FIRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2002, 2001 and 2000
F-9
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations
First Financial Bankshares, Inc. (a Texas corporation) (“Bankshares”) is a financial holding company which owns
(through its wholly-owned Delaware subsidiary) all of the capital stock of ten banks located in Texas as of
December 31, 2002.  Those subsidiary banks are First National Bank of Abilene; Hereford State Bank; First
National Bank, Sweetwater; Eastland National Bank; First Financial Bank, National Association, Cleburne;
Stephenville Bank & Trust Co.; San Angelo National Bank; Weatherford National Bank; First Financial Bank,
National Association, Southlake and City National Bank, Mineral Wells.  Each subsidiary bank’s primary source of
revenue is providing loans and banking services to consumers and commercial customers in the market area in
which the subsidiary is located.
A summary of significant accounting policies of Bankshares and subsidiaries (collectively, the “Company”) applied
in the preparation of the accompanying consolidated financial statements follows.  The accounting principles
followed by the Company and the methods of applying them are in conformity with both accounting principles
generally accepted in the United States of America and prevailing practices of the banking industry.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those
estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the
determination of the allowance for loan losses, the valuations of foreclosed real estate, deferred income tax assets,
and the fair value of financial instruments.
Consolidation
The accompanying consolidated financial statements include the accounts of Bankshares and its subsidiaries, all of
which are wholly-owned.  All significant intercompany accounts and transactions have been eliminated.
Investment Securities
Management classifies debt and equity securities as held-to-maturity, available-for-sale, or trading based on its
intent.  Debt securities that management has the positive intent and ability to hold to maturity are classified as held-
to-maturity and recorded at cost, adjusted for amortization of premiums and accretion of discounts, which are
recognized as adjustments to interest income using the interest method.  Securities not classified as held-to-maturity
or trading are classified as available-for-sale and recorded at estimated fair value, with unrealized gains and losses,
net of deferred income taxes, excluded from earnings and reported in a separate component of shareholders’ equity.
Securities classified as trading are recorded at estimated fair value, with unrealized gains and losses included in
earnings.  The Company had no trading securities at December 31, 2002, 2001, or 2000.
Loans and Allowance for Loan Losses
Loans are stated at the amount of unpaid principal, reduced by unearned income and an allowance for loan losses.
Unearned income on installment loans is recognized in income over the terms of the loans in decreasing amounts
using a method which approximates the interest method.  Interest on other loans is calculated by using the simple
interest method on daily balances of the principal amounts outstanding.  The Company expenses its net loan
origination costs, a method which does not materially differ from deferring and amortizing such amounts as an