First Financial's Winning Formula

Story updated with comments from First Financial's CEO.

ABILENE, Texas (TheStreet) -- The announced deal to expand its market presence through an acquisition of a small institution in Huntsville, Texas underscores the strength of First Financial Bankshares (FFIN) and the company's stellar performance through the credit crisis.

The company announced late Thursday an agreement to acquire the privately-held Sam Houston Financial, the holding company of First State Bank of Huntsville, for $22.2 million in stock and cash. In a conversation with TheStreet, First Financial's CEO F. Scott Dueser described First State Bank as a strong performer and added that the Huntsville area was very attractive because of its "vibrant economy," including Sam Houston State University, which he described as "the fastest-growing in Texas," and the Texas Department of Criminal Justice, which employs 5,000 workers in the area.

The deal will be First Financial's first acquisition since 2005. The company's strategy includes maintaining the separate charters of acquired subsidiary banks, and when the Sam Houston Financial deal is completed, First Financial will have 11 separate banking charters and 52 offices "in Texas that span from Hereford in the Panhandle to Huntsville in Southeast Texas."

In contrast, the troubled Synovus Financial of Columbus, Ga. consolidated 28 of its 30 bank charters during the second quarter to simplify its capital and credit management and reduce regulatory costs.

Dueser said that maintaining separate charters has been an advantage for First Financial, since "in Texas people want their community banks," and decision making by separate boards of directors has helped the company to leverage local knowledge and maintain strong loan quality. He also said that First Financial is "actively looking for other banks to buy."

Here's a quick look at First Financial's numbers, and the stock:

Company Profile

First Financial's shares closed at $45.78 Thursday, down 14% year-to-date. Based on a quarterly dividend payout of 34 cents, the shares were yielding 2.97%.

Income Statement

The company reported second-quarter net income of $14.2 million, or 68 cents a share, increasing from $13.7 million, or 66 cents a share, the previous quarter and $13.6 million, or 65 cents a share, in the second quarter of 2009.

First Financial's return on average equity (ROA) based on net income before extra items for the second quarter was 1.70% according to SNL Financial, and has remained above 1.50% for every quarter over the past three years.

Balance Sheet

First Financial had $3.3 billion in total assets as of June 30, an 8% increase from a year earlier. Nonperforming assets - including loans past due 90 days or more or in nonaccrual status (less government-guaranteed balances) and repossessed real estate - comprised just 0.67% of total assets, compared to a national aggregate "noncurrent assets" ratio of 3.31% as of June 30 reported by the Federal Deposit Insurance Corporation.

Loan losses have also remained low, as the company's annualized ratio of net charge-offs to average loans was 0.73% for the second quarter, compared to the national aggregate charge-off ratio of 2.74%. First Financial's net charge-off ratio ranged from 0.08% and 0.36% from 2007 through 2009.