<PAGE>


As filed with the Securities and Exchange Commission on August 25, 2000

                                                      Registration No. 333-40620

================================================================================



                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                             ---------------------

                         AMENDMENT NO. 1 TO FORM S-4 ON
                                    FORM S-1
                             REGISTRATION STATEMENT
                        UNDER THE SECURITIES ACT OF 1933

                             ---------------------

                              ENB BANKSHARES, INC.

             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

<TABLE>
<CAPTION>
<S>                                <C>                             <C>
             Texas                            6712                   75-2885916
-------------------------------    ----------------------------    -------------------
(State or other jurisdiction of    (Primary Standard Industrial    I.R.S. Employer
incorporation or organization      Classification Code Number)     Identification No.)
</TABLE>



                                                          Harold Campbell
  ENB Bankshares, Inc.                                    ENB Bankshares, Inc.
  5006 Verde Valley                                       5006 Verde Valley
  Dallas, Texas 75240                                     Dallas, Texas 75240
  (972) 980-4443                                          (972) 980-4443
---------------------------------------------   --------------------------------
(Address, including ZIP Code, and telephone     Name, address, including ZIP
Code,number, including area code, of            and telephone number, including
registrant's area principal executive offices)  code, of agent for service)



                                With a Copy to:
                              Mark Haynie, Esquire
                           Haynie Rake & Repass, P.C.
                        14651 Dallas Parkway, Suite 136
                              Dallas, Texas 75240
                                 (972) 716-1855
<PAGE>

Approximate date of commencement of the proposed sale of the securities to the
public: As soon as practicable after the effective date of the Registration
Statement. [_]

If the securities being registered on this Form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act, check the
following box. [_]

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. If delivery of the prospectus is expected to be made
pursuant to Rule 434, check the following box.

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Title of Each of                                         Proposed Maximum       Propose Maximum       Amount of
Securities to be                  Amount to be           Offering Price Per    Aggregate Offering   Registration
 Registered                        Registered            Share/Debenture(1)         Price (1)          Fee (2)

----------------------------------------------------------------------------------------------------------------------
<S>                                <C>                   <C>                      <C>                 <C>
Common Stock, $5.00 par            505,750 shares            $  10.13             $5,123,247.50       $1,352.54(3)
 value
----------------------------------------------------------------------------------------------------------------------
9.5% Convertible                $2,500,000                   $  1,000             $   2,500,000       $     660(3)
 Subordinated Debentures(2)
----------------------------------------------------------------------------------------------------------------------
Common Stock                            (2)                        (2)                       (2)             --
 Underlying
 Debentures(2)
----------------------------------------------------------------------------------------------------------------------
Total                                   --                         --                        --       $2,012.54(3)
                                                                                                      ===========
----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Estimated solely for the purpose of calculating the registration fee. In
     accordance with Rule 457(f)(2), the offering price and registration fee
     with respect to the common stock are computed on the book value of $10.13
     per share of the shares of common stock of Eagle National Bank as of March
     31, 2000, the latest practicable date prior to the date of the initial
     filing of this Registration Statement, and estimated based upon the
     issuance of a maximum of 505,750 shares of Registrant's common stock in the
     reorganization of Eagle National Bank as a subsidiary of the Registrant.
     Registrant will issue one share of its common stock in exchange for each
     share of bank stock.

(2)  Includes such indeterminate number of shares of the Registrant's common
     stock as shall be issuable from time to time on conversion of the 9.5%
     Convertible Subordinated Debentures being registered hereunder. No
     additional consideration will be received by the holding company for the
     common stock and therefore no registration fee is required pursuant to Rule
     457(i).

(3)  Filing fee previously paid.

     The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended ("Securities Act"), or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to such Section 8(a), may determine.
<PAGE>


PROXY STATEMENT/PROSPECTUS                                       August __, 2000
                             ENB BANKSHARES, INC.
              Prospectus for up to 505,750 Shares of Common Stock
            and $2,500,000 9.5% Convertible Subordinated Debentures
                        due beginning December 31, 2006
                      Issue Price:  $1,000 per Debenture

                              EAGLE NATIONAL BANK
                                Proxy Statement

     This document is a prospectus of ENB Bankshares, Inc., a Texas business
corporation and the proposed holding company for Eagle National Bank. The
holding company proposes to issue up to 505,750 shares of its common stock to
the shareholders of the bank as part of a reorganization of the bank as the
wholly owned subsidiary of the holding company. The holding company does not
have an operating history. After the reorganization, its common stock will not
be listed on any securities exchange or quoted on NASDAQ or any over the counter
market and will trade, if at all, on a very limited basis.

     This document is also a prospectus for the offering of up to $2,500,000
aggregate principal amount of the holding company's 9.5% convertible
subordinated debentures. The debentures are being offered only to those
shareholders who elect to receive all holding company common stock pursuant to
the reorganization. The debentures will mature and their principal will be
payable in five equal installments, each being 20% of the original principal
amount of the debentures. The principal payments will begin on December 31, 2006
and will continue on December 31 of each following year until December 31, 2010.
The debentures will bear interest at a rate of 9.5% per year, and we will make
the first interest payment on March 15, 2001. After that, we will pay interest
on the debentures each year on the 15th day of June, September, December and
March. The debentures are convertible into shares of holding company common
stock at the price of $15.00 per share, which price is subject to adjustment in
certain events. The debentures are unsecured obligations of the holding company
and your right to payment is subordinated in right of payment to all of our
senior indebtedness. We have the right to redeem the debentures after December
31, 2002. We plan to use the proceeds from the offering of debentures to finance
the purchase of shares of the stock of the bank pursuant to a stock transfer
agreement and pursuant to the reorganization discussed in this document. The
debentures will not be listed on any securities exchange or quoted on NASDAQ or
any over-the-counter market and will trade, if at all, on a very limited basis.

                                                   Per Debenture       Total
                                                   -------------    ----------
Public offering price.............................     $1,000       $2,500,000
Underwriting discounts and commissions............     $    0       $        0
Proceeds, before expenses to us...................     $1,000       $2,500,000

     This document is also a proxy statement of the bank for its Annual Meeting
of Shareholders to be held on Thursday, September 28, 2000, at 10:00 a.m., local
time. At the meeting, shareholders will vote on a proposal to approve and adopt
the reorganization agreement, providing for the reorganization of the bank as
the wholly owned subsidiary of the holding company and the automatic exchange of
each share of bank stock for, at the election of each shareholder, one share of
common stock of the holding company, $15.00 cash, or a combination of both. At
this meeting, shareholders will also vote on a proposal to fix the number of
directors at eleven and to elect eleven directors of the bank to hold office
until the next annual meeting of shareholders or until respective successors are
duly elected and qualified. The proposed reorganization and other matters that
shareholders will vote on at the meeting are described in this document.

     An investment in the debentures and the proposed reorganization involves
elements of risk, some of which are described under the caption "Risk Factors"
beginning on page 16.

     Neither the securities and Exchange Commission, the Federal Deposit
Insurance Corporation, the Federal Reserve Bank of Dallas, the Office of the
Comptroller of the Currency ("OCC"), the Texas Securities Commission nor any
other state securities commission has approved or disapproved these securities
or determined if this document is truthful or complete. Any representation to
the contrary is a criminal offense.

     The debentures and the shares of holding company common stock offered by
this proxy statement/prospectus are not savings accounts, deposits, or other
obligations of a bank or savings association and are not insured by the Federal
Deposit Insurance Corporation ("FDIC") or any other governmental agency. There
can be no assurance that the trading price of the holding company common stock
or value of the debentures being offered will not decrease at any time.

                                       1
<PAGE>


                 SUBJECT TO COMPLETION, DATED August 25, 2000

     Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission ("Commission"). These securities may not be
sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer to
sell or the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any
such State.

                                       2
<PAGE>


                              EAGLE NATIONAL BANK
                               5006 Verde Valley
                              Dallas, Texas 75240

                   NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                         To be Held September 28, 2000

     Eagle National Bank, Dallas, Texas will hold its annual meeting of the
shareholders at the offices of the bank, 5006 Verde Valley, Dallas, Texas 75240,
on September 28, 2000, at 10:00 a.m., local time.

     We are holding this meeting:

     .  To consider and act upon a proposal to form a bank holding company to
        own the bank. Specifically, you are being asked to approve and adopt the
        Agreement and Plan of Reorganization, a copy of which is attached to the
        proxy statement/prospectus as Annex A. This agreement provides for the
                                      -------
        consolidation of New Eagle Bank, Dallas, Texas, a proposed Texas interim
        banking association (the "new bank"), with and into the bank in a
        transaction having the effect of a merger. Upon consummation of the
        reorganization, the bank will become a wholly owned subsidiary of ENB
        Bankshares, Inc., a Texas corporation (the "holding company"), and will
        continue its banking business at the same head office with the same
        management serving the bank as immediately prior to the reorganization.
        Pursuant to the reorganization, shareholders of the bank will have the
        opportunity to elect to receive either shares of voting common stock of
        the holding company, or $15.00 per share in cash or a combination of the
        two choices for each share of bank stock. The shareholders who receive
        stock of the holding company pursuant to the reorganization will be the
        sole shareholders of the holding company;

     .  To fix the number of directors to be elected at eleven and to elect
        eleven directors of the bank to hold office until the next annual
        meeting of shareholders or until their respective successors are duly
        elected and qualified; and

     .  To transact any other business that may properly come before the annual
        meeting.

     The Board of Directors of the bank has selected the close of business on
August 22, 2000, as the record date for the determination of shareholders
entitled to receive notice of and to vote at the annual meeting.  Only
shareholders of the bank of record at the close of business on the record date
are entitled to receive notice of and to vote at the annual meeting.

     You are cordially invited to attend the annual meeting.  Whether or not you
expect to attend the annual meeting in person, however, you are urged to mark,
sign, date and mail promptly the enclosed form of proxy so that your shares of
bank stock may be represented and voted in accordance with your wishes and in
order that the presence of a quorum may be assured at the annual meeting.  Your
Proxy will be returned to you if you should request return of it in the manner
provided in the attached proxy statement/prospectus.

                                    By Order of the Board of Directors
August __, 2000

                                    Harold L. Campbell
                                    Chairman of the Board

                                            1
<PAGE>

                               TABLE OF CONTENTS
<TABLE>

<S>                                                                                                                <C>
Questions and Answers...........................................................................................    3
Summary.........................................................................................................    7
Use of this Proxy Statement/Prospectus..........................................................................   12
Forward-Looking Statements - Cautionary Statement...............................................................   13
Risk Factors....................................................................................................   14
Selected Financial Information..................................................................................   18
Pro Forma Consolidated Financial Statements.....................................................................   20
Summary of Historical and Pro Forma Per Share Selected Financial Data...........................................   27
Price Range of Bank Stock.......................................................................................   30
Management's Discussion and Analysis of Financial Conditions and Results of Operations of the Bank..............   31
Dividend Policy.................................................................................................   53
Capitalization..................................................................................................   54
Beneficial Ownership of the Bank Stock by Significant Shareholders, Directors and Executive Officers............   55
Information about the Annual Meeting............................................................................   56
Proposal 1: The Proposed Reorganization.........................................................................   59
Rights of Dissenting Shareholders...............................................................................   73
Proposal 2: Election of Directors...............................................................................   74
Proposal 3: Other Matters that May Come before the Annual Meeting...............................................   76
Description of the Holding Company..............................................................................   76
Description of the Bank.........................................................................................   83
Management......................................................................................................   88
Description of the Bank's Capital Securities....................................................................   92
Description of the Holding Company's Capital Securities.........................................................   94
Comparison of Shareholder Rights................................................................................   95
Offering of Debentures..........................................................................................  102
Description of Convertible Debentures...........................................................................  102
Independent Auditors............................................................................................  108
Shareholder Proposal............................................................................................  108
Plan of Distribution............................................................................................  108
Legal Matters...................................................................................................  108
Experts.........................................................................................................  108
Where You Can Find More Information.............................................................................  108

Index to Financial Statements...................................................................................  F-1

Annex A-Agreement and Plan of Reorganization....................................................................  A-1
Annex B-Statutes Relating to Dissenters' Rights.................................................................  B-1
Annex C-Fairness Opinion of Hoefer & Arnett, Incorporated.......................................................  C-1
Annex D-Debenture Agreement and Form of Debenture...............................................................  D-1
</TABLE>

                             Available Information

     This proxy statement/prospectus incorporates important business and
financial information that is not included in or delivered with this proxy
statement/prospectus. This information is available without charge to security
holders upon written request or oral request. To obtain timely delivery,
security holders must request the information no later than September 24, 2000,
which is five days prior to the date that security holders must make their
investment decision. Requests should be directed to Patrick G. Adams, ENB
Bancshares, Inc., 5006 Verde Valley, Dallas, Texas 75240, telephone
(972) 980-4443.
                                       2
<PAGE>


                             QUESTIONS AND ANSWERS

     The following questions and answers and the rest of the summary only
highlight information in this document. The remainder of this document and
attached annexes contain more detailed information. We urge you to read the
entire document and annexes to fully understand the reorganization.

                    Questions Regarding the Annual Meeting

Q.   What am I being ask to vote upon?

A.   The board of directors of the bank is asking you to vote:

     .  to approve or disapprove the reorganization agreement, which provides
        for the reorganization of the bank as a wholly owned subsidiary of the
        holding company (Proposal 1);

     .  to elect eleven directors of the bank (Proposal 2); and

     .  upon any other matter that may be properly be submitted to bank
        shareholders at the annual meeting (Proposal 3).

     The Agreement and Plan of Reorganization is attached to this document as
     Annex A. We encourage you to read this agreement as it is the legal
     document that governs the reorganization.

Q.   Why are you reorganizing and forming a bank holding company?

A.   The holding company formation is part of the transaction provided for in
     the transfer agreement.

     The transfer agreement effectively completes a break up of the bank between
     three groups of shareholders and provides for the following two
     transactions:

     .  the sale of the bank stock owned by the selling directors and other
        shareholders who so elect to the holding company for $15.00 per share
        cash; and

     .  the sale by the bank of its Park Cities branch to the Park Cities bank
        established by the selling directors in a purchase and assumption
        transaction in which the new bank will pay a purchase premium of
        $500,000 plus the organization expenses and operating losses associated
        with the Park Cities branch.

     The board of directors of the bank recognizes that you may have a personal
     preference regarding whether you would like to keep your investment in the
     bank or join the selling directors in starting the Park Cities bank and,
     thus, is providing you a choice. The formation of the holding company
     facilitates the financing and consummation of the foregoing transactions.

Q.   How do I vote?

A.   After carefully reading and considering the information contained in this
     document, please fill out and sign the enclosed proxy form. Then mail the
     proxy to the bank in the enclosed prepaid return envelope as soon as
     possible so that your shares will be represented at the annual meeting.
     Your proxy will instruct the persons named on the form as proxy holders to
     vote your shares at the meeting as you direct on the proxy form. The bank's
     board of directors recommends that you vote FOR the election of individuals
     nominated by the board of directors as the directors of the bank and FOR
     the reorganization proposal.

Q.   What will happen to my bank stock if the reorganization is consummated?

A.   The reorganization agreement provides that shareholders of the bank, other
     than the selling directors who have agreed to sell their bank stock and
     those shareholders who exercise dissenters' rights, will be entitled to
     receive one, or a combination of, the following forms of consideration for
     each share of their bank stock

                                       3
<PAGE>


     .  one share of ENB Bankshares common stock; or

     .  $15.00 cash.

     Shareholders who elect to receive cash in the reorganization have been
     given the right by the selling directors under the transfer agreement to
     subscribe for shares of stock in the Park Cities bank at the initial
     offering price.

Q.   How do I indicate what form of consideration I wish to receive?

A.   You must make your election to receive holding company common stock, cash,
     or a combination thereof by completing the enclosed Form of Shareholder
     Election.  You must return the completed and signed Form of Shareholder
     Election to the bank at or prior to the annual shareholders' meeting.  If
     you do not return a completed and signed form by such date, you will be
     deemed to have elected to receive all holding company common stock pursuant
     to the reorganization.

Q.   Will I have to turn in my bank stock certificates?

A.   You must surrender your bank stock certificates at the effective time of
     the reorganization.  At that time, you will receive, depending on the
     election you make, holding company stock certificates, a check for $15.00
     per share for the bank stock surrendered, or a combination of the
     foregoing. If you select the cash option for any portion of your bank
     stock, you will receive instructions relating to an investment in the new
     bank that will own the Park Cities branch.  You will not receive these
     items until you surrender your bank stock certificates and a properly
     completed letter of transmittal.  The holding company will not pay interest
     on the cash consideration to be paid pursuant to the reorganization.

Q:   How will I make my election to purchase stock in the Park Cities bank?

A:   If the reorganization is consummated, we will furnish a list of eligible
     shareholders to the Park Cities bank, and the Park Cities bank will furnish
     offering and subscription materials to the eligible shareholders.

Q:   Will the sale of the Park Cities branch effect the bank?

A:   The bank will receive a purchase premium of $500,000 from the sale of the
     Park Cities branch.  In addition, the bank will recoup its organization
     costs and operating losses of approximately $197,000 in the sale.  This
     will increase the bank's 2000 net income and its capital levels.  The bank
     believes that these benefits outweigh the potential negative effects of
     giving up a location in a separate geographical market area to a new
     competitor.

Q.   How will the proposed transactions affect the value of my investment?

A.   If you elect to receive holding company common stock, the book value of
     your investment will initially decrease because the holding company is
     purchasing shares of bank stock for cash at more than the bank stock's book
     value. We estimate that if the reorganization had been completed at June
     30, 2000, the amount of this dilution would have been approximately $0.80
     per share assuming that the holding company purchases 166,666 shares of
     bank stock for cash. However, your percentage ownership of the holding
     company, and indirectly the bank, will increase as a result of the
     transaction. If the holding company is profitable, the value of your
     investment would increase more quickly because of your increased percentage
     interest.

Q.   How will the holding company finance the acquisition of bank stock from the
     selling directors and other selling shareholders?

A.   To provide the funds for the cash portion of the transaction, the holding
     company is offering for sale $2,500,000 of its 9.5% debentures. In the
     event that the holding company is unable to sell enough debentures to
     provide the entire cash requirements of the transaction, the holding
     company will rely on commercial borrowings. The holding company has
     obtained a loan commitment letter from Wells Fargo Bank providing for a
     loan of up to $1,650,000.

                                       4
<PAGE>


Q.   What if holders of more than 166,666 shares elect to receive cash in the
     reorganization?

A.   The holding company has committed to the Federal Reserve Bank of Dallas
     (its primary regulatory authority) that it will not incur indebtedness
     (either in the form of the debentures or the loan) greater than $2,500,000.
     If the cash requirements of the transaction are greater than $2,500,000,
     the holding company will

     .  first, request permission from the Federal Reserve Bank of Dallas to
        increase the maximum amount of indebtedness,

     .  second, request that all debenture holders convert debentures into
        holding company stock in an amount sufficient to enable the holding
        company to satisfy its debt commitment, and

     .  third, seek additional equity from investors in a private offering.

     If none of these alternatives are successful, the holding company will
     not be able to satisfy its regulatory commitment and will not be able to
     proceed with the transaction.

Q.   Will there be any change in the directors once the share transfer and
     reorganization is complete?

A.   Yes. The transfer agreement provides that the four directors who are
     selling their shares, Randy Pack, Jon Roy Reid, John Yeaman and Tom
     Youngblood, will remain as directors of the bank until the sale of the Park
     Cities branch is completed. Pursuant to the agreement between the bank and
     the selling directors, the selling directors will resign as directors of
     the bank when the sale of the Park Cities branch is completed.  The bank's
     board of directors does not anticipate filling the vacancies created by
     these resignations.

Q.   Will the operations and management of the bank change after the
     reorganization?

A.   The bank will continue to operate from its current main location. However,
     pursuant to the transfer agreement, the bank will longer own the Park
     Cities branch.

     On April 1, 2000, Tom Youngblood resigned as President of the bank to join
     the group of directors seeking to form the new bank to own the Park Cities
     branch.  Upon consummation of the reorganization, Mr. Youngblood will no
     longer be an employee of the bank. Mr. Youngblood will remain an employee
     of the bank until the bank sells the Park Cities branch to the new bank.
     Patrick Adams was appointed as the new President of the bank in April 2000.

Q.   If the shareholders approve the reorganization, when will it occur?

A.   We would like to complete the reorganization as soon as possible after the
     annual meeting. To complete the reorganization, the bank, the interim bank,
     the Park Cities bank, and the holding company must obtain certain
     regulatory approvals. If the necessary approvals are issued in time, the
     bank and holding company anticipate completing the reorganization in the
     fall of 2000. The transfer agreement provides that the agreement may be
     terminated if the transactions are not completed by December 31, 2000.

Q.   Will all of the transactions occur simultaneously?

A.   The transfer agreement provides that the stock transfer and reorganization
     can be completed separately from the branch sale.  If the branch sale
     occurs prior to the stock transfer and reorganization, the holding company
     will pay to the shareholders who signed the transfer agreement interest at
     the Wall Street Journal prime rate from the date of the branch sale until
     the closing date of the stock transfer.

                                       5
<PAGE>


                       Question Regarding the Debentures

Q.   Who can buy the Debentures?

A.   The debentures are being offered only to bank shareholders who elect to
     receive all holding company common stock for their bank stock in the
     reorganization.  Bank shareholders who elect to receive cash for all or a
     portion of their bank stock or who dissent from the reorganization will not
     be entitled to buy debentures.

Q:   How can I subscribe for debentures?

A:   If you elect to receive all holding company common stock pursuant to the
     reorganization and if the reorganization agreement is approved by
     shareholders at the annual shareholders' meeting, we will send you a
     debenture agreement together with instructions for subscribing for
     debentures. We anticipate that subscriptions for debentures together with
     the full amount of the purchase price, will be due by October 16, 2000.

Q.   Who can help answer my questions?

A.   If you have questions about the merger after reading this document, you
     should contact Patrick G. Adams, the bank's President, at 972-980-4443.

                                       6
<PAGE>

                                    SUMMARY

     The following is a brief summary of the material information relating to
the reorganization, the sale of the bank's Park Cities branch and the preemptive
rights offering of the debentures contained elsewhere in this document. This
summary is qualified in its entirety by the more detailed information contained
elsewhere in this document and the annexes to this document. We urge you to read
this document and its annexes carefully and in their entirety.

                         Parties to the Reorganization

ENB Bankshares, Inc.                    The holding company was organized as a
5006 Verde Valley, Dallas, Texas        Texas business corporation on May 18,
75240, telephone: (972) 980-4443        2000 for the purpose of becoming a bank
(page 76)                               holding company subject to supervision
                                        by the Board of Governors of the Federal
                                        Reserve System ("Federal Reserve"). If
                                        the reorganization is consummated, the
                                        holding company will own all of the
                                        shares of stock of the bank. The holding
                                        company has no operating history.

Eagle National Bank                     The bank is a national banking
5006 Verde Valley, Dallas, Texas        association and currently operates
75240, telephone: (972) 980-4443        banking locations in Dallas and Highland
(page 83)                               Park, Texas. The bank engages in a full
                                        service commercial and consumer banking
                                        business. The bank's primary service
                                        area is located in Dallas and Collin
                                        Counties, Texas.

New Eagle Bank                          The interim bank is a proposed interim
5006 Verde Valley, Dallas, Texas        Texas chartered banking institution and
75240, telephone (972) 980-4443         subsidiary of the holding company. It is
                                        being organized as an interim bank
                                        solely to facilitate the proposed
                                        reorganization.

Park Cities Branch (pages 61 and 83)    The full service branch of the bank,
                                        located at 6829 Hillcrest, Dallas,
                                        Texas, is being sold to the Park Cities
                                        bank, which is being organized by the
                                        selling directors.

Selling Directors (page 60)             Randy L. Pack, Jon Roy Reid, John M.
                                        Yeaman and Thomas R. Youngblood, the
                                        directors of the bank that are selling
                                        their 69,000 shares of bank stock to the
                                        holding company and who are organizing
                                        the Park Cities bank.

Park Cities Bank (in organization)      A new Texas banking corporation being
6829 Hillcrest,  Dallas, Texas          established by the selling directors as
75205, telephone (214) 203-0200         a commercial bank. The selling directors
(page 61)                               have agreed to cause the Park Cities
                                        bank to purchase the Park Cities branch
                                        of the bank. After the transaction, the
                                        bank will no longer run the Park Cities
                                        branch and will have no affiliation with
                                        the Park Cities bank.


                                       7
<PAGE>


                              The Annual Meeting

Time, Place and Date of the Annual      The annual meeting will be held at 10:00
Meeting (page 56)                       a.m., local time, on September 28, 2000
                                        at the main office of the bank, 5006
                                        Verde Valley, Dallas, Texas 75240.


Purposes of the Meeting (page 56)       At the Annual Meeting, you will be asked
                                        to consider and vote upon

                                        .  a proposal to approve the
                                           reorganization agreement and

                                        .  a proposal to elect directors of the
                                           bank.

Record Date and Shareholders            You are entitled to vote at the annual
Entitled to Vote (page 57)              meeting if you owned shares of bank
                                        stock at the close of business on August
                                        22, 2000, the record date for the annual
                                        meeting. As of the record date, there
                                        were 574,750 shares of bank stock
                                        entitled to be voted held by
                                        approximately 124 shareholders of
                                        record.

Vote Required (page 57)                 Reorganization Proposal. Approval of the
                                        reorganization requires the affirmative
                                        vote of the holders of 66-2/3% of the
                                        outstanding shares of bank stock.
                                        Failure to vote FOR the reorganization,
                                        either by not returning the enclosed
                                        proxy or by checking the ABSTAIN box on
                                        the proxy, will have the same effect as
                                        a vote AGAINST the reorganization.

                                        Election of Directors. Directors need
                                        the affirmative vote of holders of a
                                        plurality of the voting power present at
                                        the annual meeting to be elected.

Management Ownership (page 55)          As of August 22, 2000, the bank's
                                        directors and executive officers owned,
                                        in the aggregate, 191,900 shares of the
                                        outstanding bank stock, representing an
                                        aggregate of approximately 33% of the
                                        outstanding shares.

Voting (page 57)                        You will have one vote for each share
                                        of our bank stock you owned on the
                                        record date, but you are entitled to
                                        cumulative voting in the election of
                                        directors.

Solicitation of Proxies (page 58)       The proxies are being solicited by the
                                        bank's board of directors. The bank will
                                        pay all of the costs of soliciting
                                        proxies from our shareholders.

Revocation of Proxies (page 58)         You may change your vote at any time
                                        before your shares are voted at the
                                        annual meeting by:

                                        .  giving notice of revocation to Sue
                                           Higgs, Secretary of the bank, 5006
                                           Verde Valley, Dallas, Texas 75240;

                                        .  delivering a properly executed proxy
                                           form bearing a later date to Sue
                                           Higgs; or

                                        .  voting in person after giving notice
                                           to Sue Higgs.

                                        Your attendance at the annual meeting
                                        will not by itself revoke your proxy.


                                       8
<PAGE>


                    Stock Transfer and Bank Sale Agreement

Stock Transfer and Bank Sale          The transfer agreement is between the
Agreement (page 60)                   holding  company, the bank and the selling
                                      directors. It provides for

                                      .  the selling directors to sell their
                                         69,000 shares of bank stock to the
                                         holding company for $15.00 per share
                                         cash; and

                                      .  the sale of the Park Cities branch by
                                         the bank to the Park Cities bank.

                                      The holding company and the selling
                                      directors made this contractual
                                      arrangement to ensure that the bank stock
                                      owned by the selling directors would be
                                      transferred for cash. Accordingly, the
                                      selling directors are obligated to sell
                                      their bank stock for cash and have no
                                      right to elect to receive holding company
                                      stock pursuant to the reorganization

                     Agreement and Plan of Reorganization

Purpose and Effect of the             Upon completion of the reorganization:
Reorganization (page 62)

                                      .  Through a consolidation with an interim
                                         bank subsidiary of the holding company,
                                         the bank will become a wholly owned
                                         subsidiary of the holding company.

                                      .  For each share of bank stock that you
                                         own on the effective date of the
                                         reorganization (other than shares
                                         purchased from the selling directors
                                         and other than shares as to which
                                         dissenters' rights are perfected), you
                                         will be able to elect to receive either

                                         .  one share of holding company common
                                            stock;

                                         .  $15.00 in cash; or

                                         .  a combination of the foregoing.

                                      .  Shareholders who elect to receive cash
                                         in the reorganization will be given a
                                         right by the Park Cities bank to make
                                         an investment in the Park Cities bank.

                                      .  Shareholders who elect to receive all
                                         holding company common stock in the
                                         reorganization will have the right to
                                         subscribe for the debentures.

Reasons for the Reorganization        The following are the reasons for the
(page 62)                             reorganization:

                                      .  The holding company provides a vehicle
                                         to complete the transactions
                                         contemplated by the transfer agreement.


                                       9
<PAGE>


                                      .  The holding company can be an effective
                                         vehicle in financing acquisitions and
                                         in maintaining the independent
                                         franchise value of an acquired
                                         institution.

                                      .  The formation of the holding company
                                         provides an immediate source of
                                         liquidity to those shareholders who
                                         want or need to liquidate their
                                         investment in the bank at this time.

                                      .  The formation of the holding company
                                         should provide a continuing, though
                                         limited, source of liquidity for
                                         shareholders.

                                      .  Subject to the holding company's
                                         financial condition, purchases of newly
                                         issued bank stock or direct capital
                                         contributions by the holding company
                                         can be used to provide future
                                         injections of capital into the bank
                                         when and if needed.

Recommendations of the Board of       The bank's board of directors has
Directors (page 73)                   unanimously approved the reorganization,
                                      and has determined that the terms of the
                                      reorganization are fair to, and in the
                                      best interests of, the bank's
                                      shareholders. The bank's board of
                                      directors unanimously recommends that you
                                      approve the reorganization agreement and
                                      the reorganization.

Fairness Opinion (page 65)            Hoefer & Arnett, our financial advisor,
                                      has delivered their opinion to the bank's
                                      board of directors that, as of the date of
                                      such opinion, the terms of the stock
                                      transfer and branch sale contemplated by
                                      the reorganization agreement and the
                                      transfer agreement are fair from a
                                      financial point of view. The full text of
                                      the Hoefer & Arnett opinion, which has
                                      been updated through the date of this
                                      document, is attached to this proxy
                                      statement as Annex C. You should read this
                                      opinion carefully and in its entirety.

Interests of officers and directors   Our officers and directors have interests
(page 60)                             in the reorganization as employees and
                                      directors that are different from, or in
                                      addition to, your interests as
                                      shareholders. The selling directors have
                                      agreed to sell their shares of bank stock
                                      at $15.00 per share in connection with the
                                      purchase of the Park Cities branch. The
                                      holding company, the bank and the selling
                                      directors would not have agreed to the
                                      $15.00 per share sale price without the
                                      corresponding sale of the Park Cities
                                      branch. Because of this additional
                                      feature, the $15.00 per share cash
                                      purchase price may not be solely
                                      reflective of the fair value of the bank
                                      stock.

Conditions to Consummation of the     The completion of the reorganization
Reorganization (page 69)              depends upon satisfaction of a number of
                                      conditions, including, among other things:

                                      .  approval of the reorganization
                                         agreement by the shareholders of the
                                         bank holding not less than 66-2/3% of
                                         the outstanding shares of bank stock;

                                       10
<PAGE>


                                  .  receipt of all applicable regulatory
                                     approvals; and

                                  .  the purchase by the holding company of
                                     shares of bank stock owned by the
                                     selling directors pursuant to the
                                     transfer agreement.

Termination of Reorganization     The reorganization agreement provides that
Agreement                         it and the reorganization may be
                                  terminated by the mutual consent of the
                                  parties, or by either party upon the
                                  occurrence or nonoccurrence of certain
                                  events including the inability to obtain
                                  regulatory approval.

Material Federal Income Tax       The bank and the holding company will not
Consequences (page 71)            recognize any gain or loss because of the
                                  reorganization. Each shareholder who receives
                                  only holding company common stock will not
                                  recognize any gain or loss because of the
                                  reorganization. Each shareholder who receives
                                  only cash will recognize gain or loss equal to
                                  the amount of cash received less his basis in
                                  bank stock exchanged. Such gain will be
                                  capital gain to the extent the bank stock is
                                  held as a capital asset.

Accounting Treatment (page 72)    The reorganization will be accounted for as a
                                  consolidation in accordance with generally
                                  accepted accounting principles.

Rights of Dissenting              Under the National Bank Act, if holders of the
Shareholders (page 73)            shares of the bank stock dissent from adoption
                                  of the reorganization agreement and the
                                  reorganization, they are entitled to appraisal
                                  rights, provided that they strictly comply
                                  with certain statutory procedures further
                                  explained in detail in this document. A copy
                                  of Section 215 of the United States Code,
                                  which sets forth the rights of dissenting
                                  shareholders under the National Bank Act, is
                                  attached as Annex B to this document.

Price Range of Bank Stock         There has never been an organized or regular
(page 30)                         public trading market for the bank stock. The
                                  bank stock is traded in private transactions.

Selected and Pro Forma Financial  Certain selected historical and pro forma
Information (pages 18 and 20)     financial information of the bank is set forth
                                  under the "Selected Financial Information,"
                                  and "Pro Forma Consolidated Financial
                                  Statements."


                                       11
<PAGE>


                   The Offering of the Debentures (Page 102)

Issuer ..........................    ENB Bankshares, Inc.

Offerees.........................    Only those shareholders who elect to
                                     receive all holding company common stock in
                                     the reorganization may elect to purchase
                                     debentures.

Debentures Offered...............    Up to $2,500,000 principal amount of 9.5%
                                     convertible subordinated debentures

Price per Debenture..............    $1,000

Principal Due....................    We will pay the principal in five annual
                                     installments, each equal to 20% of the
                                     original principal amount of the
                                     debentures, beginning on December 31, 2006
                                     and continuing on December 31 of each
                                     following year until December 31, 2010

Interest.........................    Annual fixed rate - 9.5%

                                     Interest payment frequency:

                                     .   First payment:  March 31, 2001

                                     .   Remaining payments on the 15/th/ day of
                                         each following June, September,
                                         December and March.

Ranking..........................    The debentures are unsecured, and are
                                     subordinate in right of payment to all of
                                     our senior indebtedness, as more fully
                                     described in "Description of Convertible
                                     Debentures."

Conversion Rights................    You may convert the debentures into the
                                     holding company's common stock at any time,
                                     generally until December 31, 2006, at a
                                     conversion price of $15.00, which price is
                                     subject to adjustment in certain events.
                                     This means that for each $1,000 debenture
                                     you convert you will receive 66.67 shares
                                     of holding company common stock.

Optional Redemption by Us........    After December 31, 2002, we may redeem the
                                     Debentures at $1,000 per debenture plus
                                     accrued interest. See "Description of
                                     Convertible Debentures."

Use of Proceeds..................    We will use the proceeds from the sale of
                                     the debentures and bank borrowings, if
                                     necessary, to provide the cash needed to
                                     complete the stock purchase transaction
                                     provided for in the transfer agreement and
                                     the reorganization provided for in the
                                     reorganization agreement.

USE OF THIS PROXY STATEMENT/PROSPECTUS

     You should rely only on the information contained or referred to in this
document or any supplement. Neither the holding company nor the bank has
authorized anyone else to provide you with different or additional information.

     This document does not constitute an offer of securities in any
jurisdiction in which, or to any person to whom, it is not permitted. You should
not assume that the information in this document or any supplement is accurate
as of any date other than the date indicated on those documents.

                                       12
<PAGE>


     This proxy statement/prospectus does not cover resales of shares of the
holding company common stock or debentures after completion of the proposed
reorganization, and no person is authorized to make use of this document in
connection with any resale.

              FORWARD-LOOKING STATEMENTS - CAUTIONARY STATEMENTS

     This document contains certain forward-looking statements and information
relating to the bank that are based on the beliefs of the bank's management as
well as assumptions made by and information currently available to the bank'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 bank or bank management, are intended to identify forward-
looking statements. Such statements reflect the current view of the bank 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 bank does not intend to update these forward-looking
statements.

                                       13
<PAGE>

                                 RISK FACTORS

     You should carefully consider all information in this document, especially
the risk factors below, in determining how to vote on the reorganization,
whether to elect to receive holding company common stock or cash pursuant to the
reorganization, or a combination thereof, and whether to subscribe for the
debentures. We have divided the risk factors into four groups:

     .    risks relating to the reorganization;

     .    risks relating to ownership of holding company common stock;

     .    risks relating to ownership of debentures; and

     .    risks that apply to the bank and will apply substantially equally to
          the holding company because the holding company's primary asset will
          be its ownership of the equity of the bank.

Risks relating to the Reorganization

The $15.00 per share cash consideration may not reflect fair value of your bank
stock.

     The transfer agreement provides for the purchase of bank stock for $15.00
per share and provides for the sale of the Park Cities branch. The holding
company and the selling directors would not have agreed to the $15.00 per share
sale price without the corresponding sale of this Park Cities branch. Because of
this additional feature, the $15.00 per share purchase price may not be solely
reflective of the fair value of the shares of bank stock.

The new Park Cities bank that will own the Park Cities branch will be a separate
bank with no operating history.

     If you elect to receive cash in the reorganization, you may subscribe for
shares of the Park Cities bank pursuant to its offering at the initial offering
price. The Park Cities bank is completely independent of and will have no
affiliation with, the holding company and the bank. The Park Cities bank is
being established as a new bank and has no operating history. You must base your
decision whether to invest in Park Cities bank solely upon that bank's offering
materials.

The sale of the Park Cities branch may have a harmful competitive effect on the
bank.

     The selling directors, particularly Tom Youngblood, have relationships with
the bank's customers. As such, even though the Park Cities bank will operate in
a different market than the bank, the bank expects that the Park Cities bank
will compete with the bank for the deposit and loan business of some of the
bank's customers. If the bank loses a material amount of business to the Park
Cities bank, the bank's overall financial condition would suffer.

The transaction may need to be restructured.

     If the cash requirements of the transaction are greater than $2,500,000,
the holding company will attempt to restructure the transaction. If we are
unable to restructure the transaction, the necessary regulatory approvals will
not be obtained and we will be unable to proceed with the reorganization.

Risks Relating to the Ownership of Holding Company Stock

You will lose your entire investment if we cannot repay the loan to Wells Fargo
Bank.

     The loan from Wells Fargo Bank, if necessary, will be secured by the pledge
of 100% of the bank stock. Unless you have pledged your bank stock to secure
your personal debt, the bank stock is currently free of liens and not subject to
foreclosure. However, upon completion of the reorganization, all of the bank
stock will be subject to a lien securing the holding company's debt. If the
holding company does not or cannot repay the loan, then Wells Fargo Bank could
foreclose on the bank stock. Because the holding company will not have any other
material tangible asset other than the bank stock, the foreclosure of

                                       14
<PAGE>

the bank stock by Wells Fargo Bank would result in a complete loss to the
shareholders of the holding company.

We do not expect to pay dividends for many years.

     We do not intend to pay dividends on the holding company stock until the
debt is paid in full or significantly reduced. The ability of the holding
company and the bank to pay dividends is restricted by federal regulations. You
should refer to page 53 for more information regarding our dividend policy and
the restrictions applicable to the payment of dividends.

As a result of the reorganization and the sale of the Park Cities branch, the
book value of your investment will be diluted.

     The transaction will result in dilution in the tangible book value of your
investment. Book value is sometimes used by investors in banks as a benchmark
from which to determine the market value of bank stocks. Book value is not
market value. However, it provides a reference point as to the amount of equity
in the organization. Book value per share is determined by dividing the
stockholders' equity by the number of shares outstanding.

     The holding company will pay cash for shares of bank stock in the
transaction. As a result, there will be a fewer number of shares of holding
company common stock outstanding after the reorganization than the number of
shares of bank stock currently outstanding. This increases the percentage
ownership of the holding company by each shareholder who elects to receive
holding company common stock in the reorganization. However, because the amount
of cash to be paid ($15.00 per share) is greater than the book value per share
of the bank stock ($10.29 per share at June 30, 2000), the book value per share
of the holding company common stock will initially be less than the book value
per share of the bank stock.

There is no active trading market for the holding company stock.

     Like the bank stock, there will be no active public market for the holding
company stock. The lack of an active public market reduces the liquidity of your
investment. This means that you may not be able to sell your shares of holding
company stock when you want. You may also not be able to sell your shares for
the price you wish to obtain.

Risks involved with Ownership of the Debentures.

The debentures are unsecured and subordinate to our other indebtedness.

     The debentures will be unsecured and subordinate in right of payment to
senior debt. We may borrow up to $1,650,000 from Wells Fargo Bank in connection
with the transaction. We may also incur other debt in the future that will be
senior to the debentures. If we have senior debt, if we file for bankruptcy or
liquidate our business, we will be able to pay the debentures, if at all, only
after any senior lender is paid in full and then only to the extent other
unsecured creditors are paid. In addition, if the bank stock is used as
collateral for a loan (as will be the case with the loan from Wells Fargo Bank),
then upon the foreclosure of the bank stock, we will not be able to pay the
indebtedness evidenced by the debentures.

We will not set aside funds for the repayment of debentures

     We will not begin paying principal on the debentures until December 31,
2006. Because there will be no funds set aside, the repayment of the debentures
will be dependent upon the ability of the holding company and its primary asset,
the bank, to sustain profitable operations over a long period of time.

The interest rate payable on the debentures is fixed.

     We will pay a fixed rate of interest on the debentures equal to 9.5% per
year. If interest rates increase, the amount of interest on the debentures would
be less than prevailing rates. In that event, holders of debentures would
receive a lesser rate of interest than they could have received in an investment
with an interest rate that would change with market interest rates. You will not
be able to increase the interest rate on the debentures even if market interest
rates increase.

                                       15
<PAGE>

There is no active trading market for the debentures.

     Like the bank stock and the holding company common stock, there will be no
active public market for the debentures. As such, you may not be able to sell
the debentures in a reasonable period of time, or at all, if you have a personal
financial need for liquidity in your investment in the debentures.

Risks Shared by the Bank and the Holding Company

Funds invested in the holding company stock and the debentures

     Like your current investment in the bank stock, your investment in the
holding company stock and the debentures are not deposits insured by the FDIC.
In the event of the bank's failure, you would lose your entire investment in the
holding company stock and the debentures.

Our future success is dependent on our ability to compete effectively in the
highly competitive banking industry.

     We face substantial competition in all phases of our operations from a
variety of different competitors. Our future growth and success will depend on
our ability to compete effectively in this highly competitive environment. We
compete for loans, deposits and other financial services in our geographic
market with other commercial banks, savings and loan associations, credit
unions, finance companies, mutual funds, insurance companies, brokerage and
investment banking firms and various other nonbank competitors. Many of our
competitors offer services that we do not, and many have substantially greater
resources, name recognition and market presence that benefit them in attracting
business. In addition, larger competitors may be able to price loans and
deposits more aggressively than we do. Within Dallas County, Texas, as of June
30, 1999, the bank was 1 of 69 commercial banks and 13 savings institutions
competing for customers. At June 30, 1999, the bank held less than 1% of FDIC-
insured deposits in Dallas County and approximately 1.5% of FDIC-insured
deposits in Collin County, Texas. The nonbank financial institutions and
financial services organizations with which we compete are not subject to the
same degree of regulation as is imposed on banks. As a result, these nonbank
competitors have an advantage over us in providing certain services.

The bank is susceptible to an economic downturn in Northern Texas.

     The bank is affected by economic and governmental monetary and fiscal
policies beyond its control. In particular, a downturn in the economic
conditions in northern Texas, where the bank's lending and deposit-gathering are
concentrated, could reduce our growth rate, impair our ability to collect loans.
This would have a negative effect upon the bank's financial condition and
results of operations.

Increases in interest rates could make us less profitable.

     Our profitability is dependent to a large extent on our net interest
income. Net interest income is the difference between interest income on
interest-earning assets and interest expense on interest-bearing liabilities.
Like most financial institutions, we are affected by changes in general interest
rate levels, which are currently at relatively low levels, and by other economic
factors beyond our control. In addition, interest rate risks can result from
mismatches between the dollar amount of repricing or maturing assets and
liabilities and is measured in terms of the ratio of the interest rate
sensitivity gap to total assets. Although our management believes it has
implemented strategies to reduce the potential effects of changes in interest
rates on our results of operations, any substantial and prolonged increase in
market interest rates could adversely affect our operating results.

Our allowance for loan losses may prove to be insufficient.

     Lending money is a substantial part of our business. However, every loan
we make carries a certain risk of nonpayment. The bank maintains an allowance
for loan losses that is our best estimate of the probable losses inherent in the
portfolio as of the balance sheet date. We cannot assure you that our allowance
for loan losses will be sufficient to absorb actual loan losses. We also cannot
assure you that we will not experience significant losses in our loan portfolios
that may require significant increases to the

                                       16
<PAGE>

allowance for loan losses in the future. Although we evaluate every loan that we
make against our underwriting criteria, we may experience losses by reasons of
factors beyond our control. Some of these factors include changes in market
conditions affecting the value of real estate and unexpected problems affecting
the creditworthiness of our borrowers.

Federal and state governmental entities extensively regulate and supervise the
banking industry.

     The bank is subject to, and will continue to be subject to, extensive
governmental supervision, regulation and control. The regulatory burden on banks
is costly and makes competition with other types of financial institutions, such
as insurance companies and brokerage houses, that are not subject to the same
regulatory burden. See "Description of the Bank--Supervision and Regulation of
the Bank" below.

Changes in the law and regulations may affect our ability to do business, our
costs, and our profits.

     We are subject to extensive state and federal supervision and regulation.
These laws and regulations are intended to protect depositors, not shareholders.
Any change in applicable laws or regulations may have a material effect on our
business and prospects. We cannot predict the nature or the extent of the effect
on our business or earnings that monetary policies, economic control, or new
federal or state regulations may have in the future. For example, we cannot
predict the full impact of the new financial services reform law, the Gramm-
Leach-Bliley Financial Services Modernization Act, signed into law on November
12, 1999, which will allow bank holding company subsidiaries and national bank
operating subsidiaries to offer a wide range of new financial services,
including securities underwriting. The new law also permits bank holding company
subsidiaries to engage in real estate development and insurance underwriting.

The charter documents of the holding company make it difficult for shareholders
to sue the holding company's directors, officers and employees on behalf of the
holding company.

     You may not be able to sue the holding company's directors, officers and
employees because of limitations included in the holding company's charter
documents. The holding company's articles of incorporation and bylaws provide
for indemnification of its directors, officers, employees and agents to the
fullest extent permitted under federal and state corporate law. Indemnification
will only apply to persons who act in good faith, in a manner he reasonably
believed to be in the best interest of the company, without willful misconduct
or recklessness. The bank's bylaws provide similar indemnification provisions,
but for directors only. The holding company's articles of incorporation and
bylaws also limit the liability of directors for monetary damages to acts of
self-dealing, willful misconduct or recklessness, unless the act constitutes a
crime or involves liability for the payment of taxes. The bank's bylaws provide
similar limits on directors' liability.

                                       17
<PAGE>

                        SELECTED FINANCIAL INFORMATION

     Prior to the closing of the reorganization, the holding company will not
have commenced operations and will have no material assets or liabilities.
Presented below is selected financial information for the bank.

