UNITED STATES
                SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C.  20549
                                 
                                 
                             FORM 10-Q
                                 
                                 
      [ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
              OF THE SECURITIES EXCHANGE ACT OF 1934
                                 
          For the quarterly period ended:  March 31, 1999
                                 
                                OR
                                 
      [   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
              OF THE SECURITIES EXCHANGE ACT OF 1934
                                 
  For the transition period from _____________ to ______________
                                 
                 Commission File Number:  0-10196
                                 
                   INDEPENDENT BANKSHARES, INC.
      (Exact name of registrant as specified in its charter)
                                 
                                 
              Texas                          75-1717279
 (State or other jurisdiction of          (I.R.S. Employer
  incorporation or organization)        Identification No.)

       547 Chestnut Street
          P. O. Box 3296
          Abilene, Texas                       79604
(Address of principal executive offices)     (Zip Code)

                          (915) 677-5550
       (Registrant's telephone number, including area code)

Indicate  by  check mark whether the registrant (1) has  filed  all
reports  required  to  be  filed by Section  13  or  15(d)  of  the
Securities Exchange Act of 1934 during the preceding 12 months  (or
for  such shorter period that the registrant was required  to  file
such  reports) and (2) has been subject to such filing requirements
for the past 90 days.

                           YES   X    NO

       Indicate the number of shares outstanding of each of
      the issuer's classes of common stock at March 31, 1999.
                                 
          Class:  Common Stock, par value $0.25 per share
         Outstanding at March 31, 1999:  2,180,780 shares
                                 
                                 
<PAGE>

                              PART I
                                 
                       FINANCIAL INFORMATION
                                 
                                 
Item 1. Financial Statements.


                                -2-

<PAGE>


                  INDEPENDENT BANKSHARES, INC.
                  CONSOLIDATED BALANCE SHEETS
              MARCH 31, 1999 AND DECEMBER 31, 1998
                          (Unaudited)
<TABLE>
<CAPTION>
                                                        March 31,            December 31,
ASSETS                                                    1999                 1998
------                                                 ------------        ---------------
<S>
Cash and Cash Equivalents:                             <C>                 <C>
 Cash and Due from Banks                               $21,315,000           $22,562,000
 Federal Funds Sold                                     26,745,000            42,175,000
                                                       -----------          ------------
   Total Cash and Cash Equivalents                      48,060,000            64,737,000
                                                       -----------          ------------
Securities:
 Available-for-sale                                     45,368,000            30,370,000
 Held-to-maturity                                       60,446,000            64,838,000
                                                       -----------          ------------
   Total Securities                                    105,814,000            95,208,000
                                                       -----------          ------------
Loans:
 Total Loans                                           185,404,000           186,326,000
 Less:
  Unearned Income on Installment Loans                   1,311,000             1,766,000
  Allowance for Possible Loan Losses                     1,849,000             1,842,000
                                                       -----------          ------------
   Net Loans                                           182,244,000           182,718,000
                                                       -----------          ------------
Intangible Assets                                       10,665,000            10,831,000
Premises and Equipment                                  10,191,000            10,294,000
Accrued Interest Receivable                              3,482,000             3,254,000
Other Real Estate and Other Repossessed
  Assets                                                   350,000               630,000
Other Assets                                             2,282,000             2,506,000
                                                       -----------          ------------
      Total Assets                                  $  363,088,000          $370,178,000
                                                       ===========          ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
 Noninterest-bearing Demand Deposits                $   54,379,000          $ 60,086,000
 Interest-bearing Demand Deposits                      110,686,000           110,485,000
 Interest-bearing Time Deposits                        159,009,000           160,233,000
                                                       -----------          ------------
   Total Deposits                                      324,074,000           330,804,000
Accrued Interest Payable                                 1,003,000             1,163,000
Other Liabilities                                          675,000               706,000
                                                       -----------          ------------
     Total Liabilities                                 325,752,000           332,673,000
                                                       -----------          ------------
Guaranteed Preferred Beneficial Interests in the
 Company's Subordinated Debentures                      13,000,000            13,000,000
                                                       -----------          ------------
Stockholders' Equity:
Series C Preferred Stock                                    46,000                51,000
Common Stock                                               557,000               554,000
Additional Paid-in Capital                              15,935,000            15,933,000
Retained Earnings                                        8,489,000             7,975,000
Unrealized Gain on Available-for-sale
 Securities                                                 10,000               161,000
Treasury Stock                                            (538,000)                    0
Unearned ESOP Stock                                       (163,000)             (169,000)
                                                       -----------          ------------
     Total Stockholders' Equity                         24,336,000            24,505,000
                                                       -----------          ------------
      Total Liabilities and Stockholders' Equity     $ 363,088,000          $370,178,000
                                                       ===========          ============

</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

                                   -3-

<PAGE>

                   INDEPENDENT BANKSHARES, INC.
    CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
              QUARTERS ENDED MARCH 31, 1999 AND 1998
                           (Unaudited)

<TABLE>
<CAPTION>

                                                                    Quarter Ended March 31,
                                                                -----------------------------
                                                                   1999          1998
                                                                ---------      -------------
<S>                                                             <C>            <C>
Interest Income:
 Interest and Fees on Loans                                     $4,239,000     $3,144,000
 Interest on Securities                                          1,406,000      1,017,000
 Interest on Federal Funds Sld                                     411,000        414,000
                                                                ----------      ---------
  Total Interest Income                                          6,056,000      4,575,000
                                                                ----------      ---------
Interest Expense:
 Interest on Deposits                                            2,543,000      2,152,000
 Interest on Notes Payable                                               0          1,000
                                                                ----------      ---------
  Total Interest Expense                                         2,543,000      2,153,000
                                                                ----------      ---------
   Net Interest Income                                           3,513,000      2,422,000
 Provision for Loan Losses                                         105,000        175,000
                                                                ----------      ---------
     Net Interest Income After Provision for Loan Losses         3,408,000      2,247,000
                                                                ----------      ---------
Noninterest Income:
 Service Charges                                                   734,000        460,000
 Trust Fees                                                         58,000         47,000
 Other Income                                                       51,000        152,000
                                                                ----------      ---------
  Total Noninterest Income                                         843,000        659,000
                                                                ----------      ---------
Noninterest Expenses:
 Salaries and Employee Benefits                                  1,533,000      1,079,000
 Net Occupancy Expense                                             343,000        229,000
 Distributions on Guaranteed Preferred Beneficial Interests
  in the Company's Subordinated Debentures                         276,000              0
 Equipment Expense                                                 265,000        214,000
 Amortization of Intangible Assets                                 166,000         56,000
 Stationery, Printing and Supplies Expense                         123,000         98,000
 Professional Fees                                                  94,000         63,000
 Net Costs Applicable to Other Real Estate
  and Other Repossessed Assets                                      28,000         26,000
 Other Expenses                                                    498,000        418,000
                                                                ----------       --------
  Total Noninterest Expenses                                     3,326,000      2,183,000
                                                                ----------      ---------
     Income Before Federal Income Taxes                            925,000        723,000
 Federal Income Taxes                                              296,000        268,000
                                                                ----------      ---------
Net Income                                                         629,000        455,000
Other Comprehensive Income, Net of Taxes:
 Unrealized Holding Gains (Losses) on Available-for-sale
  Securities Arising During the Period                            (151,000)        17,000
                                                                ----------      ---------
 Comprehensive Income                                          $   478,000     $  472,000     
                                                               ===========     ==========
Preferred Stock Dividends                                      $     5,000      $   6,000
                                                               ===========      =========
Net Income Available to Common Stockholders                    $   624,000     $  449,000
                                                               ===========     ==========
Basic Earnings Per Common Share Available to Common
 Stockholders                                                  $      0.28      $    0.23
                                                               ===========      =========
Diluted Earnings Per Common Share Available to Common
 Stockholders                                                  $      0.27      $    0.22
                                                               ===========      =========
</TABLE>


   See Accompanying Notes to Consolidated Financial Statements.
                                 
                                -4-
                                 

<PAGE>
                                 
                   INDEPENDENT BANKSHARES, INC.
               CONSOLIDATED STATEMENTS OF CASH FLOWS
              QUARTERS ENDED MARCH 31, 1999 AND 1998
                            (Unaudited)
<TABLE>
<CAPTION>
                                                                            1999          1998
                                                                         ---------      --------
<S>                                                                      <C>            <C>          
Cash Flows from Operating Activities:
 Net Income                                                             $ 629,000       $ 455,000 
Adjustments to Reconcile Net Income to Net Cash Provided by
 Operating Activities:
 Deferred Federal Income Tax Expense                                      120,000         110,000
 Depreciation and Amortization                                            357,000         201,000
 Provision for Loan Losses                                                105,000         175,000
 Gains on Sale of Premises and Equipment                                   (1,000)              0
 Gains on Sales of Other Real Estate and Other Repossessed
  Assets                                                                        0          (3,000)
 (Increase) Decrease in Accrued Interest Receivable                      (228,000)        122,000
 Decrease in Other Assets                                                 104,000          55,000
 Decrease in Accrued Interest Payable                                    (160,000)        (68,000)
 Increase in Other Liabilities                                             89,000          94,000
                                                                       ----------       ---------
     Net Cash Provided by Operating Activities                          1,015,000       1,141,000
                                                                       ----------       ---------
Cash Flows from Investing Activities:
 Proceeds from Maturities of Available-for-sale Securities              1,261,000       5,156,000
 Proceeds from Maturities of Held-to-maturity Securities               23,344,000       8,957,000
 Purchases of Available-for-sale Securities                           (16,510,000)     (2,004,000)
 Purchases of Held-to-maturity Securities                             (19,007,000)     (5,450,000)
 Net (Increase) Decrease in Loans                                        (330,000)        310,000
 Proceeds from Sales of Premises and Equipment                              1,000               0
 Additions to Premises and Equipment                                      (88,000)        (38,000)
 Proceeds from Sales of Other Real Estate and Other Repossessed
  Assets                                                                  484,000         614,000
                                                                       ----------      ----------
   Net Cash Provided by (Used in) Investing Activities                (10,845,000)      7,545,000
                                                                       ----------      ----------

Cash Flows from Financing Activities:
 Increase (Decrease) in Deposits                                       (6,730,000)      4,009,000
 Repayment of Notes Payable                                                (1,000)        (52,000)
 Payment of Cash Dividends                                               (116,000)       (105,000)
                                                                       ---------       ----------
   Net Cash Provided (Used in) by Financing Activities                 (6,847,000)      3,852,000
                                                                       ----------      ----------
Net Increase (Decrease) in Cash and Cash Equivalents                  (16,677,000)     12,538,000
Cash and Cash Equivalents at Beginning of Period                       64,737,000      39,418,000
                                                                       ----------      ----------

Cash and Cash Equivalents at End of Period                            $48,060,000     $51,956,000
                                                                      ===========     ===========
Noncash Investing Activities:
  Additions to Other Real Estate and Other Repossessed
   Assets Through Foreclosures                                        $   204,000     $   355,000
  Sales of Other Real Estate and Other Repossessed
   Assets Financed with Loans                                                   0          60,000

</TABLE>

   See Accompanying Notes to Consolidated Financial Statements.

