18.

STOCK OPTION PLAN AND RESTRICTED STOCK PLAN:

The Company has two incentive stock plans previously approved by the Company’s shareholders to provide for the granting of options to employees of the Company at prices not less than market at the date of grant. At December 31, 2020, the Company had reserved

5,378,359

shares of stock for issuance under the plan. The plan provides that options granted are exercisable after

two years

from date of grant at a rate of

20%

each year cumulatively during the 10-year term of the option. Shares are issued under the stock option plan from available authorized shares. An analysis of stock option activity for the year ended December 31, 2020 is presented in the table and narrative below:


	Shares			Weighted- Average Ex. Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value ($000)
Outstanding, beginning of year		2,138,196		$	20.12
Granted		11,250			34.55
Exercised		(294,645	)		15.96
Cancelled		(21,744	)		22.04

Outstanding, end of year		1,833,057			20.85		5.81	$	28,098

Exercisable at end of year		892,957		$	17.20		4.46	$	16,936

The options outstanding at December 31, 2020 had exercise prices ranging between $7.87 and $34.55. Stock options have been adjusted retroactively for the effects of stock dividends and split

The following table summarizes information concerning outstanding and vested stock options as of December 31, 2020:


Exercise Price		Number Outstanding		Remaining Contracted Life (Years)		Number Vested

$	7.87		42,020		0.8		42,020
$	15.43		258,507		2.8		258,507
$	16.95		477,294		4.8		355,654
$	21.18		656,736		6.4		236,776
$	29.70		388,050		8.5		—
$	34.55		11,250		9.1		—

The fair value of the options granted during 2020 and 2019 were

estimated using the Black-Scholes options pricing model with the following weighted-average assumptions: risk-free interest rate of 1.83%; expected dividend yield of 1.62%; expected life of 6.64; and expected volatility of 26.69%.

The weighted-average grant-date fair value of options granted during 2020 and 2019 was $7.31, respectively. There were no grants during 2018. The total intrinsic value of options exercised during the years ended December 31, 2020, 2019 and 2018, was $4,052,000, $5,742,000 and $5,476,000,

respectively. The Company recorded stock option expense totaling $1,377,000, $1,489,000 and $1,508,000 for the years ended December 31, 2020, 2019 and 2018, respectively.

As of December 31, 2020, there was $4,977,000 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 1.86 years. The total fair value of shares vested during the years ended December 31, 2020, 2019 and 2018 was $1,293,000, $1,693,000 and $888,000.

On April 28, 2015, shareholders of the Company approved a restricted stock plan for selected employees, officers,

non-employee

directors and consultants. At December 31, 2020, the Company had allocated 633,524 shares of stock for issuance under the plan.

The following table summarized information about vested and unvested restricted stock outstanding at December 31, 2020, 2019 and 2018, respectively.


	For the year ended					For the year ended					For the year ended
	2020					2019					2018
	Restricted Stock Outstanding			Weighted Average Grant Date Fair Value		Restricted Stock Outstanding			Weighted Average Grant Date Fair Value		Restricted Stock Outstanding			Weighted Average Grant Date Fair Value

Balance at beginning of period		105,309		$	29.93		97,192		$	25.45		94,679		$	20.12
Grants		56,480			29.22		67,331			31.80		73,470			26.95
Vesting		(65,662	)		29.39		(57,406	)		31.49		(65,411	)		25.79
Forfeited/expired		(239	)		29.70		(1,808	)		27.67		(5,546	)		22.85

Balance at end of period		95,888		$	29.89		105,309		$	29.93		97,192		$	25.45

The total fair value of restricted stock vested was $1,924,000, $1,597,000 and $1,385,000 for the years ended December 31, 2020, 2019 and 2018, respectively.

The Company recorded restricted stock expense for officers of $1,301,000, $995,000 and $680,000, respectively, for the years ended December 31, 2020, 2019 and 2018. The Company recorded director expense related to these restricted stock grants of $635,000, $620,000 and $560,000 for the years ended December 31, 2020, 2019, and 2018, respectively.

As of December 31, 2020 and 2019, there were $2,157,000 and $2,456,000, respectively, of total unrecognized compensation cost related to unvested restricted stock which is expected to be recognized over a weighted-average period of 1.69 years and 1.67 years, respectively. At December 31, 2020 and 2019, there was $49,000 and $46,000, respectively, accrued in other liabilities related to dividends declared to be paid upon vesting.

About Stock Compensation Disclosures

Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.

Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.

FIRST FINANCIAL BANKSHARES INC Stock Compensation Disclosure

About Stock Compensation Disclosures

Other Available Disclosures