<TABLE>
<CAPTION>
                                                                                               At and for the Ten
                                        At and for the Six                                          Months from
                                       Months Ended June 30,        At and for the Years            Inception at
                                          (unaudited)                Ended  December 31,         February 28, 1997
                                      -----------------------      -----------------------
                                         2000          1999          1999           1998       to December 31, 1997
                                      ---------     ---------      ---------      --------    ----------------------
                                                   (dollars in thousands, except for share amounts)
<S>                                   <C>           <C>            <C>            <C>            <C>
Selected Balance Sheet Data:
   Total Assets                       $  60,339     $  46,059      $  45,315      $ 44,666       $  27,772
   Securities                               868           353            851           256             673
   Net Loans                             40,276        34,218         37,260        33,718          18,666
   Deposits                              54,054        40,390         39,503        39,315          22,976
   Shareholders' equity                   5,912         5,440          5,715         5,186           4,709

Selected Operating Data:
   Interest income                    $   2,551     $   1,876      $   3,895      $  3,164       $   1,086
   Interest expense                       1,035           774          1,523         1,280             417
   Net interest income                    1,516         1,102          2,372         1,884             669
   Provision for loan losses                 90            48             98           180             225
   Net interest income after
    provision for loan losses             1,426         1,054          2,274         1,704             444
   Noninterest income                       134            88            228           121              37
   Noninterest expense                    1,249           849          1,809         1,512           1,049
   Income before provision for
    income taxes                            311           293            693           313            (568)
   Net income                               197           254            529           477            (568)

Per Share Data:
   Basic earnings per share           $    0.34     $    0.44      $    0.92      $   0.83       $   (0.99)
   Diluted earnings per share              0.34          0.44           0.92          0.83           (0.99)
   Cash dividends per share                 N/A           N/A            N/A           N/A             N/A
   Book value per share                   10.29          9.46           9.94          9.02            8.19

   Weighted average number of
    shares outstanding - basic          574,750       574,750        574,750       574,750         574,750

   Weighted average number of
    shares outstanding - diluted        578,050       574,750        576,730       574,750         574,750

   Actual shares outstanding            574,750       574,750        574,750       574,750         574,750
</TABLE>

                                       18
<PAGE>


<TABLE>
<CAPTION>
                                                                                                   At and for the Ten
                                         At and for the Six           At or for the Years           Month Period from
                                        Months Ended June 30,          Ended December 31,              Inception at
                                        ---------------------         -------------------           February 28, 1997
                                          2000          1999          1999           1998         to December 31, 1997
                                          ----          ----          ----           ----         --------------------
                                                    (dollars in thousands, except per share data)
<S>                                     <C>             <C>           <C>            <C>          <C>
Selected Financial Ratios and
  Other Data(7):
Performance Ratios:
   Return on average assets               0.70%          1.15%        1.16%          1.38%              (4.02)%
   Return on average stockholders'
    equity                                6.73           9.67         9.74           9.82              (13.58)
   Average stockholders' equity to
    average assets                       10.38          11.91        11.95          14.08               29.62
   Efficiency ratio (1)                  75.70          71.34        69.58          75.41              148.58
   Interest rate spread (2)               4.81           4.41         4.64           4.73                3.61
   Net Interest margin (3)                5.96           5.45         5.75           5.94                5.37
   Dividend payout ratio                    --             --           --             --                  --

Regulatory Capital Ratios:
   Tier 1 capital (4)                    12.60%         16.05%       17.06%         17.17%              24.36%
   Total capital (5)                     13.70          17.30        18.31          18.42               25.53
   Leverage (6)                           9.90          11.76        12.05          12.28               18.66
</TABLE>

------------------
(1)  The efficiency ratio is computed by dividing noninterest expense by the sum
     of net interest income before provision for loan losses plus noninterest
     income, excluding securities gains and losses.
(2)  Interest rate spread represents the difference between average yield on
     interest-earning assets and the average costs of interest-bearing
     liabilities.
(3)  Net interest margin represents net interest income divided by average
     interest-earning assets.
(4)  Tier 1 capital to risk weighted assets.
(5)  Total capital to risk-weighted assets.
(6)  Tier 1 capital to adjusted quarterly average assets.

(7)  Ratios for the six months ended June 30, 2000 and 1999 are presented on an
     annualized basis.

                                       19
<PAGE>

                  PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

     The following unaudited pro forma consolidated financial statements are
presented for illustrative purposes only. You should not rely on the pro forma
information as being indicative of the consolidated financial position or
results of future operations of ENB Bankshares, Inc. and Subsidiaries or of the
actual results that would have been achieved had the following transactions been
consummated as of the dates indicated.

     The following Pro Forma Consolidated Balance Sheet as of June 30, 2000 and
Pro Forma Consolidated Statements of Operations for the six months ended June
30, 2000 and the year ended December 31, 1999 are based upon the historical
consolidated financial statements of the bank and are intended to give you a
better picture of what the consolidated holding company might have looked like
had the reorganization, issuance of debt and the stock buy-out been effective on
January 1, 1999. Additional pro forma adjustments are presented to remove the
effect of the organization and operation of the Park Cities branch on the
Consolidated Statements of Operations for year ended December 31, 1999 and the
six months ended June 30, 2000 and the Consolidated Balance Sheet as of June 30,
2000.

     The following unaudited pro forma consolidated financial statements were
prepared giving effect for the following assumptions:

     .    Upon consummation of the reorganization, shareholders of the bank are
          given one share of holding company common stock for each share of bank
          stock owned. The pro forma consolidated balance sheet of the holding
          company as of June 30, 2000 reflects the stockholders equity of the
          holding company which included common stock of $2,874,000 and paid-in
          capital of $2,312,000 and retained earnings from the assumed inception
          date on January 1, 1999 of $726,000. The amounts applied to common
          stock and paid-in capital reflect a redistribution of bank equity on
          January 1, 1999 from common stock of $2,874,000, paid-in capital of
          $2,871,000 and retained earnings of $(559,000).

     .    The holding company incurs an aggregate of $2,500,000 in indebtedness
          as a result of the sale and issuance of the debentures offered hereby
          and borrowings from Wells Fargo Bank.

     .    The holding company accrues interest on the debt at a rate of 9.50%
          with the first interest payment to be made on March 15, 2001. No
          principal payments will be made until December 31, 2006.

     .    The holding company pays an aggregate of $2,500,000 in cash to acquire
          an aggregate of 166,666 shares of bank stock in connection with the
          purchase of shares from the selling directors and shareholders and
          from shareholders who elect to receive cash pursuant to the
          reorganization. The $2,500,000 aggregate indebtedness evidenced by the
          debentures and the Wells Fargo Bank borrowings is the maximum amount
          that the holding company believes that banking regulatory authorities
          will permit the holding company to borrow.

     .    None of the debentures have been converted into shares of holding
          company common stock.

     .    Where applicable, all transactions are tax effected using an effective
          tax rate of 34.0%.

                                       20
<PAGE>

                     ENB BANKSHARES, INC. AND SUBSIDIARIES
                     PRO FORMA CONSOLIDATED BALANCE SHEET

                               At June 30, 2000
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                                            Pro Forma
                                                                                           Pro Forma      Consolidated
                                                                                          Adjustments    After Removal
                                                           Pro Forma       Pro Forma       to Remove     of the Effect
                                              ENB         Adjustments    Consolidated    Effect of the       of the
                                           Bankshares      for Debt       After Debt      Operation of   Operation of
                                           Pro Forma     Issuance and    Issuance and       the Park       the Park
                                          Consolidated   Share Buy-out  Share Buy-out    Cities Branch   Cities Branch
                                         -------------------------------------------------------------------------------
<S>                                       <C>            <C>            <C>              <C>             <C>
Assets:
   Cash and cash equivalents:
     Cash and due from banks                $    4,346       $     --      $    4,346        $     130      $    4,476
     Federal funds sold                         11,200             --          11,200               --          11,200

                                         -------------------------------------------------------------------------------
       Total cash and cash
           equivalents                          15,546             --          15,546              130          15,676
   Securities available for sale
                                                   369             --             369               --             369
   Securities held to maturity
                                                   499             --             499               --             499
   Loans, net                                   40,276             --          40,276               --          40,276
   Premises and equipment, net                   2,756             --           2,756               --           2,756
   Other assets                                    893             --             893               --             893
                                         -------------------------------------------------------------------------------

     Total assets                           $   60,339       $     --      $   60,339        $     130      $   60,469
                                         ===============================================================================

Liabilities:
   Deposits:
     Noninterest-bearing                    $    9,154       $     --      $    9,154        $      --      $    9,154
     Interest-bearing                           44,900             --          44,900               --          44,900
                                         -------------------------------------------------------------------------------
       Total deposits                           54,054             --          54,054               --          54,054

   Borrowed funds                                   --          2,500           2,500               --           2,500
   Other liabilities                               373            235             608               --             608
                                         -------------------------------------------------------------------------------
     Total liabilities                          54,427          2,735          57,162               --          57,162

Stockholders' equity:
   Common stock                                  2,874           (834)          2,040               --           2,040
   Paid-in capital                               2,312         (1,666)            646               --             646
   Retained earnings                               726           (235)            491              130             621
                                         -------------------------------------------------------------------------------
     Total equity                                5,912         (2,735)          3,177              130           3,307
                                         -------------------------------------------------------------------------------

Total liabilities and equity                $   60,339       $     --      $   60,339        $     130      $   60,469
                                         ===============================================================================
</TABLE>

                                       21
<PAGE>


                     ENB BANKSHARES, INC. AND SUBSIDIARIES
                PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
                    For the six months ended June 30, 2000
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                                            Pro Forma
                                                                                           Pro Forma       Consolidated
                                                                                          Adjustments to   After Removal
                                                           Pro Forma      Pro Forma       Remove Effect    of the Effect
                                              ENB         Adjustments    Consolidated         of the           of the
                                          Bankshares       for Debt       After Debt       Operation of     Operation of
                                           Pro Forma     Issuance and    Issuance and        the Park         the Park
                                         Consolidated    Share Buy-Out   Share Buy-Out     Cities Branch    Cities Branch
                                       -----------------------------------------------------------------------------------
<S>                                    <C>               <C>             <C>               <C>              <C>
Interest income:
  Loans, including fees                  $      2,274          $    --        $  2,274            $  (11)        $  2,263
  Securities                                       29               --              29                --               29
  Federal funds sold                              248               --             248               (33)             215
                                       -----------------------------------------------------------------------------------
      Total interest income                     2,551               --           2,551               (44)           2,507

Interest expense:
  Deposits                                      1,035               --           1,035               (29)           1,006
  Borrowed funds                                   --              119             119                --              119
                                       -----------------------------------------------------------------------------------
      Total interest expense                    1,035              119           1,154               (29)           1,125
                                       -----------------------------------------------------------------------------------
Net interest income                             1,516             (119)          1,397               (15)           1,382

Provision for loan losses                          90               --              90                --               90
                                       -----------------------------------------------------------------------------------
Net interest income after provision
   for loan losses                              1,426             (119)          1,307               (15)           1,292

Noninterest income:
Service charges on deposit accounts               109               --             109                (1)             108
  Other income                                     25               --              25                --               25
                                       -----------------------------------------------------------------------------------
    Total noninterest income                      134               --             134                (1)             133

Noninterest expense:
   Salaries and employee benefits
                                                  640               --             640               (93)             547
  Occupancy expense                               171               --             171               (66)             105
  Professional services                            58               --              58                (8)              50
  Other expenses                                  380               --             380               (25)             355
                                       -----------------------------------------------------------------------------------
    Total noninterest expense                   1,249               --           1,249              (192)           1,057
                                       -----------------------------------------------------------------------------------

Income before income taxes                        311             (119)            192               176              368
Income tax expense/(benefit)                      114              (40)             74                60              134
                                       -----------------------------------------------------------------------------------
Net income                               $        197          $   (79)       $    118            $  116         $    234
                                       ===================================================================================

Earnings per share:
  Basic                                  $       0.34                         $   0.29                           $   0.57
  Diluted                                        0.34                             0.29                               0.57

Weighted-average shares outstanding:
     Basic                                    574,750                          408,084                            408,084
     Diluted                                  578,050                          411,384                            411,384
</TABLE>

                                       22
<PAGE>


                      ENB BANKSHARES, INC. AND SUBSIDIARIES
                 PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
                      For the year ended December 31, 2000
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                               Pro Forma
                                                                                              Pro Forma      Consolidated
                                                                                           Adjustments to    After Removal
                                                           Pro Forma        Pro Forma       Remove Effect    of the Effect
                                              ENB         Adjustments      Consolidated        of the           of the
                                          Bankshares        for Debt        After Debt      Operation of     Operation of
                                           Pro Forma      Issuance and     Issuance and       the Park         the Park
                                         Consolidated    Share Buy-Out    Share Buy-Out     Cities Branch    Cities Branch
                                         ----------------------------------------------------------------------------------
<S>                                       <C>            <C>              <C>               <C>              <C>
Interest income:
  Loans, including fees                       $  3,576            $  --         $  3,576             $  --           $3,576
  Securities                                        28               --               28                --               28
  Federal funds sold                               291               --              291                --              291
                                         ----------------------------------------------------------------------------------
     Total interest income                       3,895               --            3,895                --            3,895

Interest expense:
  Deposits                                       1,523               --            1,523                --            1,523
  Borrowed funds                                    --              238              238                --              238
                                         ----------------------------------------------------------------------------------
      Total interest expense                     1,523              238            1,761                --            1,761
                                         ----------------------------------------------------------------------------------
Net interest income                              2,372             (238)           2,134                --            2,134

Provision for loan losses                           98               --               98                --               98
                                         ----------------------------------------------------------------------------------
Net interest income after provision
   for loan losses                               2,274             (238)            2,036               --         $  2,036

Noninterest income:
   Service charges on deposit accounts
                                                   190               --              190                --              190
   Premium on sale of Park Cities branch            --               --               --                --               --
   Other income                                     38               --               38                --               38
                                         ----------------------------------------------------------------------------------
     Total noninterest income                      228               --              228                --              228

Noninterest expense:
   Salaries and employee benefits                  988               --              988               (17)             971
  Occupancy expense                                212               --              212                (1)             211
  Professional services                             48               --               48                (3)              45
  Other expenses                                   561               --              561                --              561
                                         ----------------------------------------------------------------------------------
    Total noninterest expense                    1,809               --            1,809               (21)           1,788
                                         ----------------------------------------------------------------------------------

Income before income taxes                         693             (238)             455                21              476
Income tax expense/(benefit)                       164              (81)              83                 7               90
                                         ----------------------------------------------------------------------------------
Net income                                    $    529            $(157)        $    372             $  14         $    386
                                         ==================================================================================

Earnings per share:
  Basic                                       $   0.92                          $   0.91                           $   0.95
  Diluted                                         0.92                              0.91                               0.94
Weighted-average shares outstanding:
     Basic                                     574,750                           408,084                            408,084
     Diluted                                   576,730                           410,064                            410,064
</TABLE>

                                       23
<PAGE>


     The following Pro Forma Consolidated Balance Sheet as of June 30, 2000 and
Pro Forma Consolidated Statement of Operations for the six months ended June 30,
2000 are based upon the historical consolidated financial statements of the bank
and are intended to give you a better picture of what the consolidated company
might have looked like had the reorganization, issuance of debt and the stock
buy-out been effective on January 1, 1999 and as if the sale of the Park Cities
branch had occurred on June 30, 2000.

     The unaudited pro forma consolidated financial statements were prepared
giving effect for the following assumptions:


     .    The holding company incurs an aggregate of $2,500,000 in indebtedness
          as a result of the sale and issuance of the debentures offered hereby
          and borrowings from Wells Fargo Bank.

     .    The holding company accrues interest on the debt at a rate of 9.50%
          with the first interest payment to be made on March 15, 2001. No
          principal payments will be made until December 31, 2006.

     .    The holding company pays an aggregate of $2,500,000 in cash to acquire
          an aggregate of 166,666 shares of bank stock in connection with the
          purchase of shares from the selling directors and from shareholders
          who elect to receive cash pursuant to the reorganization. The
          $2,500,000 aggregate indebtedness evidenced by the debentures and the
          Wells Fargo Bank borrowings is the maximum amount that the holding
          company believes that banking regulatory authorities will permit the
          holding company to borrow.

     .    None of the debentures have been converted into shares of holding
          company common stock.

     .    The assets and liabilities of the Park Cities branch as of June 30,
          2000 were as follows:

                      Assets:
                        Cash                              $     182,000
                        Loans, net                            1,090,000
                        Premises and equipment                  366,000
                        Other assets                             59,000
                                                          -------------

                          Total Assets                    $   1,697,000
                                                          =============

                      Liabilities:
                        Noninterest-bearing deposits      $     979,000
                        Interest-bearing deposits             4,074,000
                        Other liabilities                        33,000
                                                          -------------

                          Total liabilities               $   5,086,000
                                                          =============

     .    The Park Cities bank established by the selling directors pays a
          purchase premium of $697,000, which includes a $500,000 premium plus
          the organization expenses and the operating losses associated with the
          Park Cities branch since its inception. The organization expenses
          related to the branch totaled $89,000, of which $21,000 was incurred
          in 1999 and $68,000 was incurred in 2000. The operating losses related
          to the Park Cities branch since operations began on March 27, 2000
          totaled $108,000.

     .    After giving effect for the $697,000 premium on the sale, the net cash
          paid by the bank to the Park Cities bank in connection with the Park
          Cities bank's assumption of the net liabilities of the Park Cities
          branch totaled $2,874,000, which includes the $182,000 in cash already
          maintained at the Park Cities branch.

     .    Where applicable, all transactions are tax effected using an effective
          tax rate of 34.0%.

                                       24
<PAGE>

                     ENB BANKSHARES, INC. AND SUBSIDIARIES
                     PRO FORMA CONSOLIDATED BALANCE SHEET
                               At June 30, 2000
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                         Pro Forma
                                                        Adjustments      Pro Forma         Pro Forma       Pro Forma
                                             ENB         for Debt       Consolidated      Adjustments    Consolidated
                                          Bankshares     Issuance        After Debt       for the Sale    After Sale
                                          Pro Forma      and Share      Issuance and      of the Park     of the Park
                                         Consolidated     Buy-out      Share Buy-out     Cities Branch   Cities Branch
                                        ---------------------------------------------------------------------------------
<S>                                     <C>             <C>            <C>               <C>             <C>
 Assets:
   Cash and cash equivalents:
     Cash and due from banks                   $ 4,346       $    --         $   4,346          $ (2,874)       $ 1,472

     Federal funds sold                         11,200            --            11,200                --         11,200
                                         ------------------------------------------------------------------------------
         Total cash and cash
           equivalents                          15,546            --            15,546            (2,874)        12,672

   Securities available for sale                   369            --               369                --            369
   Securities held to maturity                     499            --               499                --            499
   Loans, net                                   40,276            --            40,276            (1,090)        39,186
   Premises and equipment, net                   2,756            --             2,756              (366)         2,390
   Other assets                                    893            --               893               (59)           834
                                         ------------------------------------------------------------------------------

     Total assets                              $60,339       $    --         $  60,339          $ (4,389)       $55,950
                                         ==============================================================================

 Liabilities:
   Deposits:
     Noninterest-bearing                       $ 9,154       $    --         $   9,154          $   (979)       $ 8,175
     Interest-bearing                           44,900            --            44,900            (4,074)        40,826
                                         ------------------------------------------------------------------------------
       Total deposits                           54,054            --            54,054            (5,053)        49,001

   Borrowed funds                                   --         2,500             2,500                --          2,500
   Other liabilities                               373           235               608               204            812
                                         ------------------------------------------------------------------------------
     Total liabilities                          54,427         2,735            57,162            (4,849)        52,313

 Stockholders' equity:                           2,874          (834)            2,040                --          2,040
   Common stock
   Paid-in capital                               2,312        (1,666)              646                --            646
   Retained earnings                               726          (235)              491               460            951
                                         ------------------------------------------------------------------------------
     Total equity                                5,912        (2,735)            3,177               460          3,637
                                         ------------------------------------------------------------------------------
   Total liabilities and equity
                                               $60,339       $    --         $  60,339          $ (4,389)       $55,950
                                         ==============================================================================
</TABLE>

                                       25
<PAGE>


                     ENB BANKSHARES, INC. AND SUBSIDIARIES
                PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
                    For the six months ended June 30, 2000
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                            Pro Forma                      Pro Forma
                                                             Pro Forma     Consolidated     Pro Forma     Consolidated
                                                            Adjustments     After Debt     Adjustments     After the
                                         ENB Bankshares       for Debt       Issuance      for the Sale   Sale of the
                                            Pro Forma       Issuance and    and Share      of the Park    Park Cities
                                          Consolidated     Share Buy-Out     Buy-Out      Cities Branch      Branch
                                         --------------------------------------------------------------------------------
<S>                                      <C>               <C>              <C>           <C>             <C>
  Interest income:
    Loans, including fees                      $   2,274       $       --      $  2,274          $    --      $  2,274
    Securities                                        29               --            29               --            29
    Federal funds sold                               248               --           248               --           248
                                         -----------------------------------------------------------------------------
        Total interest income                      2,551               --         2,551               --         2,551

  Interest expense:
    Deposits                                       1,035               --         1,035               --         1,035
    Borrowed funds                                    --              119           119               --           119
                                         -----------------------------------------------------------------------------
        Total interest expense                     1,035              119         1,154               --         1,154
                                         -----------------------------------------------------------------------------
  Net interest income                              1,516             (119)        1,397               --         1,397
  Provision for loan losses                           90               --            90               --            90
                                         -----------------------------------------------------------------------------
  Net interest income after provision
  for loan losses                                  1,426             (119)        1,307               --         1,307

  Noninterest income:
    Service charges on deposit                       109               --           109               --           109
  accounts

    Gain on sale of the Park Cities                   --               --            --              697           697
      branch
    Other income                                      25               --            25               --            25
                                         -----------------------------------------------------------------------------
         Total noninterest income

                                                     134               --           134              697           831

  Noninterest expense:
    Salaries and employee benefits                   640               --           640               --           640
    Occupancy expense                                171               --           171               --           171
    Professional services                             58               --            58               --            58
    Other expenses                                   380               --           380               --           380
                                         -----------------------------------------------------------------------------
         Total noninterest expense                 1,249               --         1,249               --         1,249
                                         -----------------------------------------------------------------------------
  Income before income taxes                         311             (119)          192              697           889
  Income tax expense/(benefit)                       114              (40)           74              237           311
                                         -----------------------------------------------------------------------------
  Net income                                   $     197       $      (79)     $    118          $   460      $    578
                                         =============================================================================

  Earnings per share:
    Basic                                      $    0.34                       $   0.29                       $   1.42
    Diluted                                         0.34                           0.29                           1.41

  Weighted-average shares outstanding:
      Basic                                      574,750                        408,084                        408,084
      Diluted                                    578,050                        411,384                        411,384
</TABLE>

                                       26
<PAGE>

     SUMMARY OF HISTORICAL AND PRO FORMA PER SHARE SELECTED FINANCIAL DATA

     Set forth below are the basic earnings, diluted earnings, cash dividends
and book value per common share data for the bank on a historical basis and for
the holding company on a pro forma combined basis. Also included are weighted
average shares outstanding and shares outstanding at period end for the bank and
for the holding company on a pro forma basis. You should read the information
below together with historical financial statements and related notes and other
information included in this document. The unaudited pro forma combined data
below is for illustrative purposes only. You should not rely on this information
as being indicative of future results that the holding company will experience
after the reorganization.

The pro forma information was prepared giving effect for the following
assumptions:

     Pro Forma Consolidated Holding Company
     --------------------------------------

     .    Upon consummation of the reorganization, shareholders of the bank are
          given one share of the holding company common stock for each share of
          bank stock owned. The pro forma consolidated balance sheet of the
          holding company as of June 30, 2000 reflects the stockholders equity
          of the holding company, which included common stock of $2,874,000 and
          paid-in capital of $2,312,000 and retained earnings from the assumed
          inception date on January 1, 1999 of $726,000. The amounts applied to
          common stock and paid-in capital reflect a redistribution of bank
          equity on January 1, 1999 from common stock of $2,874,000, paid-in
          capital of $2,871,000 and retained earnings of $(559,000).

     Pro Forma Consolidated Holding Company After Debt Issuance and Stock Buy-
     -------------------------------------------------------------------------
     Out
     ---

     .    Includes the above assumption.

     .    The holding company incurs an aggregate of $2,500,000 in indebtedness
          as a result of the sale and issuance of the debentures offered hereby
          and borrowings from Wells Fargo Bank;

     .    The holding company accrues interest on the debt at a rate of 9.50%
          with the first interest payment to be made on March 15, 2001. No
          principal payments will be made until December 31, 2006.

     .    The holding company pays an aggregate of $2,500,000 in cash to acquire
          an aggregate of 166,666 shares of bank stock in connection with the
          purchase of shares from the selling directors and from shareholders
          who elect to receive cash pursuant to the reorganization. The
          $2,500,000 aggregate indebtedness evidenced by the debentures and the
          Wells Fargo Bank borrowings is the maximum amount that the holding
          company believes that banking regulatory authorities will permit the
          holding company to borrow.

     .    None of the debentures have been converted into shares of the holding
          company common stock.

     .    Where applicable, all transactions are tax effected using an effective
          tax rate of 34.0%.

     Pro Forma Consolidated the Holding Company After Debt Issuance, Stock Buy-
     -------------------------------------------------------------------------
Out and Sale of Park Cities Branch
----------------------------------

     .    Includes the above assumptions.

     .    The Park Cities bank established by the selling directors pays a
          purchase premium of $697,000, which includes a $500,000 premium plus
          the organization expenses and the operating losses associated with the
          Park Cities branch since its inception. The organization expenses
          related to the branch totaled $89,000, of which $21,000 was incurred
          in 1999 and $68,000 was incurred in 2000. The operating losses related
          to the Park Cities branch since operations began on March 27, 2000
          totaled $108,000.

                                       27
<PAGE>


<TABLE>
<CAPTION>
                                                                          At or for the     At or for the
                                                                        Six Months Ended      Year Ended
                                                                          June 30, 2000   December 31, 1999
                                                                        -------------------------------------
<S>                                                                     <C>               <C>
      Basic earnings per share:
          Bank                                                              $   0.34           $   0.92
          Pro forma consolidated holding company                                0.34               0.92
          Pro forma consolidated holding company
             after debt issuance and stock buy-out                              0.29               0.91
          Pro forma consolidated holding company
             after debt issuance, stock buy-out and
             sale of Park Cities branch                                         1.42                N/A

      Weighted-average shares outstanding - Basic:
          Bank                                                               574,750            574,750
          Pro forma consolidated holding company                             574,750            574,750
          Pro forma consolidated holding company
             after debt issuance and stock buy-out                           408,084            408,084
          Pro forma consolidated holding company
             after debt issuance, stock buy-out and
             sale of Park Cities branch                                      408,084            408,084

      Diluted earnings per share:
           Bank                                                             $   0.34           $   0.92
          Pro forma consolidated holding company                                0.34               0.92
          Pro forma consolidated holding company
             after debt issuance and stock buy-out                              0.29               0.91
          Pro forma consolidated holding company
             after debt issuance, stock buy-out and
             sale of Park Cities branch                                         1.41                N/A

      Weighted-average shares outstanding - Diluted:
          Bank                                                               578,050            576,730
          Pro forma consolidated holding company                             578,050            576,730
          Pro forma consolidated holding company
             after debt issuance and stock buy-out                           411,384            410,064
          Pro forma consolidated holding company
             after debt issuance, stock buy-out and
             sale of Park Cities branch                                      411,384                N/A
</TABLE>

                                       28
<PAGE>


<TABLE>
<CAPTION>
                                                                         At or for the     At or for the Year
                                                                       Six Months Ended    Ended December 31,
                                                                         June 30, 2000            1999
                                                                       --------------------------------------
<S>                                                                    <C>                 <C>
      Cash dividends per share:
           Bank                                                             $     --           $       --
          Pro forma consolidated holding company                                  --                   --
          Pro forma consolidated holding company
             after debt issuance and stock buy-out                                --                   --
          Pro forma consolidated holding company
             after debt issuance, stock buy-out and
             sale of Park Cities branch                                           --                   --


      Book value per share:
          Bank                                                              $  10.29           $     9.94
          Pro forma consolidated holding company                               10.29                 9.94
          Pro forma consolidated holding company
             after debt issuance and stock buy-out                              7.79                 7.49
          Pro forma consolidated holding company
             after debt issuance, stock buy-out and
             sale of Park Cities branch                                         8.91                  N/A


      Shares outstanding at end of period:
          Bank                                                               574,750              574,750
          Pro forma consolidated holding company                             574,750              574,750
          Pro forma consolidated holding company
            after debt issuance and stock buy-out                            408,084              408,084
          Pro forma consolidated holding company
            after debt issuance, stock buy-out and
            sale of Park Cities branch                                       408,084              408,084
</TABLE>

                                       29
<PAGE>

                           PRICE RANGE OF BANK STOCK

Comparative Market Prices

         There has never been an organized or regular public trading market for
the outstanding bank stock. The bank stock is traded in private transactions. As
of July 31, 2000, the highest trade price known to management for transactions
of the bank stock was for a trade of 6,000 shares at $17.00 per share on April
21, 2000. The most recent sale price as of July 31, 2000, was $15.00 per share.
The last reported sale of the bank stock prior to the public
announcement of the proposed reorganization was a trade of 500 shares at
$15.00 per share on August 15, 2000. Due to the infrequency of trading and
the fact that these trades are generally private transactions, we are unable to
determine actual trading prices on any given date.

         Because there is no organized or regular public trading market for the
bank stock, bid price information for the bank stock is not available. However,
the bank does have information on sale prices. The following table shows
quarterly high and low sale prices for the bank stock:

                            Trade Prices: Bank Stock
                               (Price per share)

<TABLE>
<CAPTION>
                                                                     High            Low
                                                                     -----           -----
            <S>                                                     <C>             <C>
            For Quarter Ended:
              March 31, 1998..............................             N/A             N/A
              June 30, 1998...............................          $10.00          $10.00
              September 30, 1998..........................           10.00           10.00
              December 31, 1998...........................           15.00           15.00

              March 31, 1999..............................             N/A             N/A
              June 30, 1999...............................             N/A             N/A
              September 30, 1999..........................             N/A             N/A
              December 31, 1999...........................             N/A             N/A

              March 31, 2000..............................          $17.00          $17.00
              June 30, 2000...............................           17.00           15.00
              September 30, 2000 (through August 22, 2000)           17.00           15.00
</TABLE>

          No shares of the holding company common stock will be outstanding
until consummation of the reorganization. Therefore, the holding company common
stock has not been traded and no market for it exists. We do not anticipate that
an active market for the holding company common stock will develop after the
reorganization.

                                       30
<PAGE>


                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATION OF THE BANK'

General

     The following discussion and analysis presents the more significant factors
affecting the bank's financial condition at June 30, 2000, December 31, 1999 and
1998, and results of operations for the three and six months ended June 30, 2000
and 1999 and each of the three years in the period ended December 31, 1999. This
discussion and analysis should be read in conjunction with the bank's financial
statements, notes thereto and other financial information appearing elsewhere in
this document. All references to the year ended December 31, 1997 are for the
period from February 28, 1997 (Inception) to December 31, 1997.

Analysis of Financial Condition

Assets

     Total assets increased $15,024,000, or 33.2%, from $45,315,000 at December
31, 1999, to $60,339,000 at June 30, 2000. The increase was primarily due to an
increase in loans and federal funds sold funded by an overall increase in
deposits. Total assets increased only $649,000, or 1.5%, from $44,666,000 at
December 31, 1998, to $45,315,000 at December 31, 1999. Despite lack of
significant growth in total assets, the mix of total assets changed as federal
funds sold were reinvested in higher yielding loans and securities.

Cash and Cash Equivalents

     Cash and cash equivalents include cash and due from banks and federal funds
sold. Federal funds sold increased $9,400,000 from $1,800,000 at December 31,
1999 to $11,200,000 at June 30, 2000. The bank experienced a significant
increase in deposits during the first six months of 2000 as a result of special
promotions for certificate of deposit accounts. The excess cash provided from
these deposits was invested in federal funds sold to provide liquidity to fund
loan growth as demand warrants. Federal funds sold decreased $4,740,000 from
$6,540,000 at December 31, 1998 to $1,800,000 at December 31, 1999. The decrease
resulted as management redirected such funds to invest in higher-yielding loans
and securities.

Securities

     Securities remained fairly stable totaling $868,000 at June 30, 2000
compared to $851,000 at December 31, 1999. Securities increased $595,000, from
$256,000 at December 31, 1998, to $851,000 at December 31, 1999. The increase in
1999 was primarily due to the purchase of an additional bond.

     The bank's investments include obligations of U.S. government agencies and
stock holdings in the Federal Reserve Bank of Dallas and the Federal Home Loan
Bank of Dallas. The bank's equity securities are classified as available for
sale while the obligations of U.S. government agencies are classified as held to
maturity. The bank held no derivative securities or structured notes during any
period presented.

     The following tables summarize the amounts and the distribution of the
bank's securities held at the dates indicated:

<TABLE>
<CAPTION>

                                                       June 30, 2000         December 31, 1999
                                                     ----------------       --------------------
                                                       Amount    %            Amount       %
                                                     --------- ------       --------   ---------
                                                             (Dollars in thousands)
<S>                                                  <C>       <C>          <C>        <C>
Carrying value:
  U.S. Government agency obligations
    held to maturity                                 $ 499      57.5%       $   498       58.5%
  Equity securities available for sale                 369      42.5            353       41.5
                                                     -----     -----        -------     ------

      Total securities                               $ 868     100.0%       $   851      100.0%
                                                     =====     =====        =======     ======

      Total estimated fair value                     $ 868                  $   849
                                                     =====                  =======

</TABLE>

                                       31
<PAGE>

<TABLE>
<CAPTION>
                                                                 December 31,
                                           -------------------------------------------------------
                                                1999               1998               1997
                                           ---------------  -----------------  -------------------
                                           Amount     %      Amount      %       Amount       %
                                           ------  -------  --------   ------  ----------  -------
                                                      (Dollars in thousands)
<S>                                        <C>     <C>      <C>        <C>     <C>         <C>
Carrying value:
  U.S. Government agency
    obligations held to
    maturity                               $  498    58.5%   $     -       -    $   500     74.3%
Equity securities available
  for sale                                    353    41.5        256   100.0        173     25.7
                                           ------  ------    -------   -----    -------    -----

     Total securities                      $  851   100.0%   $   256   100.0%   $   673    100.0%
                                           ======  ======    =======   =====    =======    =====

     Total estimated fair value            $  849            $   256            $   673
                                           ======            =======            =======
</TABLE>

          The following tables provide the maturity distribution and weighted
average interest rates of the bank's debt securities at June 30, 2000 and
December 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 discount, to the amortized cost of the securities. The amortized
cost of securities is their cost, adjusted for previous amortization or
accretion.

<TABLE>
<CAPTION>
                                                                                  Estimated      Weighted
                                                             Par      Carrying      Fair          Average
                                                           Amount       Value      Value          Yield
                                                         ----------   --------    ---------    ---------
                                                                     (Dollars in thousands)
<S>                                                      <C>          <C>         <C>          <C>
June 30, 2000
U.S. Government agency obligations held
 to maturity:
 Due within one year                                     $        -   $      -    $      -             -%
 Due after one but within five years                            500        499         499          6.13
                                                         ----------   --------    --------      --------
  Total                                                  $      500   $    499    $    499          6.13%
                                                         ==========   ========    ========      ========
 <CAPTION>
                                                                                  Estimated      Weighted
                                                             Par      Carrying      Fair          Average
                                                           Amount       Value      Value          Yield
                                                         ----------   --------    ---------    ---------
                                                                     (Dollars in thousands)
<S>                                                      <C>          <C>         <C>          <C>
December 31, 1999
U.S. Government agency obligations held
 to maturity:
 Due within one year                                     $        -   $      -    $      -             -%
 Due after one but within five years                            500        499         499          6.13
                                                         ----------   --------    --------      --------
  Total                                                  $      500   $    499    $    499          6.13%
                                                         ==========   ========    ========      ========
</TABLE>

Loan Portfolio

     Total net loans increased $3,016,000, or 8.1%, from $37,260,000 at December
31, 1999 to $40,276,000 at June 30, 2000. The largest increase was in interim
construction loans which increased $3,556,000, or 22.4%, from $15,896,000 at
December 31, 1999 to $19,452,000 at June 30, 2000. The increase in interim
construction loans was a result of management's effort to increase this type of
lending due to the higher yields that can be achieved. Other less significant
changes in the Bank's loan portfolio included a $1,529,000 increase in
installment loans, a $939,000 decrease in commercial loans and a $1,000,000
decrease in real estate loans.

     Total net loans increased $3,542,000, or 10.5%, from $33,718,000 at
December 31, 1998, to $37,260,000 at December 31, 1999. The increase was a
result of increases in commercial loans, which increased $1,972,000, or 21.2%,
and interim construction loans, which increased $1,428,000, or 9.9%. Management
specifically targeted growth in these categories of loans due to the higher
yields that can be achieved. Changes in other categories of loans were not
significant.

     The bank provides general commercial lending services for corporate and
other business clients as a part of the bank's efforts to serve the local
communities in which it operates. Certain risks are involved in granting loans,
primarily related to the borrowers' ability and willingness to repay the debt.
Before the bank extends a new loan to a


                                       32
<PAGE>

customer, these risks are assessed through a review of the borrower's past and
current credit history, the collateral being used to secure the transaction in
case the customer does not repay the debt, the borrower's character and other
factors. Once the decision has been made to extend credit, the bank's
independent loan review function, which is currently performed by an independent
accounting and consulting firm, and responsible credit officer monitor these
factors throughout the life of the loan. Any loan identified as a problem credit
by management or during the loan review is assigned to the bank's "watch loan
list," and is subject to ongoing monitoring to ensure appropriate action is
taken when deterioration has occurred.

     Commercial and industrial loans include operating lines of credit and term
loans made to small businesses primarily based on their ability to repay the
loan from the business's cash flow. Business assets such as equipment and
inventory typically secure these loans. When the borrower is not an individual,
the bank generally obtains the personal guarantee of the business owner. As
compared to consumer lending, which includes loans secured by a single-family
residence, personal installment loans and automobile loans, commercial lending
entails significant additional risks. These loans typically involve larger loan
balances and are generally dependent on the business's cash flow and, thus, may
be subject to adverse conditions in the general economy or in a specific
industry. Management reviews the borrower's cash flows when deciding whether to
grant the credit to evaluate whether estimated future cash flows will be
adequate to service principal and interest of the new obligation in addition to
existing obligations.

     Commercial real estate loans are primarily secured by borrower-occupied
business real estate and are dependent on the ability of the related business to
generate adequate cash flow to service the debt. Commercial real estate loans
are generally originated with a loan-to-value ratio of 80% or less. Management
performs much the same analysis when deciding whether to grant a commercial real
estate loan as a commercial loan.

     Construction loans are secured by residential and business real estate,
generally occupied by the borrower on completion. The bank's construction
lending program is established in a manner to minimize risk of this type of
lending by not making a significant amount of loans on speculative projects. The
bank does not generally make the permanent loan at the end of the construction
phase. Construction loans also are generally made in amounts of 80% or less of
the value of collateral.

     Although not a significant portion of the bank's portfolio, on occasion,
the bank originates short-term residential real estate loans and home equity
lines of credit which are secured by the borrower's residence. Such loans are
made based on the borrower's ability to make repayment from employment and other
income. Management assesses the borrower's ability to repay the debt through
review of credit history and ratings, verification of employment and other
income, review of debt-to-income ratios and other measures of repayment ability.
The bank generally makes these loans in amounts of 80% or less of the value of
collateral. An appraisal is obtained from a qualified real estate appraiser for
substantially all loans secured by real estate.

     Consumer installment loans to individuals include loans secured by
automobiles and other consumer assets. Consumer loans for the purchase of new
automobiles generally do not exceed 80% of the sticker price of the car. Loans
for used cars generally do not exceed average loan value as stipulated in a
recent auto industry used car price guide. Overdraft protection loans are
unsecured personal lines of credit to individuals of demonstrated good credit
character with reasonably assured sources of income and satisfactory credit
histories. Consumer loans generally involve more risk than residential mortgage
loans because of the type and nature of collateral and, in certain types of
consumer loans, the absence of collateral. Because these loans are generally
repaid from ordinary income of an individual or family unit, repayment may be
adversely affected by job loss, divorce, ill health or by general decline in
economic conditions. The bank assesses the borrower's ability to make repayment
through a review of credit history, credit ratings, debt-to-income ratios and
other measures of repayment ability.


                                       33
<PAGE>

   The following tables present the bank's loan balances at the dates indicated
separated by loan type:

<TABLE>
<CAPTION>
                                                    June 30,     December 31,
                                                      2000           1999
                                                    -------      -----------
                                                       (In thousands)
     <S>                                            <C>          <C>
     Commercial loans                               $10,327        $11,266
     Installment loans                                4,239          2,740
     Real estate loans                                6,981          7,981
     Interim construction loans                      19,452         15,896
                                                    -------        -------
         Gross loans                                 40,999         37,883
     Less:
       Deferred loan fees                              (204)          (192)
       Allowance for loan losses                       (519)          (431)
                                                    -------        -------
         Net loans                                  $40,276        $37,260
                                                    =======        =======

 <CAPTION>
                                              December 31,
                                    --------------------------------------
                                      1999            1998           1997
                                    -------         -------        -------
                                                   (In thousands)
<S>                                 <C>            <C>             <C>
     Commercial loans               $11,266         $ 9,294        $ 4,684
     Installment loans                2,740           1,929          1,600
     Real estate loans                7,981           8,536          7,189
     Interim construction loans      15,896          14,468          5,518
                                    -------         -------        -------
         Gross loans                 37,883          34,277         18,991
     Less:
       Deferred loan fees              (192)           (104)          (100)
       Allowance for loan losses       (431)           (405)          (225)
                                    -------         -------        -------
         Net loans                  $37,260         $33,718        $18,666
                                    =======         =======        =======
</TABLE>

     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 bank had no
concentrations of loans at June 30, 2000, or December 31, 1999, except for those
categories of loans detailed in the above tables. The bank had no loans
outstanding to foreign countries or borrowers headquartered in foreign countries
at June 30, 2000 or December 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 bank's best interest. The bank 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 tables present the distribution of the maturity of the bank's
loans and the interest rate sensitivity of those loans, excluding installment
loans, at June 30, 2000 and December 31, 1999. The tables also present 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 interest rate
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>
June 30, 2000
     Commercial loans                 $ 9,670  $  657   $  -   $10,327
     Real estate loans                  3,128   3,382    471     6,981
     Interim construction loans        19,452       -      -    19,452
                                      -------  ------   ----   -------
      Total loans                     $32,250  $4,039   $471   $36,760
                                      =======  ======   ====   =======

     With fixed interest rates        $23,620  $3,001   $471   $27,092
     With variable interest rates       8,630   1,038      -     9,668
                                      -------  ------   ----   -------
      Total loans                     $32,250  $4,039   $471   $36,760
                                      =======  ======   ====   =======

</TABLE>

                                       34
<PAGE>

<TABLE>
<S>                                  <C>      <C>     <C>     <C>
December 31, 1999
     Commercial loans                $ 8,652  $2,614  $    -  $11,266
     Real estate loans                 1,141   4,147   2,693    7,981
     Interim construction loans       15,896       -       -   15,896
                                     -------  ------  ------  -------
      Total loans                    $25,689  $6,761  $2,693  $35,143
                                     =======  ======  ======  =======

     With fixed interest rates       $15,661  $5,819  $2,693  $24,173
     With variable interest rates     10,028     942       -   10,970
                                     -------  ------  ------  -------
      Total loans                    $25,689  $6,761  $2,693  $35,143
                                     =======  ======  ======  =======
</TABLE>

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 for 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.

     As of June 30, 2000 and December 31, 1999, 1998 and 1997, the bank had no
nonaccrual or restructured loans. Additionally, at such dates, the bank had no
investments in repossessed real estate or other assets. Accruing loans
contractually past due over 90 days totaled $37,000 at June 30, 2000, while
there were no such loans at December 31, 1999, 1998 or 1997. The balance of
accruing loans contractually past due over 90 days at June 30, 2000 related to a
single commercial loan that was fully secured by a certificate of deposit with
the bank.

     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. At June 30, 2000 and December 31, 1999, the bank
did not believe it had any potential problem loans. As a result of the a review
by the bank's external loan review service provider in July 2000, three
commercial loans totaling $1,885,000 were subsequently identified as potential
problem loans due to concerns about each of the borrowers financial stability.
As of July 31, 2000, such loans were included on management's loan
classification list despite the fact that all of the loans were current.

     The bank maintains an internally classified loan list that helps management
assess the overall quality of the loan portfolio and the adequacy of the
allowance. Loans classified as "special mention" are those that contain a
weakness that, if left unattended, could develop into a problem affecting the
ultimate collectibility of the loan. 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. There were no loans classified in these categories at June 30, 2000 or at
December 31, 1999, 1998 and 1997.

                                       35
<PAGE>

Allowance for Loan Losses

     Implicit in the bank'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 bank's loan
portfolio, additions are made to the bank's allowance for 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" below.

     The amount of the allowance equals the cumulative total of the provisions
made from time to time, reduced by loan charge-offs and increased by recoveries
of loans previously charged off. The bank's allowance was $519,000, or 1.27%, of
gross loans at June 30, 2000, compared to $431,000, or 1.14% of gross loans at
December 31, 1999 and $405,000, or 1.18% of gross loans, 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 bank. The bank's practice is to charge off any loan or portion
of a loan when the loan 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 bank charged off $2,000 in installment loans during the first six
months of 2000 and $72,000 in commercial loans, during calendar year 1999,
respectively. No other charge-offs have been experienced by the bank since its
inception in 1997.

     The following tables present 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 six months
ended June 30, 2000 and 1999, and for the last three years since inception.

<TABLE>
<CAPTION>
                                                                June 30,
                                                        --------------------
                                                           2000        1999
                                                        ---------  ---------
                                                        (Dollars in thousands)
     <S>                                                <C>        <C>
     Analysis of allowance for loan losses:
     Beginning balance, January 1                         $   431   $   405
       Provision for loan losses                               90        48
     Loans charged off:
       Commercial loans                                         -       (11)
       Installment loans                                        -         -
       Real estate loans                                        -         -
       Interim construction loans                              (2)        -
                                                          -------   -------
        Total charge-offs                                      (2)      (11)
                                                          -------   -------
     Recoveries of loans previously charged off:
       Commercial loans                                         -         -
       Installment loans                                        -         -
       Real estate loans                                        -         -
       Interim construction loans                               -         -
                                                          -------   -------
        Total recoveries                                        -         -
                                                          -------   -------

         Net loans charge-offs                                 (2)      (11)
                                                          -------   -------

     Ending balance, June 30                              $   519   $   442
                                                          =======   =======

     Average loans outstanding, net of deferred fees      $41,956   $34,361
                                                          =======   =======
     Ratio of net loan charge-offs to average loans
       outstanding, net of deferred fees  (annualized)       0.01%     0.06%
                                                          =======   =======
     Ratio of allowance for loan losses to
      gross loans at June 30                                 1.27%     1.27%
                                                          =======   =======
</TABLE>

                                       36
<PAGE>

<TABLE>
<CAPTION>
                                                         1999        1998         1997
                                                     -----------  -----------  ----------
Analysis of allowance for loan losses:                     (Dollars in thousands)
<S>                                                  <C>          <C>          <C>
Beginning balance, January 1                            $   405      $   225    $      -
    Provision for loan losses                                98          180         225
Loans charged off:
    Commercial loans                                        (72)           -           -
    Real estate loans                                         -            -           -
    Installment loans                                         -            -           -
    Interim construction loans                                -            -           -
                                                        -------      -------    --------
      Total charge-offs                                     (72)           -           -
                                                        -------      -------    --------

Recoveries of loans previously charged off:
    Commercial loans                                          -            -           -
    Real estate loans                                         -            -           -
    Installment loans                                         -            -           -
    Interim construction loans                                -            -           -
                                                        -------      -------    --------
      Total recoveries                                        -            -           -
                                                        -------      -------    --------

        Net loans charged off                               (72)           -           -
                                                        -------      -------    --------

          Ending balance, December 31                   $   431      $   405    $    225
                                                        =======      =======    ========

Average loans outstanding, net of deferred fees         $34,971      $27,362    $  7,298
                                                        =======      =======    ========
Ratio of net loan charge-offs to average loans,
  net of deferred fees                                     0.21%         N/A         N/A
                                                        =======
Ratio of allowance for loan losses to gross loans
  at December 31                                           1.14%        1.18%       1.18%
                                                        =======      =======    ========
</TABLE>

     Management estimates the allowance balance required, in part, by review of
the loan portfolio to evaluate potential problem loans.  As discussed above
under the heading "Nonpeforming Assets," potential problem loans are classified
as special mention, substandard, doubtful and loss and are separately monitored
by management.  Loan impairment is reported when full payment under the loan
terms is not expected. Loans are evaluated for impairment when payments are
delayed, typically 90 days or more, or when analysis of a borrower's operating
results and financial condition indicates the borrower's underlying cash flows
are not adequate to meet debt service requirements and it is probable that not
all principal and interest amounts will be collected according to the original
terms of the loan.  Impairment is evaluated in total for smaller-balance loans
of similar nature such as residential mortgage and consumer loans and on an
individual loan basis for other loans. If a loan is impaired, a portion of the
allowance is allocated so that the loan is reported, net, at the present value
of estimated future cash flows using the loan's existing rate or at the fair
value of collateral if repayment is expected solely from the collateral.
Impaired loans, or portions thereof, are charged off when deemed uncollectible.