                               -5-


<PAGE>


INDEPENDENT BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     For information with regard to significant accounting
policies, reference is made to Notes to Consolidated Financial
Statements included in the Annual Report on Form 10-K for the year
ended December 31, 1998, which was filed with the Securities and
Exchange Commission pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934, as amended.

     The accompanying financial statements reflect all adjustments
necessary to present a fair statement of the results for the
interim periods presented, and all adjustments are of a normal
recurring nature.

(2)  ACQUISITION OF SUBSIDIARY BANK

     The Company completed the acquisition of Azle Bancorp and its
subsidiary bank, Azle State Bank, Azle, Texas ("Azle State"),
effective September 22, 1998, for an aggregate cash consideration
of $19,025,000.  To obtain funding for the acquisition, the Company
sold an aggregate of 230,000 shares of Common Stock at a price of
$11.50 per share, and Independent Capital Trust, a Delaware
business trust formed by the Company ("Independent Capital"), sold
1,300,000 of its 8.5% Cumulative Trust Preferred Securities (the
"Trust Preferred Securities") at $10.00 per preferred security
(having a liquidation value of $13,000,000) in an underwritten
offering (the "1998 Offering").  The proceeds from the sale of the
Trust Preferred Securities were used by Independent Capital to
purchase an equivalent amount of Subordinated Debentures of the
Company.  The Company also borrowed $4,300,000 from a financial
institution in Fort Worth, Texas (the "Fort Worth Bank") to finance
a portion of the cost of acquiring Azle Bancorp.  The borrowings
from the Fort Worth Bank were paid off on September 30, 1998, from
the proceeds of a cash dividend paid to the Company by Azle State.
At the date of acquisition, Azle Bancorp had total assets of
$93,158,000, total loans, net of unearned income, of $45,163,000
total deposits of $80,955,000 and stockholders' equity of
$9,872,000.  This acquisition was accounted for using the purchase
method of accounting.  A total of $8,014,000 of intangible assets,
including $2,895,000 of core deposit intangible and $5,119,000 of
goodwill, was recorded as a result of this acquisition.  The core
deposit intangible is being amortized over a period of 12 years and
the goodwill is being amortized over a period of 25 years.

(3)  TREASURY STOCK

     During the first quarter of 1999, the Company authorized the
repurchase of up to 60,000 shares of the Company's Common Stock in
the open market.  As of March 31, 1999, the Company had repurchased
a total of 48,000 shares of its Common Stock at an average price of
$11.22 per share.  The repurchased shares are currently being held
as treasury stock.


                                -6-
                                 
<PAGE>

(4)  UNEARNED ESOP SHARES

     The Company's Employee Stock Ownership/401(k) Plan (the
"Plan") purchased 18,750 shares of Common Stock in an underwritten
offering (the "1997 Offering") for $214,000.  The funds used for
the purchase were borrowed from the Company.  The note evidencing
such borrowing is due in eighty-four equal monthly installments of
$4,000, including interest, and matures on February 27, 2004.  The
note bears interest at the Company's floating base rate plus 1%
(8.75% at March 31, 1999).  The note is collateralized by the stock
purchased in the 1997 Offering.

     As a result of the lending arrangement between the Company and
the Plan, the shares are considered "unearned."  The shares are
"earned" on a pro rata basis as principal payments are made on the
note.  The shares are included in the Company's earnings per share
calculations only as they are earned.  At March 31, 1999, a total
of 14,271 shares with an original cost of $163,000 are considered
to be unearned.

(5)  EARNINGS PER SHARE

     Basic earnings per common share is computed by dividing net
income available to common stockholders by the weighted average
number of shares and share equivalents outstanding during the
period.  Because the Company's outstanding Series C Cumulative
Convertible Preferred Stock (the "Series C Preferred Stock") is
cumulative, the dividends allocable to such preferred stock reduces
income available to common stockholders in the basic earnings per
share calculations.  In computing diluted earnings per common share
for the quarters ended March 31, 1999 and 1998, the conversion of
the Series C Preferred Stock was assumed, as the effects are
dilutive.  The weighted average common shares outstanding used in
computing basic earnings per common share for the quarters ended
March 31, 1999 and 1998, was 2,202,000 and 1,960,000 shares,
respectively.  The weighted average common shares outstanding used
in computing diluted earnings per common share for the quarters
ended March 31, 1999 and 1998, was 2,312,000 and 2,085,000 shares,
respectively.

(6)  ACCUMULATED OTHER COMPREHENSIVE INCOME

     An analysis of accumulated other comprehensive income for the
quarters ended March 31, 1999 and 1998, is as follows:

                                        Unrealized Gain
                                            (Loss) on
                                        Available-for-sale
                                            Securities
                                        --------------------
                                         1999         1998
                                        -------      -------
                                            (In thousands)
               Balance, at January 1     $ 161        $ 31
               Current period change      (151)         17
                                           ---         ---
                Balance, at March 31     $  10        $ 48
                                           ===         ===


                                -7-
<PAGE>


Item  2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF  FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS

     This Quarterly Report on Form 10-Q contains certain forward-
looking statements and information relating to Independent
Bankshares, Inc. (the "Company") and its subsidiaries that are
based on the beliefs of the Company's management as well as
assumptions made by and information currently available to the
Company's management.  When used in this report, the words
"anticipate," "believe," "estimate," "expect" and "intend" and
words or phrases of similar import, as they relate to the Company
or its subsidiaries or Company management, are intended to identify
forward-looking statements.  Such statements reflect the current
view of the Company with respect to future events and are subject
to certain risks, uncertainties and assumptions related to certain
factors including, without limitation, competitive factors, general
economic conditions, customer relations, the interest rate
environment, governmental regulation and supervision, nonperforming
asset levels, loan concentrations, changes in industry practices,
one time events and other factors described herein.  Based upon
changing conditions, should any one or more of these risks or
uncertainties materialize, or should any underlying assumptions
prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated, expected or
intended.  The Company does not intend to update these forward-
looking statements.

The Company
-----------

     The Company is a bank holding company that, at March 31, 1999,
owned 100% of the common securities of Independent Capital Trust
("Independent Capital") and 100% of Independent Financial Corp.
("Independent Financial") which, in turn, owned 100% of First State
Bank, National Association, Abilene, Texas (the "Bank").  The Bank
currently operates full-service banking locations in the cities of
Abilene (three locations), Azle (two locations), Lubbock, Odessa
(four locations), San Angelo, Stamford and Winters.

     As noted in "Note 2:  Acquisition of Subsidiary Bank," the
Company acquired Azle Bancorp and Azle State Bank, Azle, Texas
("Azle State"), on September 22, 1998.  Azle State was merged with
and into and became a branch of the Bank on March 12, 1999.

Results of Operations
---------------------

General

     The following discussion and analysis presents the more
significant factors affecting the Company's financial condition at
March 31, 1999, and December 31, 1998, and results of operations
for each of the quarters ended March 31, 1999 and 1998.  This
discussion and analysis should be read in conjunction with the
Consolidated Financial Statements, notes thereto and other
financial information appearing elsewhere in this quarterly report.

Net Income

     Net income for the quarter ended March 31, 1999, amounted to
$629,000 ($0.28 basic and $0.27 diluted earnings per common share,
respectively) compared to net income of $455,000 ($0.23

                                -8-

<PAGE>

basic and $0.22 diluted earnings per common share, respectively)
for the quarter ended March 31, 1998.  Net income and earnings per
share increased in 1999 primarily due to the acquisition of Azle
State, an increase in the Company's net interest margin and a
reduction in the amount of the provision for loan losses recorded
for the first quarter of 1999 compared to the first quarter of
1998.

Net Interest Income

     Net interest income represents the amount by which interest
income on interest-earning assets, including loans and securities,
exceeds interest paid on interest-bearing liabilities, including
deposits and other borrowed funds.  Net interest income is the
principal source of the Company's earnings.  Interest rate
fluctuations, as well as changes in the amount and type of interest-
earning assets and interest-bearing liabilities, combine to affect
net interest income.

     Net interest income amounted to $3,513,000 for the first
quarter of 1999, an increase of $1,091,000, or 45.0%, from the
first quarter of 1998.  Net interest income for the first quarter
of 1998 was $2,422,000.  The increase in 1999 was due to the
acquisition of Azle State effective September 22, 1998.  The net
interest margin on a fully taxable-equivalent basis, increased from
4.10% for the first quarter of 1998, to 4.47% for the first quarter
of 1999, which was a slight increase from the 4.45% recorded during
the fourth quarter of 1998.  The increase in the net interest
margin from the first quarter of 1998 to the first quarter of 1999
is due primarily to a 50-basis point decrease in the Company's
overall cost of funds and a shift within the Company's loan
portfolio to more commercial and real estate loans and away from
lower-yielding indirect installment loans.

     At March 31, 1999, approximately $49,002,000, or 26.6%, of the
Company's total loans, net of unearned income, were loans with
floating interest rates.  Average overall rates paid for various
types of certificates of deposit decreased from March 31, 1998, to
March 31, 1999.  For example, the average rate paid for
certificates of deposit less than $100,000 decreased from 5.29% for
the first quarter of 1999 to 4.89% for the first quarter of 1999,
while the average rate paid by the Company for certificates of
deposit of $100,000 or more also decreased from 5.37% during the
first quarter of 1998 to 4.98% during the first quarter of 1999.
Rates on other types of deposits, such as interest-bearing demand,
savings and money market deposits, decreased from an average of
2.69% during the first quarter of 1998 to an average of 2.14%
during the first quarter of 1999.  These changes caused the
Company's overall cost of interest-bearing deposits to decrease
from 4.29% for the first three months of 1998 to 3.79% for the
first three months of 1999.

