services.  Except as permitted under
Rule 2-01 of SEC Regulation S-X, unless the specific service has been previously
pre-approved  with respect to that year,  the audit  committee  must approve the
permitted  service before the independent  auditor is engaged to perform it. The
audit  committee  has  delegated to its Chairman to approve  permitted  services
provided  that the Chairman  reports any  decisions to the committee at its next
scheduled meeting.

                        INTEREST IN CERTAIN TRANSACTIONS

     As has been true in the past,  some of our officers and directors,  members
of their families,  and other businesses with which they are affiliated,  are or
have been customers of one or more of our subsidiary  banks. As customers,  they
have entered into  transactions  in the  ordinary  course of business  with such
banks, including borrowings,  all of which were on substantially the same terms,
including  interest rates and  collateral,  as those  prevailing at the time for
comparable  transactions on an arms-length basis and did not involve more than a
normal risk of collectibility  or present any other unfavorable  features to the
subsidiary  banks involved.  None of the  transactions  involving our subsidiary
banks and our officers and directors, or other businesses with which they may be
affiliated,   have  been  classified  or  disclosed  as  nonaccrual,  past  due,
restructured or potential problems.

                           INCORPORATION BY REFERENCE

     With  respect  to any  future  filings  with the  Securities  and  Exchange
Commission into which this proxy  statement is  incorporated  by reference,  the
material   under  the  headings   "Executive   Committee   Report  on  Executive
Compensation," "Report of the Audit Committee" and "Performance Graph" shall not
be incorporated into such future filings.

                                      -18-


<PAGE>


                           FORWARD-LOOKING STATEMENTS

     This proxy statement 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 proxy statement,  words such
as  "anticipate,"   "believe,"   "estimate,"   "expect,"  "intend,"   "predict,"
"project,"  and similar  expressions,  as they  relate to us or our  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 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.

     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.

              SHAREHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING

     To be considered  for inclusion in our proxy  statement for the 2006 annual
meeting,  shareholder  proposals  must be  received at our  principal  executive
offices no later than December 1, 2005. Under Rule 14a-4(c)(1) of the Securities
Exchange Act of 1934, if any  shareholder  proposal  intended to be presented at
the 2006  annual  meeting  without  inclusion  in our proxy  statement  for this
meeting is received at our principal  executive offices after February 14, 2006,
then a proxy will have the ability to confer discretionary  authority to vote on
this proposal.

                                       By Order of the Board of Directors,



                                       KENNETH T. MURPHY, Chairman

March 25, 2005

                                      -19-
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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