     In addition to allocations made for specific classified loans, general
reserve allocations are made after consideration of such factors as past loan
loss experience, general prevailing economic conditions, the nature, composition
and volume of the loan portfolio, and other qualitative factors based on
management's judgment. General reserves were allocated to the various categories
of loans based on estimated percentage loss factors developed by management
after analysis of the above factors.  For each of the reported periods, the
percentage loss factors were approximately 2.00% for commercial loans, 1.50% for
installment loans, 1.00% for real estate loans and 0.50% for interim
construction loans.

                                       37
<PAGE>


          The following tables show the allocations in the allowance and the
respective percentages of each loan category to total loans at June 30, 2000 and
December 31, 1999 and at year-end for each of the past three years since
inception.

<TABLE>
<CAPTION>

                                                          June 30, 2000                         December 31, 1999
                                                ----------------------------------     ---------------------------------
                                                   Amount of          Percent of          Amount of          Percent of
                                                   Allowance           Loans by           Allowance           Loans by
                                                 Allocated to         Category to       Allocated to        Category to
                                                   Category           Gross Loans         Category          Gross Loans
                                                --------------       -------------     --------------       ------------
                                                                          (Dollars in thousands)
<S>                                             <C>                  <C>               <C>                  <C>
Commercial loans                                    $    207               25.2%        $     225                29.7%
Installment loans                                         64               10.3                41                 7.2
Real estate loans                                         70               17.0                80                21.1
Interim construction loans                                98               47.5                79                42.0
                                                    --------             ------         ---------             -------
  Total allocated                                        439              100.0%              425               100.0%
                                                                         ======                               =======
Unallocated                                               80                                    6
                                                    --------                            ---------
Total allowance for loan losses                     $    519                            $     431
                                                    ========                            =========
</TABLE>

<TABLE>
<CAPTION>
                                                                       December 31,
                                   -------------------------------------------------------------------------------------
                                              1999                         1998                          1997
                                   -------------------------    --------------------------    --------------------------
                                    Amount of     Percent of     Amount of      Percent of     Amount of    Percent of
                                    Allowance      Loans by      Allowance       Loans by      Allowance     Loans by
                                   Allocated to  Category to    Allocated to   Category to    Allocated to  Category to
                                     Category    Gross Loans      Category     Gross Loans     Category     Gross Loans
                                   ------------  ------------   ------------   ------------   ------------  -----------
<S>                                <C>           <C>            <C>            <C>            <C>           <C>
                                                                   (Dollars in thousands)
Commercial loans                        $ 225          29.7%        $  186           27.1%       $    94         24.7%
Installment loans                          41           7.2             29            5.6             24          8.4%
Real estate loans                          80          21.1             85           24.9             72         37.9
Interim construction loans                 79          42.0             72           42.4             28         29.0
                                        -----        ------         ------         ------        -------     --------
 Total allocated                          425         100.0%           372          100.0%           218        100.0%
                                                     ======                        ======                    ========
 Unallocated                                6                           33                             7
                                        -----                       ------                       -------
  Total allowance for
   possible loan losses                 $ 431                       $  405                       $   225
                                        =====                       ======                       =======
</TABLE>

Premises and Equipment

     Premises and equipment increased $277,000, or 11.2%, during the first six
months of 2000, from $2,479,000 at December 31, 1999 to $2,756,000 at June 30,
2000, and increased $695,000, or 39.0%, from $1,784,000 at December 31, 1998 to
$2,479,000 at December 31, 1999. The increase during the first six months of
2000 was related to leasehold improvements and additional furniture and
equipment purchased in connection with the opening of the Park Cities branch.
The increase in 1999 over 1998 was due to a $694,000 purchase of land for a
potential future branch location in Allen, Texas.

Deposits

     Deposits are attracted principally from within the bank's primary market
area through the offering of a broad selection of deposit instruments, including
checking accounts, money market accounts, regular savings accounts, term
certificate accounts and individual retirement accounts. Interest rates paid,
maturity terms, service fees and withdrawal penalties for the various types of
accounts are established periodically by management based on the bank's
liquidity requirements, growth goals and interest rates paid by competitors. The
bank does not use brokers to attract deposits.

     Total deposits increased $14,551,000, or 36.8%, from $39,503,000 at
December 31, 1999, to $54,054,000 at June 30, 2000. The increase in deposits was
primarily in certificates of deposit, which increased $10,739,000, or 51.8%,
from $20,748,000 at December 31, 1999 to $31,487,000 at June 30, 2000. The
increase in certificates of deposit was the result of special interest rate
promotions offered by the bank to attract such deposits. The bank also
experienced a $4,387,000, or 58.9%, increase in limited access money market
accounts as result of additional deposits received from new loan customers and
normal bank growth. Total deposits increased $188,000, or 0.48%, from
$39,315,000 at December 31, 1998, to $39,503,000 at December 31, 1999. Despite
little increase in total deposits in 1999, the bank experienced a slight shift
in the mix of the portfolio as noninterest-bearing demand deposits increased
from 18.4% of total deposits at December 31, 1998 to 25.0% of total deposits at
December 31, 1999, while certificates of

                                       38
<PAGE>

deposit decreased from 58.6% of total deposits at December 31, 1998 to 52.5% of
total deposits at December 31, 1999. Fluctuations in other categories of
deposits were not significant.

     The following tables present the average amounts of, and the average rates
paid on, deposits of the bank for the six months ended June 30, 2000 and 1999
and for each of the last three years since inception:

<TABLE>
<CAPTION>
                                                                  Six Months Ended June 30,
                                                      -----------------------------------------------
                                                               2000                      1999
                                                      ----------------------    ----------------------
                                                      Average       Average     Average       Average
                                                       Amount        Rate        Amount        Rate
                                                      -------       ------      -------       ------
                                                                   (Dollars in thousands)
<S>                                                   <C>           <C>         <C>           <C>
Noninterest-bearing demand deposits                    $10,516        N/A       $ 6,911         N/A
Interest-bearing demand, savings and
   money market deposits                                 9,627       3.74%        9,066        3.84%
Time deposits of less than $100,000                     18,209       5.60        14,550        5.35
Time deposits of $100,000 or more                       11,925       5.77         8,148        5.16
                                                       -------                  -------
    Total deposits                                     $50,277       4.12%      $38,675        4.00%
                                                       =======                  =======
</TABLE>

<TABLE>
<CAPTION>

                                                       Year Ended December 31,
                                   -----------------------------------------------------------------
                                            1999                  1998                 1997
                                   -------------------     --------------------   ------------------
                                   Average     Average     Average      Average   Average    Average
                                   Amount       Rate       Amount        Rate     Amount      Rate
                                   -------     -------     -------      -------   -------    -------
                                                           (Dollars in thousands)
<S>                                <C>         <C>         <C>          <C>       <C>        <C>
Noninterest-bearing
 demand deposits                   $ 8,007        N/A      $ 5,073        N/A     $ 1,745       N/A
Interest-bearing demand,
 savings and money
  market deposits                    9,623       3.84%       6,786       4.11%      3,257      4.24%
Time deposits of less
 than $100,000                      13,938       5.26       11,774       5.71       2,493      5.78
Time deposits of $100,000
 or more                             8,195       5.13        5,835       5.64       2,414      5.59
                                   -------     ------      -------     ------     -------    ------

   Total deposits                  $39,763       3.83%     $29,468       4.34%    $ 9,909      4.21%
                                   =======     ======      =======     ======     =======    ======
 </TABLE>

  The maturity distribution of time deposits of $100,000 or more at June 30,
2000 and December 31, 1999, is presented below.

<TABLE>
<CAPTION>

                                                          At June 30, 2000      December 31, 1999
                                                          -----------------     ------------------
                                                           (In thousands)         (In thousands)
          <S>                                             <C>                   <C>
          3 months or less                                    $  2,481               $  1,448
          Over 3 through 6 months                                6,669                  4,324
          Over 6 through 12 months                               3,238                  1,942
          Over 12 months                                           768                    634
                                                              --------               --------

           Total time deposits of $100,000 or more            $ 13,156               $  8,348
                                                              ========               ========
</TABLE>

     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 bank's future
earnings because of interest rate sensitivity. At June 30, 2000 and December 31,
1999 and 1998, deposits of $100,000 or more totaled 24.3%, 21.1% and 21.1%, of
the bank's total deposits.

Results of Operations

Net Income

     General economic conditions, the monetary and fiscal policies of federal
agencies and the regulatory policies of agencies that regulate financial
institutions affect the operating results of the bank. Interest rates on
competing investments and general market rates of interest influence the bank's
cost of funds. Lending activities are influenced by the demand for various types
of loans, which in turn is affected by the interest rates at which such loans
are made, general economic conditions and the availability of funds for lending
activities.

                                       39
<PAGE>

     The bank's net income is primarily dependent upon its net interest income,
which is the difference between interest income generated on interest-earning
assets and interest expense incurred on interest-bearing liabilities. Provisions
for loan losses, service charges, gains on the sale of assets and other income,
noninterest expense and income taxes also affect net income.

     Net income for the three and six months ended June 30, 2000 amounted to
$88,000 and $197,000 ($0.15 and $0.34 earnings per share) compared to net income
of $126,000 and $254,000 ($0.22 and $.44 earnings per share) for the comparable
periods in 1999. Increases in net interest income during the three and six month
periods ended June 30, 2000 were offset by increases in noninterest expense.
Additionally, during the six months ended June 30, 2000, income tax expense was
recognized at a higher effective tax rate as all prior net operating loss
carryforwards had been utilized.

     Net income for the year ended December 31, 1999, amounted to $529,000
($0.92 basic and diluted earnings per common share) compared to net income of
$477,000 ($0.83 basic and diluted earnings per common share) for the year ended
December 31, 1998, and compared to a net loss of $568,000 ($0.99 basic and
diluted loss per common share) for the year ended December 31, 1997. Net income
for 1998 increased over 1997 due to an increase in interest income resulting
from an increased volume of loans. Net income in 1999 increased over 1998 due to
similar reasons.

     Two key measures of performance within the banking industry are return on
average assets and return on average stockholders' equity. Return on average
assets ("ROA") measures net income in relation to average total assets and
indicates a company's ability to employ its resources profitably. The bank's ROA
was 0.70% and 1.15% of the first six months of 2000 and 1999 and 1.16% for 1999
compared to 1.38% for 1998 and (4.02)% for 1997.

     Return on average stockholders' equity ("ROE") is determined by dividing
net income by average stockholders' equity and indicates how effectively a
company can generate net income on the capital invested by its stockholders. The
bank's ROE 6.73% and 9.67% for the first six months of 2000 and 1999 and was
9.74% for 1999, compared to 9.82% for 1998 and (13.58)% for 1997.

Net Interest Income

     Net interest income is the largest component of the bank's income and is
affected by the interest rate environment and the volume and composition of
interest-earning assets and interest-bearing liabilities.

     The general market rates of interest, including the deposit and loan rates
offered by many financial institutions, are influenced by the Federal Reserve
through adjustments to the discount rate. The discount rate is the interest rate
at which member institutions can borrow funds from the Federal Reserve if
necessary. The discount rate began 1997 at 5.00% and remained stable until the
fourth quarter of 1998 when the rate was decreased in two separate adjustments
of 25 basis points each. In 1999, the discount rate was increased by 25 basis
points in the third quarter and again in the fourth quarter to end the year at
5.00%. During 2000, the discount rate was increased 50 basis points in both
first and second quarters to end the first six months of the year at 6.00%. Over
the same period, the bank's prime interest rate, the rate offered on loans to
borrowers with strong credit, adjusted in a similar pattern. The prime rate
began 1997 at 8.50% and remained stable until the end of the third quarter of
1998 when the rate was decreased 25 basis points. The rate later decreased an
additional 50 basis points during the fourth quarter of 1998 and remained stable
until the third quarter of 1999. In 1999, the prime rate increased 50 basis
points in the third quarter and 25 basis points in the fourth quarter to end the
year at 8.50%. During 2000, the prime rate increased 50 basis points in both the
first and second quarters to end the first six months of 2000 at 9.50%.

                                       40
<PAGE>


     The "gap" is the difference between the repricing of interest-earning
assets and interest-bearing liabilities within certain time periods. The
following tables present the maturity and rate sensitivity gap of interest-
earning assets and interest-bearing liabilities at June 30, 2000 and December
31, 1999.

<TABLE>
<CAPTION>
                                                           Maturity or Next Rate Adjustment Date
                                   -----------------------------------------------------------------------------------
                                                   More than 3     More than      More than
                                     3 Months      Months to 1     1 Year to      3 Years to       Over 5
                                     or Less          Year          3 Years        5 Years          Years       Total
                                     --------      -----------     ---------      ----------       ------       -----
                                                                (Dollars in Thousands_
<S>                                <C>             <C>          <C>               <C>             <C>          <C>
June 30, 2000
Rate Sensitive Assets:
   Loans                           $   23,310      $    14,842     $    2,173     $      674      $       -    $  40,999
   Securities                             369                -            499              -              -          868
   Federal funds sold                  11,200                -              -              -              -       11,200
                                   ----------      -----------     ----------     ----------      ---------    ---------
                                   $   34,879      $    14,842     $    2,672     $      674      $       -    $  53,067
                                   ==========      ===========     ==========     ==========      =========    =========

Rate Sensitive Liabilities:
   Interest-bearing deposits       $   19,255      $    22,277     $    3,076     $      292      $       -    $  44,900
                                   ==========      ===========     ==========     ==========      =========    =========

Gap                                $   15,624      $    (7,435)    $     (404)    $      382      $       -    $   8,167

Cumulative gap                     $   15,624      $     8,189     $    7,785     $    8,167      $   8,167

Cumulative gap as a percent of
   total rate sensitive assets          29.44%           15.43%         14.67%         15.39%         15.39%


Cumulative rate sensitive assets
   as a percent of cumulative
   rate sensitive liabilities          181.14%          119.72%        117.45%        118.19%       118.19%
</TABLE>

<TABLE>
<CAPTION>
                                                           Maturity or Next Rate Adjustment Date
                                   -----------------------------------------------------------------------------------
                                                   More than 3     More than      More than
                                     3 Months      Months to 1     1 Year to      3 Years to       Over 5
                                     or Less          Year          3 Years        5 Years          Years       Total
                                   ----------      -----------     ---------      ----------       ------       -----
December 31, 1999
-----------------
<S>                                <C>             <C>          <C>               <C>             <C>          <C>
Rate Sensitive Assets:
   Loans                           $   22,259      $   13,038      $    2,030     $      556      $        -   $  37,883
   Securities                             353               -             498              -               -         851
   Federal funds sold                   1,800               -               -              -               -       1,800
                                   $   24,412      $   13,038      $    2,528     $      556      $        -   $  40,534

Rate Sensitive Liabilities:
   Interest-bearing deposits       $   12,139      $   15,500      $    1,991     $        2      $        -   $  29,632

Gap                                $   12,273      $   (2,462)     $      537     $      554      $        -   $  10,902

Cumulative gap                         12,273           9,811          10,348         10,902          10,902

Cumulative gap as a percent of
   total rate sensitive assets          30.28%          24.20%          25.53%         26.90%          26.90%


Cumulative rate sensitive

   assets as a percent of
   cumulative rate sensitive
   liabilities                         198.91%         135.50%         134.92%        136.79%         136.79%
</TABLE>

                                       41
<PAGE>


     As of June 30, 2000 and December 31, 1999, the bank was in a cumulative
positive gap position, or asset sensitive, on a one-year time horizon.
Accordingly, the bank's interest-earning assets will generally reprice more
quickly than its interest-bearing liabilities. Therefore, the bank's net
interest margin is likely to increase in periods of rising interest rates in the
market and decrease in periods of falling interest rates. Further analysis of
the bank's net interest margin is provided below. Also see discussion under the
heading "Asset and Liability Management and Quantitative and Qualitative
Disclosures About Market Risk" below.

     Net interest income totaled $797,000 and $1,516,000 for the three and six
months ended June 30, 2000, increasing $239,000, or 42.8%, and $414,000, or
37.6%, from the comparable periods in 1999. The increase in 2000 was primarily
due to an increase in the average volume of loans combined with an increase in
the average yield earned on such investments compared to the prior year. The
average yield earned on loans increased from 10.08% for the first six months of
1999 to 10.84% for the first six months of 2000. Similarly, the net interest
margin, which is calculated by dividing net interest income by average interest-
earning assets, increased from 5.45% to 5.96% over the comparable six-month
periods.

     Net interest income totaled $2,372,000 for 1999, increasing $488,000, or
25.9%, from 1998. Net interest income for 1998 was $1,884,000, increasing
$1,215,000, or 181.6%, from 1997. The increases over the comparable periods were
primarily due to an increase in the average volume of loans partly offset by a
decrease in the average yield earned on such investments. The average yield
earned on loans decreased from 10.94% in 1997 to 10.73% in 1998 and 10.23% in
1999. Despite the 50 basis point decrease in the yield on loans in 1999, the net
interest margin decreased only 19 basis points from 5.94% in 1998 to 5.81% in
1999. The impact on net interest income resulting from the decrease in the
average yield earned on loans was partly offset by a 45 basis point decrease in
the average rate paid on deposits. The average rate paid on deposits totaled
4.80% in 1999, 5.25% in 1998 and 5.11% in 1997. The net interest margin
increased 57 basis points from 5.37% in 1997 to 5.94% in 1998. In 1998, the bank
had a larger proportion of average interest-earning assets invested in higher
yielding loans compared to 1997. As such, the bank's average yield on interest-
earning assets increased from 8.72% in 1997 to 9.98% in 1998 despite a 20 basis
point decrease in the average yield earned on loans. The increase in the average
yield earned on interest-earning assets offset the impact of a 14 basis point
increase in the average rate paid on deposits and resulted in an increased net
interest margin for 1998.

                                       42
<PAGE>

The  following  tables set forth  information  relating  to the  bank's  average
balance sheet and reflects the average yield on interest-earning  assets and the
average cost of  interest-bearing  liabilities for the periods  indicated.  Such
yields and costs are  derived  by  dividing  income or  expense  by the  average
balance of  interest-earning  assets or  interest-bearing  liabilities,  for the
periods  presented.  Average  balances  are derived from daily  balances,  which
include nonaccruing loans in the loan portfolio.

<TABLE>
<CAPTION>
                                                                         Six Months Ended June 30,
                                           ---------------------------------------------------------------
                                                         2000                               1999
                                           ----------------------------     ------------------------------
                                                       Interest                        Interest
                                           Average     Income/  Yield/      Average    Income/     Yield/
                                           Balance     Expense  Rate(5)     Balance    Expense     Rate(5)
                                           -------     -------  -------     -------    -------     -------
ASSETS                                                          (Dollars in thousands)
<S>                                      <C>          <C>       <C>         <C>        <C>         <C>
Interest-earning assets:
   Loans, net (1)                        $  41,956    $   2,274   10.84%    $   34,361   $   1,732    10.08%
   Securities (2)                              859           29    6.75            306          10     6.54
   Federal funds sold                        8,096          248    6.13          5,756         134     4.66
                                         ---------    ---------             ----------   ---------
       Total interest-earning assets        50,911        2,551   10.02         40,423       1,876     9.28
                                         ---------    ---------             ----------   ---------

Noninterest-earning assets:
   Cash and due from banks                   2,474                               1,480
   Premises and equipment                    2,756                               1,932
   Other assets                                719                                 718
   Allowance for loan losses                  (471)                               (442)
                                         ---------                          ----------
       Total noninterest-earning
         assets                              5,478                               3,688
                                         ---------                          ----------
         Total assets                    $  56,389                          $   44,111
                                         =========                          ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
   NOW, savings and money
     market deposits                      $  9,627    $     180   3.74      $    9,066   $     174     3.84
   Time deposits                            30,134          855   5.67          22,698         600     5.29
                                          --------     --------             ----------   ---------    ------
     Total interest-bearing
       liabilities                          39,761        1,035   5.21          31,764         774     4.87
                                          --------     --------  -----      ----------   ---------    ------

Noninterest-bearing liabilities:
   Demand deposits                          10,516                               6,911
   Other liabilities                           261                                 184
                                          --------                           ---------
     Total noninterest-bearing
       liabilities                          10,777                               7,095
                                          --------                           ---------
       Total liabilities                    50,538                              38,859
Stockholders' equity                         5,851                               5,252
                                          --------                           ---------
         Total liabilities and
           stockholders' equity           $ 56,389                          $   44,111
                                          ========                           =========

Average cost of all deposits                                     4.12%                                4.00%
                                                                 ====                                 ====

Net interest income                                   $   1,516                          $   1,102
                                                      =========                          =========

Interest rate spread (3)                                         4.81%                                4.41%
                                                                 ====                                 ====

Net interest margin (4)                                          5.96%                                5.45%
                                                                 ====                                 ====
</TABLE>

------------------------------
(1)  Calculated net of deferred loan fees.
(2)  Average balance includes unrealized gains and losses on available for sale
     securities while yield is based on amortized cost.
(3)  The interest rate spread is the difference between the average yield on
     interest-earning assets and the average cost of interest-bearing
     liabilities.
(4)  The net interest margin is equal to net interest income divided by average
     interest-earning assets. Yields earned and rates paid are presented on an
     annualized basis.

(5)  Yields earned and rates paid are presented on an annualized basis.
                                       43
<PAGE>

<TABLE>
<CAPTION>
                                                           Year Ended December 31,
                              ------------------------------------------------------------------------------------------------
                                              1999                             1998                         1997(1)
                              ------------------------------     -----------------------------     ---------------------------
                                            Interest                         Interest                         Interest
                                 Average    Income/   Yield/     Average     Income/    Yield/     Average    Income/   Yield/
                                 Balance    Expense    Rate      Balance     Expense     Rate      Balance    Expense   Rate
                              ----------    -------   ------     -------     --------   ------     -------    -------   ------
<S>                           <C>           <C>       <C>      <C>           <C>        <C>        <C>        <C>       <C>
ASSETS                                                                (Dollars in thousands)
Interest-earning assets:
  Loans, net (2)              $   34,971    $ 3,576    10.23%    $ 27,362    $ 2,936    10.73%     $ 7,298    $   798   10.93%
  Securities (3)                     456         28     6.14          343         19     5.54          896         53    5.92
  Federal funds sold               5,837        291     4.99        3,989        209     5.24        4,255        235    5.52
                              ----------    -------              --------    -------               -------    -------
        Total interest
        earning assets            41,264      3,895     9.44       31,694      3,164     9.98       12,449      1,086    8.72
                              ----------    -------              --------    -------               -------    -------

Noninterest-earning assets:
  Cash and due from banks          1,822                            1,026                              489
Premises and equipment, net        2,183                            1,748                            1,098
Other assets                         579                              332                              141
  Allowance for loan losses         (425)                            (314)                             (53)
                              ----------                         --------                          -------
        Total noninterest-
          earning assets           4,159                            2,792                            1,675
                              ----------                         --------                          -------
               Total assets   $   45,423                         $ 34,486                          $14,124
                              ==========                         ========                          =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
  Demand, savings and money
    market deposits           $    9,623    $   370     3.84%    $  6,786    $   279     4.11%     $ 3,257    $   138    4.24%
  Time deposits                   22,133      1,153     5.21       17,609      1,001     5.68        4,907        279    5.69
                              ----------    -------              --------    -------    -----      -------    -------
      Total interest-
        bearing deposits          31,756      1,523     4.80       24,395      1,280     5.25        8,164        417    5.11
                              ----------    -------   ------     --------    -------    -----      -------    -------   -----

Noninterest-bearing liabilities:
  Demand deposits                  8,007                            5,073                            1,745
  Other liabilities                  231                              163                               32
                              ----------                         --------                          -------
        Total noninterest-
          bearing liabilities      8,238                            5,236                            1,777
                              ----------                         --------                          -------
            Total liabilities     39,994                           29,631                            9,941
Stockholders' equity               5,429                            4,855                            4,183
                              ----------                         --------                          -------
            Total liabilities
              and stockholders'
              equity          $   45,423                         $ 34,486                          $14,124
                              ==========                         ========                          =======

Average cost of all deposits                            3.83%                            4.34%                           4.21%
                                                        ====                             ====                            ====

Net interest income                         $ 2,372                          $ 1,884                          $   669
                                            =======                          =======                          =======

Interest rate spread (4)                                4.64%                            4.73%                           3.61%
                                                        ====                             ====                            ====

Net interest margin (5)                                 5.75%                            5.94%                           5.37%
                                                        ====                             ====                            ====
</TABLE>
------------------------------
(1)  1997 includes the period from February 28, 1997 (Inception) through
     December 31, 1997.
(2)  Calculated net of deferred loan fees.
(3)  Average balance includes unrealized gains and losses on available for sale
     securities while yield is based on amortized cost. (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 divided by average
     interest-earning assets.

                                       44
<PAGE>

     The following tables present 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 volume and rate in the tables have been
allocated to volume or rate change in proportion to the absolute amounts of the
change in each.

                                                   June 30, 2000 vs 1999
                                            ----------------------------------
                                                 Increase (Decrease) Due To
                                                        Changes In
                                            ----------------------------------
                                             Volume        Rate        Total
                                            -------       -----       --------
                                                     (In thousands)
Interest-earning assets:
   Loans, net                               $   404       $ 138       $    542
   Securities                                    18           1             19
   Federal funds sold                           164          50            114
                                            -------       -----       --------
       Total interest income                    486         189            675
                                            -------       -----       --------

Interest-bearing liabilities:
   Deposits:
     NOW, savings and money market deposits      10          (4)             6
     Time deposits                              209          46            255
                                            -------       -----       --------
         Total interest expense                 219          42            261
                                            -------       -----       --------

Net interest income                         $   267       $ 147       $    414
                                            =======       =====       ========

<TABLE>
<CAPTION>
                                                    1999 vs 1998                           1998 vs 1997
                                         ---------------------------------      --------------------------------
                                             Increase (Decrease) Due To           Increase (Decrease) Due To
                                                      Changes In:                          Changes In:
                                         ---------------------------------      --------------------------------
                                          Volume        Rate       Total        Volume        Rate        Total
                                         --------    --------    ---------      -------      -------     -------
                                                                       (In thousands)
<S>                                      <C>         <C>         <C>            <C>          <C>         <C>
Interest-earning assets:
  Loans, net of unearned
    income                               $    777    $   (137)   $     640      $ 2,185      $   (47)    $ 2,138
  Securities                                    7           2            9          (32)          (2)        (34)
  Federal funds sold                           91          (9)          82          (14)         (12)        (26)
                                         --------    --------    ---------      -------      -------     -------
       Total interest income                  875        (144)         731        2,139          (61)      2,078
                                         --------    --------    ---------      -------      -------     -------

Interest-bearing liabilities:
  Deposits:
    NOW, savings and money                    110         (19)          91          145           (4)        141
      market deposits                         241         (89)         152          722            -         722
    Time deposits                        --------    --------    ---------      -------      -------     -------
                                              351        (108)         243          867           (4)        863
        Total interest expense           --------    --------    ---------      -------      -------     -------


  Net interest income                    $    524    $    (36)   $     488      $ 1,272      $   (57)    $ 1,215
                                         ========    ========    =========      =======      =======     ========
</TABLE>

Provision for Loan Losses

     The provision for loan losses is determined by management as the amount to
be added to the allowance for loan losses after net charge-offs have been
deducted to bring the allowance to a level which, in management's best estimate,
is necessary to absorb losses inherent in the loan portfolio. The amount of the
provision is based on management's review of the loan portfolio and
consideration of such factors as historical loss experience, general prevailing
economic conditions, changes in the size and composition of the loan portfolio
and specific borrower considerations, including the ability of the borrower to
repay the loan and the estimated value of the underlying collateral.

     The provision for loan losses for the three and six months ended June 30,
2000 totaled $45,000 and $90,000 compared to $10,000 and $48,000 for the
comparable periods in 1999. The provision for loan losses for the year ended
December 31, 1999, was $98,000 compared to $180,000 in 1998 and $225,000 in
1997. The bank experienced charge-offs of $2,000, which were related to
installment loans, during the first six months of 2000 and $11,000, which were
related to commercial loans, during the first six months of 1999. Total charge-
offs for 1999 were $72,000, all of which were related to commercial loans,

                                       45
<PAGE>


while there were no charge-offs experienced in 1998 or 1997. The amount of the
provision for loan losses over the comparable six-month periods has increased to
compensate for the additional risk in the bank's loan portfolio resulting from
the growth in interim construction loans. The amount of the provision for loan
losses over the comparable annual periods has declined based on the low levels
of charge-offs experienced. At June 30, 2000 and December 31, 1999 and 1998, the
allowance for loan losses totaled $519,000, $431,000 and $405,000. These reserve
balances represent management's best estimate of probable losses that have been
incurred at such dates.

Noninterest Income

     Total noninterest income increased $17,000, or 34.0%, and $46,000, or
52.3%, from $50,000 and $88,000 during the three and six months ended June 30,
1999 to $67,000 and $134,000 for the same periods in 2000 and increased
$107,000, or 88.4%, from $121,000 in 1998 to $228,000 in 1999. The amount for
1998 increased $84,000, or 227.0%, from $37,000 in 1997. The increases were
primarily the result of increases in services charges on deposit accounts due to
the overall growth total deposits over the comparable periods.

Noninterest Expense

     Total noninterest expense increased $243,000, or 56.1%, and $400,000, or
47.1%, from $433,000 and $849,000 during the three and six months ended June 30,
1999 to $676,000 and $1,249,000 during the same periods 2000 and increased
$297,000, or 19.6%, from $1,512,000 in 1998 to $1,809,000 in 1999. Total
noninterest expense increased $463,000, or 44.1%, from $1,049,000 in 1997 to
$1,512,000 in 1998. Significant changes in the various components of noninterest
expense are discussed below. As discussed above, financial information for 1997
includes period from February 28, 1997 (Inception) through December 31, 1999.

     Salaries and employee benefits totaled $232,000 and $467,000 for the three
and six months ended June 30, 1999 compared to $342,000 and $640,000 for the
same periods of 2000 and $988,000 during the year ended December 31, 1999
compared to $815,000 and $527,000 in 1998 and 1997. The increase in salaries and
employee benefits over the comparable periods is the result of the addition of
staff due to growth in the bank and normal, annual merit increases.

     Occupancy expense totaled $92,000 and $171,000 for the three and six months
ended June 30, 2000 compared to $48,000 and $95,000 during the comparable
periods in 1999 and $212,000 during the year ended December 31, 1999 compared to
$195,000 in 1998 and $127,000 in 1997. The increase over the comparable six-
month periods resulted from the opening of a new branch office in the first
quarter of 2000. The increase in 1999 compared to 1998 resulted from increases
in normal costs associated with operating bank's main facility. The increase in
1998 compared to 1997 is the result of the recognition of a full year expense in
1998.

     Other noninterest expense totaled $202,000 and $380,000 for the three and
six months ended June 30, 2000 compared to $135,000 and $261,000 for the same
periods in 1999 and $561,000 during the year ended December 31, 1999 compared to
$455,000 in 1998 and $369,000 in 1997. Other noninterest expense includes
supplies, telephone, data processing, collection and advertising expenses, as
well as directors fees and franchise taxes, among other things. Increases in
these types of expenses over the comparable periods is consistent with the
overall growth in the bank. No single category of other noninterest expense
makes up a significant portion of the increases over the comparable periods.

Federal Income Taxes

     The change in income tax expense/(benefit) is primarily attributable to the
change in income/(loss) before income taxes. The provision for income taxes
totaled $55,000 and $114,000, for effective rates of 38.5% and 36.7%, for the
three and six months ended June 30, 2000 compared to $39,000 and $39,000, for
effective tax rates of 23.6% and 13.3%, for the same periods in 1999. The lower
effective tax rate during the three and six months ended June 30, 1999 resulted
as the bank was able to utilize net operating loss carryforwards to reduce the
tax liability. The provision for income taxes totaled $164,000, for an effective
rate of 23.7%, in 1999 and $(164,000), for an effective rate of (52.4)%, in
1998, while no provision for income tax was recognized in 1997.

                                       46
<PAGE>

Asset and Liability Management and Quantitative and Qualitative Disclosures
About Market Risk

     The bank's primary market risk exposure is interest rate risk and, to a
lesser extent, liquidity risk. Interest rate risk is the risk that the bank's
financial condition will be adversely affected due to movements in interest
rates. The income of financial institutions is primarily derived from the excess
of interest earned on interest-earning assets over the interest paid on
interest- bearing liabilities. Accordingly, the bank places great importance
on monitoring and controlling interest rate risk.

     There are several methods employed by the bank to monitor and control
interest rate risk. One such method is using a gap analysis. As presented and
discussed above in management's analysis of net interest income, the gap is
defined as the repricing variance between rate sensitive assets and rate
sensitive liabilities within certain periods. The repricing can occur due to
changes in rates on variable rate products as well as maturities of interest-
earning assets and interest-bearing liabilities. A high ratio of interest
sensitive assets, generally referred to as a positive gap, tends to benefit net
interest income during periods of rising interest rates as the average rate
earned on interest-earning assets rises faster than the average rate paid on
interest-bearing liabilities. The opposite holds true during periods of falling
interest rates. The bank attempts to minimize the interest rate risk through
management of the gap in order to achieve consistent return. At June 30, 2000
and December 31, 1999, the bank's ratio of rate sensitive assets to rate
sensitive liabilities was 119.72% and 135.50% on a one-year time horizon. One
strategy used by the bank in gap management is to originate variable rate loans
tied to market indices. Such loans reprice on an annual, quarterly, monthly or
daily basis as the underlying market indices change. Additionally, all of the
bank's fixed-rate interim construction loans are originated with original
maturities of twelve months or less. The bank also invests excess funds in
liquid federal funds that mature and reprice on a daily basis.

     In addition to the gap analysis, management measures the bank's interest
rate risk by computing estimated changes in net interest income and the "net
portfolio value" ("NPV") of its cash flows from assets, liabilities and off-
balance sheet items in the event of a range of assumed changes in market
interest rates. The bank's senior management and the Board of Directors review
the exposure to interest rates at least quarterly. Exposure to interest rate
risk is measured with the use of an interest rate sensitivity analysis to
determine the change in NPV in the event of hypothetical changes in interest
rates, while the gap analysis is used to determine the repricing characteristics
of assets and liabilities.

     NPV represents the market value of portfolio equity and is equal to the
market value of assets minus the market value of liabilities, with adjustments
made for off-balance sheet items. The application of the methodology attempts to
quantify interest rate risk as the change in the NPV that would result from
theoretical 100, 200 and 300 basis point (1 basis point equals 0.01%) changes in
market interest rates. Both increases and decreases in market interest rates are
considered.

     The following tables present, as of June 30, 2000 and December 31, 1999 and
1998, an analysis of the bank's interest rate risk as measured by changes in NPV
for instantaneous and sustained parallel shifts of 100, 200 and 300 basis points
in market interest rates.

                                           June 30, 2000
                                        ------------------
                 Change in              $ Amount  % Change
                Interest Rate            of NPV    in NPV
                -------------           --------  --------
                                     (Dollars in thousands)
                  + 300 bp             $6,625        12.1%
                  + 200 bp              6,388         8.1
                  + 100 bp              6,152         4.1

                    Base                5,912         --

                  - 100 bp              5,658       (4.3)
                  - 200 bp              5,397       (8.7)
                  - 300 bp              5,138      (13.1)



                                       47
<PAGE>

<TABLE>
<CAPTION>
                                            December 31, 1999       December 31, 1998
                                            -----------------       -----------------
                          Change in        $ Amount    % Change   $ Amount      % Change
                        Interest Rate       of NPV      in NPV     of NPV        in NPV
                        -------------      --------   --------    --------      --------
                                                          (Dollars in thousands)
                        <S>                <C>        <C>          <C>          <C>
                          + 300 bp         $5,958       4.25%      $5,247        1.18%
                          + 200 bp          5,875       2.80        5,227        0.79
                          + 100 bp          5,795       1.40        5,207        0.40

                            Base            5,715         --        5,186          --

                          - 100 bp          5,628      (1.52)       5,166       (0.39)
                          - 200 bp          5,532      (3.20)       5,146       (0.77)
                          - 300 bp          5,435      (4.90)       5,125       (1.18)
</TABLE>


     As illustrated in the above tables, the bank's NPV improves in periods
rising rates due to the bank's positive gap position. This is principally
because, as interest rates rise, the bank is able to reinvest a larger
proportion of its interest-earning assets at higher rates more quickly than it
would be forced to increase its rates paid on deposits, particularly longer-term
fixed-rate certificates of deposit. Thus, in a rising interest rate environment,
the amount of interest the bank would receive on its loans would increase
relatively quickly as variable-rate loans adjust upward and short-term fixed-
rate loans mature and new loans at higher rates are made.

     Computations of prospective effects of hypothetical interest rate changes
are based on numerous assumptions, including relative levels of market interest
rates, loan prepayments and deposit decay rates, and should not be relied upon
as indicative of actual results. Further, the computations do not contemplate
any actions the bank may undertake in response to changes in interest rates.

     As with any method of measuring interest rate risk, certain shortcomings
are inherent in the NPV approach. For example, although certain assets and
liabilities may have similar maturities or periods of repricing, they may react
in different degrees to changes in market interest rates. Also, the interest
rates on certain types of assets and liabilities may fluctuate in advance of
changes in market interest rates, while interest rates on other types may lag
behind changes in market rates. Further, in the event of a change in interest
rates, expected rates of prepayment on loans and early withdrawal levels from
certificates of deposit would likely deviate significantly from those assumed in
making risk calculations.

                                       48
<PAGE>

                           Selected Financial Ratios

     The following table presents selected financial ratios for the six months
ended June 30, 2000 (annualized) and 1999 and for each of the last three fiscal
years since inception:

<TABLE>
<CAPTION>
                                                Six Months Ended
                                                    June 30,                      Year Ended December 31,
                                                ----------------              ------------------------------
                                                 2000      1999               1999         1998         1997
                                                 ----      ----               ----         ----         ----
<S>                                              <C>       <C>              <C>           <C>         <C>
Net income to:
  Average assets                                  0.70%     1.15%            1.16%         1.38%       (4.02)%
  Average interest-earning assets                 0.77      1.26             1.28          1.52        (4.56)
  Average stockholders' equity                    6.73      9.67             9.74          9.82       (13.58)
Dividend payout to:
  Net income                                     --        --               --            --           --
  Average stockholders' equity                   --        --               --            --           --
Average stockholders' equity to:
  Average total assets                           10.38     11.91            11.95         14.08        29.62
  Average loans (1)                              13.95     15.28            15.52         17.74        57.32
  Average total deposits                         11.64     13.58            13.65         16.48        42.21
Average interest-earning assets to:
  Average total assets                           90.29     91.64            90.84         91.90        88.14
  Average total deposits                        101.26    104.52           103.77        107.55       125.63
  Average total liabilities                     100.74    104.02           103.18        106.96       125.23
Ratio to total average deposits of:

  Average loans (1)                              83.45     88.85            87.95         92.85        73.65
  Average noninterest-bearing
     deposits                                    20.92     17.87            20.14         17.22        17.61
  Average interest-bearing deposits              79.08     82.13            79.86         82.78        82.39
Total interest expense to total
     interest income                             40.57     41.26            39.10         40.46        38.40
Efficiency ratio (2)                             75.70     71.34            69.58         75.41       148.58
</TABLE>

-------------------------
(1)  Before allowance for loan losses.
(2)  Calculated as noninterest expense divided by the sum of net interest income
     before provision for loan losses and total  noninterest  income, excluding
     securities gains and losses.

Liquidity

     Liquidity is the ability of the bank to fund customers' needs for borrowing
and deposit withdrawals. The purpose of liquidity management is to assure
sufficient cash flow to meet all of the financial commitments and to capitalize
on opportunities for business expansion. This ability depends on the
institution's financial strength, asset quality and types of deposit and
investment instruments offered by the bank to its customers. The bank's
principal sources of funds are deposits, loan and securities repayments, and
other funds provided by operations. The bank also has the ability to borrow from
the Federal Home Loan bank (FHLB). While scheduled loan repayments and maturing
investments are relatively predictable, deposit flows and early loan prepayments
are more influenced by interest rates, general economic conditions and
competition. The bank maintains investments in liquid assets based upon
management's assessment of (1) need for funds, (2) expected deposit flows, (3)
yields available on short-term liquid assets and (4) objectives of the
asset/liability management program.

     Cash and cash equivalents totaled $15,546,000, or 25.8% of total assets, at
June 30, 2000 compared to $4,017,000, or 8.86% of total assets, at December 31,
1999 and $8,094,000, or 18.1% of total assets, at December 31, 1998. The bank
has the ability to borrow funds from the FHLB and has various federal fund
sources from correspondent banks, should the bank need to supplement its future
liquidity needs in order to meet deposit flows, loan demand or to fund
investment opportunities. Management believes the bank's liquidity position is
strong based on its high level of cash, cash equivalents, core deposits, the
stability of its other funding sources and the support provided by its capital
base.

     As summarized in the Statements of Cash Flows, the most significant
transactions which affected the bank's level of cash and cash equivalents, cash
flows and liquidity during the first six months of 2000 were the net increase in
loans of $3,106,000 and the net increase in deposits of $14,551,000. The most
significant transactions which affected

                                       49
<PAGE>

the bank's level of cash and cash equivalents, cash flows and liquidity during
the year ended December 31, 1999 were the net increase in loans of $3,640,000,
securities purchases of $595,000 and capital expenditures of $787,000.

Capital Resources

     At June 30, 2000, stockholders' equity totaled $5,912,000, or 9.8% of total
assets, compared to $5,715,000, or 12.6% of total assets, at December 31, 1999
and $5,186,000, or 11.6% of total assets, at December 31, 1998. The increases in
stockholders' equity are the result of earnings retained. Since its inception in
1997, the bank has not paid any dividends.

     The bank is subject to regulatory capital requirements administered by
federal banking agencies. The bank regulators monitor capital adequacy very
closely and consider it an important factor in ensuring the safety of
depositors' accounts. As a result, bank regulators have established standard
risk based capital ratios that measure the amount of an institutions capital in
relation to the degree of risk contained in the balance sheet, as well as off-
balance sheet exposure. Federal law requires each federal banking regulatory
agency to take prompt corrective action to resolve problems of insured
depository institutions including, but not limited to, those that fall below one
or more prescribed capital ratios. According to the regulations, institutions
whose Tier 1 and total capital ratios meet or exceed 6.0% and 10.0% of risk-
weighted assets, respectively, are considered "well capitalized." Institutions
whose Tier 1 and total capital ratios meet or exceed 4.0% and 8.0% of risk-
weighted assets, respectively, are considered "adequately capitalized." Tier 1
capital is shareholders' equity excluding the unrealized gain or loss securities
classified as available for sale and intangible assets. Tier 2 capital, or total
capital, includes Tier 1 capital plus the allowance for loan losses not to
exceed 1.25% of risk weighted assets. Risk weighted assets are the bank's total
assets after such assets are assessed for risk and assigned a weighting factor
based on their inherent risk. In addition to the risk-weighted ratios, all
institutions are required to maintain Tier 1 leverage ratios of at least 5.0% to
be considered "well capitalized" and 4.0% to be considered "adequately
capitalized." The leverage ratio is defined as Tier 1 capital divided by
adjusted average assets for the most recent quarter.

     The tables below set forth the bank's actual capital levels in addition to
the capital requirements under the prompt corrective action regulations as of
June 30, 2000 and December 31, 1999.

<TABLE>
<CAPTION>
                                                                      June 30, 2000            December 31, 1999
                                                                      -------------            -----------------
                                                                               (Dollars in thousands)
  <S>                                                                 <C>                       <C>
  Tier 1 capital:
    Common stockholders' equity, excluding unrealized
      loss on available-for-sale securities                           $      5,912              $     5,715
    Intangible assets                                                            -                        -
                                                                      ------------              -----------
         Total Tier 1 capital                                                5,912                    5,715
                                                                      ------------              -----------

  Tier 2 capital:
    Allowance for loan losses -limited to 1.25% of
      risk-weighted assets                                                     519                      419
                                                                      ------------              -----------
         Total Tier 2 capital                                                  519                      419
                                                                      ------------              -----------

            Total capital                                             $      6,431              $     6,134
                                                                      ============              ===========

  Risk-weighted assets                                                $     46,931              $    33,503
                                                                      ============              ===========

  Adjusted quarterly average assets                                   $     59,696              $    47,421
                                                                      ============              ===========
</TABLE>

                                       50
<PAGE>


<TABLE>
<CAPTION>
                                                             Regulatory       Well-capitalized         Actual
                                                               Minimum             Minimum              Ratio
                                                             ----------       ----------------         ------
June 30, 2000
-------------
<S>                                                          <C>              <C>                      <C>
  Tier 1 capital to risk-weighted assets ratio                    4.00%             6.00%               12.60%
  Total capital to risk-weighted assets ratio                     8.00             10.00                13.70
  Leverage ratio                                                  4.00              5.00                 9.90

December 31, 1999
-----------------
  Tier 1 capital to risk-weighted assets ratio                    4.00              6.00                17.06
  Total capital to risk-weighted assets ratio                     8.00             10.00                18.31
  Leverage ratio                                                  4.00              5.00                12.05
</TABLE>

     As of June 30, 2000 and December 31, 1999 the bank met the level of capital
required to be categorized as well capitalized under prompt corrective action
regulations. Management is not aware of any conditions subsequent to June 30,
2000 and December 31, 1999 that would change the bank's capital category.

     On May 31, 2000, the bank entered into the transfer agreement with the
holding company and the selling directors. The selling directors may be joined
by other shareholders who sign a counterpart of the transfer agreement.

     The transfer agreement provides for the following two transactions:

          .     The sale of bank stock owned by the selling directors and other
                shareholders who sign a counterpart of the transfer agreement to
                the holding company for $15.00 per share cash. The selling
                directors collectively own 69,000 shares of bank stock. The
                selling directors are also aware of other shareholders of the
                bank who may desire to sell their shares of bank stock to the
                holding company.

          .     The sale by the bank of its Park Cities branch to the Park
                Cities bank that has been established by the selling directors
                in a purchase and assumption transaction in which the Park
                Cities bank will pay a purchase premium of $500,000 plus the
                organization expenses and operating losses associated with the
                Park Cities branch. The bank began operations of the Park Cities
                branch, a full service branch facility, on March 27, 2000.

          The holding company and the bank have entered into the reorganization
agreement, whereby the bank will become a wholly owned subsidiary of the holding
company. The bank will continue to operate from its current location. However,
pursuant to the transfer agreement, the bank will no longer own the Park Cities
branch and the selling directors will no longer be directors or employees of the
bank.

          The reorganization agreement provides that each shareholder of the
bank (other than the selling directors and other shareholders who have signed
the transfer agreement) may choose to receive one share of the holding company
common stock or $15.00 cash for each share of bank stock they own. The selling
directors have agreed to cause the Park Cities bank to provide bank shareholders
who elect to receive cash in the reorganization the right to subscribe for
shares of stock of the new bank that will own the Park Cities branch at the
initial offering price.

          To provide the funds for the cash portion of the transaction, the
holding company is offering for sale up to $2,500,000 of 9.5% fixed-rate
debentures. The debentures are payable in five equal installments, each being
20% of the original amount of the debentures. The principal payments will begin
on December 31, 2006 and continue until December 31, 2010. The debentures are
convertible, at any time at the option of the owner until December 31, 2006,
into shares of holding company common stock at $15.00 per share. In the event
that the holding company is unable to sell enough debentures to provide the
entire cash requirements of the transaction, the holding company has obtained a
loan commitment letter from another financial institution providing for a loan
of $1,650,000. The loan is payable over 10 years and bearing interest at
floating Wall Street Journal prime rate. The loan will be secured by a security
interest in all of the bank stock owned by the holding company.