     The following table presents the average balance sheets of the
Company for the quarters ended March 31, 1999 and 1998, and
indicates the interest earned or paid on the major categories of
interest-earning assets and interest-bearing liabilities on a fully
taxable-equivalent basis and the average rates earned or paid on
each major category.  This analysis details the contribution of
interest-earning assets and the impact of the cost of funds on
overall net interest income.

                                -9-



<PAGE>

<TABLE>
<CAPTION>

                                                                 Quarter Ended March 31,
                                             -------------------------------------------------------------------
                                                          1999                              1998
                                             -------------------------------    --------------------------------
                                                        Interest                               Interest
                                              Average   Income/      Yield/     Average        Income/   Yield/
                                              Balance   Expense       Rate      Balance        Expense    Rate          
                                              -------   --------     ------     --------       -------   -------
                                                                    (Dollars in thousands)
<S>                                           <C>       <C>          <C>        <C>            <C>       <C>         
ASSETS(1)
Interest-earning assets:
  Loans, net of unearned income (2)          $184,347   $  4,239      9.20%     $139,643       $  3,144    9.01%
  Securities  (3)                             100,485      1,463      5.82        66,584          1,018    6.12
  Federal funds sold                           34,475        411      4.77        30,325            414    5.46
                                             --------     ------      ----      --------        -------    ----
     Total  interest-earning  assets          319,307      6,113      7.66       236,552          4,576    7.74
Noninterest-earning assets:                  --------     ------      ----      --------        -------    ----
Cash and due from banks                        20,271                             14,019
Intangible Assets                              10,687                              3,130
Premises and equipment                         10,203                              7,473
Accrued interest receivable 
   and other assets                             6,483                              4,921
Allowance for possible loan losses             (1,796)                            (1,103)
                                             --------                           ---------
      Total noninterest-earning assets         45,848                             28,440
                                             --------                           --------
        Total assets                         $365,155                           $264,992
                                             ========                           ========

LIABILITIES AND STOCKHOLDERS' EQUITY(1)
Interest-bearing liabilities:
   Demand, savings and money
    market deposits                          $109,215     $  585      2.14%    $ 78,258      $    527     2.69%
   Time deposits                              159,347      1,958      4.92      122,320         1,625     5.31
                                             --------     ------      ----      -------       -------    -----
   Total interest-bearing deposits            268,562      2,543      3.79      200,578         2,152     4.29
   Note payable                                    0           0        --            6             1     7.84
                                             -------      ------      ----      -------        ------    -----
     Total interest-bearing liabilities      268,562       2,543      3.79      200,584         2,153     4.29
                                            --------      ------      ----      -------        ------    -----
Noninterest-bearing liabilities
   Demand deposits                            56,855                             42,135
   Accrued interest payable and
    other liabilities                          2,110                              1,458
                                             -------                            ------- 
Total noninterest-bearing liabilities         58,965                             43,593
                                             -------                            ------- 
   Total liabilities                         327,527                            244,177
Guaranteed preferred beneficial
 interests in the Company's
 subordinated debentures                      13,000                                  0
Stockholders' equity                          24,628                             20,815
                                             -------                            -------
     Total liabilities and
      stockholders' equity                  $365,135                           $ 264,992
                                            ========                            ========
Net interest income                                        $3,570                                  $  2,423
                                                         ========                                  ========
Interest rate spread (4)                                              3.87%                                         3.45%
                                                                      ====                                          =====
Net interest margin (5)                                               4.47%                                         4.10%
______________________________                                        ====                                          =====

(1)    The Average Balance and Interest Income/Expense columns include the
       balance sheet and income statement accounts of Azle State from September
       22, 1998, the date of acquisition of such bank.
(2)    Nonaccrual loans are included in the Average Balance columns, and income
       recognized on these loans, if any, is    included in the Interest
       Income/Expense columns.  Interest income on loans includes fees on loans,
       which are not   material in amount.
(3)    Nontaxable interest income on securities was adjusted to a taxable yield
       assuming a tax rate of 34%.
(4)    The interest rate spread is the difference between the average yield on
       interest-earning assets and the average cost of interest-bearing
       liabilities.
(5)    The net interest margin is equal to net interest income, on a fully
       taxable-equivalent basis, divided by average interest-earning assets.

</TABLE>

                                      -10-

<PAGE>

     The following table presents the changes in the components of
net interest income and identifies the part of each change due to
differences in the average volume of interest-earning assets and
interest-bearing liabilities and the part of each change due to the
average rate on those assets and liabilities.  The changes in
interest due to both rate and volume in the table have been
allocated to volume or rate change in proportion to the absolute
amounts of the change in each.

                                             March 31, 1999 vs 1998(1)
                                             --------------------------
                                             Increase (Decrease) Due To
                                                  Changes In
                                             --------------------------
                                             Volume    Rate     Total
                                             -------   ------  -------
                                                    (In thousands)
Interest-earning assets:
 Loans, net of unearned income (2)           $1,007   $   88  $  1,095
 Securities (3)                                 520      (75)      445
 Federal funds sold                              56      (59)       (3)
                                             ------    -----   -------
   Total interest income                      1,583      (46)   1,537
                                             ------    -----   -------
Interest-bearing liabilities:
 Deposits:
  Demand, savings and money market deposits     208     (150)      58
  Time deposits                                 489     (156)     333
                                             ------   ------   ------
   Total interest-bearing deposits              697     (306)     391
 Note payable                                    (1)      --       (1)
                                             ------   ------   ------
     Total interest expense                     696     (306)     390
                                             ------   ------   ------
Increase in net interest income              $  887   $  260  $ 1,147
                                             ======   ======  =======
______________________________
(1)  Income statement items include the income statement accounts
     of Azle State beginning September 22, 1998, the date of
     acquisition of such bank.
(2)  Nonaccrual loans have been included in average assets for the
     purposes of the computations, thereby reducing yields.
(3)  Information with respect to tax-exempt securities is provided
     on a fully taxable-equivalent basis assuming a tax rate of
     34%.

Provision for Loan Losses

     The amount of the provision for loan losses is based on
periodic (not less than quarterly) evaluations of the loan
portfolio, especially nonperforming and other potential problem
loans.  During these evaluations, consideration is given to such
factors as: management's evaluation of specific loans; the level
and composition of nonperforming loans; historical loss experience;
results of examinations by regulatory agencies; an internal asset
review process conducted by the Company that is independent of the
management of the Bank; expectations of future economic conditions
and their impact on particular industries and individual borrowers;
the market value of collateral; the strength of available
guarantees; concentrations of credits; and other judgmental
factors.  The provision for loan losses for the quarter ended March
31, 1999 was $105,000, compared to $175,000 for the quarter ended
March 31, 1998.  The provision for the first quarter of 1999 was
smaller than the first quarter of 1998 due to a lower level of
charge-offs.  Of the total charge-offs of $142,000 during the first
quarter of 1999, $123,000, or 86.7%, were indirect installment
loans.  The Bank is continuing to make some indirect installment
loans; however, the Company is attempting to reduce its reliance on
such loans by increasing commercial and real estate loans.  See
"Analysis of

                               -11-

<PAGE>

Financial Condition - Loan Portfolio" below. In management's
opinion, the overall quality of the Company's loan portfolio has
continued to improve.

Noninterest Income

     Noninterest income increased $184,000, or 27.9%, from $659,000
during the first quarter of 1998 to $843,000 during the first
quarter of 1999.

     Service charges on deposit accounts and on other types of
services are the major source of noninterest income to the Company.
This source of income increased from $460,000 during the first
three months of 1998 to $734,000 during the first three months of
1999, a $274,000, or 59.6%, increase.  The increase was primarily
due to the acquisition of Azle State during September 1998, which
accounted for $162,000 or 59.1% of the increase and an increase in
rates on selected charges during the first quarter of 1998.

     Trust fees from the operation of the trust department of the
Bank increased $11,000, or 23.4%, from $47,000 during the first
three months of 1998 to $58,000 during the same period in 1999, as
a result of an overall increase in the value of assets under
management of the trust department and one-time termination fees
assessed during the first quarter of 1999.

     Other income is the sum of several components of noninterest
income including insurance premiums earned on automobiles financed
through the Company's indirect installment loan program, check
printing income, commissions earned on the sale of mutual funds and
annuities, bank card royalty income and other sources of
miscellaneous income.  Other income decreased $101,000, or 66.4%,
from $152,000 during the first quarter of 1998 to $51,000 during
the first quarter of 1999, due to a significant decrease in
insurance premiums received during the first quarter of 1999 on
automobiles financed through the Company's indirect installment
lending program, which loans declined as a result of a shift by the
Company to more commercial and real estate lending.

Noninterest Expenses

     Noninterest expenses increased $1,143,000, or 52.4%, from
$2,183,000 during the first quarter of 1998 to $3,326,000 during
the first quarter of 1999.  Approximately $825,000, or 72.2%, of
the increase from 1998 to 1999 was due to the acquisition of Azle
State effective September 22, 1998.  An additional $265,000, or
23.2%, of the increase was due to distributions paid on the
Company's 8.5% Cumulative Trust Preferred Securities (the "Trust
Preferred Securities"), which were issued in an underwritten
offering to fund the acquisition of the Azle Bancorp and Azle State
(the "1998 Offering").

     Salaries and employee benefits increased $454,000, or 42.1%,
from $1,079,000 for the first quarter of 1998 to $1,533,000 for the
corresponding period of 1999.  Approximately $415,000, or 91.4%, of
the increase was a result of the acquisition of Azle State
effective September 22, 1998.  The remainder of the increase was
due to the opening of one additional grocery store branch location
in May 1998 and overall salary increases.

                               -12-

<PAGE>

     Net occupancy expense was $343,000 for the first three months
of 1999, an increase of $114,000, or 49.8%, from the $229,000 in
expense recorded during the first three months of 1998.
Approximately $11,000, or 9.6%, of increase was a result of the
opening of the additional branch location and $85,000, or 74.6%, of
the increase was a result of the Azle State acquisition.

     Distributions on guaranteed preferred beneficial interest in
the Company's subordinated debentures totaled $276,000 for the
first quarter of 1999, compared to $0 for the first quarter of
1998.  The Company's Trust Preferred Securities were issued in
September 1998 in conjunction with the 1998 Offering.

     Equipment expense increased from $214,000 for the first
quarter of 1998 to $265,000 for the corresponding period in 1999,
representing an increase of $51,000, or 23.8%.  The entire increase
was due to the acquisition of Azle State.

