First Financial's Winning Formula

The company was strongly capitalized, with a Tier 1 leverage ratio of 10.64% and a total risk-based capital ratio of 19.47%. That second ratio was nearly doubled the 10% required for most banks and thrifts to be considered well-capitalized by regulators.

First Financial Bankshares did not participate in the Troubled Assets Relief Program.

Stock Ratios

As of Thursday's market close, the shares were trading for 2.6 times tangible book value according to SNL Financial, which may look a bit expensive when considering that roughly two-thirds of banks stocks (excluding the Pink Sheets) were trading below book value, but Frst Financial has often traded well above three times tangible book over the past several years.

The shares were trading for 17.5 times trailing earnings. The price-to-forward earnings ratio based on the consensus earnings estimate for 2011 among analysts polled by Thomson Reuters was 16.4, dropping to 15.3 based on the 2012 consensus and 14.7 for 2013.

Analyst Ratings

All eight analysts covering First Financial recommend holding the shares. Even though the stock dropped 14% this year through Thursday, the stock price ratios looked a bit high compared to many other holding companies.

Then again, you get what you pay for. None of the companies profiled in TheStreet's 10 Cheapest Bank Stocks for 2011 have recent earnings performance that matches First Financial, which has been an amazingly consistent performer. First Financial's dividend yield is also attractive and the company has plenty of excess capital and earnings to consider a dividend increase and of course, continued expansion.

First Financial's a conservative play and despite relatively high valuations is worth keeping an eye on. Investors may also consider going in slowly, taking advantage of the volatile market for bank stocks to build a position on dips in price.

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-- Written by Philip van Doorn in Jupiter, Fla.

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