          The holding company will not incur indebtedness (either in the form of
debentures or the loan) of more than $2,500,000. If the cash requirements of the
transaction are more than $2,500,000, the holding company will, first, request
permission from the Federal Reserve Bank of Dallas to increase the maximum
amount of indebtedness, second, request

                                       51
<PAGE>


that all debenture holders convert debentures into holding company stock in an
amount sufficient to enable the holding company to satisfy its debt commitment,
and third, seek additional equity from investors in a private offering. The bank
will receive a purchase premium of $500,000 from the sale of the Park Cities
branch. In addition, the bank will recoup its organization costs and operating
losses of approximately $197,000 in the sale. This will increase the bank's 2000
net income and its capital levels.

     The reorganization agreement is subject to regulatory and shareholder
approval. Assuming the appropriate approvals are received, the bank hopes to
complete the stock transfer, the branch sale and the reorganization at the same
time in the fourth quarter of 2000.

Impact of Inflation and Changing Prices

     The financial statements and notes included herein have been prepared in
accordance with generally accepted accounting principles ("GAAP"). Presently
GAAP requires the bank to measure financial position and operating results
primarily in terms of historic dollars. Changes in the relative value of money
due to inflation or recession are generally not considered. The primary effect
of inflation on the operations of the bank is reflected in increased operating
costs.

     Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
changes in interest rates have a more significant effect on the performance of a
financial institution than do the effects of changes in the general rate of
inflation and changes in prices. Interest rates do not necessarily move in the
same direction or in the same magnitude as the prices of goods and services.
Interest rates are highly sensitive to many factors that are beyond the control
of the bank, including the influence of domestic and foreign economic conditions
and the monetary and fiscal policies of the United States government and federal
agencies, particularly the Federal Reserve. The Federal Reserve implements
national monetary policy such as seeking to curb inflation and combat recession
by its open market operations in United States government securities, control of
the discount rate applicable to borrowing by banks, and establishment of reserve
requirements against bank deposits. The actions of the Federal Reserve in these
areas influence the growth of bank loans, investments and deposits, and affect
the interest rates charged on loans and paid on deposits. The nature, timing and
impact of any future changes in federal monetary and fiscal policies on the bank
and its results of operations are not predictable.

Year 2000 Preparedness

     The bank successfully completed its Year 2000 changeover without any
problems in its core business processes. The bank has confirmed normal business
operations across all products and markets on a sustained basis.

     While management believes it is unlikely, problems associated with
noncompliant third parties could still occur. Management will continue to
monitor all business processes and relationships with third parties during 2000
to ensure that all processes continue to function properly.

     Costs related to the bank's Year 2000 conversion project, including
equipment replacement or upgrade, vendor payments, customer communications and
education, were not significant.

Recent Accounting Pronouncements

     Beginning January 1, 2001 a new accounting standard, Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," will require all derivatives to be recorded at fair
value. Unless designated as hedges, changes in these fair values will be
recorded in the income statement. Fair value changes involving hedges will
generally be recorded by offsetting gains and losses on the hedge and on the
hedged item, even if the fair value of the hedged item is not otherwise
recorded. This standard is not expected to have a material effect, but the
effect will depend on derivative holdings when this standard applies.

                                       52
<PAGE>

                                DIVIDEND POLICY

The Holding Company

     It is the holding company's current intention to retain earnings for the
foreseeable future to support operations and finance expansion. The payment of
any future dividends will be at the discretion of the holding company's board of
directors and will depend on, among other things, the holding company's
earnings, financial condition, cash flow from operations, capital requirements,
expansion plans, the income tax laws then in effect, the requirements of Texas
corporate law and bank regulatory requirements, dividends by the bank and
restrictions that may be imposed by the holding company's current and future
financing arrangements.

     The holding company's ability to pay dividends is restricted by Texas
statute and federal regulations. Article 2.38 of the Texas Business Corporation
Act provides that the holding company may not pay dividends if (1) after giving
effect to the dividend, the holding company would be insolvent, or (2) the
dividend exceeds the surplus of the holding company.

     The holding company's ability to pay cash dividends on the holding company
common stock is also restricted by the requirement that it maintain a certain
level of capital in accordance with regulatory guidelines promulgated by the
Federal Reserve Board. Under the current guidelines of the Federal Reserve
Board, the holding company may not pay dividends on the holding company common
stock without the prior consent of the Federal Reserve Bank of Dallas until the
holding company has achieved a debt-to-equity ratio of 1:1 or less. As of June
30, 2000, the holding company's debt-to-equity ratio on a pro forma basis, after
the debt issuance, share buy-out and sale of the Park Cities branch calculated
in accordance with Federal Reserve Board guidelines, would have been
approximately 0.67:1 just after consummation of the reorganization. The holding
company does not anticipate paying dividends on the holding company common stock
until its long-term debt incurred in the reorganization has been significantly
reduced.

     Finally, and most importantly, the holding company's principal source of
revenue is dividends from the bank. The holding company's ability to satisfy its
obligations and pay dividends is dependent upon the bank's ability to pay
dividends to the holding company.

The Bank

     The ability of the bank to pay dividends is restricted (i) by the
requirement that it maintain an adequate level of capital in accordance with
regulatory guidelines, and (ii) by statute. Federal regulatory authorities have
adopted capital guidelines that require capital based upon a percentage of an
asset's face value, depending upon the perceived credit risk associated with
categories of assets. Further, the regulations provide for a two tier concept of
capital, with "Tier 1" capital consisting primarily of common shareholders'
equity and "Tier 2" capital consisting of a percentage of the allowance for loan
losses, hybrid capital investments and mandatory convertible debt securities,
and term subordinated debt and intermediate term preferred stock. The capital
adequacy standards require a minimum total capital (Tier 1 capital plus Tier 2
capital) to risk weighted assets ratio of 8.0%. At June 30, 2000, the bank's
total capital to risk weighted assets was 13.70%, calculated in accordance with
regulatory guidelines.

     In addition to "risk-based" minimum capital requirements, the federal
regulations include minimum capital requirements related strictly to "Tier 1"
capital. The regulations reflect the position of banking regulatory authorities
that every institution, regardless of how credit risk-free it may be, must
maintain an absolute minimum level of equity. The minimum level of "Tier 1"
capital required by the regulations for banks in exceptional financial condition
is 3%. Banks not meeting the specific requirements in the regulations relating
to their condition must maintain higher levels of "Tier 1" capital. At June 30,
2000, the bank's Tier 1 capital "leverage" ratio was 9.90%, calculated in
accordance with regulatory guidelines.

     Certain statutory provisions also restrict the payment of dividends. One
federal statute provides that prior to declaring a dividend, a bank must
transfer to its surplus account an amount equal to or greater than 10% of the
net profits earned by the bank since its last dividend was declared, unless such
transfer would increase the surplus of the bank to an amount greater than the
bank's stated capital. Also, federal banking laws provide that the approval of
the OCC is required for any dividend if the total of all

                                       53
<PAGE>

dividends, including the proposed dividend, declared by the bank in any calendar
year exceeds the total of its net profits for such year combined with its
retained net profits for the preceding two years, less any required transfers to
surplus. Further, federal law prohibits the payment of a dividend in an amount
greater than a bank's undivided profits then on hand and, if accumulated losses
exceed the bank's accumulated profits, then no dividend may be paid.

     The bank is not currently prohibited by such statutes and regulations from
paying dividends. However, there can be no assurance that the bank will be able
to pay dividends to the holding company in the future. If the bank is prohibited
from paying dividends to the holding company in the future, the holding company
will not be able satisfy its financial obligations or to pay dividends on the
holding company common stock.

                                CAPITALIZATION

     The following  table sets forth the bank's  historical  and the holding
company's long-term debt and capitalization:

     .    as if the holding company existed on June 30, 2000 and the stock
          transfer and branch sale and reorganization was completed as of
          June 30, 2000;

     .    as adjusted to give effect to the reorganization and the stock
          transfer and branch sale transaction, assuming that the holding
          company pays an aggregate of $2,500,000 for 166,666 shares of bank
          stock and the holding company receives $500,000 in purchase premium
          and an aggregate of approximately $197,000 to reimburse it for
          organization costs and operating losses;

     .    as adjusted to give effect to the borrowing of $2,500,000 through a
          combination of sale and issuance of the debentures and borrowings from
          Wells Fargo Bank; and

     .    where applicable, all transactions are tax affected using an effective
          tax rate of 34.0%.

     This table should be read together with the bank's historical financial
statements and related notes appearing elsewhere in this document.

<TABLE>
<CAPTION>
                                                                 At June 30, 2000
                                                                 ----------------
                                                                           Holding
                                                                Bank       Company
                                                               Actual     Pro Forma
                                                               ------     ---------
                                                                     (Dollars in
                                                                     Thousands)
          <S>                                               <C>           <C>
          Convertible debentures/borrowings from
            Wells Fargo Bank                                $      --     $    2,500

            Stockholders' equity
            Common stock, par value $5.00 per share;
              shares authorized                                 2,874          2,040
            Paid-in capital                                     2,871          1,372
            Retained earnings                                     167            460
                                                            ---------     ----------
               Total stockholders' equity                   $   5,912     $    3,872
                                                            =========     ==========

               Total capitalization                         $   5,912     $    6,372
                                                            =========     ==========

          Total shares issued and outstanding (1)             574,750        408,084
</TABLE>

(1)  As of June 30, 2000, excludes stock options to purchase 15,000 shares of
     our bank stock granted to employees and directors at a weighted average
     exercise price of $10.00 per share. Also, excludes any issuance of holding
     company common stock upon conversion of the debentures.

                                       54
<PAGE>

             BENEFICIAL OWNERSHIP OF THE BANK STOCK BY SIGNIFICANT
                SHAREHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS

Security Ownership of Management

     The following table and notes to the table provide on the record date
certain information with respect to bank stock beneficially owned, as of the
record date for the annual meeting by:

     .    each executive officer of the bank,

     .    each director and nominee for director of the bank; and

     .    all executive officers and directors of the bank as a group.

     We determined beneficial ownership by applying the General Rules and
Regulations of the Commission, which state that a person may be credited with
the ownership of bank stock:

     .    owned by or for the person's spouse, minor children or any other
          relative sharing the person's home;

     .    of which the person shares voting power, which includes the power to
          vote or to direct the voting of the stock;

     .    of which the person has investment power, which includes the power to
          dispose or direct the disposition of the stock; and

     .    of which the person can acquire within 60 days upon the exercise of
          stock options.

<TABLE>
<CAPTION>
                                                              Amount and Nature of       Percentage of Bank
                                                              Beneficial Ownership       Stock Beneficially
           Name of Person or Group                               of Bank Stock                 Owned(1)
-----------------------------------------                     ---------------------      ------------------
<S>                                                           <C>                        <C>
Patrick G. Adams                                                         200                      0.03%
Donald A. Bailey                                                       2,500                      0.43
Harold L. Campbell                                                    50,000(2)                   8.70
Christopher G. Griffith                                                7,500                      1.30
Clyde W. Hensley                                                       9,500(3)                   1.64
Sue Higgs                                                                200                      0.03
Robert H. Lutz                                                        55,000(4)                   9.51
Randy L. Pack                                                         35,000(5)                   6.09
Jon Roy Reid                                                          23,800(6)                   4.14
Ronald W. Rhoades                                                      2,500                      0.43
John M. Yeaman                                                        10,000                      1.74
Thomas R. Youngblood                                                   4,700(7)                   0.81
All executive officers and directors as a
  group (12 persons)                                                 200,900                     34.41%
</TABLE>

-------------------------
(1)  The percentage of bank stock indicated is based upon 574,750 shares of bank
     stock outstanding date for the annual meeting.
(2)  Includes 40,000 shares of bank stock held jointly of record by Mr. Campbell
     and his spouse, 5,000 shares held of record by his spouse's IRA and 5,000
     shares held of record by Southwest Securities for the benefit of Mr.
     Campbell.
(3)  Includes 4,500 shares of bank stock that may be acquired within 60 days
     upon exercise of stock options granted under the bank's Stock Option Plan.
(4)  Includes 50,000 shares held of record by Mr. Lutz and 5,000 shares held of
     record by Southwest Securities for the benefit of Mr. Lutz.
(5)  Includes 20,000 shares held of record by Mr. Pack and 15,000 shares held of
     record by Southwest Securities for the benefit of Mr. Pack.

                                       55
<PAGE>

(6)      Includes 12,800 shares held of record by Mr. Reid and 11,000 shares
         held of record by Southwest Securities for the benefit of Mr. Reid.

(7)      Includes 4,500 shares of bank stock that may be acquired within 60 days
         upon exercise of stock options granted under bank's Stock Option Plan.

Security Ownership of Certain Beneficial Owners

         The following persons and entity are known by the bank to own
beneficially more than 5% of the bank stock on the record date.


                                         Number of        Percent of
           Name and Address                Shares          of Class (1)
     -----------------------------   ------------------  --------------
     Harold L. Campbell                      50,000             8.70%
     5006 Verde Valley
     Dallas, Texas 75240

     Jarman Family Investments, Ltd.(2)      40,000             6.96
     5344 Blake Drive
     Plano, Texas 75093

     Robert H. Lutz                          55,000             9.57
     17300 Dallas Parkway, Suite 3180
     Dallas, Texas 75248

     Randy L. Pack                           35,000             6.09
     P.O. Box 3049
     Grapevine, Texas 76099


----------------------
(1)      The percentage of bank stock indicated is based on 574,750 shares of
         stock outstanding on the record date.

(2)      Jarman Family Investments, Ltd. is a Texas limited partnership of which
         Judy Jarman is the sole general partner.

         The required vote for approval of the reorganization is the affirmative
vote of at least 66 2/3 of the outstanding shares of bank stock. On the record
date, there were 574,250 shares of bank stock outstanding. Accordingly, the
affirmative vote of at least 383,186 shares is necessary to approve the
reorganization.

         The seven continuing directors collectively own 122,900 shares. These
individuals have verbally indicated that they intend to vote these shares in
favor of the reorganization. Although these statements are not binding, we
believe that these individuals will vote their shares in favor of the
reorganization. The four selling directors collectively own 69,000 shares. As
part of the transfer agreement, they have granted to Robert H. Lutz, a
continuing director of the bank and a director of the holding company, their
proxy to vote their shares in favor of the reorganization. Accordingly, we
believe that an aggregate 191,900 shares held by the continuing and selling
directors will be voted in favor of the reorganization.

                      INFORMATION ABOUT THE ANNUAL MEETING

Time and Place of Annual Meeting

         The board of directors of the holding company is furnishing this proxy
statement to solicit your proxy for use at the Annual Meeting of shareholders of
the bank and any adjournment(s) of the meeting. The annual meeting will be held
at the main office of the bank, 5006 Verde Valley, Dallas, Texas 75240, on
Thursday, September 28, 2000, at 10:00 a.m., local time.

Purpose of the Annual Meeting

         At the annual meeting, the board of directors of the bank will request
shareholders:

         .    to consider and act upon a proposal to approve and adopt the
              reorganization agreement, providing for the reorganization of the
              bank as the wholly owned

                                       56
<PAGE>

              subsidiary of the holding company through the consolidation of the
              bank with New Eagle Bank, a proposed Texas chartered banking
              institution and subsidiary of the holding company;

         .    to consider and act upon a proposal to fix the number of directors
              to be elected at eleven and to elect eleven directors of the bank
              to hold office until the next annual meeting of shareholders or
              until their respective successors are duly elected and qualified;
              and

         .    to transact any other business that may properly come before the
              annual meeting and any adjournment(s) of the meeting.

Voting Rights

         The board of directors of the bank has fixed August 22, 2000, as the
record date for the determination of shareholders of the bank entitled to vote
at the annual meeting. Only holders of record of the outstanding shares of bank
stock at the close of business on the record date are entitled to notice of, and
to vote at, the annual meeting or any adjournment(s) of the annual meeting. On
the record date, the bank had outstanding 574,750 shares of bank stock, the only
authorized class of stock. At such date, the bank stock was held by
approximately 124 shareholders. Each outstanding share of bank stock entitles
the record holder to one vote. Shareholders are also entitled to cumulative
voting in the election of directors. Under cumulative voting, each shareholder
is entitled to an aggregate number of votes equal to the number of directors to
be elected multiplied by the number of shares the shareholder owns. You may
divide this aggregate number votes among the nominees for election of directors
as you choose.

Quorum

         Under federal law and the bylaws of the bank, the presence of a quorum
is required for each matter to be acted upon at the annual meeting. Holders of a
majority interest of all outstanding bank stock must be present at the meeting,
either in person or by proxy, to establish a quorum. For purposes of
establishing a quorum, the bank will count as present shareholders represented
by proxies marked "withhold" or "abstain." "Broker nonvotes" will also be
counted in determining the presence of a quorum for the particular matter.
"Broker nonvotes" are shares represented at the meeting held by brokers or
nominees as to which instructions have not been received from the beneficial
owners or persons entitled to vote and the broker or nominee does not have the
discretionary voting power on a particular matter. In the absence of a quorum,
the board of directors of the bank intends to adjourn the meeting to another
place and time without further notice to shareholders, until the necessary
shareholders are present. Those shareholders who fail to return a proxy or
attend the annual meeting in person will not count towards determining a quorum.

Vote Required

         The required vote for the approval of the reorganization is the
affirmative vote of at least 66-2/3% of the outstanding shares of bank stock.
Abstentions and broker nonvotes are not votes cast and therefore do not count
either for or against the approval and adoption of matters before the meeting.
Although abstentions and broker nonvotes are not votes cast, they have the
practical effect of votes cast AGAINST the reorganization proposal.

         In the election of directors, directors must receive a plurality of the
bank stock present and voting in person or by proxy, provided a quorum exists. A
plurality means receiving the largest number of votes, regardless of whether
that is a majority. All matters other than the reorganization and the election
of directors submitted to you at the annual meeting will be decided by a
majority of the votes cast on the matter, provided a quorum exists, except as
otherwise provided by law or our articles of association or bylaws. Those who
fail to return a proxy or attend the annual meeting in person will not count
towards determining any required plurality or majority.

                                       57
<PAGE>


Adjournment

         If for any reason the Board of Directors of the bank believes
additional time should be allowed to obtain proxies, the Board may adjourn the
meeting to another place and time with a vote of a majority of shares present at
the meeting.

Solicitation of Proxies

         The bank's Board of Directors is sending this proxy statement and the
enclosed proxy form to shareholders of the bank on or about August __, 2000. In
addition to the solicitation of proxies by use of the mail, officers, directors
and regular employees of the bank may solicit the return of proxies by personal
interview, mail, telephone, facsimile and/or through the Internet. These persons
will not be additionally compensated, but will be reimbursed for out-of-pocket
expenses. The bank will also request brokerage houses and other custodians,
nominees and fiduciaries to forward solicitation material to the beneficial
owners of shares. The bank encourages the personal attendance of its
shareholders at the annual meeting. An execution of the accompanying proxy will
not affect a shareholder's right to attend the annual meeting and to vote in
person.

         In connection with the solicitation of proxies, the bank will:

         .    bear the cost of soliciting proxies; and

         .    reimburse brokerage firms and other custodians, nominees and
              fiduciaries for their reasonable expenses in soliciting proxies;

Voting by Proxy

         By properly completing and signing a proxy and returning it to the bank
prior to the annual meeting, you will be appointing the proxy holders to vote
your shares at the annual meeting according to your instructions on the proxy.
If a proxy is completed, signed and returned without indicating any voting
instructions, the shares represented by the proxy will be voted:

         .    FOR the approval and adoption of the reorganization agreement, and

         .    FOR approval of the proposal to set the number of directors at
              eleven and to elect the eleven nominees for director set forth in
              this proxy statement/prospectus.

         The proxy holders will not vote any proxy that withholds authority. A
proxy also gives the persons named as proxy holders the right to vote on other
matters incidental to the conduct of the annual meeting. If other matters are
properly brought before the meeting, the proxy holders will vote your proxy in
accordance with the discretion of the proxies.

Revocation of Proxies

         Execution and return of the enclosed proxy will not affect your right
to attend the annual meeting and vote in person if you first give notice to Sue
Higgs, Secretary of the bank. A shareholder of the bank who returns a proxy may
revoke the proxy prior to the time it is voted:

         .    by giving written notice of revocation dated at any time before
              the proxy is voted to Sue Higgs, Secretary of Eagle National Bank,
              5006 Verde Valley, Dallas, Texas 75240;

         .    by delivering a properly executed proxy bearing a later date to
              Sue Higgs, Secretary of the bank; or

         .    by attending the annual meeting and voting in person after giving
              notice to Sue Higgs, Secretary of the bank.

                                       58
<PAGE>

         Attendance by a shareholder at the annual meeting will not itself
revoke the proxy. A revocation letter or later-dated proxy will not be effective
until received by Sue Higgs, Secretary of the bank, at or prior to the annual
meeting.

                                   PROPOSAL 1:

                           THE PROPOSED REORGANIZATION

Description of Reorganization Proposal

         We are asking that you approve the reorganization agreement that would
result in the reorganization of the bank as a subsidiary of the holding company.

Background

         The board of directors of the bank has been considering a number of
alternatives regarding the strategic direction of the bank for some time. The
stock transfer transaction and the reorganization are a result of decisions made
during this process.

         Since its inception in 1997, the shareholders of the bank have been
segregated into three distinct groups. One group is represented by Harold
Campbell, the Chairman of the Board, another group is represented by Clyde
Hensley, the Vice Chairman of the Board, and the third group is represented by
Tom Youngblood, the former President of the Bank. In the bank's initial years of
operation, these three groups worked together to cause the bank to become
profitable.

         After the bank achieved profitability, however, the three groups began
expressing differences of opinion regarding several strategic initiatives. These
differences arose over principally

         .    expansion plans;

         .    day to day management styles and objectives; and

         .    long term investment desires.

         During 1998 and early 1999 the three groups attempted to resolve their
differences. During this time, the bank continued with efforts to expand into
the Park Cities area of Dallas by preparing to open the Park Cities branch. The
Board also considered the possibility of forming a bank holding company to own
the bank. The bank began taking preliminary steps toward the formation of a bank
holding company in late 1999.

         In early 2000, the bank began receiving unsolicited offers to acquire
100% of the stock of the bank. The bank board held informal conversations with
interested purchasers in January and February regarding a potential transaction.
However, the board ultimately decided not to proceed further with these
inquiries primarily because the board concluded the proposed consideration was
determined to be inadequate for a change of control transaction.

         During these discussions, it became apparent that the directors had
different opinions regarding the strategic plan for the bank. As a result, in
early March 2000 the selling directors and the remaining directors began
discussing the possibility of splitting the bank into two entities, with the
remaining directors keeping the bank at its north Dallas office and the selling
directors selling their shares of bank stock and forming the Park Cities bank to
own the Park Cities branch.

         In late March, the Board approved the concept of the transaction,
authorizing the execution of a letter of intent, and authorizing Harold Campbell
to negotiate the terms of a definitive agreement on behalf of the bank.

         On April 3, 2000, the bank entered into a letter of intent with the
selling directors. The letter of intent provided, among other things, that:

         .    the selling directors would sell their stock for $15.00 per share;

                                       59
<PAGE>

         .    the bank would sell the Park Cities branch to a new bank
              established by the selling directors for a purchase premium of
              $500,000 plus organization expenses and operating losses; and

         .    Tom Youngblood would resign as President of the bank effective as
              of April 1, 2000, but would remain the employee primarily
              responsible for the Park Cities branch.

         During April and May 2000, the bank and the selling directors
negotiated the terms of the transfer agreement. Meetings between Harold Campbell
and Tom Youngblood and the selling directors were held on various dates during
this period. On April 26, 2000, Harold Campbell and Tom Youngblood held a
meeting with separate legal counsel representing the bank and the selling
directors to negotiate the agreement. Harold Campbell, Robert H. Lutz, Chris
Griffith and Patrick Adams met with the bank's legal counsel on May 17, 2000, to
discuss the agreement. Harold Campbell met individually with the other remaining
directors during late May, 2000 to discuss the agreement.

         By Unanimous Consent dated effective as of May 31, 2000, the Board of
Directors approved the transfer agreement and authorized Harold Campbell to
execute the agreement on behalf of the bank. The transfer agreement was signed
effective as of May 31, 2000.

         During the negotiations, all of the directors recognized that
shareholders will have personal preferences regarding whether they would like to
keep their investment in the bank or join the selling directors in starting the
Park Cities bank. The primary purpose of the reorganization is to give you this
choice. As discussed below, you may elect to receive holding company common
stock or cash for your bank stock. You must make this election prior to or at
the special meeting. If you elect to receive cash, the selling directors have
agreed in the transfer agreement to cause the Park Cities bank to provide you
with the right to purchase shares of stock of the Park Cities bank.

         The Park Cities bank (In Organization) began soliciting investors for
its stock through its Offering Circular dated July 17, 2000. The terms of the
offering and a description of the Park Cities bank, its management and its
stock, are set forth in the Offering Circular. You will receive an Offering
Circular together with instructions for investing in the Park Cities bank if you
elect to receive cash in the reorganization.

Purchase of Stock from Selling Directors

         Pursuant to the transfer agreement, the holding company will purchase
the 69,000 shares of bank stock owned by the selling directors at a per share
price of $15.00. The transfer agreement includes a list of shareholders who the
selling directors believe may also desire to sell their shares of bank stock to
the holding company (the "selling shareholders"). These shareholders
collectively own 68,700 shares of bank stock. The transfer agreement provides
that the selling directors may contact the selling shareholders to determine if
they in fact desire to sell their shares of bank stock pursuant to the transfer
agreement. As of the date of this document, none of the shareholders who were
listed in the transfer agreement have agreed to sell their shares of bank stock
pursuant to the Stock Transfer and Branch Sale Agreement.

         The purchase price for the selling shareholder shares is also $15.00
per share. The purchase price under the transfer agreement may be increased if
the sale of the branch by the bank to the new bank is consummated prior to
consummation of the stock transfer. In such event, then the purchase price will
be increased by a daily interest rate equal to Wall Street Journal prime rate
for the number of days between the closing of the branch sale and the closing of
the stock transfer. The purchase price is payable in cash at closing of the
stock transfer.

         The transfer agreement also provides that Tom Youngblood will cancel
his option to purchase 7,500 shares of bank stock. In February, 1997, the bank
granted to Mr. Youngblood an option to purchase 7,500 shares of bank stock at
$10.00 per share. In consideration of his cancellation of the option, the
holding company will pay him $5.00 per share for each share subject to the
option, reflecting the difference between the $15.00 per share price to be paid
to the selling directors and the selling shareholders and the per share exercise
price of the option. Such payment is to be made in cash at the closing of the
stock transfer.

                                       60
<PAGE>


Sale of Park Cities Branch

         Pursuant to the transfer agreement, the bank will sell the Park Cities
branch to the Park Cities bank, the new bank being established by the selling
directors. The branch sale is part of the split up of the board of directors.
The bank would not sell the branch without the corresponding purchase of stock
from the selling directors. The bank recognizes that by selling the branch, it
is giving up a location in a separate market. Further, the bank recognizes that
the selling directors have relationships with some of the bank's customers and
that the Park Cities bank will compete with the bank for these customers.
Nevertheless, the bank believes that the sale of the Park Cities branch, when
taken in context with the purchase of stock from the selling directors, is in
the best interests of the bank.

         The transfer agreement also provides for the sale of the Park Cities
branch by the bank to the selling director's new bank. The Park Cities branch
will be sold pursuant to a purchase and assumption transaction where the new
bank will purchase the assets of the Park Cities branch (loans, leasehold
improvements, furniture, fixtures and equipment, the branch name, etc.) and
assume the liabilities of the Park Cities branch (primarily deposits and the
branch facility lease). The new bank will pay book value for the assets such as
loans, leasehold improvements, and furniture fixtures and equipment. The new
bank will also pay a purchase premium for the deposits equal to

         .    $500,000; plus
                        ----

         .    $2.50 multiplied by the difference between (a) 110,000 less (b)
              the number of shares of bank stock delivered by the selling
              directors and selling shareholders for sale pursuant to the
              transfer agreement; plus

         .    the organization costs of the Park Cities branch ($89,571.96);
              plus

         .    the net loss, if any, arising from the operation of the Park
              Cities branch from the date it opened (March 27, 2000) to the
              closing of the branch sale.

         The closing of the branch sale will be within thirty days after receipt
of regulatory approvals for the new bank to open for business and acquire the
Park Cities branch.

         The sale of the Park Cities branch will have a positive effect upon the
bank's financial condition and results of operations for the year ending
December 31, 2000. The Park Cities branch is a new branch that opened for
business on March 27, 2000. As such, the Park Cities branch has a relatively
small amount of assets (approximately $4,300,000 at June 30, 2000) which
constitute less than 10% of the bank's total assets. Further, the Park Cities
branch has incurred operational losses of approximately $108,000 through June
30, 2000. The bank will recoup the organization expenses and the operational
losses as well as receive a purchase premium of $500,000 in the branch sale.
This will increase the bank's pre-tax net income by at least $697,000 for 2000.
The increased net income will increase the bank's capital level as well. Given
the relatively small amount of assets being transferred, the branch sale will
not have a material effect upon the bank's liquidity.

         The sale of the Park Cities branch will divest the bank of a separate
location in a different market area. This sale will diminish the potential for
diversity in the bank's customer base that the bank was attempting to achieve
when it established the branch. The new Park Cities bank will be a new
competitor in the Dallas/Fort Worth area. However, the Park Cities bank will be
located in a different market from the bank and, as such, will not be in direct
competition with the bank. The bank does expect that, given that the selling
directors (in particular former President Tom Youngblood) have relationships
with the bank's customers, the bank will lose some of its customers to the new
Park Cities bank.

Holding Company Formation

         In proceeding with the transfer agreement, the board of directors of
the bank required that these transactions be fair to the shareholders of the
bank. To that end, the transfer agreement provides

                                       61
<PAGE>

         .    the holding company will acquire the bank in a corporate
              reorganization that provides shareholders with a choice of
              receiving holding company stock or $15.00 per share cash for their
              shares of bank stock;

         .    shareholders who elect to receive cash in the reorganization have
              the right to purchase shares of the new bank that will own the
              Park Cities branch at the initial offering price of the new bank
              stock; and

         .    the bank will obtain a fairness opinion from an independent bank
              valuation firm that the transactions are fair to the shareholders
              of the bank from a financial point of view.

Reasons for the Formation of the Holding Company

         A bank holding company is an entity that controls a bank through
ownership or other control of the voting stock of such bank. As a result of the
reorganization and the transfer agreement, the holding company will own 100% of
the issued and outstanding shares of the bank.

         The reasons for the establishment of the holding company to own the
bank include the following:

         .    The holding company provides a vehicle to complete the
              transactions contemplated by the transfer agreement.

         .    As part of its strategic planning, the bank is considering
              expansion of its geographic markets through the acquisition of, or
              merger with, other banks. The holding company can be an effective
              vehicle in financing such acquisitions and in maintaining the
              independent franchise value of an acquired institution. The
              holding company has no specific plans to acquire any particular
              financial institution at this time.

         .    By offering the opportunity for shareholders to elect to receive
              cash for their shares of bank stock as part of the reorganization,
              the formation of the holding company provides an immediate source
              of liquidity to those shareholders who want or need to liquidate
              their investment in the bank at this time.

         .    A bank is restricted by regulation from purchasing its own stock,
              while a bank holding company is generally subject to less
              regulatory restrictions. Because the holding company could create
              a market for and is permitted to purchase its own stock, holders
              of the holding company bank stock will have an additional
              prospective purchaser of such stock. The formation of the holding
              company should provide a continuing, though limited, source of
              liquidity for shareholders.

         .    Subject to the holding company's financial condition, purchases of
              newly issued bank stock or direct capital contributions by the
              holding company can be used to provide future injections of
              capital into the bank when and if needed. If the holding company
              were not formed and the bank sought additional capital injections
              through the issuance of additional shares of bank stock,
              shareholders desiring to avoid dilution of their percentage
              ownership of the bank would be required to purchase additional
              shares of bank stock with their personal funds. With the bank
              wholly owned by the holding company, such future injections of
              capital could be made by the holding company through borrowing
              without change in the percentage ownership of the shareholders of
              the holding company. The holding company's ability to obtain the
              necessary funds through borrowing instead of through the issuance
              of stock would be subject, of course, to regulatory restrictions
              and financial considerations.

Description and Effects of the Reorganization

         As a step toward establishing a holding company for the bank, the board
of directors of the bank incorporated the holding company on May 18, 2000, to
serve as the bank holding company. The holding company has taken no actions
except those aimed at

                                       62
<PAGE>


consummating the reorganization and achieving bank holding company status. No
shares of holding company bank stock have as yet been issued and the holding
company is being managed by its initial directors, Harold Campbell, Bobby Lutz
and Patrick Adams. The holding company has not engaged nor will it engage in any
business other than taking such actions as necessary to effect the transactions
described in this document.

         The establishment of the holding company as a bank holding company is
to be accomplished by the reorganization pursuant to the terms of the
reorganization agreement, a copy of which is attached as Annex A. The bank will
                                                         -------
be the resulting bank from the reorganization and will be wholly owned by the
holding company. Upon consummation of the reorganization, the bank will continue
to possess all of its property, rights, and interests and will be liable for all
of its liabilities and obligations. The bank will continue its banking business
at the same location with the same management as immediately prior to the
effective date of the reorganization. However, as a result of the transfer
agreement, the bank will no longer own the Park Cities branch and Randy Pack,
Jon Roy Reid, John Yeaman and Tom Youngblood will no longer be directors or
employees of the bank.

Conversion and Exchange of Shares

         The reorganization agreement provides that the shareholders (other than
the selling directors and shareholders who sell their shares to the holding
company pursuant to the transfer agreement) will be entitled to receive, for
each share of bank stock they own on the effective date of the reorganization,
at their option,

         .    one share of holding company common stock;

         .    $15.00 cash; or

         .    A combination of the foregoing.

As noted above, shareholders who elect to receive cash in the reorganization
have been granted the right by the new bank to subscribe for shares of the new
bank that will own the Park Cities branch. The transfer agreement provides that
such shareholders may subscribe for shares of the new bank at the initial
offering price until the earlier of

         .    30 days after the effective date of the reorganization; or

         .    December 31, 2000.

Shareholders may elect to receive holding company stock for part of their shares
of bank stock and cash for part of their shares of bank stock.

         Shareholders must make their election in writing in the form
transmitted with this document. The election form must be returned to the
holding company at or prior to the shareholders' meeting. If you do not return a
completed and signed election form by that date, you will be deemed to have
elected to receive all holding company common stock.

         The directors of the bank who are not selling their shares pursuant to
the transfer agreement are:

                  Patrick G. Adams
                  Donald A. Bailey
                  Harold L. Campbell
                  Christopher G. Griffith
                  Clyde W. Hensley
                  Robert H. Lutz
                  Ronald W. Rhoades

These directors beneficially own an aggregate of 122,700 shares of bank stock,
constituting approximately 21% of the shares of the outstanding bank stock. All
of these directors have indicated that they will elect to receive shares of
holding company stock for their shares of bank stock.

         We have committed to banking regulators that we will not incur
indebtedness (either in the form of the debentures or the loan from Wells Fargo
Bank) greater than $2,500,000. This means that the maximum number of shares of
the bank stock for which the holding

                                       63
<PAGE>


company could pay cash for is 166,667 shares. As mentioned above, the holding
company will purchase 69,000 shares for cash from the selling directors. This
leaves 97,667 shares that the holding company may acquire for cash from other
shareholders pursuant to the reorganization. If bank shareholders owning more
than 97,667 shares elect to receive cash in the reorganization, the holding
company will

         .    first, request permission from the Federal Reserve Bank of Dallas
              to increase the maximum amount of indebtedness,

         .    second, request that all debenture holders convert debentures into
              holding company stock in an amount sufficient to enable the
              holding company to satisfy its debt commitment, and

         .    third, seek additional equity from investors in a private
              offering.

         If none of these alternatives are successful, the holding company will
not be able to satisfy its regulatory commitment and will not be able to proceed
to consummate the transaction.

         At consummation of the reorganization, the 1,000 shares of bank stock
of the interim bank outstanding and held by the holding company will be
converted into and become 574,750 shares of the bank as the bank is the entity
surviving the reorganization. The shares of bank stock issued and outstanding
immediately prior to the reorganization and held by shareholders of the bank
other than the holding company will represent, after the reorganization, the
right to receive the consideration described above.

         The following table indicates the aggregate amount of consideration to
be received by the continuing directors as a group, the selling directors who
sell pursuant to the transfer agreement as a group, and all other shareholders
as a group assuming that all shareholders other than the selling directors elect
to receive holding company stock for their shares of bank stock.

<TABLE>
<CAPTION>
                                                                 Aggregate Number of
                                     Aggregate Number of          Shares of Holding
                                      Shares of Bank             Company Stock After
                                       Stock Prior to              the Reorganization
              Group                  Reorganization (%)                 (%) (1)                   Cash
-----------------------------       --------------------         -------------------          -----------
<S>                                 <C>                          <C>                          <C>
Continuing Directors                     122,700 (21%)               122,700 (24%)                      0

Selling Directors and Selling             69,000 (12%)                     0 (0%)              $1,035,000
Shareholders (2)

All Other Shareholders                   383,050 (67%)               383,050 (76%)                      0
                                    -------------------          -------------------         ------------

                             Total       574,750 (100%)              505,750 (100%)            $1,035,000
                                    ===================          ====================        ============
</TABLE>

(1)      Based upon 505,750 shares of holding company stock assumed to be
         outstanding and does not include shares issuable upon the exercise of
         stock options assumed by the holding company in the reorganization.

(2)      Reflects number of shares to be sold and consideration to be paid
         pursuant to the transfer agreement.

                                       64
<PAGE>


         The following table indicates the aggregate amount of consideration to
be received by the continuing directors as a group, the selling directors who
sell pursuant to the transfer agreement as a group, and all other shareholders
as a group assuming that shareholders holding 97,666 shares of bank stock (the
maximum amount of shares the holding company believes it can acquire from
shareholders other than the selling directors and to obtain regulatory approval)
elect to receive cash for their shares of bank stock.

<TABLE>
<CAPTION>
                                                                 Aggregate Number of
                                    Aggregate Number of           Shares of Holding
                                      Shares of Bank             Company Stock After
                                      Stock Prior to             the Reorganization
          Group                      Reorganization (%)               (%) (1)                    Cash
-----------------------------     -----------------------       ---------------------         ----------
<S>                               <C>                            <C>                          <C>

Continuing Directors                     122,700 (21%)               122,700 (30%)           $          0

Selling Directors and Selling             69,000 (12%)                     0 (0%)               1,035,000
Shareholders (2)

All Other Shareholders                   383,050 (67%)               285,384 (70%)              1,464,990
                                         -------------            ----------------           ------------
                             Total       574,750 (100%)              408,084 (100%)          $  2,499,990
                                         =============            ================           ============
</TABLE>

(1)      Based upon 408,084 shares of holding company assumed stock to be
         outstanding and does not include shares issuable upon the exercise of
         stock options assumed by the holding company in the reorganization.

(2)      Reflects number of shares to be sold and consideration to be paid
         pursuant to the transfer agreement.

         As indicated above, all of the continuing directors of the bank have
indicated that they intend to elect to receive shares of holding company stock
pursuant to the reorganization. The continuing directors of the bank will not
receive any additional consideration pursuant to the reorganization other than
the consideration to which they are entitled to receive by virtue of their
position as shareholders of the bank.

         After the effective date of the reorganization, each outstanding
certificate (except those held by any shareholders exercising dissenters'
rights), which prior to the effective date represented shares of bank stock,
shall be deemed for all purposes to evidence solely the right to exchange those
certificates for the consideration described in the reorganization agreement. As
soon as practicable after the consummation of the reorganization, transmittal
forms will be sent to the former shareholders of the bank for use in
surrendering their bank stock certificates.

Fairness Opinion

         The board of directors of the bank believes that the terms of the
reorganization are fair and reasonable. To support this position, The bank's
board of directors retained Hoefer & Arnett to render a written opinion (the
"Fairness Opinion") as investment bankers as to the fairness, from a financial
point of view, to the board of directors and shareholders of the bank of the
$15.00 per share cash purchase price to be paid by the holding company for less
than 30% of the outstanding common stock of the bank. In addition, the board of
directors of the bank has requested Hoefer & Arnett's opinion as investment
bankers as to the fairness, from a financial point of view, to all of the
shareholders of the bank of the proposed transfer of the Park Cities Branch to
certain shareholders of the bank for $500,000 plus certain other adjustments as
described in detail in the transfer agreement. No limitations were imposed by
the bank's board of directors upon Hoefer & Arnett with respect to the
investigations made or procedures followed in rendering the Fairness Opinion.

         A copy of the Fairness Opinion of Hoefer & Arnett, dated as of August
__, 2000, which sets forth certain assumptions made, matters considered and
limits on the review undertaken by Hoefer & Arnett, is attached as Annex C to
this document. The bank shareholders are urged to read the Fairness Opinion in
its entirety. Hoefer & Arnett's Fairness Opinion is directed only to the
financial terms of the transaction and does not constitute a recommendation to
any bank shareholder as to how such shareholder should vote at the annual
meeting.

                                       65
<PAGE>


         The board of directors of the bank has specifically adopted the
conclusions of the fairness opinion. If Hoefer & Arnett withdraws its fairness
opinion, the board of directors will discuss the reasons for withdrawal with
Hoefer & Arnett and consult with other financial advisors regarding the fairness
of the transaction. If the bank is ultimately unable to obtain a fairness
opinion, it may terminate the transfer agreement and not proceed with the
reorganization.

         The following disclosure includes, all procedures followed, findings
and recommendations, the bases for the methods of arriving at such findings and
recommendations, all principal materials reviewed, instructions received from
the bank or holding company or their affiliates and any limitation imposed by
any of the foregoing on the scope of the investigation.

         In arriving at its opinion, Hoefer & Arnett reviewed and analyzed,
among other things, the following:

         .    the transfer agreement;

         .    Audited financial statements for the bank as of December 31, 1998
              and December 31, 1999;

         .    Quarterly FDIC Call reports for the bank for the quarters ended
              June 30, 2000, December 31, 1999, September 30, 1999, June 30,
              1999, March 31, 1999 and December 31, 1998;

         .    certain other publicly available financial and other information
              concerning the bank;

         .    publicly available information concerning other banks and holding
              companies, the trading markets for their securities and the nature
              and terms of certain other transactions that Hoefer & Arnett
              believed to be relevant to its inquiry; and

         .    Hoefer & Arnett held discussions with senior management of the
              bank concerning their past and current operations, financial
              condition and prospects, as well as the results of regulatory
              examinations.

         Hoefer & Arnett reviewed with senior management of the bank earnings
projections for the years 2000 through 2004 for the bank as a stand-alone
entity, assuming the reorganization would not occur. The projections utilized
for the bank were as follows:

                              Eagle National Bank
           ------------------------------------------------------------
                                                          Return on
           Year              Asset Growth               Average Assets
           --------       ----------------            -----------------

           2000                  45.00%                      1.00%
           2001                  15.00                       1.05
           2002                  12.00                       1.10
           2003                  10.00                       1.15
           2004                  10.00                       1.20

         In conducting its review and in arriving at its opinion, Hoefer &
Arnett relied upon and assumed the accuracy and completeness of the financial
and other information provided to it or publicly available, and did not attempt
to independently verify the same. Hoefer & Arnett relied upon the management of
the bank as to the reasonableness of the financial and operating forecasts, and
projections (and the assumptions and bases therefor) provided to it, and Hoefer
& Arnett assumed that such forecasts and projections reflect the best currently
available estimates and judgments of the bank management. Hoefer & Arnett also
assumed, without independent verification, that the allowance for loan losses
for the bank was adequate to cover such losses. Hoefer & Arnett did not make or
obtain any evaluations or appraisals of the properties of the bank, nor did it
examine any individual loan credit files. For purposes of its opinion, Hoefer &
Arnett assumed that the reorganization will have the tax, accounting and legal
effects described in the transfer agreement and relied, as to legal matters,
exclusively on counsel to the bank, as to the accuracy of the disclosures set
forth in the transfer agreement. Hoefer & Arnett's opinion is limited to the
fairness, from a financial point of view, to all of the holders of the common
shares of the bank stock with respect to the sale of less than 30% of the bank
stock to the Company at $15.00 per share and the transfer of the Park Cities
branch to the Park Cities bank for $500,000 plus certain adjustments and does
not address the bank's underlying business decision to proceed with the proposed
transaction.

                                       66
<PAGE>


         As more fully discussed below, Hoefer & Arnett considered the following
financial and other factors:

         .    the historical and current financial position and results of
              operations of the bank, including interest income, interest
              expense, net interest income, net interest margin, provision for
              loan losses, noninterest income, noninterest expense, earnings,
              dividends, internal capital generation, book value, intangible
              assets, return on assets, return on shareholders' equity,
              capitalization, the amount and type of nonperforming assets, loan
              losses and the reserve for loan losses, all as set forth in the
              financial statements for the bank;

         .    the assets and liabilities of the bank, including the loan,
              investment and mortgage portfolios, deposits, other liabilities,
              historical and current liability sources and costs and liquidity;

         .    the nature and terms of certain other merger transactions
              involving banks and bank holding companies; and

         .    Hoefer & Arnett's assessment of general economic, market and
              financial conditions and its experience in other transactions, as
              well as its experience in securities valuation and its knowledge
              of the banking industry generally.

         Hoefer & Arnett's opinion is necessarily based upon conditions as they
existed and can be evaluated on the date of its opinion and the information made
available to it through that date.

         In connection with rendering its Fairness Opinion, Hoefer & Arnett
performed certain financial analyses, which are summarized below. Hoefer &
Arnett believes that its analysis must be considered as a whole and that
selecting portions of such analysis and the factors considered therein, without
considering all factors and analysis, could create an incomplete view of the
analysis and the processes underlying Hoefer & Arnett's Fairness Opinion. The
preparation of a fairness opinion is a complex process involving subjective
judgments. In its analyses, Hoefer & Arnett made numerous assumptions with
respect to industry performance, business and economic conditions, and other
matters, many of which are beyond the control of the bank. Any estimates
contained in Hoefer & Arnett's analyses are not necessarily indicative of future
results or values, which may be significantly more or less favorable than such
estimates. Estimates of values of companies do not purport to be appraisals or
necessarily reflect the prices at which companies or their securities may
actually be sold. Except as described below, none of the financial analyses
performed by Hoefer & Arnett was assigned a greater significance by Hoefer &
Arnett than any other.

         The financial forecasts and projections of the bank prepared by Hoefer
& Arnett were based on projections provided by the bank as well as Hoefer &
Arnett's own assessment of general economic, market and financial conditions.
All such information was reviewed with the respective management of the bank.
The bank does not publicly disclose internal management financial forecasts and
projections of the type provided to Hoefer & Arnett in connection with its
review of the proposed reorganization. Such forecasts and projections were not
prepared with a view towards public disclosure. The forecasts and projections
prepared by Hoefer & Arnett were based on numerous variables and assumptions,
which are inherently uncertain, including, without limitation, factors related
to general economic and market conditions. Accordingly, actual results could
vary significantly from those set forth in such forecasts and projections.

         Summary of Proposal. Hoefer & Arnett reviewed the terms of the proposed
transaction. A purchase price of $15.00 per share represents a price to stated
book value at April 30, 2000 of 1.47, price to estimated 2000 earnings of 15.53
and a price to total assets of 19.03%.

         Guideline Company Analysis. Hoefer & Arnett reviewed certain
information relating to selected publicly traded Texas banking organizations as
of May 31, 2000 (the "Guideline Companies"). This data was obtained from SNL
Securities, L.P., an independent financial information publishing firm.

                                       67
<PAGE>

         On the basis of the trading multiples of the Guideline Companies,
Hoefer & Arnett calculated a range of purchase prices as a multiple of stated
book value, earnings and assets. The chart below shows the low, high and median
for the Guideline Companies and the resulting price range for the bank.