     Amortization of intangible assets increased $110,000, or
196.4%, from $56,000 for the first quarter of 1998 to $166,000 for
the first quarter of 1999 as a result of the core deposit
intangible and goodwill incurred in conjunction with the
acquisition of Azle State.

     Stationery, printing and supplies expense increased $25,000,
or 25.5%, from $98,000 for the first three months of 1998 to
$123,000 for the first three months of 1999.  Approximately 88% of
the increase was a result of the acquisition noted above.

     Professional fees, which include legal and accounting fees,
increased $31,000, or 49.2%, from $63,000 during the first quarter
of 1998 to $94,000 during the same period of 1999.  Approximately
71% of the increase was due to the Azle State acquisition.

     Net costs applicable to other real estate and other
repossessed assets consist of expenses associated with holding and
maintaining repossessed assets, the net gain or loss on the sales
of such assets, the write-down of the carrying value of the assets
and any rental income that is credited as a reduction in expense.
The Company recorded net costs of $28,000 during the first quarter
of 1999 and $26,000 during the first quarter of 1998.  Of the
$28,000 in net costs incurred in 1999, $26,000 represented net
costs associated with other repossessed assets, primarily
automobiles.

     Other noninterest expense includes, among many other items,
postage, data processing, due from bank account charges,
advertising, travel and entertainment, insurance, loan expenses,
directors' fees, dues and subscriptions, regulatory examinations,
franchise taxes, charges and Federal Deposit Insurance Corporation
("FDIC") insurance expense.  These expenses increased $80,000, or
19.1%, from $418,000 for the first quarter of 1998 to $498,000 for
the first quarter of 1999.  All of the increase was due to the
acquisition of Azle State.

Federal Income Taxes

     The Company accrued $296,000 and $268,000 in federal income
taxes in the first quarter of 1999 and 1998, respectively.  As a
result of an increase in nontaxable income on obligations of states
and political subdivisions owned by Azle State, the Company's
effective tax rate decreased

                               -13-

<PAGE>

from approximately 37% during the first quarter of 1998 to
approximately 32% during the first quarter of 1999.

Impact of Inflation

     The effects of inflation on the local economy and on the
Company's operating results have been relatively modest for the
past several years.  Because substantially all of the Company's
assets and liabilities are monetary in nature, such as cash,
securities, loans and deposits, their values are less sensitive to
the effects of inflation than to changing interest rates, which do
not necessarily change in accordance with inflation rates.  The
Company tries to control the impact of interest rate fluctuations
by managing the relationship between its interest rate-sensitive
assets and liabilities.  See "Analysis of Financial Condition -
Interest Rate Sensitivity" below.

Analysis of Financial Condition
-------------------------------
Assets

     Total assets decreased $7,090,000, or 1.9%, from $370,178,000
at December 31, 1998, to $363,088,000 at March 31, 1999, due to a
decrease in noninterest-bearing demand deposits during the first
three months of 1999 at most of the Bank's larger branches.

Cash and Cash Equivalents

     The amount of cash and cash equivalents decreased $16,677,000,
or 25.8%, from $64,737,000 at December 31, 1998, to $48,060,000 at
March 31, 1999, due to purchases of securities during the first
quarter of 1999 with funds that were invested temporarily in
federal funds sold at December 31, 1998, and as a result of a
decrease in deposits during the first three months of 1999.

Securities

     Securities increased $10,606,000, or 11.1%, from $95,208,000
at December 31, 1998, to $105,814,000 at March 31, 1999.  The
increase in 1999 is due to purchases of securities during the first
quarter of 1999 with funds that had been invested temporarily in
federal funds sold at December 31, 1998, as noted above.

     The Board of Directors of the Bank reviews all securities
transactions monthly and the securities portfolio periodically.
The Company's current investment policy provides for the purchase
of U.S. Treasury securities, federal agency securities and mortgage-
backed securities having maturities of five years or less and for
the purchase of state, county and municipal agencies' securities
with maximum maturities of 10 years.  The Company's policy is to
maintain a securities portfolio with staggered maturities to meet
its overall liquidity needs.  Municipal securities must be rated A
or better.  Certain school district issues, however, are acceptable
with a Baa rating.  Securities totaling $45,368,000 are classified
as available-for-sale and are carried at fair value at March 31,
1999.  Securities totaling $60,446,000 are classified as held-to-
maturity and are carried at

                               -14-

<PAGE>
amortized cost.  The decision to sell securities classified as
available-for-sale is based upon management's assessment of changes
in economic or financial market conditions.

     Certain of the Company's securities are pledged to secure
public and trust fund deposits and for other purposes required or
permitted by law.  At March 31, 1999, the book value of U.S.
Treasury and other U.S. Government agency securities so pledged
amounted to $17,244,000, or 16.3% of the total securities
portfolio.

     The following table summarizes the amounts and the
distribution of the Company's securities held at the dates
indicated.

<TABLE>
<CAPTION>

                                            March 31, 1999     December  31, 1998
                                            ---------------    ------------------
                                            Amount      %        Amount     %
                                            ---------------    ------------------   
                                                   (Dollars in thousands)
<S>                                         <C>      <C>         <C>         <C>
Carrying value:
 Obligations of U.S. Government
  agencies and corporations                $ 66,980   63.3%       $61,669    64.8%
 U.S. Treasury securities                    17,213   16.3         11,573    12.2
 Mortgage-backed securities                  11,390   10.8         12,121    12.7
 Obligations of states and political
   subdivisions                               9,212    8.7          9,262     9.7
 Other securities                             1,019    0.9            583     0.6
                                            -------   ----        -------   -----
Total carrying value of securities        $ 105,814  100.0%       $95,208   100.0%
                                          =========  =====        =======   =====
Total fair value of securities            $ 105,677               $95,276
                                          =========               =======
</TABLE>


     The market value of securities classified as held-to-maturity
is usually different from the reported carrying value of such
securities due to interest rate fluctuations that cause market
valuations to change.

     The following table provides the maturity distribution and
weighted average interest rates of the Company's total securities
portfolio at March 31, 1999.  The yield has been computed by
relating the forward income stream on the securities, plus or minus
the anticipated amortization of premiums or accretion of discounts,
to the carrying value of the securities.  The book value of
securities classified as held-to-maturity is their cost, adjusted
for previous amortization or accretion.  The restatement of the
yields on tax-exempt securities to a fully taxable-equivalent basis
has been computed assuming a tax rate of 34%.

                               -15-

<PAGE>
<TABLE>
<CAPTION>


                                                                        Estimated     Weighted
Type and Maturity Grouping            Principal         Carrying           Fair        Average
at March 31, 1999                      Amount             Value            Value        Yield
------------------------------       -----------        --------       ----------      ---------
                                                               (Dollars in thousands)
<S>                                  <C>                <C>            <C>             <C>     
Obligations of U.S. Government
 agencies and corporations:
 Within one year                      $  9,000          $  9,032        $    9,026         5.84%
 After one but within five years        57,700            57,948            57,698         5.55
                                      --------          --------         ---------         -----
  Total obligations of U.S. Government
   agencies and corporations            66,700            66,980            66,724         5.59
                                       -------          --------         --------          -----
U.S. Treasury securities:
 Within one year                         7,000             7,068             7,075         5.97
 After one but within five years        10,000            10,145            10,151         5.19
                                       -------          --------         ---------        -----
  Total U.S. Treasury securities        17,000            17,213            17,226         5.51
                                       -------          --------         ---------         -----

Mortgage-backed securities              11,276            11,390            11,474         5.84
                                       -------         ---------         ---------          ----

Obligations of states and political 
 subdivisions:  Within one year             50                50                50         6.35
 After one but within five years           905               947               949         8.55
 After five but within ten years         4,465             4,698             4,709         9.23
 After ten years                         3,275             3,517             3,526         9.71
                                       -------        ----------         ---------       ------
  Total obligations of states and
  political subdivisions                 8,695             9,212             9,234         9.32
                                       -------        ----------         ---------       ------
Other securities:
 Within one year                             0                 0                 0           --
 After one but within five years             0                 0                 0           --
 After five but within ten years             0                 0                 0           --
 After ten years                         1,019             1,019             1,019         4.83
                                     ---------        ----------         ---------       ------
  Total other securities                 1,019             1,019             1,019         4.83
                                     ---------        ----------         ---------       ------
   Total securities                  $ 104,690         $ 105,814         $ 105,677         5.90%
                                     =========        ==========         =========       ======

</TABLE>


Loan Portfolio

     Total loans, net of unearned income, decreased $467,000, or
0.3%, from $184,560,000 at December 31, 1998, to $184,093,000 at
March 31, 1999.  The decrease during the first quarter of 1999 was
a result of continued net payoffs of the Company's indirect
installment loans.  These payoffs resulted in a decrease of
approximately $4,749,000 in such loans.  This decrease was
partially offset by an aggregate increase in other types of loans
during the first three months of 1999.

     The Bank primarily makes installment loans to individuals and
commercial and real estate loans to small to medium-sized
businesses and professionals.  The Bank offers a variety of
commercial lending products including revolving lines of credit,
letters of credit, working capital loans and loans to finance
accounts receivable, inventory and equipment.  Typically, the
Banks' commercial loans have floating rates of interest, are for
varying terms (generally not exceeding five

                               -16-

<PAGE>

years), are personally guaranteed by the borrower and are
collateralized by accounts receivable, inventory or other business
assets.

     Due to diminished loan demand during the early 1990's, the
Bank instituted an installment loan program whereby it began to
purchase automobile loans from automobile dealerships in its market
areas.  Under this program, an automobile dealership will agree to
make a loan to a prospective customer to finance the purchase of a
new or used automobile.  The different financial institutions that
have a pre-established relationship with the particular dealership
review the transaction, including the credit history of the
prospective borrower, and decide if they would agree to purchase
the loan from the dealership and, if so, at what rate of interest.
The dealership selects the financial institution to which it
decides to sell the loan.  The financial institution purchasing the
loan has a direct loan to the borrower collateralized by the
automobile, and the dealership realizes a profit based on the
difference between the interest rate quoted to the buyer by the
dealership and the interest rate at which the loan is purchased by
the financial institution.  At March 31, 1999, the Company had
approximately $25,141,000, net of unearned income, of this type of
loan outstanding compared to approximately $29,890,000 of this type
loan at December 31, 1998.  The decrease is due to management's
decision to shift the loan portfolio toward more commercial and
real estate loans and less toward indirect installment loans.

     The following table presents the Company's loan balances at
the dates indicated separated by loan types.

                                         March 31,    December 31,
                                           1999          1998
                                         ---------   ------------
                                               (In thousands)
     Real estate loans                    $69,917       $71,901
     Loans to individuals                  60,440        57,564
     Commercial loans                      44,571        47,551
     Other loans                           10,476         9,310
                                          -------      --------
      Total loans                         185,404       186,326
     Less unearned income                   1,311         1,766
                                          -------      --------
      Loans, net of unearned income      $184,093      $184,560
                                         ========      ========

     Loan concentrations are considered to exist when there are
amounts loaned to a multiple number of borrowers engaged in similar
activities that would cause them to be similarly impacted by
economic or other conditions.  The Company had no concentrations of
loans at March 31, 1999 except for those described in the above
table.  The Bank had no loans outstanding to foreign countries or
borrowers headquartered in foreign countries at March 31, 1999.

     Management of the Bank may renew loans at maturity when
requested by a customer whose financial strength appears to support
such renewal or when such renewal appears to be in the Company's
best interest.  The Company requires payment of accrued interest in
such instances and may adjust the rate of interest, require a
principal reduction or modify other terms of the loan at the time
of renewal.

     The following table presents the distribution of the maturity
of the Company's loans and the interest rate sensitivity of those
loans, excluding loans to individuals, at March 31, 1999.  The
table

                               -17-

<PAGE>

also presents the portion of loans that have fixed interest rates
or interest rates that fluctuate over the life of the loans in
accordance with changes in the money market environment as
represented by the prime rate.

<TABLE>
<CAPTION>
                                                       One to           Over          Total
                                         One Year       Five            Five         Carrying
                                         and Less      Years            Years         Value
                                         ---------     --------       --------     ------------
                                                            (In thousands)
     <S>                                 <C>          <C>             <C>          <C>
     Real estate loans                   $ 11,807     $ 44,100        $ 14,010      $  69,917
     Commercial loans                      20,356       20,543           3,672         44,571
     Other loans                            7,086        2,900             490         10,476
                                         --------      -------        --------     ----------
      Total loans                        $ 39,249     $ 67,543        $ 18,172      $ 124,964
                                         ========     ========        ========     ==========

     With fixed interest rates           $ 16,865      $48,841        $ 11,599     $   77,305
     With variable interest rates          22,384       18,702           6,573         47,659
                                         --------      -------        ---------    ----------
      Total loans                        $ 39,249      $67,543        $ 18,172     $  124,964
                                         ========     ========       =========     ==========

</TABLE>

Allowance for Possible Loan Losses

     Implicit in the Company's lending activities is the fact that
loan losses will be experienced and that the risk of loss will vary
with the type of loan being made and the creditworthiness of the
borrower over the term of the loan.  To reflect the currently
perceived risk of loss associated with the Company's loan
portfolio, additions are made to the Company's allowance for
possible loan losses (the "allowance").  The allowance is created
by direct charges against income (the "provision" for loan losses),
and the allowance is available to absorb possible loan losses.  See
"Results of Operations - Provision for Loan Losses" above.

     The amount of the allowance equals the cumulative total of the
loan loss provisions made from time to time, reduced by loan charge-
offs, and increased by recoveries of loans previously charged off.
The Company's allowance was $1,849,000, or 1.00% of loans, net of
unearned income, at March 31, 1999, compared to $1,842,000, or
1.00% of loans, net of unearned income, at December 31, 1998.

     Credit and loan decisions are made by management and the Board
of Directors of the Bank in conformity with loan policies
established by the Board of Directors of the Company.  The
Company's practice is to charge off any loan or portion of a loan
when it is determined by management to be uncollectible due to the
borrower's failure to meet repayment terms, the borrower's
deteriorating or deteriorated financial condition, the depreciation
of the underlying collateral, the loan's classification as a loss
by regulatory examiners or for other reasons.  The Company charged
off $142,000 in loans during the first quarter of 1999.  Recoveries
during the first quarter of 1999 were $44,000.

     The following table presents the provisions for loan losses,
loans charged off and recoveries on loans previously charged off,
the amount of the allowance, the average loans outstanding and
certain pertinent ratios for the quarters ended March 31, 1999 and
1998.

                               -18-



<PAGE>

<TABLE>
<CAPTION>
                                                                      March 31,
                                                                 -------------------------
                                                                   1999          1998
                                                                 --------     -----------
                                                                  (Dollars  in thousands)
     <S>                                                         <C>           <C>
     Analysis of allowance for possible loan losses:
      Balance, at January 1                                       $  1,842       $ 1,173
        Provision   for  loan   losses                                 105            175
                                                                  --------        -------
                                                                     1,947          1,348
                                                                  --------        --------
     Loans charged off: 
         Real estate loans                                               0             40
         Loans to individuals                                          141            200
         Commercial loans                                                1              0
         Other loans                                                     0              0
                                                                  --------        -------
          Total charge-offs                                            142            240
                                                                  --------        -------
     Recoveries of loans previously
      charged off:
         Real estate loans                                               0              0
         Loans to individuals                                           35              7
         Commercial loans                                                9              6
         Other loans                                                     0              0
                                                                  --------        -------
          Total recoveries                                              44             13
                                                                  --------        -------
           Net loans charge-offs                                        98            227
                                                                  --------        -------
      Balance, at March 31                                        $  1,849        $ 1,121
                                                                 =========        =======

     Average loans outstanding, net of
       unearned income                                           $ 184,347      $ 139,643
                                                                 =========      =========
     Ratio of net loan charge-offs to average loans
       outstanding, net of unearned income (annualized)              0.21%           0.65%
                                                                 =========      =========
     Ratio of allowance for possible loan losses to total loans,
       net  of  unearned  income, at  March  31                      1.00%           0.80%
                                                                 =========      ==========
</TABLE>


     Foreclosures on defaulted loans result in the Company
acquiring other real estate and other repossessed assets.
Accordingly, the Company incurs other expenses, specifically net
costs applicable to other real estate and other repossessed assets,
in maintaining, insuring and selling such assets.  The Company
attempts to convert nonperforming loans into interest-earning
assets, although usually at a lower dollar amount than the face
value of such loans, either through liquidation of the collateral
securing the loan or through intensified collection efforts.

     As the economies of the Company's market areas recovered and
stabilized over the past several years, there was a steady
reduction in the amount of the provisions, as a percentage of
average loans outstanding, necessary to maintain an adequate
balance in the allowance.  This reflected not only the loan loss
trend, but management's assessment of the continued reduction of
credit risks associated with the loan portfolio.  The Company
increased the provision in the first quarter of 1998, however, due
to higher than normal charge-offs in the Company's indirect
installment loan portfolio, which, as noted above, continues to
decline. As noted above, the Company made a smaller provision
during the first quarter of 1999 due to decreased loan charge-offs
during that time period.

     The amount of the allowance is established by management based
upon estimated risks inherent in the existing loan portfolio.
Management reviews the loan portfolio on a continuing basis to
evaluate potential problem loans.  This review encompasses
management's estimate of current economic conditions and the
potential impact on various industries, prior loan loss experience
and

                               -19-

<PAGE>


the financial conditions of individual borrowers.  Loans that have
been specifically identified as problem or nonperforming loans are
reviewed on at least a quarterly basis, and management critically
evaluates the prospect of ultimate losses arising from such loans,
based on the borrower's financial condition and the value of
available collateral.  When a risk can be specifically quantified
for a loan, that amount is specifically allocated in the allowance.
In addition, the Company allocates the allowance based upon the
historical loan loss experience of the different types of loans.
Despite such allocation, both the allocated and unallocated
portions of the allowance are available for charge-offs for all
loans.

     The following table shows the allocations in the allowance and
the respective percentages of each loan category to total loans at
March 31, 1999 and December 31, 1998

<TABLE>
<CAPTION>

                                     March 31, 1999                December 31, 1998
                                   ---------------------------   ---------------------------
                                                   Percent of                     Percent of
                                                   Loans by                        Loans by
                                   Amount of     Category to     Amount of       Category to
                                   Allowance    Loans, Net of    Allowance        Loans, Net of
                                   Allocated to    Unearned     Allocated to       Unearned
                                   Category         Income        Category          Income
                                   ------------  ------------    ------------  -------------
                                                  (Dollars in thousands)
<S>                                <C>            <C>            <C>           <C>
Real estate loans                   $      91          38.0%     $    106          39.0%
Loans to individuals                      716          32.1           577          30.2
Commercial loans                          129          24.2           164          25.8
Other   loans                              16           5.7             9           5.0
                                   ----------      --------      --------       -------

       Total  allocated                   952         100.0%          856         100.0%
Unallocated                               897      ========           986       ======= 
                                   ----------                    --------
Total allowance for possible
  loan losses                       $   1,849                    $  1,842
                                    =========                    ========

</TABLE>


Loan Review Process

     The Company follows a loan review program to evaluate the
credit risk in its loan portfolio.  Through the loan review
process, the Bank maintains an internally classified loan list
that, along with the list of nonperforming loans discussed below,
helps management assess the overall quality of the loan portfolio
and the adequacy of the allowance.  Loans classified as
"substandard" are those loans with clear and defined weaknesses
such as highly leveraged positions, unfavorable financial ratios,
uncertain repayment sources or poor financial condition, which may
jeopardize recoverability of the loan.  Loans classified as
"doubtful" are those loans that have characteristics similar to
substandard loans, but also have an increased risk that a loss may
occur or at least a portion of the loan may require a charge-off if
liquidated at present.  Although loans classified as substandard do
not duplicate loans classified as doubtful, both substandard and
doubtful loans may include some loans that are past due at least 90
days, are on nonaccrual status or have been restructured.  Loans
classified as "loss" are those loans that are in the process of
being charged off.  At March 31, 1999, substandard loans totaled
$678,000, of which $53,000 were loans designated as nonaccrual or
90 days past due.  There were no doubtful loans and loss loans
totaled $56,000.  Of the $56,000 in loans classified as loss,
$45,000 are indirect installment loans that are 120 days past due
and, according to regulatory guidelines, must be classified as a
loss and $11,000 represents the unguaranteed portion of an SBA loan
that is in process of being liquidated.  Substandard, doubtful and
loss loans at December 31, 1998, were $880,000, $5,000 and $10,000,
respectively.