<TABLE>
<CAPTION>
                                         Pricing Multiples for                       Per Share Value
                                          Guideline Companies                         for the Bank
                                        -----------------------------    -------------------------------
                                           Low       High      Median       Low        High       Median
                                        -----------------------------    -------------------------------
        <S>                             <C>         <C>       <C>        <C>        <C>         <C>
        Price/Book Value                 0.94x      2.79x      1.78x      $9.57      $28.40       $18.12
        Price/Earnings                    6.9x      20.9x      11.7x      $6.69      $20.27       $11.35
        Price/Assets                     7.40%     19.80%     13.39%      $7.39      $19.77       $13.37
</TABLE>

The price to book value multiple resulting from the terms of the transfer
agreement is below the median for the trading multiples for the Guideline
Companies. The price to earnings multiple and price to assets multiple are
higher than the median price to earnings multiple and price to assets multiple
for the trading multiples for the Guideline Companies. Given the bank's high
capital to asset ratio when compared to the Guideline Companies (10.20% compared
to 7.52%), we would expect a lower price to book multiple.

         Discounted Cash Flow Analysis. Hoefer & Arnett performed a discounted
cash flow analysis to determine hypothetical present values for a share of the
bank stock as a five-year investment. Under this analysis, Hoefer & Arnett
considered certain scenarios for the performance of the bank stock using an
asset growth rate ranging from 45.00% to 10% and a return on average assets
ranging from 1.00% to 1.20% and a multiple of 1.78 times book value and 11.7
times earnings as the terminal value for the bank stock. A discount rate of 14%
was applied to these growth and terminal value scenarios. This discount rate,
growth rate and terminal value were chosen based upon what Hoefer & Arnett, in
its judgment, considered to be appropriate taking into account, among other
things, the bank's past and present performance, the general level of inflation,
rates of return for fixed income and equity securities in the marketplace
generally and for companies with similar risk profiles. In the scenarios
considered, the present value of a share of the bank stock was calculated to
average slightly less than that of the proposed offer. Thus, Hoefer & Arnett's
discounted cash flow analysis indicated that the bank shareholders would be
fairly compensated at the $15.00 per share cash purchase price. This analysis
also indicates that the shareholders of the bank that are not selling are not
adversely affected at the $15.00 per share cash purchase price.

         Park Cities Branch Transfer Analysis. Hoefer & Arnett analyzed the
premiums paid for other bank branches in 1999 in both the nation and in the
Southwestern region of the United States. In 1999, there were 176 branch
transactions in the United States with a medium premium to total deposits of
8.50%. In the Southwest there were 14 branch transactions in 1999 with a median
premium to total deposits of 9.64%. At April 30, 2000, the Park Cities branch
had total deposits of $2,218,517 with significant growth potential in an
attractive market. Therefore, based on its analysis of all relevant factors,
Hoefer & Arnett opined that the proposed branch sale for $500,000 plus certain
adjustments as defined in the transfer agreement is fair to all shareholders of
the bank, from a financial point of view.

         Other Analysis. Hoefer & Arnett prepared an overview of historical
financial performance of the bank.

         The opinion expressed by Hoefer & Arnett was based upon market,
economic and other relevant considerations as they existed and have been
evaluated as of the date of the opinion. Events occurring after the date of
issuance of the opinion, including but not limited to, changes affecting the
securities markets, the results of operations or material changes in the assets
or liabilities of the bank could materially affect the assumptions used in
preparing the opinion.

         Fees and Relationships. The bank engaged Hoefer & Arnett to review the
terms of the transaction and to render a fairness opinion in connection with the
proposed reorganization for $16,000, including all out-of-pocket expenses.
Hoefer & Arnett did not determine the amount of consideration to be paid. Hoefer
& Arnett does not own any shares of stock of the bank, the holding company or
the proposed Park Cities bank. There are no material relationships between
Hoefer & Arnett and its affiliates and the bank and its affiliates. There are
not any specific factors that did not support the fairness opinion. Hoefer &
Arnett will update its fairness opinion as of the date that this document is


                                       68
<PAGE>


mailed to shareholders and the bank. The bank will obtain a revised fairness
opinion if there is a material amendment to the transfer agreement or
reorganization agreement.

Negotiation of the Terms of the Reorganization

         The structure and terms of the transfer agreement were determined
through arm's-length negotiations between the bank and the selling directors.
The structure and terms of the reorganization agreement were based upon the
structure and terms of the transfer agreement. However, the holding company was
organized solely for the purpose of becoming a bank holding company, and certain
of the officers and directors of the bank also serve as officers and directors
of the holding company. For the foregoing reasons, the terms of the
reorganization agreement cannot be considered solely the result of arm's-length
negotiations.

         The holding company will file an application to become a bank holding
company with the Federal Reserve Bank of Dallas. The bank will file an
application with the FDIC for approval of the reorganization. Management
anticipates receiving all necessary approvals following the shareholders'
meeting. You should be aware that regulatory approval reflects only the view
that the transaction does not contravene applicable competitive standards
imposed by law, and that the transaction is consistent with regulatory policies
relating to safety and soundness. Regulatory approval is not an opinion that the
proposed transaction is favorable to the shareholders from a financial point of
view or that the regulatory authority has considered the adequacy of the terms
of the transaction. Regulatory approval is not an endorsement or recommendation
of the reorganization.

         The respective boards of directors of the bank and the holding company
believe that the conversion and exchange of bank stock described above is a fair
and equitable method of effecting the reorganization. While the board of
directors of the bank advises each shareholder to make his or her own decision
with respect to the vote on the reorganization based on such shareholder's own
investment needs, we recommend that you vote in favor of the reorganization.

Conditions to Consummation of the Reorganization

         Consummation of the reorganization is conditioned upon the approval and
consent to the reorganization agreement by the holders of at least two-thirds of
the outstanding shares of bank stock, pursuant to the National Bank Act (12
U.S.C. (S)215).

         Consummation of the reorganization is also subject to the receipt of
all required regulatory approvals and to consummation of the acquisition of
shares of bank stock from the selling directors and selling shareholders
pursuant to the transfer agreement. If all conditions precedent are satisfied,
it is anticipated that the reorganization will be consummated in the fall of
2000.

         The reorganization agreement may be amended by mutual agreement, in
writing, of the parties to the agreement with the approval of their respective
boards of directors and without the necessity of further action by the
shareholders. Should there be any material amendment to the reorganization
agreement prior to the Annual Meeting, all shareholders of the bank will receive
information relating to such amendment prior to such meeting. There will be no
amendment to the reorganization agreement following approval of the
reorganization by the shareholders of the bank that would materially affect the
consideration to be received by any shareholders of the bank, unless prior
notice, to the extent such notice is required by law, is given to all
shareholders and shareholder approval, to the extent such approval is required
by law, is obtained.

Operations of the Bank After the Reorganization

         After the effective date of the reorganization, the holding company
will own the bank and former shareholders of the bank who elect to receive
holding company common stock in the reorganization will be shareholders of the
holding company. The bank will continue to conduct the business it presently
conducts except that it will operate only from its main office at 5006 Verde
Valley, Dallas, Texas because it will have sold the Park Cities branch to the
new bank being established by the selling directors. Following the
reorganization, the present officers and directors of the bank will continue in
those positions, except that Randy Pack, Jon Roy Reid, John Yeaman and Tom
Youngblood will have resigned as directors and employees of the bank. There will
be no change in the

                                       69
<PAGE>

supervision and regulation of the bank by banking regulatory authorities. See
"Governmental Regulation."

Borrowings by the Holding Company

         To fund the cash requirements of the stock transfer transaction and the
reorganization, the holding company intends to utilize two sources. First, the
holding company is offering $2,500,000 of its debentures. We are offering the
debentures to shareholders of the bank who elect to receive all holding company
stock in connection with the reorganization. The terms of the debentures are
described beginning on page 95.

         If you elect to become a shareholder of the holding company, you should
be aware that the debentures represent indebtedness of the holding company. As
such, the holding company is obligated to pay interest on the debentures
annually at 9.5%. The holding company is also obligated to repay the principal
amount of the debentures over five years beginning in 2006. The repayment of the
debentures will reduce the amount of earnings available for the holding company
and the bank to retain to supplement capital to support growth and/or to pay
dividends to shareholders of the holding company.

         The debentures will be unsecured. This means that the holders of the
debentures will have no collateral against which they can collect if the holding
company fails to make payments when due.

         If we are successful in selling all $2,500,000 of the debentures and
assuming the amount of aggregate cash requirements of the stock transfer
transaction and the reorganization are less than $2,500,000, the holding company
will not borrow any funds from Wells Fargo Bank. However, if we sell an amount
of debentures that is less than the aggregate amount of the cash requirements of
the stock transfer transaction and the reorganization, then the holding company
will borrow funds from Wells Fargo Bank.

         Wells Fargo Bank has issued a commitment letter indicating that it will
loan up to $1,650,000 to the holding company. The commitment letter provides
that the obligation to make the loan is subject to execution of loan documents,
due diligence review of the bank and final loan committee approval.

         The commitment letter provides that the loan will be repaid over a ten
year period. Interest will be due and payable upon demand, but if demand is not
made, will be due and payable quarterly. The loan will bear interest on the
unpaid balance at a rate equal to the prime rate in effect from time to time at
Wells Fargo Bank. The loan will be secured by a pledge of the bank stock
obtained by the holding company. In the event the holding company should default
in the repayment of the indebtedness, Wells Fargo Bank could foreclose upon the
bank stock to satisfy the remaining indebtedness. In that event, the holding
company would lose its ownership of the bank stock, the holding company's only
material asset. If this happens and you own holding company stock or debentures,
you will lose your entire investment.

         The holding company's ability to repay the debt owed to Wells Fargo
Bank and the debt represented by the debentures, and to meet its operating
expenses will depend on the profitability of the bank and the bank's ability to
pay dividends to the holding company. The bank's ability to pay dividends to the
holding company is restricted by federal law and regulations. See "Dividends
Policy" and "Governmental Regulation."

         You should also be aware that the holding company's ability to pay
dividends on its common stock is also restricted. See "Dividends Policy" and
"Governmental Regulations." In addition, the holding company plans to retain
earnings and not pay dividends on its common stock until its debt is
substantially reduced.

Difference in Book Value

         Book value is sometimes used by investors in banks as a benchmark from
which to determine the market value of bank stocks. Book value per share is not
fair market value per share. However, it provides a reference point as to the
amount of equity in the organization. The book value of the bank stock and the
holding company stock is effected by several factors, including the amount of
stockholders' equity and the number of shares of stock outstanding.

                                       70
<PAGE>


         The tangible book value per share of the bank stock is determined by
dividing the stockholders' equity of the bank by the number of shares
outstanding. At the effective date of the reorganization, the tangible book
value per share of the holding company stock will initially be somewhat less
than the tangible book value per share of the bank stock. This is because the
$15.00 per share amount of cash to be paid pursuant to the stock transfer
transaction and the reorganization is greater than $10.29, the tangible book
value per share of the bank stock as of June 30, 2000.

         The following table reflects the potential for dilution in book value
resulting from the transaction:

<TABLE>
<CAPTION>
                                                                                  Potential
                                                                                  Dilution(1)
                                                                                 -----------
         <S>                                                                     <C>
         Tangible Book Value Per Share of Bank Stock(2)                               $10.29

         Tangible Book Value Per Share of Holding Company Stock(3)                      9.49
                                                                                 -----------
         Amount of Dilution Per Share                                                 $ 0.80
                                                                                 ===========
</TABLE>


--------------------

(1)      Assumes and reflects the payment of $2,500,000 for an aggregate of
         166,666 shares being sold by the selling directors and other
         shareholders who elect to receive cash in the reorganization and the
         proceeds received from the sale of the Park Cities branch.
(2)      As of June 30, 2000.
(3)      Assumes that the transactions had been completed as of June 30, 2000.

Expenses of the Reorganization

         The bank will pay for the expenses associated with solicitation of
proxies for the annual shareholders meeting and for all other expenses
associated with the reorganization.

Material Federal Income Tax Consequences

         The following discussion is a general summary of certain United States
federal income tax consequences of the reorganization. This discussion is based
upon the Internal Revenue Code, regulations promulgated by the United States
Treasury Department, judicial authorities, and current rulings and
administrative practice of the Internal Revenue Service "IRS") in each case as
in effect as of the date of this document and all of which are subject to change
at any time, possibly with retroactive effect. For purposes of this discussion,
it is assumed that shares of bank stock are held as "capital assets" within the
meaning of Section 1221 of the Code (i.e., property held for investment). This
discussion does not address all aspects of federal income taxation that might be
relevant to particular holders of the bank stock in light of their status or
personal investment circumstances; nor does it discuss the consequences to such
holders who are subject to special treatment under the federal income tax laws
such as foreign persons, dealers in securities, regulated investment companies,
life insurance companies, other financial institutions, tax-exempt
organizations, pass-through entities, taxpayers who hold bank stock as part of a
"straddle," "hedge" or "conversion transaction" or who have a "functional
currency" other than the United States dollar or to persons who have received
their bank stock as compensation. Further, this discussion does not address the
state, local or foreign tax consequences of the reorganization.

         The reorganization should not qualify as a reorganization under Section
368(a)(2)(E) of the Code. Rather, for federal income tax purposes the
reorganization is intended to constitute a non taxable incorporation pursuant to
Section 351 of the Code.

         Assuming the reorganization is treated as a non taxable incorporation
within the meaning of Section 351 of the Code, the reorganization will result in
the following federal income tax consequences to the bank shareholders:

         .    The bank, the holding company and the interim bank will recognize
no gain or loss because of the reorganization.

                                       71
<PAGE>


         .    The bank will recognize taxable gain or loss upon the sale of the
              Park Cities branch pursuant to the transfer agreement.

         .    Each shareholder who receives only holding company common stock
              will not recognize any gain or loss because of the reorganization.

         .    Each shareholder who receives only cash will recognize gain equal
              to the amount of cash received, less the shareholder's basis in
              the bank stock exchanged therefor. The gain recognized upon the
              receipt of cash will be a capital gain to the extent the shares of
              bank stock were held by the shareholder as a capital asset.

         .    A shareholder's aggregate tax basis in the shares of holding
              company common stock received pursuant to the reorganization in
              exchange for bank stock will be equal to the aggregate tax basis
              of the shares of bank stock surrendered in exchange therefor.

         .    Each shareholder will include in his holding period for holding
              company common stock received in the reorganization the holding
              period of the shares of bank stock surrendered in exchange
              therefor, provided that the bank stock is held as a capital asset
              on the date of the exchange.

         The foregoing is a summary discussion of the material federal income
tax consequence of the reorganization. The discussion is included for general
information purposes only and may not apply to a particular bank shareholder in
light of such shareholder's particular circumstances. Bank shareholders should
consult their own tax advisors as to the particular tax consequences to them of
the reorganization, including the application of state, local and foreign tax
laws and possible future changes in federal income tax laws and the
interpretation thereof, which can have retroactive effects.

Accounting Treatment

         We intend to treat the proposed reorganization as a consolidation of
the bank with the interim bank for financial accounting purposes, whereby the
bank will become a wholly owned subsidiary of the holding company as a change in
corporate form. Results of operations are restated for prior periods as if the
entities involved had always been combined. Because the holding company will be
a one-bank holding company, immediately after the reorganization, its
consolidated financial statements will be substantially equivalent to the bank's
financial statements prior to the reorganization except that the holding
company's financial statements will reflect the debt to be incurred by the
holding company as part of the transaction. The holding company's parent-only
financial statements will reflect its investment in 100% of the shares of the
bank stock.

Trading and Resale of Holding Company Stock

         The bank's shares are sold from time to time in private transactions.
Initially, we do not expect that holding company common stock will trade on a
more established basis following the reorganization. Currently, we have no plans
to list shares of the holding company common stock on any stock exchange or
automated quotation system, although we may do so in the future.

         The holding company is registering its common stock to be issued in the
reorganization with the Commission under the Securities Act. Following the
reorganization, former shareholders may freely resell or otherwise transfer
their shares, except those former shareholders who are deemed "affiliates" of
the bank, within the meaning of Commission Rules 144 and 145. In general terms,
any person who is an executive officer, director or 10% shareholder of the bank
at the time of the shareholders' meeting may be deemed to be an affiliate of the
bank for purposes of Commission Rules 144 and 145. This proxy
statement/prospectus does not cover resales of shares of the holding company
common stock to be issued to affiliates of the bank in connection with the
transaction.

         The holding company common stock received by persons who are deemed to
be affiliates of the bank may be resold only:

                                       72
<PAGE>

         .    in compliance with the resale provisions of Commission Rule
              145(d);

         .    in compliance with the provisions of another applicable exemption
              from the registration requirements of the Securities Act; or

         .    pursuant to an effective registration statement filed with the
              Commission.

           In general terms, Commission Rules 144 and 145(d) permit an affiliate
of the bank to sell shares of the holding company common stock received by him
or her or her in ordinary brokerage transactions subject to certain limitations
on the number of shares that may be resold in any consecutive three-month
period. Generally, the affiliate, not acting in concert with others, may not
sell that number of shares which is more than 1% of the outstanding shares of
the holding company common stock during the three-month period.

           The ability of affiliates to resell shares of the holding company
common bank stock received in the transaction under Rule 144 or Rule 145 is
subject to the holding company's having satisfied its Securities Exchange Act of
1934 ("Exchange Act") reporting requirements, if any, for specified periods
prior to the time of sale. See "Description of the Holding Company--Supervision
and Regulation of the Holding Company--The Securities Exchange Act of 1934--
Periodic Reporting Requirements" for information regarding the probable
suspension of the holding company's reporting obligations.

           Finally, an affiliate of the bank may not, as a general rule and
subject to an exception in a case of certain very small sales:

         .    sell any shares of the holding company common stock during the 30-
              day period immediately preceding the day of the reorganization; or

         .    sell any shares of the holding company's stock received by him or
              her in exchange for shares of the bank stock until after the
              publication of financial results covering at least 30 days of
              post-reorganization operations.

Proposed Resolution and Board Recommendation

         Shareholders will be asked to consider and act upon the following
resolution in connection with the proposed reorganization:

                  RESOLVED, that the reorganization agreement entered
                  by and between Eagle National Bank and New Eagle
                  Bank, and joined in by ENB Bankshares, Inc. is
                  hereby approved and adopted and that the
                  consolidation provided for therein is authorized and
                  approved.

         The board of directors unanimously recommends that shareholders vote in
favor of the foregoing resolution approving and adopting the reorganization
agreement and authorizing the consolidation.

                        RIGHTS OF DISSENTING SHAREHOLDERS

         Pursuant to the provisions of Section 9 of the reorganization agreement
and 12 U.S.C. (S).215, any shareholder of the bank who votes against the
reorganization at the annual meeting or who gives notice in writing at or prior
to the annual meeting to the presiding officer that such shareholder dissents to
the reorganization shall, following consummation of the reorganization, be
entitled to receive the value of the shares so held by him or her as of the
effective date of the reorganization, upon written request made to the bank at
any time within thirty days after the effective date of the reorganization. The
written request must be accompanied by the surrender of such shareholder's bank
stock certificates. Any dissenting shareholder of the bank who does not follow
the prescribed procedure will not be entitled to appraisal rights with respect
to his shares. Failure by a shareholder to either (1) vote against the
reorganization or (2) give notice in writing at or prior to the annual meeting
that he or she is dissenting to the reorganization will be construed as a waiver
of appraisal rights.

         The value of the shares of any dissenting shareholder will be
ascertained, as of the effective date of the reorganization, by an appraisal
made by a committee of three persons comprised of (i) one person selected by the
vote of the holders of the majority of the stock, the owners of which are
entitled to payment in cash (by reason of such request for appraisal), (ii) one
person selected by the directors of the bank, and (iii) one person selected by
the two persons who are selected in the foregoing manner. The valuation agreed
upon by any two of the

                                       73
<PAGE>

three appraisers will govern. If the value so fixed is not satisfactory to any
dissenting shareholder who has requested payment, that shareholder may, within
five days after being notified of the appraised value of such shares, appeal to
the OCC who will then cause a reappraisal to be made, which will be final and
binding as to the value of the shares of such shareholder.

         If, within ninety days from the effective date of the reorganization,
for any reason one or more of the appraisers is not selected as provided above
or the appraisers fail to determine the value of such shares, the OCC will, upon
written request of any interested party, cause an appraisal to be made by an
independent professional appraiser, which appraisal will be final and binding
upon all parties. The expenses of the OCC in making the appraisal or the
reappraisal, as the case may be, will be paid by the Resulting bank. The value
of the shares ascertained must be promptly paid to the dissenting shareholders.
The shares of holding company stock which would have been delivered to such
dissenting shareholders, if applicable, had they not requested payment must be
sold in such manner as satisfies the requirements of 12 U.S.C. (S)215, a copy of
the relevant portions of which is attached as Annex B. If such shares are sold
at a price greater than the amount paid to such dissenting shareholders, the
excess in such sale price must be paid to such dissenting shareholders.

         Any shareholder of the bank who votes against the reorganization or who
gives notice of such dissent in writing at or prior to the Annual Meeting will
be notified in writing of the effective date of the reorganization.

         The foregoing summary of dissenters' rights does not purport to be a
complete statement of the appraisal rights of dissenting shareholders. Because
of the complexity of the procedures described above, we urge you to consult with
independent legal counsel if you desire to exercise the right to an appraisal.

                                   PROPOSAL 2:
                              ELECTION OF DIRECTORS

         One of the purposes of the annual meeting is to elect directors of the
bank to hold office until the next annual meeting of shareholders or until their
respective successors are duly elected and qualified. The bylaws of the bank
provide that the shareholders set the number of members of the Board of
Directors at the annual meeting. The Board of Directors has proposed that the
shareholders set the board at eleven members.

         The directors will be elected at the annual meeting to serve for a one-
year term expiring at the bank's annual meeting in the year 2001. Each nominee
elected as a director will continue in office until his successor has been duly
elected and qualified, or until the earliest of his or her death, resignation or
retirement.

         The tables below set forth for each nominee for director:

         .     the name;

         .     age and the principal occupation of each nominee during the
               previous five years;

         .     the directorships of public companies, if any, held by each
               nominee; and

         .     the year he first became a director of the bank.

                                       74
<PAGE>

         The current Board of Directors of the bank has nominated the following
persons to serve as directors:


<TABLE>
<CAPTION>
                                                               Year First
                                                                Became a
                                    Current Position           Director of                Principal Occupation during
      Name and Age                   with the Bank              the Board                       Past Five Years
-------------------------      --------------------------      --------------   -------------------------------------------------
<S>                            <C>                             <C>              <C>
Patrick G. Adams (47)            President and Director              2000        President of Eagle National Bank (April 2000 to
                                                                                 present); previously Senior Vice President of First
                                                                                 State Bank of Texas (July 1997 to April 2000);
                                                                                 personal investments (November 1996 to July 1997);
                                                                                 Executive Vice President of Bent Tree National Bank
                                                                                 (August 1987 to November 1996)

Donald A. Bailey (58)            Director                            1997        President and Chief Executive Officer of Human
                                                                                 Resources Corporation (August 1993 to present)

Harold L. Campbell (65)          Chairman of the Board and           1997        Chairman of the Board of Eagle National Bank
                                 Director                                        (September 1996 to present); previously personal
                                                                                 investments (August 1990 to September 1996)

Christopher G. Griffith (53)     Director                            1997        President and Chief Executive Officer of The
                                                                                 Wyndham Group, Inc. (real estate development)
                                                                                 (August 1992 to present)

Clyde W. Hensley (58)            Vice Chairman of the Board          1997        Vice Chairman of the Board of Eagle National Bank
                                 and Director                                    (September 1996 to present); previously President
                                                                                 and Chief Executive officer of Addison National
                                                                                 Bank (June 1992 to September 1996)

Robert H. Lutz (49)              Director                            1997        Personal investments (October 1997 to present);
                                                                                 previously Chairman of the Board of GL Seaman & Co.
                                                                                 (January 1985 to October 1997)

Randy L. Pack (48)               Director                            1997        Chief Executive Officer of Floors,
                                                                                 Inc. (January 1983 to present)

Jon Roy Reid (52)                Director                            1997        President of Trinity Floor Company
                                                                                 (July 1970 to present)

Ronald W. Rhoades (51)           Director                            1997        Chief Financial Officer and Chief Operating Officer
                                                                                 of Harvard Property Advisors (January 1996 to
                                                                                 present); previously independent Certified Public
                                                                                 Accountant (July 1993 to January 1996)
</TABLE>

                                       75
<PAGE>

<TABLE>
<CAPTION>
                                                                Year First
                                                                 Became a
                                     Current Position           Director of                   Principal Occupation during
     Name and Age                     with the Bank              the Board                          Past Five Years
------------------------       -----------------------------   --------------   ----------------------------------------------------
<S>                            <C>                             <C>              <C>
John M. Yeaman (58)              Director                            1997        President and Co-Chief Executive Officer of Tyler
                                                                                 Corporation (December 1998 to present); previously
                                                                                 Director of Real Estate of Electronic Data Systems,
                                                                                 Inc. (January 1995 to December 1998)

Thomas R. Youngblood (52)        Director                            1997        President and Branch Executive of Eagle National
                                                                                 Bank (December 1996 to present); previously,
                                                                                 President and Chief Executive Officer of Western
                                                                                 Bank & Trust (November 1990 to December 1996)
</TABLE>


         Unless otherwise indicated on any duly executed and dated proxy, the
proxies will be voted "FOR" the election of the nominees listed in the table
above for the term specified. The bank does not anticipate that any of the
above-named nominees will refuse or be unable to accept or serve as a directo
of the bank for the term specified. However, if any nominee is unable or
unwilling to serve as a director, the proxies will vote for the election of
such other person(s) as may be nominated by management, unless you indicate to
vote otherwise. Assuming the receipt by each nominee of the affirmative vote
of at least a plurality of the shares of bank stock present or represented at
the annual meeting, the eleven nominees receiving the greatest number of votes
will be elected as directors.

         Information regarding the stock ownership of the above nominees can be
found in the Information About the Annual Meeting section of this document
beginning on page 56. Information regarding the compensation paid to these
nominees and information regarding transactions between these nominees and the
bank and the holding company, and information regarding the indemnification of
these nominees can be found in the Description of the Bank section of this
document beginning on page 83.

                The Board of Directors Recommends a Vote "For"
                     the Election of Each of the Individuals
                      Nominated for Election as a Director

                                  PROPOSAL 3:
             OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING

         The Board of Directors of the bank is not aware of any matters, other
than those referred to in the accompanying Notice of Annual Meeting of
Shareholders, which properly may come before the annual meeting. However, if any
other matter should be properly presented for consideration and voting at the
annual meeting or any adjournment(s) thereof, it is the intention of the persons
named as proxies on the enclosed proxy card to vote the proxy cards in
accordance with their judgment.

                       DESCRIPTION OF THE HOLDING COMPANY

Organization and Description of Business

         We organized the holding company as a Texas business corporation on May
18, 2000, for the purpose of forming a bank holding company. The articles of
incorporation of the holding company authorize the issuance of up to 1,000,000
shares of bank stock, par value, $5.00 per share. The holding company has not
issued any shares and is being managed by its initial Board of Directors.

         The primary function of the holding company is to own of all of the
bank stock. Its profitability will be dependent on the financial results of its
operating subsidiary, the bank. In the future, we may decide to acquire or form
additional subsidiaries, including other banks.

                                       76
<PAGE>

         At present, the holding company does not own or lease any property and
has no paid employees. It will not actively engage in business until after the
completion of the proposed reorganization. Until the day of the reorganization,
the holding company will use the bank's space and employees without payment.
After the reorganization, it will reimburse the bank on a fair and reasonable
basis for all services furnished to it and for all expenses that the bank pays
on its behalf. The holding company has not been involved in any litigation.

Properties

         The holding company does not own or lease any properties. For
information about properties that the bank owns or leases, see "Description of
the Bank--Properties."

Management

         The board of directors of the holding company is comprised of Harold
Campbell, Bobby Lutz and Patrick Adams. See "Description of the Bank--Directors
and Executive Officers" below. After the reorganization, the holding company
will be the sole shareholder of the bank and will elect the directors of the
bank annually. The board of directors of the holding company will appoint the
officers of the holding company to serve for one-year terms.

         The following table provides information about the current officers of
the holding company. Both of these officers also serve as officers of the bank
and are employees of the bank.

<TABLE>
<CAPTION>
                                 Age as of         Position with
          Name                June 30, 2000      Holding Company                Position with Bank
---------------------    -------------------   --------------------      --------------------------
<S>                      <C>                   <C>                       <C>
Harold L. Campbell                  65           President                  Chairman of the Board

Patrick G. Adams                    47           Vice President and         President and Chief
                                                 Secretary                  Executive Officer
</TABLE>

Executive and Director Compensation

         Because the holding company was not in existence in 1999, it paid no
compensation to its directors and officers for that year. Further, the holding
company has paid no compensation to its directors or officers to date during
2000. We anticipate that together the holding company and the bank will pay
directors and officers the same compensation that they currently receive, with
such increases in the future as may have occurred had the proposed
reorganization not occurred. Although the holding company will hold several
board meetings each year, we expect the total amount spent on directors for
their attendance at board meetings to remain the same as before the
reorganization. The holding company will not pay its directors separate
compensation for their attendance at board meetings, but the bank will continue
to compensate directors for their attendance at bank board meetings. See
"Description of the Bank--Executive Compensation" and "Description of the Bank--
Director Compensation" below.

Information about Beneficial Ownership of Significant Shareholders, Directors
and Executive Officers

         Because of the stock transfer and branch sale transaction and the
payment of cash for bank stock pursuant to the reorganization, there will be
fewer shares of holding company stock than shares of bank stock outstanding
after the reorganization. As a result, after the reorganization, the percentage
ownership of the holding company by all shareholders who elect to receive
holding company stock, including significant shareholders, directors and
executive officers, will be greater than their percentage ownership in the bank
stock immediately prior to the reorganization. See Beneficial Ownership of the
by Significant Shareholders, Directors and Executive Officers."

Certain Relationships and Related Transactions

         The information regarding certain relationships between the directors
and officers of the bank and transactions between the directors and officers of
the bank and the bank

                                       77
<PAGE>

also applies to the holding company. Please refer to "Description of the Bank--
Certain Relationships and Related Transactions."

Directors' and Officers' Indemnification and Limits on Liability

         The holding company's articles of incorporation and bylaws provide for
indemnification of its directors, officers, employees and agents against
liabilities and expenses incurred in legal proceedings concerning the holding
company, to the fullest extent permitted under Texas corporate law.
Indemnification will only apply to persons who act in good faith, in a manner he
or she reasonably believed to be in the best interest of the company, without
willful misconduct or recklessness.

         We expect to extend the bank's present directors' and officers'
liability insurance policy to cover the holding company's directors and officers
without significant additional cost. This liability policy would cover the
typical errors and omissions liability associated with the activities of the
holding company. The provisions of the insurance policy would probably not
indemnify any of the holding company's officers and directors against liability
arising under the Securities Act. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and
persons controlling the holding company pursuant to the foregoing provision, we
have been informed that in the opinion of the Commission, such indemnification
is against public policy and unenforceable.

         The holding company's articles of incorporation and bylaws also limit
the liability of directors for monetary damages to acts of self-dealing, willful
misconduct or recklessness, unless the act constitutes a crime or involves
liability for the payment of taxes or an unlawful dividend. We believe that
these provisions will help reduce baseless litigation, but they may also make it
more difficult for shareholders to sue these persons on behalf of the holding
company.

Supervision and Regulation of the Holding Company

         The Securities Act of 1933--The Offer and Sale of Securities. Under the
Securities Act, the holding company will be subject to the jurisdiction of the
Commission and of state securities commissions for matters relating to the offer
and sale of its securities. Presently, the bank is exempt from these
registration requirements. Accordingly, additional issuances of the holding
company's stock to raise capital or for dividend reinvestment, stock option and
other plans will require registration (absent any exemption from registration).
Registration will result in additional costs that the bank does not presently
have to incur because of an exemption for bank stock under the Securities Act.

         The Securities Exchange Act of 1934--Periodic Reporting Requirements.
The bank stock is not registered under Section 12 of the Exchange Act. After the
reorganization, Section 12 of the Exchange Act will require that the holding
company register its stock. The holding company will file periodic reports,
proxy statements and other information with the Commission. The reports will
include consolidated financial information about both the holding company and
the bank. The holding company's obligation to file periodic reports and other
information under Section 15(d) of the Exchange Act will be suspended
automatically upon the beginning of its first fiscal year in which it has less
than 300 holders of holding company common stock. Therefore, the holding company
anticipates that its reporting obligations will be suspended as of the beginning
of its next fiscal year.

         The Bank Holding Company Act of 1956--Supervision by the Federal
Reserve Board. On the day of the reorganization, the holding company will become
subject to the provisions of the Bank Holding Company Act of 1956, as amended,
and to supervision by the Federal Reserve Board. The following restrictions will
apply:

         .    General Supervision by the Federal Reserve Board. As a bank
              holding company, our activities will be limited to the business of
              banking and activities closely related or incidental to banking.
              Bank holding companies are required to file periodic reports with
              and are subject to examination by the Federal Reserve Board. The
              Board has adopted a risk-focused supervision program for small
              shell bank holding companies which is tied to the examination
              results of the subsidiary bank. The Federal Reserve Board has
              issued regulations under the Bank Holding Company Act that require
              a bank holding company to serve as a source of financial and
              managerial strength to its subsidiary banks. As a result, the
              Federal Reserve Board may require that the holding company stand
              ready to provide adequate capital

                                       78
<PAGE>

              funds to The Fidelity Deposit and Discount Bank during periods of
              financial stress or adversity.

         .    Restrictions on Acquiring Control of other Banks and Companies. A
              bank holding company may not

         .    acquire direct or indirect control of more than 5% of the
              outstanding shares of any class of voting stock, or substantially
              all of the assets of, any bank, or

         .    merge or consolidate with another bank holding company without
              prior approval of the Federal Reserve Board.

         In addition, a bank holding company may not

         .    engage in a nonbanking business, or

         .    acquire ownership or control of more than 5% of the outstanding
              shares of any class of voting stock of any company engaged in a
              nonbanking business

         unless the business is determined by the Federal Reserve Board to be so
         closely related to banking as to be a proper incident to banking. In
         making this determination, the Federal Reserve Board considers whether
         these activities offer benefits to the public that outweigh any
         possible adverse effects.

         .    Anti-Tie-In Provisions. A bank holding company and its
              subsidiaries may not engage in certain tie-in arrangements in
              connection with any extension of credit or provision of any
              property or services. The so-called "anti-tie-in" provisions state
              generally that a bank may not

                .    extend credit,

                .    lease or sell property, or

                .    furnish any service to a customer on the condition that the
                     customer provide additional credit or service to the bank
                     or its affiliates, or on the condition that the customer
                     not obtain other credit or service from a competitor of the
                     bank.


         .    Restrictions on Extensions of Credit by Banks to their Holding
              Companies. Subsidiary banks of a bank holding company are also
              subject to certain restrictions imposed by the Federal Reserve Act
              on

                .    any extensions of credit to the bank holding company or any
                     of its subsidiaries,

                .    investments in the stock or other securities of the bank
                     holding company, and

                .    taking these stock or securities as collateral for loans to
                     any borrower.

         .    Risk-Based Capital Guidelines. Bank holding companies must comply
              with the Federal Reserve Board's risk- based capital guidelines.
              The required minimum ratio of total capital to risk-weighted
              assets, including certain off-balance sheet activities, such as
              standby letters of credit, is 8%. At least half of the total
              capital is required to be "Tier I Capital," consisting principally
              of bank stockholders' equity, less certain intangible assets. The
              remainder, "Tier II Capital," may consist of:

                .    certain preferred stock,

                .    a limited amount of subordinated debt,

                                       79
<PAGE>

                .    certain hybrid capital instruments,

                .    other debt securities, and

                .    a limited amount of the general loan loss allowance.

         The risk-based capital guidelines are required to take adequate account
         of interest rate risk, concentration of credit risk, and risks of
         nontraditional activities.

         .    Capital Leverage Ratio Requirements. The Federal Reserve Board
              requires a banking holding company to maintain a leverage ratio of
              a minimum level of Tier I capital (as determined under the risk-
              based capital guidelines) equal to 3% of average total
              consolidated assets for those bank holding companies that have the
              highest regulatory examination rating and are not contemplating or
              experiencing significant growth or expansion. All other bank
              holding companies are required to maintain a ratio of at least 1%
              to 2% above the stated minimum. The Bank is subject to almost
              identical capital requirements adopted by the OCC.

         .    Restrictions on Control Changes. The Change in Bank Control Act of
              1978 requires persons seeking control of a bank or bank holding
              company to obtain approval from the appropriate federal banking
              agency before completing the transaction. "Control" is generally
              presumed to be the power to vote 10% or more of a company's voting
              stock. The Federal Reserve Board is responsible for reviewing
              changes in control of bank holding companies. In doing so, the
              Federal Reserve Board reviews the financial position, experience
              and integrity of the acquiring person and the effect on the
              financial condition of the bank holding company, relevant markets
              and federal deposit insurance funds.

         The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994-Interstate Banking. Prior to the passage of the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994, also known as the Interstate
Banking Act, the Bank Holding Company Act prohibited a bank holding company
located in one state from acquiring a bank located in another state, unless the
law of the state where the bank to be acquired was located specifically
authorized the acquisition. Similarly, prior law generally prohibited interstate
branching by a single bank. The Interstate Banking Act permits an adequately
capitalized and adequately managed bank holding company to acquire a bank in
another state whether or not the law of that other state permits the
acquisition, subject to certain deposit concentration caps and approval by the
Federal Reserve Board. The law permits states to require stricter concentration
limitations or to require that the target be in existence for up to 5 years
before an out-of-state bank or bank holding company may acquire it. In contrast
to interstate acquisitions and mergers, the Interstate Banking Act permits
acquisitions of less than all branches of a bank only if the state's laws permit
it.

         A bank holding company or bank may not acquire a bank outside its home
state primarily for the purpose of deposit production, and the transaction must
not have a negative impact on the communities that the target bank serves.

Permitted Activities

         The Federal Reserve Board permits bank holding companies to engage in
activities so closely related to banking or managing or controlling banks as to
be a proper incident of banking. In 1997, the Federal Reserve Board
significantly expanded its list of permissible nonbanking activities to improve
the competitiveness of bank holding companies. The following list includes
activities that a holding company may presently conduct and is subject to change
by the Federal Reserve Board:

         .    Making, acquiring or servicing loans and other extensions of
              credit for its own account or for the account of others.

         .    Any activity used in connection with making, acquiring, brokering,
              or servicing loans or other extensions of credit, as determined by
              the Federal Reserve Board. The Board has determined that the
              following activities are permissible:

                .    Real estate and personal property appraising;

                                       80
<PAGE>


                .    Arranging commercial real estate equity financing;

                .    Check-guaranty services;

                .    Collection agency services;

                .    Credit bureau services;

                .    Asset management, servicing, and collection activities;

                .    Acquiring debt in default, if the holding company divests
                     shares or assets securing debt in default that are not
                     permissible investments for bank holding companies within
                     prescribed time periods, and meets certain other
                     conditions; and

                .    Real estate settlement services.

         .    Leasing personal and real property or acting as agent, broker, or
              advisor in leasing property, provided that:

                .    The lease is a nonoperating lease;

                .    The initial term of the lease is at least 90 days;

                .    If real property is being leased, the transaction will
                     compensate the lessor for at least the lessor's full
                     investment in the property and costs, with certain other
                     conditions.

         .    Operating nonbank depository institutions, including an industrial
              bank or savings association.

         .    Performing functions or activities that may be performed by a
              trust company (including activities of a fiduciary, agency or
              custodial nature), in the manner authorized by federal or state
              law, so long as the holding company is not a bank.

         .    Acting as investment or financial advisor to any person,
              including:

                .    serving as investment advisor to an investment company
                     registered under the Investment Company Act of 1940;

                .    furnishing general economic information and advice, general
                     economic statistical forecasting services, and industry
                     studies;

                .    providing advice in connection with mergers, acquisitions,
                     divestitures, investments, joint ventures, capital
                     structuring, financing transactions, and conducting
                     financial feasibility studies;

                .    providing general information, statistical forecasting, and
                     advice concerning any transaction in foreign exchange,
                     swaps and similar transactions, commodities, and options,
                     futures and similar instruments;

                .    providing educational courses and instructional materials
                     to consumers on individual financial management matters;
                     and

                .    providing tax planning and tax preparation services to any
                     person.

                                       81
<PAGE>


         .    Agency transactional services for customer investments, including:

                .    Securities brokerage--Providing securities brokerage
                     services, whether alone or in combination with investment
                     advisory services, and incidental activities, including
                     related securities credit activities compliant with Federal
                     Reserve Board Regulation T and custodial services, if the
                     securities brokerage services are restricted to buying and
                     selling securities solely as agent for the account of
                     customers and do not include securities underwriting or
                     dealing.

                .    Riskless-principal transactions--Buying and selling all
                     types of securities in the secondary market on the order of
                     customers as a "riskless principal."

                .    Private-placement services--Acting as agent for the private
                     placement of securities in accordance with the requirements
                     of the Securities Act and the rules of the Commission.

                .    Futures commission merchant--Acting as a futures commission
                     merchant for unaffiliated persons in the execution and
                     clearance of any futures contract and option on a futures
                     contract traded on an exchange in the United States or
                     abroad, if the activity is conducted through a separately
                     incorporated subsidiary of the bank holding company and the
                     company satisfies certain other conditions.

                .    Investment transactions as principal:

                         .   Underwriting and dealing in government obligations
                             and money market instruments, including bankers'
                             acceptances and certificates of deposit, under the
                             same limitations applicable if the activity were
                             performed by the bank holding company's subsidiary
                             member banks.

                         .   Engaging as principal in:

                                .   foreign exchanges, and

                                .   forward contracts, options, futures, options
                                    on futures, swaps, and similar contracts,
                                    with certain conditions.

                         .   Buying and selling bullion, and related activities.

         .    Management consulting and counseling activities:

                .    Subject to certain limitations, management consulting on
                     any matter to unaffiliated depository institutions, or on
                     any financial, economic, accounting, or audit matter to any
                     other company.

                .    Providing consulting services to employee benefit,
                     compensation, and insurance plans, including designing
                     plans, assisting in the implementation of plans, providing
                     administrative services to plans, and developing employee
                     communication programs for plans.

                .    Providing career counseling services to:

                         .   a financial organization and individuals currently
                             employed by, or

                         .   recently displaced from, a financial organization;

                         .   individuals who are seeking employment at a
                             financial organization; and

                                       82
<PAGE>


                .    individuals who are currently employed in or who seek
                     positions in the finance, accounting, and audit departments
                     of any company.

         .    Support services:

                .    Providing limited courier services; and

                .    Printing and selling checks and related items requiring
                     magnetic ink character recognition.

         .    Insurance agency and underwriting:

                .    Subject to certain limitations, acting as principal, agent,
                     or broker for credit life, accident, health and
                     unemployment insurance that is directly related to an
                     extension of credit by the bank holding company or any of
                     its subsidiaries.

                .    Engaging in any insurance agency activity in a place where
                     the bank holding company or a subsidiary of the bank
                     holding company has a lending office and that has a
                     population not exceeding 5,000 or has inadequate insurance
                     agency facilities, as determined by the Federal Reserve
                     Board.

                .    Supervising, on behalf of insurance underwriters, the
                     activities of retail insurance agents who sell fidelity
                     insurance and property and casualty insurance on the real
                     and personal property used in the bank holding company's
                     operations or its subsidiaries, and group insurance that
                     protects the employees of the bank holding company or its
                     subsidiaries.

                .    Engaging in any insurance agency activities if the bank
                     holding company has total consolidated assets of $50
                     million or less, with the sale of life insurance and
                     annuities being limited to sales in small towns or as
                     credit insurance.

         .    Making equity and debt investments in corporations or projects
              designed primarily to promote community welfare, and providing
              advisory services to these programs.

         .    Subject to certain limitations, providing others financially
              oriented data processing or bookkeeping services.

         .    Issuing and selling money orders, travelers' checks and United
              States savings bonds.

         .    Providing consumer financial counseling that involves counseling,
              educational courses and distribution of instructional materials to
              individuals on consumer-oriented financial management matters,
              including debt consolidation, mortgage applications, bankruptcy,
              budget management, real estate tax shelters, tax planning,
              retirement and estate planning, insurance and general investment
              management, so long as this activity does not include the sale of
              specific products or investments.

         .    Providing tax planning and preparation advice.

                             DESCRIPTION OF THE BANK

History

         Eagle National Bank opened for business on February 28, 1997, as a
national banking association. Deposits held by the bank are insured by the FDIC
to the maximum extent permitted by law. The bank's principal office is located
at 5006 Verde Valley, Dallas, Texas 75240. The bank also operates a full service
branch known as "Park Cities branch"

                                       83
<PAGE>


located at 6829 Hillcrest, Dallas, Texas, which opened March 27, 2000. The Park
Cities branch is being sold to the selling directors pursuant to the terms and
conditions of the transfer agreement.

Description of Business

         The bank engages in a full service commercial and consumer banking
business, including the following services:

         .   accepting time and demand deposits;

         .   providing personal and business checking accounts at competitive
             rates; and

         .   making secured and unsecured commercial and consumer loans.

         The bank is a locally managed community bank that seeks to provide
personal attention and professional assistance to its customer base, which
consists principally of individuals and small and medium-sized businesses. The
bank's philosophy includes offering direct access to its officers and personnel,
providing friendly, informed and courteous service, local and timely decision
making, flexible and reasonable operating procedures, and consistently-applied
credit policies.

         The bank's primary service area is located in the Dallas metropolitan
area. The Bank encounters competition in the scope and type of services it
offers, interest rates it pays on time deposits, its ability to attract new
deposits, and other aspects of its banking business.

         The bank's acceptance of time demand and savings deposits includes NOW
accounts, money market accounts, regular savings accounts, and certificates of
deposit. The bank also offers overdraft protection to its checking customers.

         The bank makes secured and unsecured commercial, consumer, installment
and construction loans. Residential mortgages and small business loans have
always been at the core of the bank's portfolio. Consumer loans include
revolving credit lines and commercial lending.

         The bank offers the following support services to make financial
management more efficient and convenient for its customers:

         .    on-line home and business banking;
         .    telephone banking;
         .    direct deposit, drive-in banking;
         .    federal tax depository;
         .    MasterCard/Visa credit card services;
         .    night deposit services;
         .    notary public services;
         .    safe deposit boxes;
         .    travelers checks;
         .    U.S. savings bonds; and
         .    individual retirement accounts.

         At June 30, 2000, the bank had

         .    total assets of $60,339,000,
         .    total shareholders' equity of $5,912,000, and
         .    total liabilities of $54,427,000, which includes $54,054,000 of
              deposits.

         On June 30, 2000, the bank had approximately 21 full time employees and
no part-time employees. Management considers relations with our employees to be
good.


                                       84
<PAGE>


Properties

         Below is a schedule of all the bank's properties, showing the location,
square footage whether the property is owned or leased and its use:

<TABLE>
<CAPTION>
                                                 Square            Type of
   Property             Location                 Footage          Ownership             Use
-------------    ------------------------      -----------       -----------        ----------------
<S>              <C>                           <C>               <C>                <C>
       1         5006 Verde Valley                  6,500        Own                Main Office
                 Dallas, Texas 75240

       2         6829 Hillcrest                     1,500        Lease              Park Cities Branch
                 Dallas, Texas 75205
</TABLE>

         Assuming that the stock transfer transaction and the reorganization are
completed, the bank will sell the Park Cities branch.

         In addition, the bank owns a tract of land in Allen, Texas at which the
bank is considering establishing an additional branch.

Supervision and Regulation of the Bank

         As an FDIC-insured, national banking association located in Texas, the
bank is subject to supervision, regulation and examination by the OCC and the
FDIC. The bank is also subject to requirements and restrictions under federal
and state law, including:

         .    requirements to maintain reserves against loans and lease losses,

         .    restrictions on the types and amounts of loans that may be granted
              and

         .    the interest that may be charged on the loans,

         .    limitations on the types of investments the bank may make and the
              types of services the bank may offer, and

         .    restrictions on loans to insiders of the bank or other insider
              transactions.

         Various consumer loans regulations also affect the operations of the
bank. In addition, the actions of the Federal Reserve Board, as it attempts to
control the money supply and credit availability in order to influence the
economy, impact commercial banks. The proposed reorganization will not
significantly change the authority of these agencies over the bank. The
information below highlights various aspects of regulation of the bank under
federal and state laws.