                               -20-

<PAGE>

     In addition to the internally classified loans, the Bank also
has a "watch list" of loans that further assists the Bank in
monitoring its loan portfolio.  A loan is included on the watch
list if it demonstrates one or more deficiencies requiring
attention in the near term or if the loan's ratios have weakened to
a point where more frequent monitoring is warranted.  These loans
do not have all the characteristics of a classified loan
(substandard, doubtful or loss), but do have weakened elements as
compared with those of a satisfactory credit.  Management of the
Bank reviews these loans in assessing the adequacy of the
allowance.  Substantially all of the loans on the watch list at
March 31, 1999, were current and paying in accordance with loan
terms.  At March 31, 1999, watch list loans totaled $1,283,000
(including $177,000 of loans guaranteed by U.S. governmental
agencies).  Of the total loans on the watch list, $554,000 of the
loans involved borrowers who had filed Chapter 13 bankruptcy and
the Bank was awaiting finalization of the individual borrowers'
bankruptcy plans.  At March 31, 1999, $73,000 of loans not
classified and not on the watch list were designated as
restructured loans.  See "Nonperforming Assets" below.

Nonperforming Assets

     Nonperforming loans consist of nonaccrual, past due and
restructured loans.  A past due loan is an accruing loan that is
contractually past due 90 days or more as to principal or interest
payments.  Loans on which management does not expect to collect
interest in the normal course of business are placed on nonaccrual
or are restructured.  When a loan is placed on nonaccrual, any
interest previously accrued but not yet collected is reversed
against current income unless, in the opinion of management, the
outstanding interest remains collectible.  Thereafter, interest is
included in income only to the extent of cash received.  A loan is
restored to accrual status when all interest and principal payments
are current and the borrower has demonstrated to management the
ability to make payments of principal and interest as scheduled.

     A "troubled debt restructuring" is a restructured loan upon
which interest accrues at a below market rate or upon which certain
principal has been forgiven so as to aid the borrower in the final
repayment of the loan, with any interest previously accrued, but
not yet collected, being reversed against current income.  Interest
is accrued based upon the new loan terms.

     Nonperforming loans are fully or substantially collateralized
by assets, with any excess of loan balances over collateral values
allocated in the allowance.  Assets acquired through foreclosure
are carried at the lower of cost or estimated fair value, net of
estimated costs of disposal, if any.  See "Other Real Estate and
Other Repossessed Assets" below.

     The following table lists nonaccrual, past due and
restructured loans and other real estate and other repossessed
assets at March 31, 1999, and December 31, 1998.

                               -21-



<PAGE>


                                         March 31,     December 31,
                                            1999          1998
                                         --------     --------------
                                                 (In thousands)
     Nonaccrual loans                    $   212      $    238
     Accruing loans contractually past
       due over 90 days                      234           198
     Restructured loans                       73           110
     Other real estate and other
       repossessed assets                    350           630
                                           -----      --------
     Total nonperforming assets            $ 869      $  1,176
                                           =====      ========

     The gross interest income that would have been recorded during
the first quarter of 1999 on the Company's nonaccrual loans if such
loans had been current, in accordance with the original terms
thereof and outstanding throughout the period or, if shorter, since
origination, was approximately $6,000.  Interest income totaling
$1,000 was actually recorded (received) on loans that were on
nonaccrual during the first quarter of 1998.

     A potential problem loan is defined as a loan where
information about possible credit problems of the borrower is
known, causing management to have serious doubts as to the ability
of the borrower to comply with the present loan repayment terms and
which may result in the inclusion of such loan in one of the
nonperforming asset categories.  The Company does not believe it
has any potential problem loans other than those reported in the
above table.

Intangible Assets

     Intangible Assets decreased $166,000, or 1.5%, from
$10,831,000 at December 31, 1998, to $10,665,000 at March 31, 1999.
This decrease was due entirely to core deposit intangible and
goodwill amortization expense recorded during the first quarter of
1999.

Premises and Equipment

     Premises and equipment decreased $103,000, or 1.0%, during the
first quarter of 1999, from $10,294,000 at December 31, 1998, to
$10,191,000 at March 31, 1999.  The decrease was due to
depreciation expense of $155,000, which was recorded during the
first quarter of 1999.  This decrease was partially offset by
purchases of small amounts of equipment during the first quarter of
1999.

Accrued Interest Receivable

     Accrued interest receivable consists of interest that has
accrued on securities and loans, but is not yet payable under the
terms of the related agreements.  The balance of accrued interest
receivable increased $228,000, or 7.0%, from $3,254,000 at December
31, 1998, to $3,482,000 at March 31, 1999.  The increase was
primarily a result of the increase in securities, on which interest
is normally collected semiannually, and a decrease in federal funds
sold, on which interest is collected daily.  Of the total balance
at March 31, 1999, $2,019,000, or 58.0%, was interest accrued on
loans and $1,463,000, or 42.0%, was interest accrued on securities.
The amounts of accrued

                               -22-

<PAGE>

interest receivable and percentages attributable to loans and
securities at December 31, 1998, were $1,819,000, or 55.9%, and
$1,435,000, or 44.1%, respectively.

Other Real Estate and Other Repossessed Assets

     Other real estate and other repossessed assets consist of real
property and other assets unrelated to banking premises or
facilities.  Income derived from other real estate and other
repossessed assets, if any, is generally less than that which would
have been earned as interest at the original contract rates on the
related loans.  At March 31, 1999, and December 31, 1998, other
real estate and other repossessed assets had an aggregate book
value of $350,000 and $630,000, respectively.  Other real estate
and other repossessed assets decreased $280,000, or 44.4%, during
the first three months of 1999, primarily due to the sale of
repossessed automobiles.  Of the March 31, 1999, balance, $312,000
represented nineteen (19) repossessed automobiles and $213,000
represented four commercial properties.

Other Assets

     The most significant component of other assets at March 31,
1999, is a net deferred tax asset of $471,000. The balance of other
assets decreased $224,000, or 8.9%, to $2,282,000 at March 31,
1999, from $2,506,000 at December 31, 1998, partially as a result
of a decrease in the Company's net deferred tax asset due to the
utilization of a portion of the Company's tax credit carryforwards.

Deposits

     The Bank's lending and investing activities are funded almost
entirely by core deposits, 50.9% of which are demand, savings and
money market deposits at March 31, 1999.  Total deposits decreased
$6,730,000, or 2.0%, from $330,804,000 at December 31, 1998, to
$324,074,000 at March 31, 1999.  The decrease was due to a decrease
in noninterest-bearing demand deposits.  The Bank does not have any
brokered deposits.

     The following table presents the average amounts of, and the
average rates paid on, deposits of the Company for the quarters
ended March 31, 1999 and 1998.
<TABLE>
<CAPTION>
                                         Quarter Ended March 31,
                                 --------------------------------------
                                       1999                1998
                                 -----------------     -----------------
                                 Average   Average    Average   Average
                                 Amount     Rate     Amount      Rate
                                 ------   -------     -------  ---------
                                     (Dollars in thousands)
<S>                              <C>       <C>       <C>         <C>
Noninterest-bearing demand
 deposits                        $ 56,855    --%     $ 42,135         -- %
Interest-bearing demand, savings
  and money market deposits       109,215   2.14       78,258        2.69
Time deposits of less than
  $100,000                        111,196   4.89       82,904        5.29
Time deposits of $100,000 or
  more                             48,151   4.98       39,416        5.37
                                 --------   ----      -------     -------
  Total deposits                 $325,417   3.13%    $242,713        3.55%
                                 ========   ====     ========     =======

</TABLE>
                               -23-

<PAGE>


     The maturity distribution of time deposits of $100,000 or more
at March 31, 1999, is presented below.

                                              At March 31, 1999
                                            --------------------
                                               (In thousands)
          3 months or less                         $ 15,273
          Over 3 through 6 months                    13,288
          Over 6 through 12 months                   17,034
          Over 12 months                              3,115
                                                   --------

          Total time deposits of $100,000 or more  $ 48,710
                                                   ========

     The Bank experiences relatively limited reliance on time
deposits of $100,000 or more.  Time deposits of $100,000 or more
are a more volatile and costly source of funds than other deposits
and are most likely to affect the Company's future earnings because
of interest rate sensitivity.  At March 31, 1999, and December 31,
1998, deposits of $100,000 or more represented approximately 13.4%
of the Company's total assets.

Accrued Interest Payable

     Accrued interest payable consists of interest that has accrued
on deposits, but is not yet payable under the terms of the related
agreements.  The balance of accrued interest payable decreased
$160,000, or 13.8%, from $1,163,000 at December 31, 1998, to
$1,003,000 at March 31, 1999, due to a decrease in overall interest
rates that are currently being paid on deposits compared to rates
that were paid during 1998.

Other Liabilities

     The most significant components of other liabilities are
amounts accrued for various types of expenses.  The balance of
other liabilities decreased $31,000 or 4.4%, from $706,000 at
December 31, 1998, to $675,000 at March 31, 1999, due to a decrease
in the amount of insurance premiums on indirect automobile loans
that had been collected from loan customers and were payable to the
insurance company.

Interest Rate Sensitivity

     Interest rate risk arises when an interest-earning asset
matures or when its rate of interest changes in a time frame
different from that of the supporting interest-bearing liability.
The Company seeks to minimize the difference between the amount of
interest-earning assets and the amount of interest-bearing
liabilities that could change interest rates in the same time frame
in an attempt to reduce the risk of significant adverse effects on
the Company's net interest income caused by interest rate changes.
The Company does not attempt to match each interest-earning asset
with a specific interest-bearing liability.  Instead, as shown in
the table below, it aggregates all of its interest-earning assets
and interest-bearing liabilities to determine the difference
between the two in specific time frames.  This difference is known
as the rate-sensitivity gap.  A positive gap indicates that more
interest-earning assets than interest-bearing liabilities mature in
a time frame, and a

                               -24-

<PAGE>

 negative gap indicates the opposite.  Maintaining a balanced
position will reduce risk associated with interest rate changes,
but it will not guarantee a stable interest rate spread because the
various rates within a time frame may change by differing amounts
and occasionally change in different directions.  Management
regularly monitors the interest sensitivity position and considers
this position in its decisions in regard to interest rates and
maturities for interest-earning assets acquired and interest-
bearing liabilities accepted.

     The Company's objective is to maintain a ratio of interest-
sensitive assets to interest-sensitive liabilities that is as
balanced as possible.  The following table shows that ratio to be
58.7%% at the 90-day interval, 53.4%% at the 180-day interval and
47.6%% at the 365-day interval at March 31, 1999.  Currently, the
Company is in a liability-sensitive position at the three
intervals.  During an overall declining interest rate environment,
this position would normally produce a higher net interest margin
than in a rising interest rate environment; however, because the
Company had $110,686,000 of interest-bearing demand, savings and
money market deposits at March 31, 1999, that are somewhat less
rate-sensitive, the Company's net interest margin does not
necessarily increase significantly in an overall declining interest
rate environment.  Excluding these types of deposits, the Company's
interest-sensitive assets to interest-sensitive liabilities ratio
at the 365-day interval would have been 84.7% at March 31, 1999.
The interest sensitivity position is presented as of a point in
time and can be modified to some extent by management as changing
conditions dictate.

     The following table shows the interest rate sensitivity position
of the Company at March 31, 1999.

<TABLE>
<CAPTION> 
                                                                                       
                                                                                         Volumes
                                                   Cumulative Volumes                   Subject to
                                                   Subject to Repricing Within            Repricing
                                         --------------------------------------          After       
                                         90 Days     180 Days          365 Days          1 Year          Total
                                         -------     --------          ----------       -----------      ----------
                                                            (Dollars in thousands)
<S>                                      <C>         <C>               <C>            <C>                <C>
Interest-earning assets:
 Federal funds sold                      $ 26,745     $ 26,745          $  26,745       $      0          $  26,745
 Securities                                 7,044       12,566             20,092         85,722            105,814
 Loans, net of unearned income             62,584       69,402             73,306        110,787            184,093
                                         --------     --------           ---------      --------            -------
  Total interest-earning assets            96,373      108,713            120,143        196,509            316,652
                                         --------     --------           --------       --------            -------
Interest-bearing liabilities:
 Demand, savings and money market
  deposits                                110,686      110,686            110,686               0           110,686
 Time deposits                             53,556       92,797            141,848          17,161           159,009
                                         --------     --------           --------        --------           -------
  Total interest-bearing liabilities      164,242      203,483            252,534          17,161           269,695
                                         --------     --------           --------        --------           -------
Rate-sensitivity gap(1)                 $ (67,869)    $(94,770)         $(132,391)       $179,348          $ 46,957
                                         ========     ========           ========        ========           =======
Rate-sensitivity ratio(2)                   58.7%        53.4%              47.6%     
______________________________
(1)  Rate-sensitive interest-earning assets less rate-sensitive interest-bearing
     liabilities.
(2)  Rate-sensitive interest-earning assets divided by rate-sensitive interest-
     bearing liabilities.

</TABLE>
                               -25-

<PAGE>

Selected Financial Ratios

     The following table presents selected financial ratios
(annualized) for the quarters ended March 31, 1999 and 1998.

                                                Quarter Ended
                                                   March 31,
                                                ---------------
                                                1999      1998
                                                ------   ------
Net income to:
  Average assets                                0.69%     0.69%
  Average interest-earning assets               0.79      0.77
  Average stockholders' equity                 10.22      8.74
Dividend payout (1) to:
  Net income                                   17.65     21.75
  Average stockholders' equity                  1.80      1.90
Average stockholders' equity to:
  Average total assets                          6.74      7.85
  Average loans (2)                            13.36     14.91
  Average total deposits                        7.57      8.58
Average interest-earning assets to:
  Average total assets                         87.44     89.27
  Average total deposits                       98.12     97.46
  Average total liabilities                    97.49     96.88
Ratio to total average deposits of:
  Average loans (2)                            56.65     57.53
  Average noninterest-bearing deposits         17.47     17.36
  Average interest-bearing deposits            82.53     82.64
Total interest expense to total interest
  income                                       41.99     47.06
Efficiency ratio (3)                           65.56     68.19
_________________________
(1)  Dividends on Common Stock only.
(2)  Before allowance for possible loan losses.
(3)  Calculated as a noninterest expense less distributions on
     guaranteed preferred beneficial interests in the Company's
     subordinated debentures, amortization of intangibles and
     expenses related to other real estate and other repossessed
     assets divided by the sum of net interest income before
     provision for loan losses and total noninterest income,
     excluding securities gains and losses.

LIQUIDITY

The Bank

     Liquidity with respect to a financial institution is the
ability to meet its short-term needs for cash without suffering an
unfavorable impact on its on-going operations.  The need for the
Bank to maintain funds on hand arises principally from maturities
of short-term borrowings, deposit withdrawals, customers' borrowing
needs and the maintenance of reserve requirements.  Liquidity

                               -26-


<PAGE>

 with respect to a financial institution can be met from either
assets or liabilities.  On the asset side, the primary sources of
liquidity are cash and due from banks, federal funds sold,
maturities of securities and scheduled repayments and maturities of
loans.  The Bank maintains adequate levels of cash and near-cash
investments to meet its day-to-day needs.  Cash and due from banks
averaged $20,271,000 during the first quarter of 1999 and
$14,019,000 during the first quarter of 1998.  These amounts
comprised 5.6% and 5.3% of average total assets during the first
three months of 1999 and 1998, respectively.  The average level of
securities and federal funds sold was $134,960,000 during the first
quarter of 1999 and $96,909,000 during the first quarter of 1998.
The increases in average balances from the first quarter of 1998 to
the first quarter of 1999 was primarily due to the acquisition of
Azle State in September 1998.

     There were no sales of securities during the quarters ended
March 31, 1999 and 1998.  At March 31, 1999, $16,150,000, or 17.1%,
of the Company's securities portfolio, excluding mortgage-backed
securities, matured within one year and $69,040,000, or 73.1%,
excluding mortgage-backed securities, matured after one but within
five years.  The Bank's commercial and real estate lending
activities are concentrated in loans with maturities of less than
five years with both fixed and adjustable interest rates, while its
installment lending activities are concentrated in loans with
maturities of three to five years and with fixed interest rates.
The Bank's experience, however, has been that these installment
loans are paid off in an average of approximately thirty months.
At March 31, 1999, approximately $73,306,000, or 39.8%, of the
Company's loans, net of unearned income, matured within one year
and/or had adjustable interest rates.  Approximately $64,524,000,
or 51.6%, of the Company's loans (excluding loans to individuals)
matured within one year and/or had adjustable interest rates.  See
"Analysis of Financial Condition - Loan Portfolio" above.

     On the liability side, the principal sources of liquidity are
deposits, borrowed funds and the accessibility to money and capital
markets.  Customer deposits are by far the largest source of funds.
During the first quarter of 1999, the Company's average deposits
were $325,417,000 or 89.1% of average total assets, compared to
$242,713,000, or 91.6% of average total assets, during the first
quarter of 1998.  The Company attracts its deposits primarily from
individuals and businesses located within the market areas served
by the Bank.  See "Analysis of Financial Condition - Deposits"
above.

     The level of nonperforming assets has squeezed interest
margins and has resulted in noninterest expenses from net operating
costs and write-downs associated with nonperforming assets,
although the ratio of such nonperforming assets to total assets has
generally been decreasing over the past several years. To improve
liquidity, the Bank has implemented various cost-cutting and
revenue-generating measures and extended efforts to reduce
nonperforming assets.

The Company

     The Company depends on the Bank for liquidity in the form of
cash flow, primarily to meet debt service and dividend requirements
and to cover other operating expenses.  This cash flow comes from
three sources: (1) dividends resulting from earnings of the Bank,
(2) current tax liabilities generated by the Bank and
(3) management and service fees for services performed for the
Bank.

                               -27-


<PAGE>

     The payment of dividends to the Company is subject to
applicable law and the scrutiny of regulatory authorities.
Dividends paid by the Bank to Independent Financial during the
first quarter of 1999 were $475,000; in turn, Independent Financial
and Independent Capital Trust paid dividends to the Company
totaling $484,000 during the same time period of 1999.  There were
no dividends paid by the Bank to Independent Financial during the
first quarter of 1998; in turn, Independent Financial paid no
dividends to the Company during the same time period. At March 31,
1999, there were approximately $3,919,000 in dividends available
for payment to Independent Financial by the Bank without regulatory
approval.

     The payment of current tax liabilities generated by the Bank
and management and service fees constituted 46.3% and 2.7%
respectively, of the Company's cash flow from the Bank during the
first quarter of 1999. Pursuant to a tax-sharing agreement, the
Bank pays to the Company an amount equal to its individual tax
liability on the accrual method of federal income tax reporting.
The accrual method generates more timely payments of current tax
liabilities by the Bank to the Company, increasing the regularity
of cash flow and shifting the time value of such funds to the
Company.  In the event that the Bank incurs losses, the Company may
be required to refund tax liabilities previously collected.
Current tax liabilities totaling $433,000 were paid by the Bank to
the Company during the first three months of 1999, compared to a
total of $312,000 during the first three months of 1998.

     From January 1, 1989, through December 31, 1995, the Company
collected federal income taxes from the Bank based on an effective
tax rate of approximately 34% and paid taxes to the federal
government at the rate of approximately 2% as a result of the
utilization of the Company's net operating loss carryforwards for
both regular tax and alternative minimum tax purposes.  At December
31, 1995, the Company's net operating loss carryforwards for
alternative tax purposes had been fully utilized.  As a result, the
Company began paying federal income taxes at the effective tax rate
of approximately 20% during the first quarter of 1996. The net
operating loss carryforwards available for regular federal income
tax purposes were fully utilized by December 31, 1997.   The
Company still has net tax credit carryforwards available for
alternative minimum tax purposes which should not be fully utilized
before December 31, 1999.

     The Bank pays management fees to the Company for services
performed.  These services include, but are not limited to,
financial and accounting consultation, attendance at the Bank's
board meetings, audit and loan review services and related
expenses.  The Bank paid a total of $25,000 and $40,000 in
management fees to the Company in the first quarter of 1999 and
1998, respectively.  The Company's fees must be reasonable in
relation to the management services rendered, and the Bank is
prohibited from paying management fees to the Company if the Bank
would be undercapitalized after any such distribution or payment.

CAPITAL RESOURCES

     At March 31, 1999, stockholders' equity totaled $24,336,000,
or 6.7% of total assets, compared to $24,505,000, or 6.6% of total
assets, at December 31, 1998.