Federal Banking Law

         Federal banking laws applicable to the bank include, among other
things, provisions that:

         .    limit the scope of the bank's business;

         .    require the maintenance of certain reserves against loans and
              lease losses;

         .    restrict investments and borrowings by the bank;

         .    limit the payment of  dividends; and

         .    regulate branching activities and mergers and acquisitions.

         Generally, the bank must obtain prior approval from the OCC for the
acquisition of shares of stock. The bank may purchase, sell and hold investments
in the form of bonds, notes and debentures to the extent permitted by federal
law.

                                       85
<PAGE>


         Federal banking law also requires that a bank obtain the approval of
the OCC for any merger where the surviving bank would be a national bank. In
reviewing the merger application, the OCC considers, among other things, whether
the merger would be consistent with adequate and sound banking practices and is
in the public interest, on the basis of several factors, including the potential
effect of the merger on competition and the convenience and needs of the
affected communities.

         Any person intending to acquire more than 10% of outstanding voting
shares of stock in a national bank must obtain the prior approval of the OCC.

         In addition, the OCC conducts regular examinations of the bank.

         The FDIC insures the bank's deposits pursuant to the system of federal
deposit insurance initially established by the Banking Act of 1933. The bank
must comply with the FDIC's risk- based capital guidelines. Under the Federal
Deposit Insurance Corporation Improvement Act of 1991, the FDIC has regulations
defining the levels at which an insured institution would be considered:

         .    well capitalized;

         .    adequately capitalized;

         .    undercapitalized;

         .    significantly undercapitalized;

         .    critically undercapitalized.

         To be adequately capitalized, the required minimum ratio of total
capital to risk-weighted assets, including certain off-balance sheet activities,
such as standby letters of credit, is 8%. To be well capitalized, this risk-
based ratio must be at least 10%. At least half of the total capital is required
to be "Tier I Capital," consisting principally of bank stockholders' equity,
less certain intangible assets. The remainder, "Tier II Capital," may consist of

         .    certain preferred stock;

         .    a limited amount of subordinated debt;

         .    certain hybrid capital instruments;

         .    other debt securities; and

         .    a limited amount of the general loan loss allowance.

         The risk-based capital guidelines must take into account interest rate
risk, concentration of credit risk, and risks of nontraditional activities. As
of June 30, 1999, the bank satisfied the criteria to be classified as "well
capitalized," and we do not expect the proposed reorganization to change the
bank's capitalization.

         The FDIC could, under certain circumstances, reclassify a "well-
capitalized" institution as "adequately capitalized" or require an "adequately
capitalized" or "undercapitalized" institution to comply with supervisory
actions as if it were in the next lower category. A reclassification could be
made if the regulatory agency determines that the institution is in an unsafe or
unsound condition (which could include unsatisfactory examination ratings). In
the event an institution's capital deteriorates to the undercapitalized category
or below, the law prescribes an increasing amount of regulatory intervention.

         The bank is also subject to rules requiring a minimum ratio of
classified assets to capital, minimum earnings necessary to absorb losses, and a
minimum ratio of market value to book value for publicly held institutions.

                                       86
<PAGE>

         The bank's deposits have the maximum insurance coverage provided by the
FDIC, currently $100,000 per account. The bank pays insurance premiums into the
Bank Insurance Fund according to rates established by the FDIC. The FDIC has
discretion to increase premiums in the future in response to changes in the
economic climate of the banking industry. As a result, the future cost of
deposit insurance for the bank is, in large part, dependent upon the extent of
future bank failures and the amount of insurance coverage provided by the FDIC
for each deposit account.

         The FDIC has implemented a risk-related premium schedule for all
insured depository institutions that results in the assessment of premiums based
on capital and supervisory measures. Under the risk-related premium schedule,
the FDIC assigns, on a semiannual basis, each depository institution to one of
three capital groups, as follows:

         .    well-capitalized;

         .    adequately capitalized; or

         .    undercapitalized.

and further assigns such institutions to a subgroup within a capital group. The
institution's subgroup assignment is based upon the FDIC's judgment of the
institution's strength in light of supervisory evaluations, including
examination reports, statistical analyses and other information relevant to
measuring the risk posed by the institution. Only institutions with a total
capital to risk-adjusted assets ratio of 10% or greater, a Tier I capital to
risk-based assets ratio of 6% or greater, and a Tier I leverage ratio of 5% or
greater, are assigned to the well-capitalized group. At June 30, 1999, the bank
was well capitalized for purposes of calculating insurance assessments.

         The Bank Insurance Fund is presently fully funded at more than the
minimum amount required by law. Accordingly, the 1999 BIF assessment rates range
from zero for those institutions with the least risk, to $0.27 for every $100 of
insured deposits for institutions deemed to have the highest risk. The bank is
in the category of institutions that presently pay nothing for deposit
insurance.  The FDIC adjusts the rates every six months.

         While the bank presently pays no premiums for deposit insurance, it is
subject to assessments to pay the interest on bonds issued by the Financing
Corporation, which is known as FICO. FICO was created by Congress to issue bonds
to finance the resolution of failed thrift institutions. Prior to 1997, only
thrift institutions were subject to assessments to raise funds to pay the FICO
bonds.

         On September 30, 1996, as part of the Omnibus Budget Act, Congress
enacted the Deposit Insurance Funds Act of 1996, which recapitalized the Savings
Association Insurance Fund and provided that commercial banks would be subject
to 1/5 of the assessment to which savings and loan associations are subject for
FICO bond payments through 1999. Beginning in 2000, commercial banks and savings
and loan associations will be subject to the same assessment for FICO bonds.

         Under the Community Reinvestment Act of 1977, the OCC must determine
whether the bank is meeting the credit needs of the community, including low and
moderate income neighborhoods, that it serves and must take this record into
account in its evaluation of most regulatory applications the bank files with
the OCC. The OCC makes publicly available its evaluation of the bank's record of
meeting the credit needs of its entire community. This evaluation includes a
descriptive rating of:

         .    outstanding;

         .    satisfactory;

         .    needs to improve, or

         .    substantial noncompliance.

         At June 30, 2000, the bank had a satisfactory CRA rating.

                                       87
<PAGE>

         The Bank Enterprise Act of 1991 requires "truth-in-savings" on consumer
deposit accounts so that consumers can make meaningful comparisons between the
competing claims of banks with regard to deposit accounts and products. Under
this provision, the bank is required to provide information to depositors
concerning the terms of their deposit accounts, and in particular, to disclose
the annual percentage yield. There are some operational costs of complying with
this law.

         Suspicious Activities Reports. Under the Bank Secrecy Act, banks must
report to the IRS currency transactions of more than $10,000 or multiple
transactions in any one day that aggregate in excess of $10,000.

         Interstate Banking. The Bank may engage in interstate banking, subject
to certain limitations. See "Description of the Holding Company--Supervision and
Regulation--The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994--Interstate Banking."

New Legislation

         Proposed legislation is introduced in almost every legislative session
that would dramatically affect the regulation of the banking industry. At this
time, we cannot predict whether or not Congress will enact legislation and what
effect the legislation might have on the bank. For example, we cannot predict
the full impact of the Gramm-Leach-Bliley Financial Services Modernization Act,
signed into law on November 12, 1999, which will allow bank holding company
subsidiaries and national bank operating subsidiaries to offer a wide range of
new financial services, including securities underwriting. The new law also
permits bank holding company subsidiaries to engage in real estate development
and insurance underwriting.

Legal Proceedings

         The nature of the bank's business generates a certain amount of
litigation involving matters arising in the ordinary course of business. In the
opinion of management of the bank, however, no legal proceedings are pending,
which, if determined adversely to the bank, would materially affect the bank's
undivided profits or financial condition. There are no proceedings pending other
than ordinary routine litigation incidental to the business of the bank. In
addition, to management's knowledge, no government authorities have initiated or
contemplated any material legal actions against the bank.

                                   MANAGEMENT

Principal Officers

         The following table shows selected information regarding principal
officers of the bank and the holding company. The board of directors of each
elects the officers for one-year terms, and the board has the discretionary
authority to remove these individuals from office.

<TABLE>
<CAPTION>
                                   Office and Position with      Held       Office and Position with the      Held
          Name (Age)                       the Bank              Since            Holding Company            Since
--------------------------      ---------------------------     ------   --------------------------------    -----
<S>                            <C>                              <C>      <C>                                 <C>
Patrick G. Adams (47)            President                       2000     Vice President and Secretary        2000

Harold L. Campbell (65)          Chairman of the Board           1997     President                           2000

Clyde W. Hensley (58)            Vice Chairman of the Board      1997     --                                    --

Sue Higgs (58)                   Senior Vice President and       1997     --                                    --
                                 Cashier
</TABLE>

Directors

         The bank's board of directors presently consists of 11 members.
Shareholders elect directors annually to serve for a term of one year. Three of
the directors who serve on the bank's board of directors currently serve on the
holding company's board of directors. After the reorganization, the shareholders
of the bank who elect to receive holding

                                       88
<PAGE>


company common stock will become shareholders of the holding company and will
elect the Board of Directors of the holding company. The holding company will be
the sole shareholder of the bank and will elect the bank's Board of Directors.
See "Election of Directors" for more detailed information about the directors of
the bank and the holding company.

Executive Compensation

         The following table provides summary information concerning
compensation paid by the bank for services in all capacities to the bank for the
fiscal years ended December 31, 1999, 1998, and the ten month period ended
December 31, 1997, to the bank's named executive officers, which at December 31,
1999 consist of

         .      the bank's Chief Executive Officer, and

         .      the four other most highly compensated executive officers of the
                bank.

                                       89
<PAGE>

                          Summary Compensation Table

<TABLE>
<CAPTION>
                                    Annual Compensation                                    Long-Term Compensation
                       --------------------------------------------   -----------------------------------------------------------
                                                                                        Securities
                                                     Other Annual      Restricted       Underlying       LTIP
Name and Principal                                   Compensation    Stock Award(s)    Options/SARs     Payouts      All Other
    Position          Year   Salary ($)  Bonus ($)        (1)             ($)              (#)            ($)      Compensation
------------------    ----   ----------  ---------   ------------   ---------------    ------------     -------    ------------
<S>                   <C>    <C>         <C>         <C>            <C>                <C>              <C>        <C>
Tom Youngblood        1999    122,000      26,000       19,191            --                 --           --            --
   President and      1998    105,000      15,000       15,706            --                 --           --            --
   Chief Executive    1997     90,000      10,000       13,531            --              7,500           --            --
   Officer

Harold L. Campbell    1999          0           0        8,400            --                 --           --            --
   Chairman of the    1998          0           0        8,400            --                 --           --            --
   Board              1997          0           0        8,400            --                 --           --            --

Clyde W. Hensley      1999     90,000       2,500       17,431            --                 --           --            --
   Vice Chairman of   1998     90,000       2,500       14,931            --                 --           --            --
   the Board          1997     90,000       2,500       13,531            --              7,500           --            --

Sue Higgs             1999     58,400       6,400        2,594            --                 --           --            --
   Senior Vice        1998     55,800       4,400        1,013            --                 --           --            --
   President and      1997     48,000       2,500            0            --                 --           --            --
   Cashier
</TABLE>

------------------
(1)    Includes the bank's contributions to the 401(k) and deferred profit
       sharing plan, a car allowance and country club membership dues paid on
       behalf of these officers. In addition, these officers receive the
       following benefits: medical, dental, life and disability insurance, and
       other customary benefits available to all of the bank's employees.

NOTE:    Patrick G. Adams became the President and Chief Executive Officer of
         the Bank in April 2000, following the resignation of Thomas Youngblood.
         Mr. Adams is paid an annual salary of $127,000. In addition, Mr. Adams
         receives insurance and other customary benefits available to all of the
         bank's employees.

                                       90
<PAGE>

Stock Option Awards

         No stock options were granted to, or exercised by, the Chief Executive
Officer or any of the next four most highly compensated officers since January
1, 1999.

         The following table sets forth certain information regarding the bank
stock underlying outstanding stock options at December 31, 1999:

         Securities Underlying Unexercised Options At Fiscal Year End

<TABLE>
<CAPTION>
                                        Number of Securities                 Value of Unexercised In-
                                  Underlying  Unexercised Options          the-Money Options at Fiscal
                                       at Fiscal Year End (#)                    Year End ($)(2)
                             ---------------------------------------------------------------------------------
            Name               Exercisable           Unexercisable        Exercisable          Unexercisable
    ---------------------    ---------------       -----------------   -----------------     -----------------
    <S>                      <C>                   <C>                 <C>                   <C>
    Clyde W. Hensley              4,500                  3,000               $22,500               $15,000

    Tom Youngblood (1)            4,500                  3,000                22,500                15,000
</TABLE>
_______________

(1)  Pursuant to the transfer agreement, Mr. Youngblood will transfer all rights
     in his stock options to the holding company for $37,500 cash.
(2)  Based upon the $15.00 price set forth in the reorganization proposal.

Compensation of Directors

         During 1999, the bank paid directors' fees of $500 per meeting attended
to bank directors for attending and participating in board of director's
meetings and $100 for committee meetings. In the aggregate, the bank paid the
Board of Directors $75,000 for all services rendered in 1999. The Board of
Directors held thirteen regular meetings and 31 committee meetings in 1999. All
directors attended at least 75% of those meetings.

         During 1999, the bank's board of directors maintained a Directors Loan
Committee, an Audit and Budget Committee and an Executive Committee.

         The Directors Loan Committee is responsible for reviewing loans made by
the bank's officers and approving loans over the individual loan limits of each
officer. Directors Campbell, Hensley, Reid, Yeaman and Youngblood served on this
committee during 1999. This committee met 19 times during 1999. All members
attended at least 75% of these meetings.

         The Audit and Budget Committee is responsible for establishing the
bank's annual budget, monitoring compliance with the bank's policies and
ensuring that internal controls are in place. Directors Bailey, Campbell,
Griffith, Rhoades and Youngblood served on this committee during 1999. This
committee met three times during 1999. All members attended at least 75% of
these meetings.

         The Executive Committee is responsible for developing the strategic
plan and making recommendations to the board regarding strategic decisions.
Directors Campbell, Lutz, Pack and Youngblood served on this committee during
1999. This committee met eight times during 1999. All members attended at least
75% of these meetings.

Certain Relationships and Related Transactions

         Except as described below and under "Proposal 1: The Proposed
Reorganization," the bank has not entered into and does not intend to enter into
any material transactions with any director or executive officer of the bank or
their associates.

         Some of our directors and officers and the companies with which they
are associated had banking transactions with the bank in the ordinary course of
its business during 1999, and the bank expects to continue such banking
transactions in the future.

         Total loans outstanding from the bank at June 30, 2000, to the bank's
officers and directors as a group, members of their immediate families and
companies in which they had an ownership interest of 10% or more, amounted to
$2,277,339, or approximately 39.1% of the total equity capital of the bank. The
bank made these loans in the ordinary course of business on substantially the
same terms, including interest rates and collateral, as

                                       91
<PAGE>


those prevailing at the time for comparable transactions with other persons,
and they did not involve more than the normal risk of collection or present
other unfavorable features.

         The largest total amount of indebtedness outstanding during 1999 to the
above described group was approximately $2,325,376. The aggregate amount of
indebtedness outstanding as of the latest practicable date, June 30, 2000, to
the above group was approximately $2,447,129.

                 DESCRIPTION OF THE BANK'S CAPITAL SECURITIES

Bank Stock

         Eagle National Bank is authorized to issue 1,000,000 shares of its
common stock, par value $5.00 per share, of which 574,750 shares were issued and
outstanding as of June 30, 2000. No other shares of capital stock were issued or
outstanding. The bank is not authorized to issue any other class of stock. At of
June 30, 2000, the bank had approximately 124 shareholders.

         Voting Rights. Each share of bank stock is entitled to one vote on all
matters that may be brought before shareholders' meetings, except that the
holders of bank stock have cumulative voting rights in the election of
directors. Cumulative voting for the election of directors entitles each
shareholder to multiply the number of votes to which the shareholder is entitled
by the total number of directors to be elected, and the shareholder may cast the
whole number of these votes for one candidate or may distribute them among two
or more candidates.

         Preemptive Rights. Shareholders of the bank have the preemptive right
to purchase additional shares of bank stock to be issued by the bank, except
with respect to 40,000 shares of bank stock to be issued pursuant to the bank's
Stock Option Plan.

         Liquidation. In the event of liquidation, dissolution or winding up of
the bank, shareholders of the bank are entitled to share ratably in all assets
remaining after payment of liabilities.

         Liability for Further Assessments. The bank's shareholders are not
subject to further assessments by the bank on their shares of bank stock.

         Sinking Fund Provision. The bank's shares do not require a "sinking
fund," which is a separate capital reserve maintained to pay shareholders who
have certain preferential rights with respect to their investment in the event
of liquidation or redemption.

         Redemption Provision. The bank's shareholders are not subject to having
their shares of bank stock  redeemed or purchased by the holding  company and do
not have a right to cause such a redemption.

         Dividends. Each shareholder of the bank is entitled to receive
dividends that may be declared by the Board of Directors out of legally
available funds. The bank, as a relatively new bank, has historically not paid
dividends to its shareholders. Payment of dividends is subject to the
restrictions under federal banking laws, which provide that a bank may declare
and pay dividends only out of accumulated net earnings and only if the bank
meets certain capital requirements. Further, an insured bank may not declare and
pay dividends if it is subject to a supervisory order. Directors are
specifically liable for unlawful dividends.

Stock Option Plans

         Stock Option Plan. The bank has reserved 40,000 shares of bank stock
for the grant of nonqualified stock options under the Stock Option Plan. The
purposes of the Stock Option Plan are:

         .    to attract, retain and compensate, as key employees of the bank,
              highly qualified individuals;

         .    to more significantly align the interests of the key employees
              with those of the bank's shareholders by underscoring their common
              interests;

                                       92
<PAGE>

         .    to encourage key employees to have a greater personal financial
              stake in the bank through the ownership of bank stock; and

         .    to increase the long-term value of the bank stock.

         The Stock Option Plan has the following significant terms:

         .    Duration of Plan.  The Stock Option Plan will  terminate  upon the
              earlier of the Board's  adoption of a resolution  terminating  the
              Stock  Option Plan or 10 years from the date the Stock Option Plan
              was approved and adopted,  which became  effective on February 28,
              1997.

         .    Shares Issuable.  The Bank may issue no more than 40,000 shares of
              bank stock under the plan,  and this  number may be adjusted  from
              time to time due to stock splits,  payments of stock  dividends or
              other  changes in the capital  structure  of the bank.  Also,  the
              shares  under  the plan may be  exchanged  for the  securities  of
              another entity, for example,  if a merger or consolidation such as
              that contemplated by the reorganization occurs.

         .    Eligible Participants, Annual Awards. Employees of the bank are
              eligible to receive awards under the plan.

         .    Purchase Price. The purchase price of bank stock subject to a
              stock option is determined by the compensation committee of the
              bank at the time of grant.

         .    Term of Stock Options. No stock option is exercisable after 10
              years from the date of grant.

         .    Vesting Periods. The bank may grant stock options with varying
              vesting periods.

         .    Change in Control Provisions. The Stock Option Plan contains
              certain change in control provisions that permit the options
              granted to become exercisable upon the occurrence of a change in
              control of the bank as described in the plan.

         .    Plan Administration. A committee comprised of three directors
              administers the Stock Option Plan. It is possible for directors
              participating in such administration to receive awards under the
              plan if they are employees of the bank. The body established to
              administer the Stock Option Plan is vested with the authority and
              discretion to interpret the Stock Option Plan, and to make any
              rules or regulations pertaining to it. Any interpretations and
              decisions of the administrative body are final and binding.

         .    Death, Retirement or Disability of Employee. In the event that a
              participant ceases to be an employee of the bank then options not
              yet subject to exercise, or the unexercised portions of any option
              the subject to exercise, shall terminate upon:

                 .    immediately upon the date on which employment is
                      terminated for "cause"; or

                 .    3 months after the date on which employment is terminated
                      other than for "cause," death or total disability; or

                 .    one year after employment is terminated due to death or
                      total disability.

         .    Nontransferability. Except as otherwise provided by the bank's
              board of directors, awards made under the Stock Option Plan are
              nontransferable other than by will or the laws of descent and
              distribution. During the employee's lifetime, only the employee
              may exercise his or her stock options granted under the plan, or,
              in the event of his or her disability or death, a legal
              representative may exercise the options.

                                       93
<PAGE>

         .    Capital Changes. The Stock Option Plan provides that, if the bank,
              at any time, increases or decreases the number of its outstanding
              shares of bank stock or changes, in any way, the rights and
              privileges of such shares through a stock dividend, or through a
              stock split, reclassification or other recapitalization involving
              the bank stock, then the bank shall increase, decrease or change,
              in like manner, the numbers, rights and privileges of shares
              issuable under the Stock Option Plan.

         .    Amendments. The Board of Directors may amend the Stock Option Plan
              at any time without shareholder approval, provided, however, that
              amendment of the Stock Option Plan may not materially and
              adversely affect any right of a participant with respect to shares
              of bank stock previously issued without the participant's written
              consent.

As of June 30, 2000, the bank had issued options to key employees to purchase an
aggregate of 15,000 shares of bank stock at an exercise price of $10.00 per
share. Shares issued under this plan may dilute the ownership interests and
voting power of existing shareholders. Pursuant to the transfer agreement, the
holding company will pay an aggregate of $37,500 or $5.00 per option share to
Tom Youngblood in exchange for the cancellation of his option to purchase 7,500
shares of bank stock. Upon consummation of the proposed reorganization, the
holding company will issue substituted or replacement options for the bank's
outstanding options under the Stock Option Plan. See "Information about the
Reorganization--Stock Option Plans."

            DESCRIPTION OF THE HOLDING COMPANY'S CAPITAL SECURITIES

Holding Company Common Stock

         The authorized capital stock of the holding company consists of
1,000,000 shares of common stock, par value $5.00 per share. Until completion of
the reorganization, no shares of the holding company common stock will be issued
or outstanding.

         Voting Rights. Each share of holding company common stock entitles its
holder to one vote on all matters upon which shareholders have the right to
vote, except that the holders of holding company common stock have cumulative
voting rights in the election of directors. The holders of holding company
common stock will possess the exclusive voting rights in the holding company.

         Preemptive Rights. Shareholders of the holding company have the
preemptive right to acquire additional shares to be issued by the holding
company except under the following circumstances:

         .    issuance of shares to employees pursuant to approval by the
              affirmative vote of the holders of a majority of the shares
              entitled to vote on such issuance or when authorized by and
              consistent with a plan previously approved by such a vote of
              shareholders;

         .    issuance of shares sold otherwise than for cash;

         .    issuance of up to 40,000 shares of holding company common stock to
              employees of the holding company or the bank pursuant to the
              exercise of options granted in replacement or substitution for
              options granted under the bank's Stock Option Plan; or

         .    issuance of shares to holders of the holding company's debentures
              upon the conversion of the debentures into holding company common
              stock pursuant to the terms of the debentures.

         Liquidation. In the event of liquidation, dissolution or winding up of
the holding company, the holders of holding company common stock are entitled to
share ratably in all assets remaining after payment of liabilities.

         Liability for Further Assessments. The holding company's shareholders
are not subject to further assessments by the holding company on their shares.

                                       94
<PAGE>

         Sinking Fund Provision. The holding company common stock does not
require a "sinking fund," which is a separate capital reserve maintained to pay
shareholders who have certain preferential rights with respect their investment
in the event of liquidation or redemption.

         Redemption Provision. The holders of holding company common stock are
not subject to having their shares "redeemed" or purchased by the holding
company and do not have a right to cause such a redemption.

         Dividends. Each shareholder is entitled to receive dividends that may
be declared by the Board of Directors from time to time out of legally available
funds. The bank has not paid any dividends since its inception in 1997. We
presently intend to continue a dividend policy of retaining earnings and not
paying dividends for several years while the holding company's debt is being
repaid. Future dividends will ultimately depend upon future earnings and
financial condition of the holding company and the bank, and appropriate legal
restrictions and other relevant factors.

         Under the Texas Business Corporation Act ("TBCA"), the holding company
may not pay a dividend if:

     .     after the payment of the dividend, the holding company would be
           unable to pay its debts as they become due, or

     .     the amount of the dividend is greater than the excess of the net
           assets of the holding company over its stated capital.

         Cash available for dividend distribution to shareholders of the holding
company must initially come from dividends that the bank pays to the holding
company. As a result, the legal restrictions on the bank's dividend payments
also affect the ability of the holding company to pay dividends. See
"Description of the Bank's Capital Securities--Bank Stock."

         Stock Option Plan. The holding company intends to establish a Stock
Option Plan, pursuant to which the continuing grantee of stock options under the
bank's Stock Option Plan will receive substituted options to purchase the common
stock of the holding company. See "Description of the Bank's Capital Securities
--Stock Option Plans."

         Periodic Reporting. After the reorganization, Section 12 of the
Exchange Act will require that the holding company register its stock. The
holding company will file periodic reports, proxy statements and other
information with the Commission. The holding company's obligation to file
periodic reports and other information under Section 15(d) of the Exchange Act
will be suspended automatically upon the beginning of its first fiscal year in
which it has less than 300 holders of holding company common stock. Therefore,
the holding company anticipates that its reporting obligations will be suspended
as of the beginning of its next fiscal year.

                       COMPARISON OF SHAREHOLDER RIGHTS

         While we believe that the description covers the material differences
between the rights of holders of bank stock and the rights of holders of holding
company common stock, this summary may not contain all of the information that
is important to you. You should carefully read this entire document and the
other documents we refer to for a more complete understanding of the differences
between being a shareholder of the bank and being a shareholder of the holding
company.

         After the reorganization, the shareholders of the bank who elect to
receive holding company common stock in the reorganization will become
shareholders of the holding company. There are certain differences in the rights
of shareholders of these two entities. These differences arise from differences
in the laws that govern the two entities and differences in their articles and
bylaws. The bank is incorporated under National Bank Act which presently governs
the rights of shareholders of the bank. The holding company is incorporated
under the TBCA, which will govern the rights of shareholders of the holding
company. A number of provisions of the TBCA and the holding company's charter
documents may have the effect of delaying, deferring or preventing a change of
control of the holding company.

                                       95
<PAGE>


         The following  table  summarizes the material  differences  between the
rights of shareholders of the bank and the rights of shareholders of the holding
company:

                                       96
<PAGE>

<TABLE>
<CAPTION>
                                          The Bank Stock                                    The Holding Company Common Stock
---------------------   ----------------------------------------------------------   -----------------------------------------------
<S>                     <C>                                                          <C>
Capitalization          1,000,000 shares, par value $5.00 per share, authorized,     1,000,000 shares, par value $5.00 per share,
                        of which 574,750 were outstanding on May 31, 2000.           authorized of which 505,750 shares would be
                                                                                     outstanding after the reorganization assuming
                                                                                     all shareholders other than the selling
                                                                                     directors elect to receive holding company
                                                                                     stock.

Number of Directors     By law, the bank must have at least five directors and no    By law, the holding company must have at least
                        more than twenty-five directors. The number of directors     one director and may have an unlimited number
                        is established by vote of majority of shareholders at the    of directors. The bylaws of the holding company
                        annual meeting. The number of directors is currently set     provide that the holding company will have at
                        at eleven.                                                   least one director and no more than twenty-five
                                                                                     directors. The number of directors is
                                                                                     established by resolution of directors. The
                                                                                     number of directors is currently set at three.

Terms of Directors      One year.                                                    One year.

Voting Rights           One vote per share with cumulative voting in the election    One vote per share with cumulative voting in
                        of directors.                                                the election of directors.

Removal of Directors    A director may be removed by vote of a majority of           A director may be removed by vote of a majority
                        shareholders utilizing cumulative voting, at a special       of shareholders, utilizing cumulative voting,
                        special meeting called for that purpose.                     at a meeting called for that purpose.

Filling  Vacancies on   The Board may fill vacancies in the Board provided that      The Board may fill vacancies in the Board
the Board of Directors  if the Board has 15 or fewer members, the Board can only     provided that the Board may not fill more than
by the Board of         fill two vacancies and if the Board has 16 to 25 members,    two vacancies.
Directors               the Board can only fill four vacancies.

Director Voting         Majority of authorized directors                             Majority of authorized directors

Preemptive Rights       Preemptive rights to subscribe for additional shares on       Preemptive rights to subscribe for additional
                        a pro rata basis, except that there are no preemptive        shares on a pro rata basis, except there are no
                        rights with respect to 40,000 shares that may be issued      preemptive rights for shares issued for other
                        pursuant to the bank's Stock Option Plan.                    than cash and for shares issued to employees
                                                                                     pursuant to the approval by the affirmative
                                                                                     vote of the holders of a majority of the shares
                                                                                     entitled to vote on such issuance or when
                                                                                     authorized by and consistent with a plan
                                                                                     previously approved by such a
</TABLE>

                                       97
<PAGE>

<TABLE>
<CAPTION>
                                          The Bank Stock                                    The Holding Company Common Stock
---------------------   ----------------------------------------------------------   -----------------------------------------------
<S>                     <C>                                                          <C>
                                                                                     vote of shareholders, up to 40,000 shares
                                                                                     issued pursuant to the stock option plan to be
                                                                                     adopted in substitution for the bank's Stock
                                                                                     Option Plan and shares issued upon conversion
                                                                                     of the debentures into holding company common
                                                                                     stock.

Dividends               As declared by the Board of Directors. Dividends may be      As declared by the Board of Directors. The
                        paid only out of accumulated net earnings of the bank.       bank's dividend restrictions apply indirectly
                        Also, the bank must have made any required transfers of      to the holding company because cash available
                        net earnings to surplus in order to maintain surplus at      for dividend  will initially come from
                        least equal to capital, prior to declaring the dividend.     dividends the bank  holding company. In
                        Surplus must not be reduced. Directors are specifically      addition, the holding company may not pay a
                        liable for unlawful dividends.                               dividend, if:

                                                                                     .    after issuing the dividend, the holding
                                                                                          company would be unable to pay its debts
                                                                                          as they become due, or

                                                                                     .    the amount of the dividend is greater than
                                                                                          the holding company's surplus.

Right to propose        Amendments can be proposed by the board of directors.        Amendments can be proposed by the board of
amendments                                                                           directors.

Amendment of articles   Approval by a majority of the votes which all shareholders   Approval by 66-2/3rds of the votes which all
of incorporation        are entitled to cast.                                        shares are  entitled to cast.
(other than
authorization of
additional shares)

Authorization of        Approval by vote of shareholders entitled to cast at least   Approval by vote of 66-2/3rds of the votes cast
Additional Shares       a majority of votes which all shareholders are entitled to   by all shareholders entitled to vote and the
(through amendment      cast and the affirmative vote of the holders of a majority   affirmative vote of a majority of the votes
of articles of          of the outstanding shares of the affected class or series    cast in a vote of the holders of outstanding
incorporation)          of stock.                                                    shares of the affected class or series of
                                                                                     stock.


Increase in Capital     Approval by vote of a majority of the directors.             Approval by vote of a majority of the
Stock through Issuance                                                               directors.
of Additional
Outstanding Shares
(shares already
authorized under
articles of
incorporation)

Shareholder Action to   Approval by a vote of at least 66-2/3% of outstanding of     Approval by a vote of at least 66-2/3% of
Approve
</TABLE>

                                       98
<PAGE>


<TABLE>
<CAPTION>
                                          The Bank Stock                                    The Holding Company Common Stock
---------------------   ----------------------------------------------------------   -----------------------------------------------
<S>                     <C>                                                          <C>
Mergers,                outstanding shares.                                          outstanding shares.
Consolidations,
Liquidation, Sales of
Substantially All
Assets

Business Combination    No restrictions.                                             By law, the holding company cannot enter into
Following a Change                                                                   a business combination within 3 years after a
of Control                                                                           person acquires 20% of the holding company
                                                                                     common stock unless (1) the board of directors
                                                                                     of the holding company approves such person's
                                                                                     acquisition of shares prior to the acquisition,
                                                                                     or (2) the business combination is approved by
                                                                                     66-2/3% of the outstanding shares of the
                                                                                     holding company common stock not owned by the
                                                                                     person who acquired 20% of the shares at a
                                                                                     meeting held at least six months after such
                                                                                     person's acquisition of shares.

Amendment of Bylaws     Approval by the affirmative vote of the majority of shares   Approval by the affirmative vote of the
                        represented at a legally called meeting of shareholders,     majority of shares represented at a legally
                        or by a majority vote of members of the Board of Directors   called meeting of shareholders, or by a
                        present at any meeting of the Board, subject to the power    majority vote of members of the Board of
                        of the bank shareholders to change such action.              Directors present at any meeting of the Board,
                                                                                     subject to the power of holding company
                                                                                     shareholders to change such action.

Right to Call           Upon request by a majority of the Board of Directors or      Upon  request by a majority of the Board of
Special Shareholder     one or more shareholders entitled to cast at least 10%       Directors or of one or more shareholders
Meetings                the votes that all shareholders are entitled to cast at a    entitled to cast at least 10% of the votes that
                        particular meeting.                                          all shareholders are entitled to cast at a
                                                                                     particular meeting.

Indemnification of      Yes. Directors and officers are indemnified to the fullest   Yes. Directors and officers are indemnified to
Directors and           extent permitted by law. Indemnification is against          the fullest extent permitted by law.
Officers                judgments, settlements and costs incurred in any action      Indemnification is against judgments,
                        that relates to service as a director or officer of the      settlements and costs incurred in any action
                        bank. No indemnification is provided if the action is for    that relates to service as a director or
                        civil money penalties or if restitution is assessed by       officer of the holding company. No
                        banking regulators. If an improper benefit is found or an    indemnification is provided if the action is
                        action is brought by the bank against a director             for civil money penalties or if restitution is
                                                                                     assessed by banking regulators. If an improper
                                                                                     benefit is found or an action is brought by the
                                                                                     holding company against a director or officer,
                                                                                     indemnification is limited to reasonable
                                                                                     expenses. The holding company must advance
                                                                                     reasonable expenses to
</TABLE>

                                       99
<PAGE>


<TABLE>
<CAPTION>
                                          The Bank Stock                                    The Holding Company Common Stock
---------------------   ----------------------------------------------------------   -----------------------------------------------
<S>                     <C>                                                          <C>
                        or officer, indemnification is limited to reasonable         defend the action if the director or officer
                        expenses. The bank must advance reasonable expenses to       signs a written affirmation that he meets the
                        defend the action if the director or officer signs a         standard for indemnification and agrees to
                        written affirmation that he meets the standard for           repay the expenses advance if indemnification
                        indemnification and agrees to repay the expenses advance     is found to be improper. The holding company is
                        if indemnification is found to be improper. The bank is      authorized to purchase insurance for
                        authorized to purchase insurance for indemnification         indemnification obligations.
                        obligations.

Repurchase of Shares    Cannot reduce or retire any part of its capital stock        Stock can be repurchased if, after the
                        without prior regulatory approvals and shareholder           repurchase:
                        approval.
                                                                                     .    the holding company would still be able to
                                                                                          pay its debts as they become due; or

                                                                                     .    may be subject to regulatory approval if
                                                                                          the repurchase price paid for all shares
                                                                                          within a 12 month period is 10% or more of
                                                                                          the holding company's net worth.

Appraisal Rights        Each bank shareholder has the right to receive the value     Each holding company shareholder has the right
                        of his shares as of the effective date of transaction in     to receive the value of his or her shares as of
                        cash in corporate reorganization if the shareholder either   the day before date of the meeting of
                        (a) votes against reorganization, or (b) gives written       shareholders to consider the corporate
                        notice prior to shareholders' meeting objecting to           reorganization in cash. Shareholder must give
                        reorganization. If the bank and the dissenting shareholder   written notice of objection to the
                        cannot agree upon the value of the shares, an appraisal      reorganization prior to shareholders' meeting.
                        will be made by committee of appraisers selected by the      If the holding company and the dissenting
                        resulting bank, the dissenting shareholders and the two      shareholder cannot agree upon the value of the
                        appraisers.  If the value is not satisfactory to the         shares, the dissenting shareholder may file an
                        dissenting shareholder, the dissenting shareholder can       action in state district court. The court then
                        request that the OCC reappraise the shares, which            appoints one or more appraisers to determine
                        reappraisal shall be final.                                  the value of the shares and to file a report
                                                                                     with the court. The court will then enter a
                                                                                     judgment as to the value of the shares, which
                                                                                     is final.

Inspection of           Shareholders and creditors of the bank have the right        The holding company must prepare and keep on
Shareholders            to inspect the list of shareholders at any time during       file at the corporate office of the holding
                        normal business hours. The list must include the name        company at least 10 days prior to each
                        and address of, and number of shares held by, each           shareholders' meeting a list of shareholders.
                        shareholder.                                                 Shareholders have the right to inspect the
                                                                                     shareholder list during this 10 day period
                                                                                     during normal business hours. The list must
                                                                                     include the name and address of, and the number
                                                                                     of shares held by, each shareholder.
</TABLE>

                                      100
<PAGE>


<TABLE>
<CAPTION>
                                          The Bank Stock                                    The Holding Company Common Stock
---------------------   ----------------------------------------------------------   -----------------------------------------------
<S>                     <C>                                                          <C>
                                                                                     The holding company must also keep a record of
                                                                                     transfers of its stock indicating the names and
                                                                                     addresses of, and shares held by, each
                                                                                     shareholder. Any shareholder who (a) has been a
                                                                                     shareholder for at least six months, or (b)
                                                                                     owns at least 5% of the outstanding shares of
                                                                                     holding company stock, has the right to inspect
                                                                                     the stock transfer records.
</TABLE>

                                      101
<PAGE>

                            OFFERING OF DEBENTURES

General

         The debentures offered hereby are being sold by the holding company.
The terms of the debentures are described below under "Description of
Convertible Debentures. The determination of the initial conversion price of
$15.00 was based upon the price negotiated with the selling directors in the
transfer agreement.

Subscription

         The right to purchase debentures is being extended only to those bank
shareholder who elect to receive all holding company common stock in the
reorganization. If you elect to receive all holding company common stock
pursuant to reorganization and if the reorganization is approved by shareholders
at the annual shareholders' meeting, we will send you a debenture agreement
together with instructions for subscribing for debentures. Thereafter, if you
wish to subscribe for debentures, you must complete and execute the enclosed
debenture agreement and otherwise follow the instructions for subscription.

         At that time, you must also tender the entire amount of your payment
for their debentures at the time of execution and delivery of the debenture
agreement by check payable to the holding company or by delivery to the holding
company of other funds representing payment for such subscription.

         We anticipate that the debenture offering will expire at 5:00 p.m.
local time on October 16, 2000. The holding company may shorten or extend the
debenture offering period without notice. After the holding company receives a
properly completed and executed debenture agreement, it will return to you an
executed debenture.

Use of Proceeds

         We will use the proceeds from the sale of the debentures and bank
borrowings, if necessary, to provide the cash needed to complete the stock
purchase transaction provided for in the transfer agreement and the
reorganization provided for in the reorganization agreement.

                     DESCRIPTION OF CONVERTIBLE DEBENTURES

         We will issue the debentures under debenture agreements between the
holding company and subscribers for the debentures. The terms and conditions
applicable to the debentures will be contained in the debenture agreements. The
following summarizes the material provisions of the debentures and the debenture
agreements. Prospective buyers of the debentures should refer to the actual
terms of the debentures and the form of debenture agreements for the definitive
terms and conditions. Copies of the proposed forms of debentures and debenture
agreement are attached to this proxy statement/prospectus as Annex D.
                                                             -------

General

         We are offering the debentures only to those shareholders who elect to
exchange all of their bank stock for holding company common stock pursuant to
the reorganization. The debentures are being offered to such shareholders, pro
rata, based upon the percentage of the holding company common stock they will
own (which will be more than the percentage of bank stock they currently own).
If such shareholders do not subscribe to purchase all of their pro rata part of
the debentures, any unsubscribed for debentures will be allocated among the
shareholders who subscribed for their full pro rata portion of the debentures.
This is called an over subscription right. Such allocation will be determined by
the holding company in its sole discretion. Certain of the continuing directors
have indicated that they currently intend to purchase at least their pro rata
portion of the debentures and unsubscribed for debentures.

         The total principal amount of the debentures will be limited to
$2,500,000. The debentures represent our general unsecured obligations and are
subordinate in right of payment to our senior debt as described under "--
Subordination" below. We will issue the debentures in fully registered form
only, without coupons, in denominations of $1,000 each and any integral multiple
of $1,000. The debentures will mature beginning on December 31, 2006 unless
converted, redeemed or repurchased before the maturity date. See "-Conversion,"
"--Optional Redemption by Us" and "--Repurchase at Option of Holder" below.

         The debentures will accrue interest at an annual rate of 9.5%. We will
pay the first interest payment on March 15th, 2001, and quarterly after that
date on the 15/th/ day of

                                      102
<PAGE>

June, September, December, March. We will also pay all accrued interest upon
maturity, conversion, redemption and repurchase of the debentures. Interest will
be payable to the person in whose name the debenture is registered at the close
of business on the regular record date for the interest installment, which is
the 15th day of the calendar month preceding each interest payment date. If any
payment date falls on a day that is not a business day, we will make the payment
on the next business day and we will not pay any additional interest. We will
generally make all interest payments on the debentures by check mailed to the
holders entitled to the interest. Whenever interest is paid, the payment will
include interest accrued to, but excluding, the interest payment date or the
date of redemption, conversion, repurchase or maturity. We will compute interest
on the debentures on the basis of a 360-day year comprised of 12 30-day months.

         The debentures will have no sinking fund. A sinking fund is a custodial
or similar account into which regularly scheduled deposits are made for purposes
of funding the redemption or repurchase of the principal amount of the
debentures.

         The holder of any debenture may present such debenture for transfer or
exchange at the holding company's main office. The holding company will maintain
a registry for the debentures. We will not charge any fee for registration,
transfer or exchange of any debentures. We may request reimbursement for taxes
incurred by us in connection with any registration, transfer or exchange of
debentures. We are not required to register the transfer or exchange of any
debenture that has been previously surrendered for repurchase, conversion or
redemption.

Conversion

         You may convert your debenture, in whole or in part, into our common
stock at a conversion price equal to $15.00 principal amount of debentures for
each share of common stock, subject to adjustment as described below. You may
convert your debenture at any time before the close of business on December 31,
2006. If we call the debentures for redemption or you submit the debentures for
repurchase, your conversion rights will expire at the close of business on the
redemption date.

         You may exercise the right to convert your debentures in denominations
of integral multiples of $1,000 by delivering your debentures to the holding
company's head office accompanied by a written notice that you elect to convert
your debentures. If the date of conversion occurs after a regular record date,
but before the next interest payment date, and we have not called the debentures
for redemption, we will pay you the interest due on the next interest payment
date, regardless of the conversion, but only interest to the date of conversion.
If the principal amount you wish to convert is not evenly divisible by the
conversion price, instead of issuing a fractional share, we will pay you a cash
adjustment in an amount equal to the same fraction of the conversion price per
share of bank stock.

         If you present a debenture for conversion, you will not be required to
pay any taxes or duties relating to the issuance of our common stock (except to
the extent relating to exchange or currency control matters or the status of the
person converting the debentures), but you will be required to pay any tax or
duty resulting from the issuance of holding company common stock in the name of
any other person.

         The conversion price may be adjusted upon certain events including:

         .  our issuing common stock or other capital stock as a dividend or
            distribution to the holders of our common stock;

         .  our dividing or combining our outstanding shares of holding company
            common stock into a different number of shares;

         .  our issuing common stock as a result of reclassification of our
            common stock; and

         .  subject to certain exceptions, our fixing a record date for making a
            rights offering to our shareholders.

         In the event of prepayment of the debenture or upon our consolidation,
merger or combination with or into another entity or a sale or conveyance to
another person of our

                                      103
<PAGE>

property and assets as an entirety or substantially as an entirety, you will be
entitled to convert your debentures into holding company common stock prior to
such event, even if such event occurs after December 31, 2006.

         You may, in certain circumstances, be deemed to have received a
distribution or dividend subject to U. S. income tax as a result of an
adjustment (or the nonoccurrence of an adjustment) to the conversion price of
your debentures. See "--Certain United States Federal Income Tax Considerations
related to the Convertible Debentures."

         Unless the adjustment in the conversion price requires an increase or
decrease of at least $.01 per share, we will not be required to make any
adjustments in the conversion price. Any adjustment not made will be taken into
account in subsequent adjustments.

Optional Redemption By Us

         On or after December 15, 2002, we may elect to redeem the debentures.
We will not be allowed to redeem the debentures before December 15, 2002. We
will provide the holders of the debentures at least 30 days' notice of our
intent to redeem the debentures.

         The redemption price for the debentures will be the principal amount of
the debenture plus all accrued but unpaid dividends through the redemption date.
If an interest payment date occurs before the redemption date, the interest
payable on such interest payment date will be paid to the holder of record as of
the relevant record date. Interest not so paid will be paid to the party to whom
the redemption price is paid.

Subordination

         All payments under the debentures are subordinate and junior to the
prior payment in full of all senior debt. The subordination provisions apply to
existing senior debt as well as senior debt incurred after the date of this
proxy statement/prospectus.

         Upon any distribution of our assets, dissolution, winding up,
liquidation or reorganization of us, the payments on the debentures will be
subordinated in right of payment to the prior payment in full of all senior
debt. Moreover, if the debentures are accelerated following an event of default,
the holders of any senior debt then outstanding will be entitled to payment in
full before the holders of the debentures are entitled to receive any payment on
the debentures. However, our obligations to make payments with respect to the
debentures will not otherwise be affected. We are the sole obligor on the
debentures.

         The subordination provisions of the debenture agreements and the
debentures will not prevent the occurrence of any default or event of default or
limit the rights of any holder of debentures to pursue any other rights or
remedies with respect to the debentures.

         As a result of the subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceedings, holders of the debentures may receive less than other creditors (on
a ratable basis).

Events of Default and Remedies

         The following events are included as "events of default" in the
debenture agreements:

         .  our failure to pay interest on the debentures when due if the
            failure continues for 180 days;

         .  our failure to pay the principal of, or premium, if any, on any of
            the debentures when due; and

         .  certain events involving bankruptcy, insolvency or reorganization of
            us.

         If an event of default has occurred and is continuing, any holder of
the debentures, may declare all amounts outstanding on the debentures to be
immediately due and payable. If an event of default occurs resulting from the
bankruptcy, insolvency or reorganization of us, all unpaid principal of an
accrued interest on the outstanding

                                      104
<PAGE>

debentures would become due and payable immediately without any declaration or
other act on the part of the holding company or holders of debentures.

Governing Law

         The debenture agreements and the debentures will be governed by the
substantive laws of the State of Texas without regard to its conflict of law
provisions.

Certain United States Federal Income Tax Considerations Related to the
Convertible Debentures

         General. The following is a summary of certain U.S. federal income tax
considerations applicable to U.S. holders of debentures relating to the
purchase, ownership and disposition of the debentures and of holding company
common stock into which debentures may be converted, but is not a complete
analysis of all potential tax considerations. The summary assumes that the
debentures will be treated as "debt" and not "equity" for federal income tax
purposes. This summary is based on laws, regulations, rulings and decisions now
in effect, which may change in the future. It relates only to those of you who
will hold debentures and holding company common stock into which debentures may
be converted as "capital assets" (within the meaning of Section 1221 of the
Internal Revenue Code) and does not address particular tax considerations or
individual circumstances. You may be subject to special tax rules not discussed
in this summary if you are:

         .  subject to the alernative minimum tax;

         .  a bank or other financial institution;

         .  a tax-exempt organization;

         .  an insurance company;

         .  a foreign person or entity;

         .  a broker or dealer in securities or currencies;

         .  holding debentures as a position in a hedging transaction,
            "straddle" or "conversion transaction"; or

         .  deemed to sell debentures or bank stock under the constructive sale
            provisions of the Internal Revenue Code.