                               -28-

<PAGE>


     Bank regulatory authorities in the United States have risk-
based capital standards by which all bank holding companies and
banks are evaluated in terms of capital adequacy.  These guidelines
relate a banking company's capital to the risk profile of its
assets.  The risk-based capital standards require all banking
companies to have Tier 1 capital of at least 4% and total capital
(Tier 1 and Tier 2 capital) of at least 8% of risk-weighted assets,
and to be designated as well-capitalized, the banking company must
have Tier 1 and total capital ratios of at least 6% and 10%,
respectively. For the Company, Tier 1 capital includes common
stockholders' equity and qualifying Series C Cumulative Convertible
Preferred Stock (the "Series C Preferred Stock") and guaranteed
preferred beneficial interest in the Company's subordinated
debentures, reduced by intangible assets.  For the Company, Tier 2
capital is comprised of the remainder of the guaranteed preferred
beneficial interests in the Company's subordinated debentures not
qualifying for Tier 1 capital and all of the allowance for possible
loan losses.

     Banking regulators also have leverage ratio requirements.  The
leverage ratio requirement is measured as the ratio of Tier 1
capital to adjusted quarterly average assets.  The leverage ratio
standards require all banking companies to have a minimum leverage
ratio of at least 4% and to be designated as well-capitalized, the
banking company must have a leverage ratio of at least 5%.  The
following table provides a calculation of the Company's risk-based
capital and leverage ratios and a comparison of the Company's and
the Bank's risk-based capital ratios and leverage ratios to the
minimum regulatory and well-capitalized minimum requirements at
March 31, 1999.

  The Company                                   March 31, 1999
                                                --------------
                                            (Dollars in thousands)
  Tier 1 capital:
   Common stockholders' equity, excluding
     unrealized gain on available-for-sale
     securities                                    $ 24,134
   Qualifying Series C Preferred Stock and
     guaranteed preferred beneficial interests in
     the Company's subordinated debentures(1)         8,043
   Intangible assets                                (10,665)
                                                   --------
     Total Tier 1 capital                            21,512
                                                   --------
  Tier 2 capital:
   Guaranteed preferred beneficial interests in
     the Company's subordinated debentures(1)         5,148
   Allowance for possible loan losses (2)             1,849
                                                   --------
     Total Tier 2 capital                             6,997
                                                   --------
      Total capital                                $ 28,509
                                                   ========
  Risk-weighted assets                             $202,106
                                                   ========
  Adjusted quarterly average assets                $362,506
                                                   ========

                               -29-


<PAGE>
<TABLE>
<CAPTION>
                                                 Regulatory  Well-capitalized    Actual Ratios at
The Company                                        Minimum       Minimum           March 31, 1999
-----------                                      ----------  ----------------    ----------------
<S>                                              <C>         <C>                  <C> 
Tier 1 capital to risk-weighted assets ratio        4.00%              6.00%         10.64%
Total capital to risk-weighted assets ratio         8.00              10.00          14.11
Leverage ratio                                      4.00               5.00           5.93

The Bank

Tier 1 capital to risk-weighted assets ratio       4.00%              6.00%           12.19%
Total capital to risk-weighted assets ratio        8.00              10.00            13.07
Leverage ratio                                     4.00               5.00             7.30
___________________________
(1)  Limited to 25% of total Tier 1 capital, with any remainder qualifying as
     Tier 2 capital.
(2)  Limited to 1.25% of risk-weighted assets.

</TABLE>



     The Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA") requires each federal banking agency to
revise its risk-based capital standards to ensure that those
standards take adequate account of interest rate risk,
concentration of credit risk and the risks of non-traditional
activities, as well as reflect the actual performance and
expected risk of loss on multi-family mortgages.  This law also
requires each federal banking agency to specify the levels at
which an insured institution would be considered "well
capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically
undercapitalized."  Under the FDIC's regulations, the Company
and the Bank were both "well capitalized" at March 31, 1999.

     The Company's ability to generate capital internally
through retention of earnings and access to capital markets is
essential for satisfying the capital guidelines for bank holding
companies as prescribed by the Federal Reserve Board.

     The payment of dividends on the Common Stock and the Series
C Preferred Stock is determined by the Company's Board of
Directors in light of circumstances and conditions then
existing, including the earnings of the Company and the Bank,
funding requirements and financial condition and applicable laws
and regulations.  The Company's ability to pay cash dividends is
restricted by the requirement that it maintain a certain level
of capital as discussed above in accordance with regulatory
guidelines.  Holders of the Series C Preferred Stock are
entitled to receive, if, as and when declared by the Company's
Board Of Directors, out of funds legally available therefor,
quarterly cumulative cash dividends at the annual rate of 10%.
The Federal Reserve Board has promulgated a policy prohibiting
bank holding companies from paying dividends on common stock
unless such bank holding company can pay such dividends from
current earnings.  The Federal Reserve Board has asserted that
this policy is also applicable to payment of dividends on
preferred stock.  Such an interpretation may limit the ability
of the Company to pay dividends on the Series C Preferred Stock.

     The Company began paying quarterly cash dividends of $0.03
per share on the Common Stock during the second quarter of 1994.
The Company also paid a 4-for-3 stock split, effected in the
form of a 33 1/3% stock dividend, on May 31, 1995. The Company's
Board of Directors

                              -30-

<PAGE>

increased the Company's quarterly Common Stock cash
dividend to $0.05 per share during the second quarter of 1996.
In addition, the Company paid a 5-for-4 stock split, effected in
the form of a 25% stock dividend, on May 30, 1997.

     At its meeting on April 21, 1999, the Board of Directors of
the Company approved the payment of the regular quarterly cash
dividend of $0.05 per share on May 31, 1999, to shareholders of
record of the Common Stock on May 17, 1999.

YEAR 2000 READINESS DISCLOSURE

     The inability of computers, software and other equipment
utilizing microprocessors to recognize and properly process data
fields containing a four digit year is commonly referred to as
the Year 2000 Compliance issue. As the year 2000 approaches, such
systems may be unable to accurately process certain date-based
information. The Year 2000 will have a broad impact on the
business environment in which the Company operates due to the
possibility that many computerized systems across all industries
will be unable to process information containing the dates
beginning in the Year 2000.

     The Company believes it has identified all significant
applications that will require modification to ensure Year 2000
Compliance.  Internal and external resources are being used to
make the required modifications and test Year 2000 Compliance.
The Company leased virtually all of its computer hardware under
leases that expired during 1998.  The Company replaced this
hardware, as well as the software used for its main operating
system and major banking applications, during this same time
period. The modification process of all significant mission-
critical applications by outside hardware and software suppliers
is complete.  The testing process of all significant mission-
critical applications has been completed and all such hardware
and software tested was found to be Year 2000 compliant.
Management currently anticipates that testing of all nonmission-
critical applications will take place by mid-1999.

      In addition, the Company has had formal communications with
other  vendors with which it does significant business  and  with
significant  loan and deposit customers to determine  their  Year
2000  readiness  and  the  extent to which  the  Company  appears
vulnerable to any third party Year 2000 issues. The Company  will
continue  to  seek  information from  nonresponsive  vendors  and
customers.  There can be no assurance, however, that the  systems
of other companies will be timely converted, or that a failure to
convert  by another company, or a conversion that is incompatible
with  the  Company's systems, would not have a  material  adverse
effect on the Company.

     As a result of the timing of the replacement and upgrade of
the Company's hardware and software, the total cost to the
Company of Year 2000 Compliance activities has not been, and is
not anticipated to be, material to the Company's financial
position or results of operations in any given year.  Year 2000
compliance costs and the date on which the Company plans to
complete the remaining nonmission-critical Year 2000 testing
processes are based on management's best estimates, which were
derived utilizing numerous assumptions of future events,
including the continued availability of certain resources, third
party modification plans and other factors. There can be no
assurance, however, that these estimates will be achieved and
actual results could differ from those plans.

                              -31-




<PAGE>

     The Company has developed a contingency plan and a business
resumption plan to address issues that may not be corrected in a
timely manner by implementation of the Company's own Year 2000
Compliance plan and to address the possibilities that third
party vendor or supplier systems may not be Year 2000 compliant.
The Company has prepared alternate strategies where necessary if
significant exposures are identified.

                              -32-

<PAGE>
                             PART II

                        OTHER INFORMATION

Item 1.   Legal Proceedings.

     The Company is involved in various litigation proceedings
incidental to the ordinary course of business.  In the opinion
of management, the ultimate liability, if any, resulting from
such litigation would not be material in relation to the
Company's financial position or results of operations.

Item 2.   Changes in Securities.

     None

Item 3.   Defaults upon Senior Securities.

     None

Item 4.   Submission of Matters to a Vote of Security Holders.

     At the Company's Annual Meeting of Shareholders held on
Tuesday, April 27, 1999 (the "Annual Meeting"), the following
members were elected to the Board of Directors:

                                         Votes For    Votes Withheld
                                         ---------    --------------
         Mrs. William R. (Amber) Cree    1,765,002       40,702
         Tommy McAlister                 1,765,018       40,686
         Bryan W. Stephenson             1,765,068       40,636
         James D. Webster, M.D.          1,765,018       40,686

     Continuing directors not standing for re-election until the
2000 and 2001 Annual Meetings of Shareholders are Lee Caldwell
(2000), Randal N. Crosswhite (2000), Louis S. Gee (2000),
Marshal M. Kellar (2000), John L. Beckham (2001), Nancy E. Jones
(2001), Scott L. Taliaferro (2001) and C.G. Whitten (2001).

     At the Annual Meeting, the Company's shareholders also
voted on a proposal to approve the 1999 Stock Option Plan, which
plan provides for the grant of incentive and nonqualified stock
options to the employees of the Company and its subsidiaries. A
maximum of 60,000 shares are subject to the granting of options
under the Plan.

The proposal to approve the 1999 Stock Option Plan passed. The
tabulation of the voting was as follows:

               Votes For      Votes Against   Abstentions
               ---------      -------------   -----------
               1,590,259       193,130         22,315

                              -33-

<PAGE>

Item 5.   Other Information.

     None

Item 6.   Exhibits and Reports on Form 8-K.

     (a)  Exhibits

          27.1 Financial Data Schedule

     (b)  Reports on Form 8-K

          None


                              -34-


<PAGE>

                            SIGNATURE


     Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.







Date:  May 17, 1998           Independent Bankshares, Inc.
                              (Registrant)



                             By:  /s/Randal N. Crosswhite
                                --------------------------------
                                Randal N. Crosswhite
                                Senior Vice President and Chief
                                Financial Officer


                              -35-


<PAGE>

                            SIGNATURE


     Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.







Date:  May 17, 1999                Independent Bankshares, Inc.
                                   (Registrant)



                                  By:  __________________________________
                                       Randal N. Crosswhite
                                       Senior Vice President and Chief
                                       Financial Officer