         This summary discusses the tax considerations applicable to those of
you who are the initial purchasers of the debentures and who purchase the
debentures at their "issue price" as defined in Section 1273 of the Internal
Revenue Code. It does not discuss the tax considerations applicable to
subsequent purchasers of the debentures. The summary does not, therefore,
discuss application of (i) the "market discount" rules of Internal Revenue Code
Sections 1276 to 1278 or (ii) the "bond premium" amortization rules of Internal
Revenue Code Section 171. Moreover, the "original issue discount" rules of
Internal Revenue Code Sections 1271 to 1275 are not generally discussed herein
because debentures are not anticipated to be issued at a discount from their
face value.

         We have not sought any ruling from the IRS or an opinion of counsel
with respect to the statements we make and the conclusions we reach in the
following summary, and we are not certain that the IRS will agree with our
statements and conclusions. The IRS may successfully adopt a contrary position.
Our summary does not consider the effect of the federal estate or gift tax laws,
the alternative minimum tax or the tax laws of any applicable foreign, state,
local or other jurisdiction.

         Those of you considering the purchase of debentures should consult your
own tax advisors with respect to the application of the U.S. federal income tax
laws to your particular situation as well as any tax consequences arising under
the federal estate or gift tax rules, under the laws of any state, local or
foreign taxing jurisdiction or under any applicable tax treaty.

                                      105
<PAGE>

         Taxation of Interest. Interest paid on the debentures will be included
in your income as ordinary income at the time it is treated as received or
accrued, in accordance with your regular method of tax accounting.

         Sale, Exchange or Redemption of the Convertible Debenteres. When you
sell or exchange a debenture or a debenture is redeemed, other than in the case
of a conversion (discussed below), you will generally recognize capital gain or
loss equal to the difference between:

         .  the amount of cash proceeds and the fair market value of any
            property received on the sale, exchange or redemption (except to the
            extent the amount is attributable to accrued interest income not
            previously included in your taxable income, which will be taxable as
            ordinary income, or is attributable to accrued interest that was
            previously included in income, which amount may be received without
            generating further taxable income); and

         .  your adjusted tax basis in the debenture.

         Your adjusted tax basis in a debenture generally will equal the amount
you paid for the debenture. Capital gain or loss will be long-term capital gain
or loss if your holding period for the debenture is more than one year at the
time of sale, exchange or redemption.

         Conversion of the Debentures. You will generally not recognize any
income, gain or loss upon conversion of a debenture into holding company common
stock except to the extent that the holding company common stock is considered
attributable to accrued interest not previously included in your taxable income
(which is taxable as ordinary income) or with respect to cash received in lieu
of a fractional share of holding company common stock. Your tax basis in the
holding company common stock received on conversion of a debenture will be the
same as your adjusted tax basis in the debenture at the time of conversion
(reduced by any basis allocable to a fractional share interest), and the holding
period of the holding company common stock will include the holding period of
the converted debenture. However, your tax basis in shares of holding company
common stock considered attributable to any accrued interest generally will
equal the amount of the accrued interest included in income, and the holding
period for such holding company common stock will begin on the date of
conversion. An adjustment of the conversion ratio of the debentures, in some
circumstances, could be treated as a constructive distribution, as discussed
under "Dividends" below.

         Cash you receive in lieu of a fractional share of holding company
common stock upon conversion will be treated as payment in exchange for the
fractional share of holding company common stock. Accordingly, cash you receive
in lieu of a fractional share of holding company common stock generally will
result in capital gain or loss (measured by the difference between the cash
received for the fractional share and your adjusted tax basis in the fractional
share).

         Dividends. Any dividends paid to you on the holding company common
stock after a conversion generally will be included in your taxable income as
ordinary income to the extent of our current or accumulated earnings and
profits. You may, in certain circumstances, be deemed to have received
constructive distributions if the conversion ratio of the debentures is
adjusted. Adjustments to the conversion ratio made pursuant to a bona fide
reasonable adjustment formula which has the effect of preventing the dilution of
your interest as a holder of the debenture will generally not be considered to
result in a constructive distribution. Certain of the possible adjustments
provided in the debentures (including, without limitation, adjustments in
respect to taxable dividends to our shareholders) will not qualify as being made
pursuant to a bona fide reasonable adjustment formula. If these adjustments are
made, you, as a debenture holder, might be deemed to have received constructive
distributions taxable as dividends even though you have not received any cash or
property as a result of the adjustments. In certain circumstances, the failure
of the debentures to provide for such an adjustment may result in taxable
dividend income to the holders of holding company common stock.

         Sale of Holding Company Common Stock. Upon the sale or exchange of
holding company common stock, you will generally recognize capital gain or loss
equal to the difference between:

                                      106
<PAGE>

         .  the amount of cash and the fair market value of any property you
            receive upon the sale or exchange; and

         .  your adjusted tax basis in the holding company common stock.

         Capital gain or loss will be long-term capital gain or loss if your
holding period in holding company common stock is more than one year at the time
of the sale or exchange. Your basis and holding period in holding company common
stock received upon conversion of a debenture are determined as discussed above
under "Conversion of the Debentures."

         Information Reporting and Backup Withholding Tax. In general,
information reporting requirements will apply to payments of principal,
redemption premium, if any, interest on a debenture, payments of dividends on
holding company common stock, payments of the proceeds of the sale of a
debenture and payments of the proceeds of the sale of holding company common
stock. A 31% backup withholding tax may apply to some or all of these payments
unless you:

         .  certify that you are a corporation, or come within certain other
            exempt categories of recipients when required to demonstrate this
            fact; or

         .  provide a taxpayer identification number on IRS Form W-9 promptly
            when requested, certify as to no loss of exemption from backup
            withholding; and

         .  otherwise comply with applicable requirements of the backup
            withholding rules.

         Any amounts withheld under the backup withholding rules from your
payment will be allowed as a credit against your U.S. federal income tax and may
entitle you to a refund, provided that you furnish required information to the
IRS.

         The preceding discussion of material U.S. federal income tax
consequences is for general information only and is not tax advice. Accordingly,
you should consult your own tax advisor as to the particular U.S. federal,
state, and local tax consequences of purchasing, holding and disposing of our
debentures and holding company common stock. You should also consult a tax
advisor as to the united states estate and gift tax consequences and the foreign
tax consequences of purchasing, holding and disposing of our debentures and
holding company common stock, as well as the consequences of any proposed change
in applicable laws.

                                      107
<PAGE>

                             INDEPENDENT AUDITORS

         Fisk & Robinson, P.C., Certified Public Accountants, of Dallas, Texas,
served as the bank's independent auditors for the 1999 fiscal year. In addition
to performing customary audit services, Fisk & Robinson, P.C. assisted the bank
with the preparation of its federal and state tax returns and assisted with
various regulatory matters, charging the bank at its customary hourly billing
rates. The Bank's board of directors approved these nonaudit services after due
consideration of the auditors' objectivity and after finding them to be wholly
independent. Fisk & Robinson, P.C. has advised the bank that none of its members
has any financial interest in the bank. Fisk & Robinson, P.C. has been engaged
as the bank's independent' auditor for the fiscal year ending December 31, 2000.
If the proposed reorganization is approved and implemented, it is anticipated
that the holding company will also select Fisk & Robinson, P.C. as its auditor.

                             SHAREHOLDER PROPOSALS

         In the event the proposed reorganization is approved and the holding
company becomes the one-bank holding company for the bank, any shareholder who,
in accordance with the proxy rules of the Commission, desires to submit a
proposal for inclusion in the holding company's proxy statement for its 2001
annual meeting of shareholders must deliver the proposal in writing to Patrick
Adams, Secretary, at the holding company's principal executive offices, 5006
Verde Valley, Dallas, Texas 75240, no later than May __ 2001.

                             PLAN OF DISTRIBUTION

         This Prospectus covers the offer and sale of up to 505,750 shares of
the holding company's common stock in the reorganization and $2,500,000
aggregate principal amount of the holding company's debentures.

         All expenses of this offering will be paid by the holding company. The
offering will be made by officers and directors of the holding company who will
not receive any separate compensation but who will be reimbursed for out of
pocket expenses. No underwriting discounts or commissions will be paid in
connection with the issuance of shares of the holding company's common stock or
debentures.

                                 LEGAL MATTERS

         The validity of the shares of common stock and convertible debt
securities offered hereby will be passed upon for the holding company by Haynie,
Rake & Repass, P.C., Dallas, Texas.

                                    EXPERTS

         The financial statements of Eagle National Bank at December 31, 1998
and 1999 and for the period from inception, February 28, 1997, through December
31, 1997, as detailed in the index on page F-1, included in this document, have
been audited by Fisk & Robinson, P.C., independent accountants, as indicated in
their report with respect to these financial statements and are included in this
document in reliance upon such report given upon the authority of this firm as
experts in accounting and auditing.

                      WHERE YOU CAN FIND MORE INFORMATION

The Holding Company's Registration Statement

         The holding company has filed with the Securities and Exchange
Commission in Washington, D.C., a registration statement under the Securities
Act for its common stock to be issued in the proposed reorganization and for its
debentures being offered hereby. This document is a part of the registration
statement.

         This document does not contain all of the information, exhibits and
undertakings contained in the registration statement, which is on file with the
Commission in Washington, D.C. The registration statement and exhibits may be
examined during normal business hours, or copies obtained by mail at prescribed
rates, at the Commission's public reference room located at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the public reference room by calling the
Commission at 1-800-SEC-0330. The registration statement may also be examined at
the Commission's regional offices:

                                      108
<PAGE>

         .  7 World Trade Center, Suite 1300, New York, New York 10048
            (telephone: 212-748-8000); and

         .  Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
            Illinois 60661.

         The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of the Commission's Web site is
http://www.sec.gov. The registration statement may be accessed from this Web
site.

Periodic Reports and Information Filed with the Commission Following the
Reorganization

         Following the reorganization, the holding company will be subject to
the information reporting requirements pursuant to Section 15(d) of the Exchange
Act, and will file periodic reports and other information with the Commission.
The financial information filed with the Commission will be consolidated with
the bank's financial information. You may inspect and copy such reports, proxy
statements and other information at the Commission's public reference facilities
described above. You may also obtain these documents at the Commission's Web
site at http://www.sec.gov. In addition, the holding company will provide
consolidated annual financial reports to shareholders.

         The holding company's obligation to file periodic reports and other
information under Section 15(d) of the Exchange Act will be suspended
automatically upon the beginning of its first fiscal year in which it has less
than 300 holders of holding company common stock. Therefore, the holding company
anticipates that its reporting obligations will be suspended as of the beginning
of its next fiscal year.

                               By Order of the Board of  Directors

                                       /s/ Harold Campbell
                               -------------------------------------------------
                               Chairman of the Board of Directors of the Bank/
                               President of the Holding Company

Dallas, Texas

August __, 2000

         It is important to us that you return your proxy promptly. If you do
not expect to attend the annual meeting and wish your stock to be voted, then
you shall date, sign and return the accompanying proxy in the enclosed self-
addressed envelope. No postage is required if mailed in the United States.

                                      109
<PAGE>

                              EAGLE NATIONAL BANK

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                              Page
                                                                                                              ----
<S>                                                                                                           <C>
Unaudited Interim Balance Sheets as of June 30, 2000 and December 31, 1999                                     F-2

Unaudited Interim Statements of Operations for the Three and Six Months
  Ended June 30, 2000 and 1999                                                                                 F-3

Unaudited Interim Statements of Changes in Stockholders' Equity for the Six
  Months Ended June 30, 2000 and 1999                                                                          F-4

Unaudited Interim Statements of Cash Flows for the Six Months Ended June 30, 2000 and 1999                     F-5

Notes to Unaudited Interim Financial Statements                                                                F-6

Report of Independent Auditors                                                                                F-14

Balance Sheets as of December 31, 1999 and 1998                                                               F-15

Statements of Operations for the Years Ended December 31, 1999 and 1998 and the
  Period from February 28, 1997 (Inception) to December 31, 1997                                              F-16

Statements of Changes in  Stockholders' Equity for the Years Ended December 31, 1999 and
  1998 and the Period from February 28, 1997 (Inception) to December 31, 1997                                 F-17

Statements of Cash Flows for the Years Ended  December 31, 1999 and 1998 and the
  Period from February 28, 1997 (Inception) to December 31, 1997                                              F-18

Notes to Financial Statements                                                                                 F-19
</TABLE>

                                      F-1
<PAGE>

                              EAGLE NATIONAL BANK

                            Interim Balance Sheets

                      June 30, 2000 and December 31, 1999

               (Dollars in Thousands, Except Per Share Amounts)

                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                   June 30, 2000            December 31, 1999
                                                                                   -------------            -----------------
<S>                                                                                <C>                      <C>
ASSETS
------

Cash and due from banks                                                            $     4,346              $      2,217

Federal funds sold                                                                      11,200                     1,800
                                                                                   -----------              ------------

      Total cash and cash equivalents                                                   15,546                     4,017

Securities available for sale                                                              369                       353

Securities held to maturity                                                                499                       498

Loans, net                                                                              40,276                    37,260

Bank premises and equipment, net                                                         2,756                     2,479

Other                                                                                      893                       708
                                                                                   -----------              ------------

                                                                                   $    60,339              $     45,315
                                                                                   ===========              ============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Deposits:
  Noninterest-bearing                                                              $     9,154              $      9,871
  Interest-bearing                                                                      44,900                    29,632
                                                                                   -----------              ------------

      Total deposits                                                                    54,054                    39,503

Other liabilities                                                                          373                        97

Commitments and contingencies                                                                -                         -

Stockholders' equity:
  Common stock, $5 par value; 1,000,000 shares authorized;
    574,750 shares issued and outstanding                                                2,874                     2,874
  Paid-in capital                                                                        2,871                     2,871
  Retained earnings (accumulated deficit)                                                  167                       (30)
                                                                                   -----------              ------------

      Total stockholders' equity                                                         5,912                     5,715
                                                                                   -----------              ------------

                                                                                   $    60,339              $     45,315
                                                                                   ===========              ============
</TABLE>

               See accompanying notes to financial statements.

                                      F-2
<PAGE>

                              EAGLE NATIONAL BANK

                       Interim Statements of Operations

           For the Three and Six Months Ended June 30, 2000 and 1999

               (Dollars in Thousands, Except Per Share Amounts)

                                  (Unaudited)

<TABLE>
<CAPTION>
                                                      Three Months Ended June 30,            Six Months Ended June 30,
                                                    -------------------------------       -------------------------------
                                                       2000                 1999             2000                 1999
                                                       ----                 ----             ----                 ----
<S>                                                 <C>                  <C>              <C>                  <C>
Interest income:
  Loans, including fees                             $    1,185           $      868       $    2,274           $    1,732
  Securities                                                16                    6               29                   10
  Federal funds sold                                       165                   69              248                  134
                                                    ----------           ----------       ----------           ----------

      Total interest income                              1,366                  943            2,551                1,876

Interest expense on deposit accounts                       569                  385            1,035                  774
                                                    ----------           ----------       ----------           ----------

Net interest income                                        797                  558            1,516                1,102

Provision for loan losses                                   45                   10               90                   48
                                                    ----------           ----------       ----------           ----------

Net interest income after provision                        752                  548            1,426                1,054
                                                    ----------           ----------       ----------           ----------

Noninterest income:
  Service charges on deposit accounts                       55                   41              109                   71
  Other                                                     12                    9               25                   17
                                                    ----------           ----------       ----------           ----------

      Total noninterest income                              67                   50              134                   88
                                                    ----------           ----------       ----------           ----------

Noninterest expense:
  Salaries and employee benefits                           342                  232              640                  467
  Occupancy expense                                         92                   48              171                   95
  Professional services                                     40                   18               58                   26
  Other                                                    202                  135              380                  261
                                                    ----------           ----------       ----------           ----------

      Total noninterest expense                            676                  433            1,249                  849
                                                    ----------           ----------       ----------           ----------

Income before income taxes                                 143                  165              311                  293

Income tax expense                                          55                   39              114                   39
                                                    ----------           ----------       ----------           ----------

Net income                                          $       88           $      126       $      197           $      254
                                                    ==========           ==========       ==========           ==========

Earnings Per Share:
  Basic                                             $     0.15           $     0.22       $     0.34           $     0.44
                                                    ==========           ==========       ==========           ==========

  Diluted                                           $     0.15           $     0.22       $     0.34           $     0.44
                                                    ==========           ==========       ==========           ==========
</TABLE>

               See accompanying notes to financial statements.

                                      F-3
<PAGE>

                              EAGLE NATIONAL BANK

             Interim Statements of Changes in Stockholders' Equity

                For the Six Months Ended June 30, 2000 and 1999

                            (Dollars in Thousands)

                                  (Unaudited)

<TABLE>
<CAPTION>

                                                                                                 Retained
                                                                                                 Earnings
                                              Common Stock                    Paid-In          (Accumulated
                                       Shares              Amount             Capital            Deficit)             Total
                                       ------              ------             -------            --------             -----
<S>                                   <C>             <C>                <C>                 <C>                <C>
Balance at January 1, 1999               574,750      $       2,874      $        2,871      $         (559)   $         5,186

Net income                                     -                  -                   -                 254                254
                                      -----------         ----------         -----------         -----------         ----------

Balance at June 30, 1999                 574,750      $       2,874      $        2,871      $         (305)    $        5,440
                                      ===========         ==========         ===========         ===========         ==========

Balance at January 1, 2000               574,750      $       2,874      $        2,871      $          (30)    $        5,715

Net income                                     -                  -                   -                 197                197
                                      -----------         ----------         -----------         -----------         ----------

Balance at June 30, 2000                 574,750      $       2,874      $        2,871      $          167      $       5,912
                                      ===========         ==========         ===========         ===========         ==========
</TABLE>





                See accompanying notes to financial statements.

                                      F-4
<PAGE>


                              EAGLE NATIONAL BANK

                       Interim Statements of Cash Flows

                For the Six Months Ended June 30, 2000 and 1999

                            (Dollars in Thousands)

                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                           Six Months Ended June 30,
                                                                           -------------------------
                                                                        2000                      1999
                                                                        ----                      ----
<S>                                                            <C>                       <C>
Cash flows from operating activities:
  Net income                                                   $              197        $              254
  Adjustments to reconcile net loss to net cash from
    operating activities:
      Depreciation and amortization                                            43                        42
      Provision for loan losses                                                90                        48
      Net change in other assets                                             (202)                       77
      Net change in other liabilities                                         276                        64
                                                                   ---------------            --------------

            Net cash from operating activities                                404                       485
                                                                   ---------------            --------------
Cash flows from investing activities:
  Purchases of securities available for sale                                    -                      (97)
  Net change in loans                                                      (3,106)                    (548)
  Net capital expenditures                                                   (320)                    (697)
                                                                   ---------------            --------------

          Net cash from investing activities                               (3,426)                  (1,342)
                                                                   ---------------            --------------
Cash flows from financing activities:
  Net change in demand deposits, NOW and savings account                    3,812                     1,308
  Net change in certificates of deposit                                    10,739                      (233)
                                                                   ---------------            --------------

          Net cash from financing activities                               14,551                     1,075
                                                                   ---------------            --------------

Net change in cash and cash equivalents                                    11,529                       218

Cash and cash equivalents at beginning of period                            4,017                     8,094
                                                                   ---------------            --------------

Cash and cash equivalents at end of period                     $           15,546        $            8,312
                                                                   ===============            ==============
</TABLE>




                See accompanying notes to financial statements.

                                      F-5
<PAGE>

                               EAGLE NATIONAL BANK

                      Notes to Interim Financial Statements

               (Dollars in Thousands, Except Per Share Amounts)

                                   (Unaudited)

1.      Summary of Significant Accounting Policies
        ------------------------------------------

These interim financial statements are prepared without audit and reflect all
adjustments that, in the opinion of management, are necessary to present fairly
the financial position of Eagle National Bank (Bank) at June 30, 2000, and its
results of operations and cash flows for the periods presented. All such
adjustments are normal and recurring in nature. The accompanying financial
statements have been prepared in accordance with the instructions of Form 10-
QSB, as established by the Securities and Exchange Commission (SEC).
Accordingly, these financial statements do not purport to contain all necessary
financial disclosures required by generally accepted accounting principles that
might otherwise be necessary in the circumstances, and should be read in
conjunction with financial statements, and notes thereto, of the Bank for the
year ended December 31, 1999, included elsewhere in this registration statement.
The accounting policies of the Bank conform to generally accepted accounting
principles and practices generally followed within the banking industry. Refer
to the accounting policies of the Bank described in the notes to financial
statements contained in the 1999 financial statements. The Bank has consistently
followed these policies in preparing these interim financial statements.

The Bank provides a full range of banking services to individual and corporate
customers and is subject to competition from other financial institutions. The
Bank is subject to the regulations of certain federal agencies and periodic
examinations by those regulatory authorities.

To prepare financial statements in conformity with generally accepted accounting
principles, management makes estimates and assumptions based on available
information. These estimates and assumptions affect the amounts reported in the
financial statements and the disclosures provided, and actual future results
could differ. The allowance for loan losses, fair values of financial
instruments, and status of contingencies are particularly subject to change.

Beginning January 1, 2001, a new accounting standard, Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," will require all derivatives to be recorded at fair
value. Unless designated as hedges, changes in these fair values will be
recorded in the income statement. Fair value changes involving hedges will
generally be recorded by offsetting gains and losses on the hedge and on the
hedged item, even if the fair value of the hedged item is not otherwise
recorded. This standard is not expected to have a material effect but the effect
will depend on derivative holdings when this standard applies.

Some items in prior financial statements have been reclassified to conform to
the current presentation.

                                      F-6
<PAGE>

                              EAGLE NATIONAL BANK

2.   Statements of Cash Flows
     ------------------------

The Bank has chosen to report on a net basis its cash receipts and cash payments
for time deposits accepted and repayments of those deposits and loans made to
customers and principal collections on those loans.

The Bank has chosen to report its cash flows by the indirect method. Other
supplemental cash flow information is presented below:

                                                     2000              1999
                                                     ----              ----

     Cash paid for:

       Interest                                    $           930    $     796
                                                  =================   ==========

       Income taxes                                $          -       $      -
                                                  =================   ==========


3.   Earnings Per Share
     ------------------

Earnings per share is computed in accordance with SFAS No. 128, "Earnings Per
Share," which requires dual presentation of basic and diluted earnings per share
("EPS") for entities with complex capital structures. Basic EPS is based on net
income divided by the weighted-average number of shares outstanding during the
period. Diluted EPS includes the dilutive effect of stock options granted using
the treasury stock method.

Earnings per common share is computed by dividing net income by the weighted-
average number of shares outstanding for the year. The weighted-average number
of common shares outstanding for basic and diluted earnings per share
computations were as follows:

<TABLE>
<CAPTION>
                                                Three Months Ended June 30,          Six Months Ended June 30,
                                                ---------------------------          -------------------------
                                                   2000             1999                 2000          1999
                                                   ----             ----                 ----          ----
    <S>                                        <C>                 <C>                <C>            <C>
     Weighted-average shares                    574,750            574,750              574,750      574,750
       outstanding - Basic
     Effect of stock options                      3,300               -                   3,300          -
                                             ------------      ------------         ------------  -----------
     Weighted-average shares
       outstanding - Diluted                    578,050            574,750              578,050      574,750
                                             ============      ============         ============  ===========
</TABLE>

                                      F-7
<PAGE>

                               EAGLE NATIONAL BANK

4.   Securities
     ----------

Debt and equity securities have been classified in the accompanying balance
sheet according to management's holding intent. The amortized cost of securities
and their estimated fair values at June 30, 2000 and December 31, 1999 are as
follows:

<TABLE>
<CAPTION>
                                                                     Gross                  Gross               Estimated
                                            Amortized              Unrealized             Unrealized               Fair
                                               Cost                  Gains                  Losses                Value
                                           -------------          -------------          -------------         -------------
<S>                                     <C>                    <C>                   <C>                   <C>
     Securities Available for Sale
     -----------------------------

     June 30, 2000:
       Equity securities                $         369           $       -              $       -             $        369
                                           =============          =============          =============         =============


     December 31, 1999:
       Equity securities                $         353           $       -              $       -             $        353
                                           =============          =============          =============         =============


     Securities Held to Maturity
     ---------------------------

     June 30, 2000:
       U.S. government agency
         obligations                    $         499           $       -              $       -             $        499
                                           =============          =============          =============         =============


     December 31, 1999:
       U.S. government agency
         obligations                    $         498           $       -              $           2         $        496
                                           =============          =============          =============         =============
</TABLE>

There were no sales of securities  during the six months ended June 30, 2000 and
1999. There were no securities pledged at June 30, 2000 or December 31, 1999.

                                      F-8
<PAGE>

                              EAGLE NATIONAL BANK

The amortized cost and estimated fair values of securities at June 30, 2000, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties. Equity securities are
shown separately since they do not have stated maturity dates.


<TABLE>
<CAPTION>
                                             Securities Available for Sale                 Securities Held to Maturity
                                           Amortized             Estimated              Amortized              Estimated
                                              Cost               Fair Value                Cost                Fair Value
                                          -------------       -------------            -------------          -------------
<S>                                    <C>                   <C>                    <C>                    <C>

     Due in one to five years          $       -             $       -              $           499        $           499

     Equity securities                             369                   369                -                      -
                                          -------------         -------------          -------------          -------------

                                       $           369       $           369        $           499        $           499
                                          =============         =============          =============          =============
</TABLE>

5.   Loans and Allowance for Loan Losses
     -----------------------------------

Loans at June 30, 2000 and December 31, 1999 consisted of the following:

<TABLE>
<CAPTION>
                                                                                June 30, 2000             December 31, 1999
                                                                                -------------             -----------------
<S>                                                                        <C>                            <C>
     Commercial                                                            $           10,327             $          11,266
     Real estate                                                                        6,981                         7,981
     Interim construction                                                              19,452                        15,896
     Installment                                                                        4,239                         2,740
                                                                               -----------------           -----------------

           Gross loans                                                                 40,999                        37,883

     Deferred loan fees                                                                  (204)                         (192)
     Allowance for loan losses                                                           (519)                         (431)
                                                                              -----------------            -----------------

                                                                           $             40,276        $             37,260
                                                                               =================           =================
</TABLE>

                                      F-9

<PAGE>

                              EAGLE NATIONAL BANK

An analysis of the  allowance for loan losses for the three and six months ended
June 30, 2000 and 1999 is as follows:

<TABLE>
<CAPTION>
                                                   Three Months Ended June 30,            Six Months Ended June 30,
                                                   ---------------------------            -------------------------
                                                     2000               1999                2000              1999
                                                     ----               ----                ----              ----
<S>                                                <C>                <C>                  <C>              <C>
     Balance at the beginning of the
       period                                      $   474            $  432               $   431           $  405
     Provision charged to earnings                      45                10                    90               48
     Loans charged to the allowance                      -                 -                    (2)             (11)
     Recoveries on loans previously
       charged-off                                                         -                     -                -
                                                   -------            ------               -------           ------
     Balance at the end of the period              $   519            $  442               $   519           $  442
                                                   =======            ======               =======           ======
</TABLE>

There were no impaired loans during the six months ended June 30, 2000 and 1999
that were required to be recognized in conformity with SFAS No. 114 "Accounting
by Creditors For Impairment of a Loan".

The Bank extends consumer and commercial credit primarily to customers in the
State of Texas. At June 30, 2000 and December 31, 1999, substantially all of the
Bank's loans were collateralized with real estate, inventory, accounts
receivable, equipment, marketable securities, or other assets.

The Bank is not committed to lend additional funds to debtors whose loans have
been modified.

6.  Deposits
    --------

Deposits at June 30, 2000 and December 31, 1999 are summarized as follows:

<TABLE>
<CAPTION>
                                                                   June 30, 2000                         December 31, 1999
                                                            -----------------------------           ----------------------------
                                                             Amount            Percent                Amount          Percent
                                                             ------            -------                ------          -------
<S>                                                         <C>                 <C>                  <C>              <C>
     Noninterest-bearing demand deposits                    $   9,154           16.9%                $  9,871           25.0%
     Interest-bearing demand deposits                           1,115            2.1                    1,191            3.0
     Limited access money market accounts                      11,835           21.9                    7,448           18.9
     Savings accounts                                             463            0.8                      245            0.6
     Certificates of deposit:
     Certificates of deposit, less than $100,000               18,331           34.0                   12,400           31.4
     Certificates of deposit, $100,000 and greater             13,156           24.3                    8,348           21.1
                                                            ----------         ------                ---------        -------
                                                            $  54,054          100.0%                $ 39,503          100.0%
                                                            ==========         ======                =========        =======
</TABLE>

                                     F-10
<PAGE>

                              EAGLE NATIONAL BANK

7.   Other Noninterest Expense
     -------------------------

Other noninterest expenses consisted of the following:

<TABLE>
<CAPTION>
                                                   Three Months Ended June 30,                Six Months Ended June 30,
                                                   ---------------------------                -------------------------
                                                       2000           1999                        2000          1999
                                                       ----           ----                        ----          ----
     <S>                                           <C>             <C>                        <C>            <C>
     Supplies                                      $        16     $         8                $        32    $       17
     Telephone                                              13               8                         22            15
     Data processing                                        42              26                         76            50
     Advertising                                            30              26                         52            38
     Directors fees                                         18              19                         36            38
     Franchise taxes                                        17               7                         31            11
     Other                                                  66              41                        131            92
                                                   -----------     ------------               -----------    -----------
         Total other noninterest expense           $       202     $       135                $       380    $      261
                                                   ===========     ============               ===========    ===========
</TABLE>

8.   Financial Instruments With Off-Balance Sheet Risk
     -------------------------------------------------

The Bank is party to financial  instruments with  off-balance-sheet  risk in the
normal course of business to meet the financing  needs of its  customers.  These
financial  instruments  include commitments to extend credit and standby letters
of credit. Those instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the balance sheet.

The Bank's exposure to credit loss in the event of  nonperformance  by the other
party to the financial  instrument for  commitments to extend credit and standby
letters of credit is represented by the contractual amount of these instruments.
The Bank uses the same credit  policies in making  commitments  and  conditional
obligations as it does for  on-balance-sheet  instruments.  At June 30, 2000 and
December 31, 1999, the amounts of these financial instruments were as
follows:

<TABLE>
<CAPTION>
                                                                                June 30, 2000             December 31, 1999
                                                                                -------------             -----------------
     <S>                                                                        <C>                        <C>
     Financial instruments whose contract amounts represent credit risk:
         Commitments to extend credit                                          $      15,257               $         14,287
         Standby letters of credit                                                        60                             10
                                                                               --------------              ----------------
                                                                               $      15,317               $         14,297
                                                                               ==============              ================
</TABLE>

                                     F-11
<PAGE>

                              EAGLE NATIONAL BANK

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  payment of a fee. Since many of the  commitments are expected to expire
without  being  drawn  upon,  the total  commitment  amounts do not  necessarily
represent future cash  requirements.  The Bank evaluates each customer's  credit
worthiness on a case-by-case  basis. The amount of collateral obtained if deemed
necessary by the Bank upon extension of credit is based on  management's  credit
evaluation of the counterparty.  Collateral held varies but may include accounts
receivable,  inventory,  property,  plant  and  equipment  and  income-producing
commercial properties.

Standby  letters of credit  are  conditional  commitments  issued by the Bank to
guarantee  the  performance  of a customer  to a third  party.  The credit  risk
involved in issuing  letters of credit is essentially  the same as that involved
in extending loan facilities to customers.

The Bank does not anticipate any material  losses as a result of the commitments
and contingent liabilities.

9.  Subsequent Event
    ----------------

On May 31, 2000, the Bank entered into a "Stock Transfer and Branch Sale
Agreement" (the "Agreement") with ENB Bankshares, Inc. and certain Directors of
the Bank. The Directors, Randy L. Pack, Jon Roy Reid, John M. Yeaman and Thomas
R. Youngblood (collectively referred to as the "Selling Directors"), may be
joined by other shareholders who sign a counterpart of the Agreement. ENB
Bankshares, Inc. is a Texas corporation located in Dallas, Texas formed for the
purpose of becoming a registered bank holding company through the acquisition of
100% of the voting common stock of the Bank.

The Agreement provides for the following two transactions:

   .   The sale of Bank stock owned by the Selling Directors and other
       shareholders who sign a counterpart of the Agreement to ENB Bankshares
       for $15.00 per share cash. The Selling Directors collectively own 69,000
       shares of Bank stock. The Selling Directors are also aware of other
       shareholders (the "Selling Shareholders") of the Bank who may desire to
       sell their shares of Bank stock to ENB Bankshares.

   .   The sale by the Bank of its Park Cities branch to a new bank established
       by the Selling Directors in a purchase and assumption transaction in
       which the new bank will pay a purchase premium of $500,000 plus the
       organization expenses and operating losses associated with the Park
       Cities branch. The Bank began operations of the Park Cities branch on
       March 27, 2000. The Park Cities branch is a full-service branch facility
       located at 6829 Hillcrest, Dallas, Texas 75205.

                                      F-12
<PAGE>

                              EAGLE NATIONAL BANK

ENB  Bankshares  and the  Bank  have  entered  into  an  Agreement  and  Plan of
Reorganization (the  "Reorganization  Plan"). As a result of the reorganization,
the Bank will become a wholly-owned subsidiary of ENB Bankshares.  The Bank will
continue  to  operate  from  its  current  location.  However,  pursuant  to the
Agreement,  the Bank will no longer own the Park  Cities  branch and the Selling
Directors will no longer be directors or employees of the Bank.

The  Reorganization  Plan provides that each shareholder of the Bank (other than
the Selling Directors and other  shareholders who have signed the Agreement) may
choose to  receive  one share of ENB  Bankshares  stock or $15.00  cash for each
share of Bank stock they own. The Selling Directors have agreed to cause the new
bank  to  provide   Bank   shareholders   who  elect  to  receive  cash  in  the
reorganization  the right to subscribe  for shares of stock of the new bank that
will own the Park Cities branch at the initial offering price.

To provide the funds for the cash portion of the transaction,  ENB Bankshares is
offering for sale up to $2,500,000 of 9.5% fixed-rate debentures. The debentures
are payable in five equal installments, each being 20% of the original principal
amount of the debentures.  The proposed payments will begin on December 31, 2006
and continue until December 31, 2010.  The  debentures are  convertible,  at any
time at the option of the owner  until  December  31,  2006,  into shares of ENB
Bankshares  bank stock at $15.00 per share.  In the event that ENB Bankshares is
unable to sell enough  debentures to provide the entire cash requirements of the
transaction,  ENB Bankshares has obtained a loan commitment  letter from another
financial  institution  providing for a loan of $1,650,000.  The loan is payable
over 10 years and will bear interest at floating Wall Street Journal prime rate.
The loan will be secured by a security  interest  in all of the Bank stock owned
by ENB Bankshares.

ENB Bankshares will not incur indebtedness  (either in the form of debentures or
the loan) of more than $2,500,000.  If the cash  requirements of the transaction
are more than $2,500,000 the holding company will

      .  first, request permission from the Federal Reserve Bank of Dallas to
         increase the maximum amount of indebtedness,

      .  second, request that all debenture holders convert debentures into
         holding company stock in an amount sufficient to enable the holding
         company to satisfy its debt commitment, and

      .  third, seek additional equity from investors in a private offering.


The Agreement and Reorganization Plan are subject to regulatory and shareholder
approval. Assuming the appropriate aprovals are received, the Bank expects to
complete the stock transfer, the breach sale and the reorganization at the same
time in the fourth quarter of 2000

                                     F-13
<PAGE>

                         Independent Auditors' Report
                         ----------------------------

The Board of Directors
Eagle National Bank

We have audited the accompanying balance sheets of Eagle National Bank as of
December 31, 1999 and 1998 and the related statements of operations, changes in
stockholders' equity and cash flows for the years ended December 31, 1999 and
1998 and the period from February 28, 1997 (Inception) through December 31,
1997. These financial statements are the responsibility of the Bank's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Eagle National Bank as of
December 31, 1999 and 1998, and the results of its operations and cash flows for
the years ended December 31, 1999 and 1998 and the period from February 28, 1997
(Inception) through December 31, 1997 in conformity with generally accepted
accounting principles.

                                                     Fisk & Robinson, P.C.

Dallas, Texas
January 14, 2000
(Except for Note 18 for which
  the date is May 31, 2000)
<PAGE>

                              EAGLE NATIONAL BANK

                                Balance Sheets

                          December 31, 1999 and 1998

               (Dollars in Thousands, Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                                                        1999                      1998
                                                                                        ----                      ----
<S>                                                                                <C>                        <C>
ASSETS
------

Cash and due from banks                                                            $        2,217             $       1,554

Federal funds sold                                                                          1,800                     6,540
                                                                                   --------------             -------------

      Total cash and cash equivalents                                                       4,017                     8,094

Securities available for sale                                                                 353                       256

Securities held to maturity                                                                   498                         -

Loans, net                                                                                 37,260                    33,718

Bank premises and equipment, net                                                            2,479                     1,784

Other                                                                                         708                       814
                                                                                   --------------             -------------

                                                                                   $       45,315             $      44,666
                                                                                   ==============             =============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Deposits:
  Noninterest-bearing                                                              $        9,871             $       7,232
  Interest-bearing                                                                         29,632                    32,083
                                                                                   --------------             -------------

      Total deposits                                                                       39,503                    39,315

Other liabilities                                                                              97                       165

Commitments and contingencies                                                                   -                         -

Stockholders' equity:
  Common stock, $5 par value; 1,000,000 shares authorized;
    574,750 shares issued and outstanding                                                   2,874                     2,874
  Paid-in capital                                                                           2,871                     2,871
  Accumulated deficit                                                                         (30)                     (559)
                                                                                   --------------             -------------

      Total stockholders' equity                                                            5,715                     5,186
                                                                                   --------------             -------------

                                                                                   $       45,315             $      44,666
                                                                                   ==============             =============
</TABLE>

                See accompanying notes to financial statements.

                                      F-15
<PAGE>

                              EAGLE NATIONAL BANK

                           Statements of Operations

         For the Years Ended December 31, 1999 and 1998 and the Period
         From February 28, 1997 (Inception) through December 31, 1997

               (Dollars in Thousands, Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                                  Years Ended December 31,                   Period Ended
                                                            --------------------------------------
                                                                1999                     1998              December 31, 1997
                                                                ----                     ----              -----------------
<S>                                                         <C>                      <C>                   <C>
Interest income:
  Loans, including fees                                     $      3,576             $      2,936             $        798
  Securities                                                          28                       19                       53
  Federal funds sold                                                 291                      209                      235
                                                            -------------            -------------            -------------

      Total interest income                                        3,895                    3,164                    1,086

Interest expense on deposit accounts                               1,523                    1,280                      417
                                                            -------------            -------------            -------------

Net interest income                                                2,372                    1,884                      669

Provision for loan losses                                             98                      180                      225
                                                            -------------            -------------            -------------

Net interest income after provision                                2,274                    1,704                      444
                                                            -------------            -------------            -------------

Noninterest income:
  Service charges on deposit accounts                                190                       95                       29
  Other                                                               38                       26                        8
                                                            -------------            -------------            -------------

      Total noninterest income                                       228                      121                       37
                                                            -------------            -------------            -------------

Noninterest expense:
  Salaries and employee benefits                                     988                      815                      527
  Occupancy expense                                                  212                      195                      127
  Professional services                                               48                       47                       26
  Other                                                              561                      455                      369
                                                            -------------            -------------            -------------

      Total noninterest expense                                    1,809                    1,512                    1,049
                                                            -------------            -------------            -------------

Income (loss) before income taxes                                    693                      313                     (568)

Income tax expense (benefit)                                         164                     (164)                       -
                                                            -------------            -------------            -------------

Net income (loss)                                           $        529             $        477             $       (568)
                                                            =============            =============            =============

Earnings per share:
  Basic                                                     $       0.92             $       0.83             $      (0.99)
                                                            =============            =============            =============

  Diluted                                                   $       0.92             $       0.83             $      (0.99)
                                                            =============            =============            =============
</TABLE>

                See accompanying notes to financial statements.

                                      F-16
<PAGE>

                              EAGLE NATIONAL BANK

                 Statements of Changes in Stockholders' Equity

         For the Years Ended December 31, 1999 and 1998 and the Period
         From February 28, 1997 (Inception) through December 31, 1997

                            (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                     Common Stock                  Paid-In          Accumulated
                                               Shares             Amount           Capital            Deficit            Total
                                               ------             ------           -------            -------            -----
<S>                                           <C>                <C>               <C>                 <C>              <C>
Balance at February 28, 1997
  (Inception)                                 574,750            $   2,874         $  2,871            $   (468)        $  5,277

Net loss                                            -                    -                -                (568)            (568)
                                           -----------           ----------        ---------           ---------        ---------

Balance at December 31, 1997                  574,750                2,874            2,871              (1,036)           4,709

Net income                                          -                    -                -                 477              477
                                           -----------           ----------        ---------           ---------        ---------

Balance at December 31, 1998                  574,750                2,874            2,871                (559)           5,186

Net income                                          -                    -                -                 529              529
                                           -----------           ----------        ---------           ---------        ---------

Balance at December 31, 1999                  574,750            $   2,874         $  2,871            $    (30)        $  5,715
                                           ===========           ==========        =========           =========        =========
</TABLE>

                See accompanying notes to financial statements.

                                      F-17
<PAGE>

                              EAGLE NATIONAL BANK

                           Statements of Cash Flows

         For the Years Ended December 31, 1999 and 1998 and the Period
         From February 28, 1997 (Inception) through December 31, 1997

                            (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                  Years Ended December 31,
                                                            --------------------------------------           Period Ended
                                                                1999                     1998              December 31, 1997
                                                                ----                     ----              -----------------
<S>                                                         <C>                      <C>                   <C>
Cash flows from operating activities:
  Net income                                                $        529             $        477             $       (568)
  Adjustments to reconcile net loss to net cash
    from operating activities:
      Depreciation and amortization                                   92                       80                       33
      Net accretion of discounts on securities                        -                        -                       (20)
      Provision for loan losses                                       98                      180                      225
      Net change in other assets                                     106                     (511)                      55
      Net change in other liabilities                                (68)                      77                     (742)
                                                            ------------             ------------             ------------

            Net cash from operating activities                       757                      303                   (1,017)
                                                            ------------             ------------             ------------

Cash flows from investing activities:
  Purchases of securities available for sale                         (97)                     (83)                    (173)
  Purchases of securities held to maturity                          (498)                      -                      (980)
  Maturities of securities held to maturity                           -                       500                      500
  Net change in loans                                             (3,640)                 (15,236)                 (18,991)
  Net capital expenditures                                          (787)                    (135)                  (1,659)
                                                            ------------             ------------             ------------

          Net cash from investing activities                      (5,022)                 (14,954)                 (21,303)
                                                            ------------             ------------             ------------

Cash flows from financing activities:
  Net change in demand deposits, NOW and
    savings accounts                                               2,472                    6,269                   10,014
  Net change in certificates of deposit                           (2,284)                  10,070                   12,962
                                                            ------------             ------------             ------------

          Net cash from financing activities                         188                   16,339                   22,976
                                                            ------------             ------------             ------------

Net change in cash and cash equivalents                           (4,077)                   1,688                      656

Cash and cash equivalents at beginning of period                   8,094                    6,406                    5,750
                                                            ------------             ------------             ------------

Cash and cash equivalents at end of period                  $      4,017             $      8,094             $      6,406
                                                            ============             ============             ============
</TABLE>

               See accompanying  notes to financial statements.

                                      F-18
<PAGE>

                              EAGLE NATIONAL BANK

                         Notes to Financial Statements

                 As of and for the Years  Ended  December  31,
                1999 and 1998 and the Period from February 28,
                  1997 (Inception) Through December 31, 1997

               (Dollars in Thousands, Except Per Share Amounts)

1.   Summary of Significant Accounting Policies
     ------------------------------------------

Basis of Presentation
---------------------

The accounting policies of Eagle National Bank (Bank) conform to generally
accepted accounting principles and practices generally followed within the
banking industry. The following are descriptions of the more significant of
these policies.

The Bank commenced operations on February 28, 1997. The excess of expenses
incurred over income earned prior to February 28, 1997, of $468 were recorded as
accumulated deficit. Such pre-opening expenses consist primarily of personnel,
occupancy, legal and marketing costs, net of interest income.

The Bank provides a full range of banking services to individual and corporate
customers and is subject to competition from other financial institutions. The
Bank is subject to the regulations of certain federal agencies and periodic
examinations by those regulatory authorities.

Use of Estimates
----------------

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Accordingly, actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change in
the near-term relate to the determination of the allowance for loan losses and
valuation of other real estate owned. In connection with the determination of
the allowance for loan losses and valuation of other real estate owned,
management normally obtains independent appraisals for significant properties.

A significant portion of the Bank's loans are secured by real estate and related
assets located in local markets. Accordingly, the ultimate collectibility of
this portion of the Bank's loan portfolio is susceptible to changes in local
market conditions.

                                      F-19
<PAGE>

                              EAGLE NATIONAL BANK

Cash and Cash Equivalents
-------------------------

For purposes of reporting cash flows, cash and cash equivalents include cash on
hand, amounts due from banks, federal funds sold and interest bearing deposits
at other banks. All highly liquid investments with an initial maturity of less
than ninety days are considered to be cash equivalents.

Securities Available For Sale
-----------------------------

Available for sale securities consist of certain equity securities not
classified as trading securities nor as held to maturity securities. Available
for sale securities are carried at fair value with unrealized gains and losses
reported in other comprehensive income.

Gains and losses on the sale of available for sale securities are all recorded
on the trade date and are determined using the specific identification method.
Premiums and discounts are recognized in interest income using the interest
method over the period to maturity.

Declines in the fair value of individual held to maturity and available for sale
securities below their cost that are other than temporary, if any, would result
in write-downs of the individual securities to their fair value. The related
write-downs, if any, would be included in earnings as realized losses.

Securities Held to Maturity
---------------------------

Bonds and notes for which the Bank has the positive intent and ability to hold
to maturity are reported at cost, adjusted for premiums and discounts that are
recognized in interest income using the interest method over the period to
maturity.

Loans
-----

Loans that management has the intent and ability to hold for the foreseeable
future or until maturity or pay-off are reported at their outstanding principal
adjusted for any charge-offs, the allowance for loan losses, and any deferred
fees or costs on originated loans and unamortized premiums or discounts on
purchased loans.

Interest income on loans is reported on the level-yield method and includes
amortization of net deferred loan fees over the loan term. Net costs associated
with originating loans are recognized in a manner that is not materially
different than the level-yield method.

                                      F-20
<PAGE>

                              EAGLE NATIONAL BANK

The accrual of interest on commercial and real estate loans is discontinued at
the time the loan is 90 days delinquent unless the credit is well-secured and in
process of collection. Other personal loans are typically charged-off no later
than 180 days past due. All interest accrued but not charged-off is reversed
against interest income. The interest on these loans is accounted for on the
cash basis until qualifying for return to accrual. Loans are returned to accrual
status when all the principal and interest amounts contractually due are brought
current and future payments are reasonably assured.

A loan is considered to be impaired if, based on current information and events,
management believes it is probable that the Bank will be unable to collect all
amounts due, both interest and principal, according to the contractual terms of
the loan agreement. Impairment is evaluated in total for smaller-balance loans
of similar nature such as residential mortgage and consumer loans and on an
individual loan basis for other loans. An allowance for credit losses related to
impaired loans, if any, is determined based on the present value of expected
cash flows discounted at the loan's effective interest rate, or the loan's
observable market price, or the fair value of collateral if the loan is
collateral dependent. Interest revenue received on impaired loans continues to
be either applied against principal or realized as interest revenue, according
to management's judgment as to the collectibility of principal.

Allowance for Loan Losses
-------------------------

The allowance for loan losses is a reserve established through a provision for
loan losses charged to expense which represents management's best estimate of
probable losses that have been incurred within the existing portfolio of loans.
The allowance, in the judgment of management, is necessary to reserve for known
loan losses and risks inherent in the loan portfolio. While management utilizes
its best judgment and information available, the ultimate adequacy of the
allowance is dependent upon a variety of factors, including the performance of
the bank's loan portfolio, the economy, changes in real estate values and
interest rates and the view of the regulatory authorities toward loan
classifications.

Management estimates the allowance balance required, in part, by review of the
loan portfolio to evaluate potential problem loans. Potential problem loans are
classified and separately monitored by management. Loans classified as "special
mention" are those that contain a weakness that, if left unattended, could
develop into a problem affecting the ultimate collectibility of the loan. 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.

Loan impairment is reported when full payment under the loan terms is not
expected. Loans are evaluated for impairment when payments are delayed,
typically 90 days or more, or when analysis of a borrower's operating results
and financial condition indicates the borrower's underlying cash flows are not
adequate to meet debt service requirements and it is probable that not all
principal and interest amounts will be collected according to the original terms
of the loan. Impairment is evaluated in total for smaller-balance loans of
similar nature such as residential mortgage and consumer loans and on an
individual loan basis for other loans. If a loan is impaired, a portion of the
allowance is allocated so that the loan is reported, net, at the present value
of estimated future cash flows using the loan's existing rate or at the fair
value of collateral if repayment is expected solely from the collateral.
Impaired loans, or portions thereof, are charged off when deemed uncollectible.

                                      F-21
<PAGE>


                              EAGLE NATIONAL BANK

In addition to allocations made for specific classified loans, general reserve
allocations are made after consideration of such factors as past loan loss
experience, general prevailing economic conditions, the nature, composition and
volume of the loan portfolio, and other qualitative factors based on
management's judgment.

While portions of allowance may be allocated for specific credits, the entire
allowance is available for any credit that, in management's judgment, should be
charged-off.

Bank Premises and Equipment
---------------------------

Land is carried at cost. Bank premises, furniture and equipment are carried at
cost, less accumulated depreciation and amortization computed principally by the
straight-line method.

Income Taxes
------------

Deferred tax assets and liabilities are reflected at currently enacted income
tax rates applicable to the period in which the deferred tax assets and
liabilities are expected to be realized or settled. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.

Fair Values of Financial Instruments
------------------------------------

Fair values of financial instruments are estimated using relevant market
information and other assumptions. Fair value estimates involve uncertainties
and matters of significant judgment regarding interest rates, credit risk,
prepayments, and other factors, especially in the absence of broad markets for
particular items. Changes in assumptions or in market conditions could
significantly affect the estimates. The fair value estimates of existing on- and
off-balance sheet financial instruments do not include the value of anticipated
future business or the value of assets and liabilities not considered financial
instruments.

Financial Instruments With Off-Balance Sheet Risk
-------------------------------------------------

In the ordinary course of business the Bank has entered into off-balance-sheet
financial instruments consisting of commitments to extend credit and standby
letters of credit. Such financial instruments are recorded in the financial
statements when they are funded.

Comprehensive Income
--------------------

The Bank adopted Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income", as of January 1, 1998. Generally accepted
accounting principles generally require that recognized revenue, expenses, gains
and losses be included in net income. Although certain changes in assets and
liabilities, such as unrealized gains and losses on available for sale
securities, are reported as a separate component of the equity section of the
balance sheet, changes in such items, along with net income, are components of
comprehensive income. The adoption of SFAS No. 130 had no effect on the Bank's
net income or shareholders' equity.

Reclassification
----------------

Certain amounts previously reported have been reclassified to conform to the
current format.

                                      F-22
<PAGE>

                              EAGLE NATIONAL BANK

2.   Recent Accounting Pronouncements
     --------------------------------

The Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities", as amended by SFAS No. 137,
which establishes accounting and reporting standards for derivative instruments
and hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. Management does not believe the pronouncement will have a
significant effect on its operations. Adoption of SFAS No. 133 will be required
for the Bank during the year ended December 31, 2001.

3.   Earnings Per Share
     ------------------

Earnings per share is computed in accordance with SFAS No. 128, "Earnings Per
Share", which requires presentation of basic and diluted earnings per share
("EPS") for entities with complex capital structures. Basic EPS is based on net
income divided by the weighted-average number of shares outstanding during the
period. Diluted EPS includes the dilutive effect of stock options granted using
the treasury stock method.

Earnings per common share is computed by dividing net income by the weighted-
average number of shares outstanding for the year. The weighted-average number
of common shares outstanding for basic and diluted earnings per share
computations were as follows:

<TABLE>
<CAPTION>
                                                                      1999                  1998                   1997
                                                                      ----                  ----                   ----
       <S>                                                        <C>                   <C>                    <C>
       Weighted-average shares outstanding - Basic                   574,750               574,750                574,750
       Effect of stock options                                         1,980                     -                      -
                                                                  -----------           -----------            -----------

       Weighted-average shares outstanding - Diluted                 576,730               574,750                574,750
                                                                  ===========           ===========            ===========
</TABLE>

                                      F-23
<PAGE>

                              EAGLE NATIONAL BANK

4.   Statements of Cash Flows
     ------------------------

The Bank has chosen to report on a net basis its cash receipts and cash payments
for time deposits accepted and repayments of those deposits and loans made to
customers and principal collections on those loans.

The Bank has chosen to report its cash flows by the indirect method. Other
supplemental cash flow information is presented below:

<TABLE>
<CAPTION>
                                                                 1999              1998            1997
                                                                 ----              ----            ----
<S>                                                          <C>               <C>               <C>
       Cash paid for:
         Interest                                            $      1,522      $       1,208     $     330
                                                             ============      =============     =========

         Income taxes                                        $        121      $           -     $       -
                                                             ============      =============     =========
</TABLE>

5.   Securities
     ----------

Debt and equity securities have been classified in the accompanying balance
sheet according to management's holding intent. The amortized cost of securities
and their estimated fair values at December 31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                                     Gross                   Gross                 Estimated
                                             Amortized             Unrealized              Unrealized                 Fair
                                                Cost                 Gains                   Losses                  Value
                                            -------------        ---------------         ---------------         ---------------
<S>                                         <C>                  <C>                     <C>                     <C>
Securities Available for Sale
-----------------------------
December 31, 1999:
  Equity securities                         $         353        $             -         $             -         $           353
                                            =============        ===============         ===============         ===============

December 31, 1998:
  Equity securities                         $         256        $             -         $             -         $           256
                                            =============        ===============         ===============         ===============

Securities Held to Maturity
---------------------------
December 31, 1999:
  U.S. government agency
    obligations                             $         498        $             -         $             2         $           496
                                            =============        ===============         ===============         ===============
</TABLE>

                                      F-24
<PAGE>

                              EAGLE NATIONAL BANK

There were no sales of securities during 1999, 1998 or 1997. There were no
securities pledged at December 31, 1999 or 1998.

The amortized cost and estimated fair values of securities at December 31, 1999,
by contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties. Equity securities are
shown separately since they do not have stated maturity dates.

<TABLE>
<CAPTION>
                                              Securities Available for Sale                 Securities Held to Maturity
                                              -----------------------------                 ---------------------------
                                            Amortized              Estimated              Amortized             Estimated
                                               Cost                Fair Value                Cost               Fair Value
                                            ---------              ----------             ---------             ----------
<S>                                         <C>                    <C>                    <C>                   <C>
Due in one to five years                    $       -              $        -             $     498             $      496

Equity securities                                 353                     353                     -                      -
                                            ---------              ----------             ---------             ----------

                                            $     353              $      353             $     498             $      496
                                            =========              ==========             =========             ==========
</TABLE>

6.   Loans and Allowance for Loan Losses
     -----------------------------------

Loans at December 31, 1999 and 1998, consisted of the following:

                                                    1999           1998
                                                    ----           ----

     Commercial                                   $   11,266     $    9,294
     Real estate                                       7,981          8,536
     Interim construction                             15,896         14,468
     Installment                                       2,740          1,929
                                                  ----------     ----------

          Gross loans                                 37,883         34,227

     Deferred loan fees                                 (192)          (104)
     Allowance for loan losses                          (431)          (405)
                                                  ----------     ----------

                                                  $   37,260     $   33,718
                                                  ==========     ==========

                                      F-25
<PAGE>

                              EAGLE NATIONAL BANK

An analysis of the allowance for loan losses for 1999, 1998 and 1997 is as
follows:

<TABLE>
<CAPTION>
                                                                    1999           1998           1997
                                                                    ----           ----           ----
     <S>                                                       <C>            <C>              <C>
     Balance at the beginning of the period                    $       405    $       225      $       -
     Provision charged to earnings                                      98            180            225
     Loans charged to the allowance                                    (72)             -              -
     Recoveries on loans previously charged-off                          -              -              -
                                                               -----------    -----------      ---------

     Balance at the end of the period                          $       431    $       405      $     225
                                                               ===========    ===========      =========
</TABLE>

There were no impaired loans that were required to be recognized in conformity
with SFAS No. 114, "Accounting by Creditors For Impairment of a Loan," during
any of the periods presented.

The Bank extends consumer and commercial credit primarily to customers in the
State of Texas. At December 31, 1999 and 1998, substantially all of the Bank's
loans were collateralized with real estate, inventory, accounts receivable,
equipment, marketable securities, or other assets.

The Bank is not committed to lend additional funds to debtors whose loans have
been modified.

7.   Bank Premises and Equipment
     ---------------------------

Bank premises and equipment at December 31, 1999 and 1998, consisted of the
following:

                                                     1999             1998
                                                     ----             ----

     Land                                          $    1,434        $     740
     Buildings and improvements                           811              780
     Furniture, fixtures and equipment                    370              315
     Computer software                                     41               39
     Automobiles                                           23               23
                                                   ----------        ---------

                                                        2,679            1,897

     Accumulated depreciation                            (200)            (113)
                                                   ----------        ---------

                                                   $    2,479        $   1,784
                                                   ==========        =========

                                      F-26
<PAGE>

                              EAGLE NATIONAL BANK

Depreciation expense totaled $92, $80 and $33 in 1999, 1998 and 1997.

Land and improvements at December 31, 1999 includes an investment in undeveloped
land acquired for future expansion. The land is carried at cost and is valued at
$694.

8.   Deposits
     --------

Deposits at December 31, 1999 and 1998 are summarized as follows:

<TABLE>
<CAPTION>
                                                                       1999                                    1998
                                                          -----------------------------           -----------------------------
                                                            Amount            Percent               Amount            Percent
                                                            ------            -------               ------            -------
     <S>                                                  <C>               <C>                   <C>              <C>
     Noninterest-bearing demand deposits                  $    9,871               25.0%          $    7,232               18.4%
     Interest-bearing demand deposits                          1,191                3.0                  810                2.1
     Limited-access money market accounts                      7,448               18.9                8,122               20.6
     Savings accounts                                            245                0.6                  119                0.3
     Certificates of deposit
     Certificates of deposit, less than $100,000              12,400               31.4               14,754               37.5
     Certificates of deposit, $100,000 and greater             8,348               21.1                8,278               21.1
                                                          ----------        -----------           ----------       ------------

                                                          $   39,503              100.0%          $   39,315              100.0%
                                                          ==========        ===========           ==========       ============
</TABLE>

The weighted average interest rate on deposits was approximately 3.0% and 3.2%
at December 31, 1999 and 1998.

At December 31, 1999, the scheduled maturities of certificates of deposit were
as follows:

     Year                                   Amount
     ----                                   ------

     2000                                 $   18,755
     2001                                      1,991
     2002                                          -
     2003                                          2
     2004                                          -
     Thereafter                                    -
                                          ----------

                                          $   20,748
                                          ==========

                                      F-27
<PAGE>

                              EAGLE NATIONAL BANK

9.   Other Noninterest Expense
     -------------------------

Other noninterest expense consisted of the following for 1999, 1998 and 1997.

<TABLE>
<CAPTION>
                                                                  1999                  1998                   1997
                                                                  ----                  ----                   ----
     <S>                                                       <C>                   <C>                     <C>
     Supplies                                                  $        37           $        41             $       39
     Telephone                                                          29                    25                     24
     Data processing                                                   106                    74                     47
     Advertising                                                        80                    89                     88
     Loan and collection expense                                         3                    10                     37
     Directors fees                                                     75                    21                      -
     Franchise taxes                                                    29                    12                      -
     Other                                                             202                   183                    134
                                                               -----------           -----------             ----------

             Total other noninterest expense                   $       561           $       455             $      369
                                                               ===========           ===========             ==========
</TABLE>

10.  Income Taxes
     ------------

Income tax expense (benefit) consisted of the following for 1999, 1998 and 1997.

                                 1999          1998           1997
                                 ----          ----           ----

     Current                   $      67    $        -      $       -
     Deferred:
       Federal                       164          ( 16)          (215)
       Valuation allowance           (67)         (148)           215
                               ---------    ----------      ---------

                               $     164    $     (164)     $       -
                               =========    ==========      =========

                                      F-28
<PAGE>

                              EAGLE NATIONAL BANK

Deferred income taxes reflect the net tax effects of temporary differences
between the recorded amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Bank's deferred tax assets and liability as of December 31, 1999 and 1998
are as follows:

<TABLE>
<CAPTION>
                                                                        1999                  1998
                                                                        ----                  ----
       <S>                                                          <C>                   <C>
       Deferred tax assets:
         Charitable contribution for book in excess
           of tax                                                   $          -          $          2
         Loan loss reserve for book in excess of tax                         118                    76
         Preopening expenses deferred for tax
           purposes                                                           73                   105
         Net operating loss carryforward                                       -                   183
                                                                    ------------          ------------

             Total deferred tax assets                                       191                   366

       Deferred tax liability:
         Bank premises and equipment basis for
           book in excess of tax                                              45                    19
         Accrual to cash conversion                                           79                   116
                                                                    ------------          ------------

             Total deferred tax liabilities                                  124                   135
                                                                    ------------          ------------

             Valuation allowance                                               -                  ( 67)
                                                                    ------------          ------------

             Net deferred tax asset                                 $         67          $        164
                                                                    ============          ============
</TABLE>


The difference between the financial statement income tax expense (benefit) and
amounts computed by applying the statutory federal income tax rate of 34.0% to
income before income taxes was as follows:

<TABLE>
<CAPTION>
                                                              1999             1998                 1997
                                                              ----             ----                 ----
       <S>                                                 <C>              <C>                  <C>
       Income taxes computed at the statutory
         federal tax rate on pre-tax income                $       236      $       106          $     (193)
       Tax effect of:
         Valuation allowance                                       (67)            (148)                215
         Other                                                     ( 5)            (122)               ( 22)
                                                           -----------      -----------          ----------

                                                           $       164      $      (164)         $        -
                                                           ===========      ===========          ==========

       Effective tax rate                                         23.7%           (52.4)%                 -%
                                                           ===========      ===========          ==========
</TABLE>

                                      F-29
<PAGE>

                              EAGLE NATIONAL BANK

11.  Employee Benefits

In 1998, the Bank implemented a 401(k) savings plan (Plan) which covers all
eligible employees. Under the Plan, the Bank matches 50% of voluntary
contributions of eligible employees up to 4% of eligible compensation. The Bank
contributed $24 and $11 to the Plan during 1999 and 1998.

The Bank has a nonqualified stock option plan covering certain executive
officers. Under the provisions of the plan, 40,000 shares were allocated for
grant. Options granted under the plan vest and become fully exercisable based on
a vesting schedule as determined on the date of grant by an oversight committee
assigned by the Bank's Board of Directors. Under the stock option plan, options
are exercisable during the lifetime of the officer, unless otherwise provided by
the Board of Directors. The exercise price of the options granted is equal to
the estimated fair market value of the stock, as determined by the Board of
Directors, on the date of grant. In 1997, Bank granted options to purchase
15,000 shares at an exercise price of $10.00 per share. The options were
immediately vested, however, as of December 31, 1999, none of the options have
been exercised. As of December 31, 1999, there were 15,000 options outstanding,
all of which were exercisable, and 25,000 options available for grant under the
plan.

No compensation expense was recorded in 1999, 1998 or 1997 as a result of the
stock options. The Bank applies Accounting Principles Board (APB) Opinion No. 25
in accounting for its stock option plan. The fair value of options granted in
1997 was not significant. Had compensation cost been determined on the basis of
fair value pursuant to SFAS 123, the pro forma impact on net income for 1999,
1998 or 1997 would not be materially different.

                                      F-30
<PAGE>

                              EAGLE NATIONAL BANK

12.  Financial Instruments With Off-Balance Sheet Risk
     -------------------------------------------------

The Bank is party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and standby letters
of credit. Those instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the balance sheet.

The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit is represented by the contractual amount of these instruments.
The Bank uses the same credit policies in making commitments and conditional
obligations as it does for on-balance-sheet instruments. At December 31, 1999
and 1998, the amounts of these financial instruments were as follows:

                                                      1999           1998
                                                      ----           ----

          Financial instruments whose
          contract amounts
            represent credit risk:
              Commitments to extend credit       $     14,287  $       8,990
              Standby letters of credit                    10              1
                                                     --------      ---------
                                                 $     14,297  $       8,991
                                                     ========      =========

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained if deemed
necessary by the Bank upon extension of credit is based on management's credit
evaluation of the counterparty. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment and income-producing
commercial properties.

Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers.

The Bank does not anticipate any material losses as a result of the commitments
and contingent liabilities.

                                     F-31
<PAGE>

                              EAGLE NATIONAL BANK

13.  Related Party Transactions
     --------------------------

In the ordinary course of business, the Bank has and expects to continue to have
transactions including borrowings with its employees, directors and their
affiliates. In the opinion of management, such transactions are on the same
terms, including interest rates and collateral requirements, as those prevailing
at the time for comparable transactions with unaffiliated persons. The aggregate
amount of such loans was $2,355 and $1,800 at December 31, 1999 and 1998. During
1999, new loans funded totaled $2,210 and repayments totaled $1,655.

14.  Commitments and Contingencies
     -----------------------------

The Bank leases a branch facility under a noncancellable operating lease
agreement. This lease agreement expires in December 2004 and requires monthly
payments of $6.

Future minimum rental payments under the noncancellable operating lease
agreement for each of the net five years and thereafter are as follows:

       Year                       Amount
       ----                       ------
       2000                $               72
       2001                                72
       2002                                72
       2003                                72
       2004                                72
                              ---------------
                           $              360
                              ===============


15.  Significant Group Concentrations of Credit Risk
     -----------------------------------------------

The Bank's loans, commitments and standby letters of credit have generally been
granted to customers in the Bank's market area. Such customers are normally also
depositors of the Bank. The concentrations of credit by type of loan are set
forth in Note 6. Generally these loans are collateralized and are expected to be
repaid from cash flow or proceeds from sale of selected assets of the borrowers.
Standby letters of credit are granted primarily to commercial borrowers.

                                     F-32
<PAGE>

                              EAGLE NATIONAL BANK

16.  Regulatory Matters
     ------------------

Under banking law, there are legal restrictions limiting the amount of dividends
Banks can declare. Approval of the regulatory authorities is required if the
effect of dividends declared would cause the regulatory capital of the Bank to
fall below specified minimum levels.

The Bank is subject to various regulatory capital requirements administered by
banking agencies. Failure to meet minimum capital requirements can initiate
certain mandatory and possibly additional discretionary actions by regulators
that, if undertaken, could have a direct material effect on the Bank's financial
statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Bank must meet specific capital guidelines that
involve quantitative measures of the Bank's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
Bank's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to risk
weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes the Bank met all capital adequacy
requirements to which it was subject as of December 31, 1999 and 1998.

As of December 31, 1999 and 1998, the Bank met the level of capital required to
be categorized as was "well capitalized" under the regulatory framework for
prompt corrective action. To be categorized as "well capitalized" the Bank must
maintain minimum total risk based, Tier I risk based, and Tier I leverage ratios
as set forth in the table. Management is not aware of any conditions or events
subsequent to December 31, 1999 that would change the Bank's capital category.

The Bank's actual capital amounts and ratios are presented in the following
table.


<TABLE>
<CAPTION>
                                                                                                              To Be Well
                                                                                                           Capitalized Under
                                                                              For Capital                  Prompt Corrective
                                                Actual                     Adequacy Purposes               Action Provisions
                                                ------                     -----------------               -----------------
                                         Amount           Ratio           Amount          Ratio          Amount           Ratio
                                         ------           -----           ------          -----          ------           -----
<S>                                     <C>               <C>                  <C>        <C>                <C>          <C>
December 31, 1999:
  Total capital to risk weighted       $       6,134     18.31  %      $        2,680      8.0  %       $       3,350      10.0  %
assets

  Tier I capital to risk weighted              5,715     17.06                  1,340      4.0                  2,010       6.0
assets

  Tier I capital to average assets             5,715     12.05                  1,897      4.0                  2,371       5.0


December 31, 1998:
  Total capital to risk weighted       $       5,564     18.42  %      $        2,416      8.0  %       $       3,020      10.0  %
assets

  Tier I capital to risk weighted              5,186     17.17                  1,208      4.0                  1,812       6.0
assets

  Tier I capital to average assets             5,186     12.28                  1,689      4.0                  2,111       5.0

</TABLE>

                                     F-33
<PAGE>

                              EAGLE NATIONAL BANK

17.  Fair Value of Financial Instruments
     -----------------------------------

The estimated fair value approximates carrying value for financial instruments
except those described below:

Securities:  Fair values for securities are based on quoted market prices or
----------
dealer quotes. If a quoted market price is not available, fair value is
estimated using quoted market prices for similar instruments.

Loans: The fair value of fixed-rate loans and variable-rate loans which reprice
-----
on an infrequent basis is estimated by discounting future cash flows using the
current interest rates at which similar loans with similar terms would be made
to borrowers of similar credit quality.

Deposits:  The fair value of deposit liabilities with defined maturities is
--------
estimated by discounting future cash flows using the interest rates currently
offered for deposits of similar remaining maturities.

Off-Balance-Sheet Instruments:  The fair values of these items are not material
-----------------------------
and are therefore not included on the following schedule.

The estimated year-end fair values of financial instruments were as follows:

<TABLE>
<CAPTION>
                                                           1999                                          1998
                                            ------------------------------------          ------------------------------------
                                              Carrying              Estimated               Carrying              Estimated
                                               Value                Fair Value               Value                Fair Value
                                            -------------          -------------          -------------          -------------
<S>                                         <C>                    <C>                    <C>                    <C>
Financial assets:
  Cash and cash equivalents                     $  4,017               $  4,017               $  8,094               $  8,094
  Securities available for sale                      353                    353                    256                    256
  Securities held to maturity                        498                    496                      -                      -
  Loans, net                                      37,260                 37,864                 33,718                  4,353
  Accrued interest receivable                        532                    532                    589                    589

Financial liabilities:
  Noninterest-bearing deposits                  $( 9,871)              $( 9,871)              $( 7,232)              $( 7,232)
  Interest-bearing deposits                      (29,632)               (29,247)               (32,083)               (32,271)
  Accrued interest payable                       (   129)               (   129)               (   159)               (   159)

</TABLE>

18.  Subsequent Event
     ----------------

On May 31, 2000, the Bank entered into a "Stock Transfer and Branch Sale
Agreement" (the "Agreement") with ENB Bankshares, Inc. and certain Directors of
the Bank. The Directors, Randy L. Pack, Jon Roy Reid, John M. Yeaman and Thomas
R. Youngblood (collectively referred to as the "Selling Directors"), may be
joined by other shareholders who sign a counterpart of the Agreement. ENB
Bankshares, Inc. is a Texas corporation located in Dallas, Texas formed for the
purpose of becoming a registered bank holding company through the acquisition of
100% of the voting common stock of the Bank.

The Agreement provides for the following two transactions:

     .    The sale of Bank stock owned by the Selling Directors and other
          shareholders who sign a counterpart of the Agreement to ENB Bankshares
          for $15.00 per share cash. The Selling Directors collectively own
          69,000 shares of Bank stock. The Selling

                                     F-34
<PAGE>

          Directors are also aware of other shareholders (the "Selling
          Shareholders") of the Bank who may desire to sell their shares of Bank
          stock to ENB Bankshares.

     .    The sale by the Bank of its Park Cities branch to a new bank
          established by the Selling Directors in a purchase and assumption
          transaction in which the new bank will pay a purchase premium of
          $500,000 plus the organization expenses and operating losses
          associated with the Park Cities branch. The Bank began operations of
          the Park Cities branch on March 27, 2000. The Park Cities branch is a
          full-service branch facility located at 6829 Hillcrest, Dallas, Texas
          75205.

ENB Bankshares and the Bank have entered into an Agreement and Plan of
Reorganization (the "Reorganization Plan"). As a result of the reorganization,
the Bank will become a wholly-owned subsidiary of ENB Bankshares. The Bank will
continue to operate from its current location. However, pursuant to the
Agreement, the Bank will no longer own the Park Cities branch and the Selling
Directors will no longer be directors or employees of the Bank.

The Reorganization Plan provides that each shareholder of the Bank (other than
the Selling Directors and other shareholders who have signed the Agreement) may
choose to receive one share of ENB Bankshares stock or $15.00 cash for each
share of Bank stock they own. The Selling Directors agreed to cause the new bank
to provide Bank shareholders who elect to receive cash in the reorganization the
right to subscribe for shares of stock of the new bank that will own the Park
Cities branch at the initial offering price.

To provide the funds for the cash portion of the transaction, ENB Bankshares is
offering for sale up to $2,500,000 of 9.5% fixed-rate debentures. The debentures
are payable in five equal installments, each being 20% of the original principal
amount of the debentures. The principal payments will begin on December 31, 2006
and continue until December 31, 2010. The debentures are convertible, at any
time at the option of the owner until December 31, 2006, into shares of ENB
Bankshares bank stock at $15.00 per share. In the event that ENB Bankshares is
unable to sell enough debentures to provide the entire cash requirements of the
transaction, ENB Bankshares has obtained a loan commitment letter from another
financial institution providing for a loan of $1,650,000. The loan is payable
over 10 years and bearing interest at floating Wall Street Journal prime rate.
The loan will be secured by a security interest in all of the Bank stock owned
by ENB Bankshares.

ENB Bankshares will not incur indebtedness (either in the form of debentures or
the loan) of more than $2,500,000. If the cash requirements of the transaction
are more than $2,500,000, the holding company will

     .    first, request permission from the Federal Reserve Bank of Dallas to
          increase the maximum amount of indebtedness,

     .    second, request that all debenture holders convert debentures into
          holding company stock in an amount sufficient to enable the holding
          company to satisfy its debt commitment, and

     .    third, seek additional equity from investors in a private offering.

The Agreement and the Reorganization Plan are subject to regulatory and
shareholder approval. Assuming the appropriate approvals are received, the Bank
expects to complete the stock transfer, the branch sale and the reorganization
at the same time in the fourth quarter of 2000.

                                     F-35
<PAGE>

                                    ANNEX A

                     AGREEMENT AND PLAN OF REORGANIZATION

     THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Consolidation Agreement"),
made this ____ day of _____________, 2000, between EAGLE NATIONAL BANK, DALLAS,
TEXAS ("Existing Bank") and NEW EAGLE BANK, DALLAS, TEXAS ("Other Bank"), and
joined in by ENB BANKSHARES, INC. a Texas corporation ("Corporation") provides
as follows:

                             W I T N E S S E T H:

     A.   Existing Bank is a national banking association duly organized and
existing under the laws of the United States, having its principal office in the
City of Dallas, County of Dallas, State of Texas;

     B.   Existing Bank has, and will have as of the Effective Time (hereinafter
defined), authorized capital stock of $5,000,000 divided into 1,000,000 shares
of common stock, $5.00 par value per share ("Existing Bank Common Stock"), of
which 574,750 shares are issued and outstanding;

     C.   Other Bank is an uninsured state banking association in organization,
having its principal office in the City of Dallas, County of Dallas, State of
Texas; Other Bank has been formed solely for the purpose of facilitating the
transactions described herein, and prior to the consummation of the transactions
described herein, it will conduct no business except incident to its
organization;

     D.   Other Bank has, or will have as of the Effective Time, authorized
capital stock of $5,000.00, divided into 1,000 shares of common stock, $5.00 par
value per share ("Other Bank Common Stock"), all of which are, or will be as of
the Effective Time, issued and outstanding and owned by the Corporation;

     E.   Corporation is a corporation duly organized and existing under the
laws of the State of Texas, having its principal office in the City of Dallas,
County of Dallas, State of Texas, with authorized capital stock of
$5,000,000.00, divided into 1,000,000 shares of common stock, $5.00 par value
per share ("Corporation Common Stock"), of which no shares are issued and
outstanding;

     F.   The majorities of the Boards of Directors of Existing Bank and of
Other Bank, pursuant to the authority given by and in accordance with the
provisions of the Act of November 7, 1918, as amended (12 U.S.C. '215), have
approved this Consolidation Agreement under which Other Bank shall be
consolidated with and into Existing Bank in a transaction having the effect of a
merger (the "Consolidation") and have authorized the execution and performance
hereof; and the Board of Directors of Corporation has approved this
Consolidation Agreement, authorized the Corporation to join in and be bound by
this Consolidation Agreement, and authorized the undertakings herein made by
Corporation; and

     G.   As and when required by the provisions of this Consolidation
Agreement, all such action as may be necessary or appropriate shall be taken by
Existing Bank, Other Bank and Corporation in order to consummate the
Consolidation.

     NOW, THEREFORE, in consideration of the premises, Existing Bank and Other
Bank, joined by Corporation, hereby agree that Other Bank shall be consolidated
with and into Existing Bank pursuant to 12 U.S.C. '215 in a transaction having
the effect of a merger on the following terms and conditions:

     1.   Consolidation of Other Bank into Existing Bank.  At the Effective
          -----------------------------------------------
Time, Other Bank shall be consolidated with and into Existing Bank pursuant to
the provisions of and with the effect provided in the Act of November 7, 1918,
as amended (12 U.S.C. 215). The Articles of Association and Bylaws of Existing
Bank shall continue in effect as the Articles of Association and Bylaws of the
bank surviving such consolidation (hereinafter referred to as the "Receiving
Bank"), until the same shall be amended and changed as provided by law.

     2.   Receiving Bank. The name of the Receiving Bank shall be "Eagle
          --------------
National Bank" The established office and facilities of Existing Bank
immediately prior to the

                                      A-1
<PAGE>


Consolidation shall continue as the established office and facilities of the
Receiving Bank.

     3.   Rights and Property of Receiving Bank. At the Effective Time, the
          -------------------------------------
corporate existence of Existing Bank and Other Bank shall, as provided in the
Act of November 7, 1918, as amended (12 U.S.C. 215), be consolidated into and
continued in the Receiving Bank. The Receiving Bank shall be deemed to be the
same corporation as Existing Bank and Other Bank. All rights, franchises and
interests of Existing Bank and Other Bank, respectively, in and to every type of
property (real, personal and mixed) and choses in action shall be transferred to
and vested in the Receiving Bank by virtue of the Consolidation without any deed
or other transfer. The Receiving Bank at the Effective Time, and without any
order or other action on the part of any court or otherwise, shall hold and
enjoy all rights of property, franchises and interests, including appointments,
designations and nominations, and all other rights and interests as trustee,
executor, administrator, transfer agent and registrar of stocks and bonds,
guardian of estates, assignee, receiver, and in every other fiduciary capacity,
and in every agency capacity, in the same manner and to the same extent as such
rights, franchises and interests were held or enjoyed by Existing Bank and Other
Bank, respectively, at the Effective Time.

     4.   Liabilities and Obligations of Receiving Bank. At the Effective Time,
          ---------------------------------------------
the Receiving Bank shall be liable for all liabilities of Existing Bank and of
Other Bank, respectively; and all deposits, debts, liabilities, obligations and
contracts of Existing Bank and of Other Bank, respectively, matured or
unmatured, whether accrued, absolute, contingent or otherwise, and whether or
not reflected or reserved against on balance sheets, books of account or records
of Existing Bank or Other Bank, as the case may be, including all liabilities of
Existing Bank and Other Bank for taxes, whether existing at the Effective Time
or arising as a result of or pursuant to the Consolidation, shall be those of
the Receiving Bank and shall not be released or impaired by the Consolidation;
and all rights of creditors and other obligees and all liens on property of
either Existing Bank or Other Bank shall be preserved unimpaired.

     5.   Exchange and Conversion of Shares.  At the Effective Time:
          ---------------------------------

          a.   Consideration to Existing Bank Shareholders. Holders of Existing
               -------------------------------------------
     Bank Common Stock other than the Corporation shall be entitled to receive,
     for each share of Existing Bank Common Stock that they own at the Effective
     Time, at their option either (i) one share of Corporation Common Stock, or
     (ii) $15.00 cash (payable in the form of a check) (the "Cash
     Consideration"). Holders of Existing Bank Common Stock who do not indicate
     to the Existing Bank which form of consideration they elect to receive in
     the manner required by the Existing Bank shall be deemed to have elected to
     receive the Cash Consideration.

          b.   Stock Held by Corporation. Notwithstanding any other provision of
               -------------------------
     this Agreement, the shares of Existing Bank Common Stock owned by the
     Corporation at the Effective Time shall, by operation of law and without
     any action by the Corporation, be converted into and become shares of
     capital stock of the Receiving Bank.

          c.   Conversion of Other Bank Common Stock. The shares of Other Bank
               -------------------------------------
     Common Stock outstanding at the Effective Time shall, by virtue of the
     Consolidation and without any action on the part of the Corporation or any
     other party as holder thereof, be converted into and become shares of
     capital stock of Receiving Bank. By virtue of this Consolidation Agreement
     and without any action by any party, the number of shares of capital stock
     of the Receiving Bank to be outstanding after the Effective Time shall be
     574,750 shares of common stock, $5.00 par value per share.

          d.   Conversion of Existing Bank Common Stock. The shares of Existing
               ----------------------------------------
     Bank Common Stock issued and outstanding at the Effective Time shall, by
     operation of law and without any action on the part of holders thereof, be
     converted into the right to receive the consideration set forth in
     subsection (a) of this Section 5.

     6.   Surrender of Existing Bank Common Stock. After the Effective Time,
          ---------------------------------------
each holder of an outstanding certificate of Existing Bank Common Stock may
surrender the same to Corporation or any successor thereto, and each such holder
shall be entitled upon such surrender to receive from Corporation in exchange
therefor the items described in Section 5(a) hereof. Until so surrendered, each
such outstanding certificate which, prior to the


                                      A-2
<PAGE>


Effective Time, represented shares of Existing Bank Common Stock shall be deemed
for all purposes, subject to the provisions of Section 9 hereof, to evidence
solely the right to receive the items described in Section 5(a) hereof. The
Corporation shall not pay interest on the cash to be delivered pursuant to
Section 5(a) hereof. Upon the holder's exchange of Existing Bank Common Stock
for Corporation Common Stock, the holder shall be paid the amount (without
interest thereon) of all distributions that have become payable since the
Effective Time, if any, with respect to the number of shares of Corporation
Common Stock, represented by the certificates issued upon such exchange. The
stock transfer books of Existing Bank shall be closed as of the close of
business on the Closing Date (hereinafter defined), and no transfer of record of
any of the shares of Existing Bank Common Stock shall take place thereafter.

     7.   Directors, Officers and Committees. The directors, advisory directors
          ----------------------------------
and officers of the Receiving Bank at the Effective Time shall be those persons
who are directors, advisory directors and officers, respectively, of Existing
Bank immediately before the Effective Time. The committees of the Board of
Directors of the Receiving Bank at the Effective Time shall be the same as, and
shall be composed of the same persons who are serving on, committees of the
Board of Directors of Existing Bank as they existed immediately before the
Effective Time.

     8.   Shareholder Approval. This Consolidation Agreement shall be submitted
          --------------------
to the shareholders of Existing Bank and Other Bank, at meetings called to be
held as promptly as practicable or by unanimous consent. Upon approval by the
requisite votes of the shareholders of Existing Bank and Other Bank, this
Consolidation Agreement shall be made effective as soon as practicable
thereafter in the manner provided in Section 14 hereof.

     9.   Dissenting Stockholders. Any stockholder of Existing Bank who objects
          -----------------------
to the Consolidation and follows the procedure for dissent set for in 12 U.S.C.
' 215, as amended, shall be entitled to the rights and benefits afforded to
dissenting shareholders by such statute.

     10.  Conditions to Consolidation. Consummation of the Consolidation as
          ---------------------------
provided herein shall be conditioned upon (a) the approval of the Consolidation
by the shareholders of Existing Bank and Other Bank, (b) the receipt of all
consents, orders, and approvals and satisfaction of all other requirements
prescribed by law which are necessary for the consummation of the Consolidation,
including without limitation, the approval of the Board of Governors of the
Federal Reserve System, the Office of the Comptroller of the Currency, the
Federal Deposit Insurance Corporation, and the State Banking Commissioner, and
(c) consummation of the purchase by the Corporation of shares of Existing Bank
Common Stock pursuant to the Stock Transfer and Branch Sale Agreement dated May
31, 2000.

     11.  Voluntary Termination. This Consolidation Agreement may be terminated
          ---------------------
and abandoned at any time prior to or on the Closing Date, whether before or
after action thereon by the stockholders of Existing Bank or Other Bank, by the
mutual consent in writing of Existing Bank and Corporation.

     12.  Liability for Voluntary Termination. In the event of the termination
          -----------------------------------
and abandonment of this Consolidation Agreement pursuant to the provisions of
Section 11 hereof, the same shall be of no further force or effect, and there
shall be no liability by reason of this Consolidation Agreement or the
termination thereof on the part of either Existing Bank, Other Bank, Corporation
or the directors, officers, employees, agents or stockholders of any of them.

     13.  Waiver and Amendment. Any of the terms or conditions of this
          --------------------
Consolidation Agreement may be waived at any time, whether before or after
action thereon by the shareholders of Existing Bank or Other Bank, by the party
that is entitled to the benefits thereof; and this Consolidation Agreement may
be modified or amended at any time, whether before or after action thereon by
the shareholders of Existing Bank or Other Bank; provided, however, that after
action hereon by the shareholders of Existing Bank, no amendment or modification
may be made which would reduce the consideration to be paid to shareholders of
Existing Bank under Section 5 hereof. Any waiver, modification or amendment
shall be in writing.

     14.  Closing Date and Effective Time. The closing date (the "Closing Date")
          -------------------------------
shall be within 30 days of the expiration of the mandatory waiting period
associated with the last required regulatory approval of the Consolidation.
Subject to the terms, and

                                      A-3
<PAGE>


upon satisfaction on or before the Closing Date of all requirements of law and
the conditions specified in this Consolidation Agreement, the Consolidation
shall become effective at the opening of business on the date specified in the
Certificate of Authority to be issued by the Office of the Comptroller of the
Currency under the seal of his office authorizing the Receiving Bank to conduct
the business of banking, such time being herein called the "Effective Time." If
a time other than the opening of business is specified in said Certificate, the
Effective Time shall be the time so specified.

     15.  Multiple Counterparts. For the convenience of the parties hereto and
          ---------------------
to facilitate the filing and recording of this Consolidation Agreement, any
number of counterparts thereof may be executed, each of which shall for all
purposes be deemed to be an original and all of which shall constitute the same
instrument, but only one of which need be produced.

     16.  Captions. The captions contained in the Consolidation Agreement are
          --------
solely for convenience of reference and shall not be deemed to affect the
meaning or interpretation of any provision contained herein.

                           [Signature Page Follows]


                                      A-4
<PAGE>


     IN WITNESS WHEREOF, a majority of the directors of Existing Bank and Other
Bank have approved this Consolidation Agreement and Existing Bank and Other Bank
have caused this Consolidation Agreement to be executed in counterparts by their
duly authorized officers and their corporate seals to be hereunto affixed as of
the date first above written.

                                        EAGLE NATIONAL BANK
[SEAL]

                                        By:  __________________________
                                             President

ATTEST:

__________________________
Cashier

                                        NEW EAGLE BANK

[SEAL]
                                        By:  __________________________
                                             President

ATTEST:

__________________________
Secretary


                                      A-5
<PAGE>


     The Corporation hereby joins in the foregoing Consolidation Agreement, and
undertakes that it will be bound thereby and will do and perform all acts and
things therein referred to or provided to be done by it.

     IN WITNESS WHEREOF, Corporation has caused this undertaking to be made in
counterparts by its duly authorized officers and its corporate seal to be
hereunto affixed as of the date first above written.

                                        ENB BANKSHARES, INC.


[SEAL]                              By: __________________________
                                               President

ATTEST:

__________________________
Secretary


                                      A-6
<PAGE>

                                    ANNEX B

                     STATUTES REGARDING DISSENTERS' RIGHTS

(S)215.  Consolidation of national banks or State banks with national banks

(a)  In general

     Any national bank or any bank incorporated under the laws of any State may,
with the approval of the Comptroller, be consolidated with one or more national
banking association located in the same State under the charter of a national
banking association on such terms and conditions as may be lawfully agreed upon
by a majority of the board of directors of each association or bank proposing to
consolidate, and be ratified and confirmed by the affirmative vote of the
shareholders of each such association or bank owning at least two-thirds of its
capital stock outstanding, or by a greater proportion of such capital stock, in
the case of such State bank if the laws of the State where it is organized so
require, at a meeting to be held on the call of the directors after publishing
notice of the time, place and object of the meeting for four consecutive weeks
in a newspaper or general circulation published in the place where the
association or bank is located, or, if there is no such newspaper, then in the
paper of general circulation published nearest thereto, and after sending such
notice to each shareholder of record by certified or registered mail at least
ten days prior to the meeting, except to those shareholders who specifically
waive notice, but any additional notice shall be given to the shareholders of
such State bank which may be required by the laws of the State Comptroller
determines that an emergency exists justifying such waiver, by unanimous action
of the shareholders of the association or State bank.

(b)  Liability of consolidated association; capital stock; dissenting
shareholders

     The consolidated association shall be liable for all liabilities of the
respective consolidating banks or associations. The capital ' stock of such
consolidated association shall not be less than that required under existing law
for the organization of a national bank in the place in which it is located:
Provided, That if such consolidation shall be voted for at such meetings by the
necessary majorities of the shareholders of each association and State bank
proposing to consolidate, and thereafter the consolidation shall be approved by
the Comptroller, any shareholder of any of the associations or State banks so
consolidated who has voted against such consolidation at the meeting of the
association or bank of which he is a stockholder, or who has given notice in
writing at or prior to such meeting to the presiding officer that he dissents
from the plan of consolidation, shall be entitled to receive the value of the
shares so held by him when such consolidation is approved by the Comptroller
upon written request made to the consolidated association at any time before
thirty days after the date of consummation of the consolidation, accompanied by
the surrender of his stock certificates.

(c)  Valuation of shares

     The value of the shares of any dissenting shareholder shall be ascertained,
as of the effective date of the consolidation, by an appraisal made by a
committee of three persons, composed of (1) one selected by the vote of the
holders of the majority of the stock, the owners of which are entitled to
payment in cash; (2) one selected by the directors of the consolidated banking
association; and (3) one selected by the two so selected. The valuation agreed
upon by any two of the three appraisers shall govern. If the value so fixed
shall not be satisfactory to any dissenting shareholder who has requested
payment, that shareholder may, within five days after being notified of the
appraised value of his shares, appeal to the Comptroller, who shall cause a
reappraisal to be made which shall be final and binding as to the value of the
shares of the appellant.

(d)  Appraisal by Comptroller; expenses of consolidated association; sale and
resale of shares; State appraisal and consolidation law

     If, within ninety days from the date of consummation of the consolidation,
for any reason one or more of the appraisers is not selected as herein provided,
or the appraisers fail to determine the value of such shares, the Comptroller
shall upon written request of any interested party cause an appraisal to be made
which shall be final and binding on all parties. The expenses of the Comptroller
in making the reappraisal or the appraisal, as the case may be, shall be paid by
the consolidated banking association. The value of the


                                      B-1
<PAGE>


shares ascertained shall be promptly paid to the dissenting shareholders by the
consolidated banking association. Within thirty days after payment has been made
to all dissenting shareholders as provided for in this section the shares of
stock of the consolidated banking association which would have been delivered to
such dissenting shareholders had they not requested payment shall be sold by the
consolidated banking association at an advertised public auction, unless some
other method of sale is approved by the Comptroller, and the consolidated
banking association shall have the right to purchase any of such shares at such
public auction, if it is the highest bidder therefor, for the purpose of
reselling such shares within thirty days thereafter to such person or persons
and at such price not less than par as its board of directors by resolution may
determine. If the shares are sold at public auction at a price greater than the
amount paid to the dissenting shareholders the excess in such sale price shall
be paid to such shareholders. The appraisal of such shares of stock in any State
bank shall be determined in the manner prescribed by the law of the State in
such cases, rather than as provided in this section, if such provision is made
in the State law; and no such consolidation shall be in contravention of the law
of the State under which such bank is incorporated.

(e)  Status of consolidated association; property rights and interests vested
and held as fiduciary

     The corporate existence of each of the consolidating banks or banking
associations participating in such consolidation shall be merged into and
continued in the consolidated national banking association and such consolidated
national banking association shall be deemed to be the same corporation as each
bank or banking association participating in the consolidation. All rights,
franchises, and interests of the individual consolidating banks or banking
associations in and to every type of property (real, person. al, and mixed) and
choses in action shall be transferred to and vested in the consolidated national
banking association by virtue of such consolidation without any deed or other
transfer. The consolidated national banking association, upon the consolidation
and without any order or other action on the part of any court or other-wise,
shall hold and enjoy all rights of property, franchises, and interests,
including appointments, designations, and nominations, and all other rights and
interests as trustee, executor, administrator, registrar of stocks and bonds,
guardian of estates, assignee, receiver, and committee of estates of lunatics,
and in every other fiduciary capacity, in the same manner and to the same extent
as such rights, franchises, and interests were held or enjoyed by any one of the
consolidating banks or banking associations at the time of consolidation,
subject to the conditions hereinafter provided.

(f)  Removal as fiduciary; discrimination

     Where any consolidating bank or banking association, at the time of the
consolidation, was acting under appointment of any court as trustee, executor,
administrator, registrar of stocks and bonds, guardian of estates, assignee,
receiver, or committee of estates of lunatics, or in any other fiduciary
capacity, the consolidated national banking association shall be subject to
removal by a court of competent jurisdiction in the same manner and to the same
extent as was such consolidating bank or banking association prior to the
consolidation. Nothing contained in this section shall be considered to impair
in any manner the right of any court to remove the consolidated national banking
association and to appoint in lieu thereof a substitute trustee, executor, or
other fiduciary, except that such right shall not be exercised in such a manner
as to discriminate against national banking associations, nor shall any
consolidated national banking association be removed solely because of the fact
that it is a national banking association.

(g)  Issuance of stock by consolidated association; preemptive rights

     Stock of the consolidated national banking association may be issued as
provided by the terms of the consolidation agreement, free from any preemptive
rights of the shareholders of the respective consolidating banks.


                                      B-2
<PAGE>

                                    ANNEX C

               FAIRNESS OPINION OF HOEFER & ARNETT INCORPORATED

                                HOEFER & ARNETT
                                 INCORPORATED
                              INVESTMENT BANKERS
                        101 W. SIXTH STREET, SUITE 416
                              AUSTIN, TEXAS 78701


August __, 2000


Members of the Board of Directors
Eagle National Bank
5006 Verde Valley Lane
Dallas, TX 75240

Members of the Board:

You have requested our opinion as investment bankers as to the fairness, from a
financial point of view, to all of the shareholders of Eagle National Bank,
Dallas, Texas (the "Bank") of the $15.00 per share cash purchase price to be
paid by ENB Bankshares, Inc., Dallas, Texas (the "Company") for less than 30% of
the outstanding common stock of the Bank. In addition, you have requested our
opinion as investment bankers as to the fairness, from a financial point of
view, to all of the shareholders of the Bank of the proposed transfer of the
Park Cities Branch to certain selling shareholders of the Bank for $500,000 plus
certain other adjustments as described in detail in the transfer agreement (the
"Agreement").

As part of its investment banking business, Hoefer & Arnett, Incorporated is
continually engaged in the valuation of bank, bank holding company and thrift
securities in connection with mergers and acquisitions nationwide. We have not
previously provided investment banking and financial advisory services to the
Bank.

In arriving at our opinion, we have reviewed and analyzed, among other things,
the following: (1) December 31, 1998 and December 31, 1999 audited financial
statements for the Bank, (II') Quarterly FDIC Call reports for the quarters
ended June 30, 1999, September 30, 1999, December 31, 1999 and June 30, 2000 for
the Bank; (iii) certain other publicly available financial and other information
concerning the Bank; (iv) publicly available information concerning other banks
and holding companies, the trading markets for their securities and the nature
and terms of certain other stock offerings we believe relevant to our inquiry.
We have held discussions with senior management of the Bank concerning its past
and current operations, financial condition and prospects, as well as the
results of regulatory examinations.

We have reviewed with senior management of the Bank earning projections for 2000
through 2004 for the Bank as a stand-alone entity, prepared by the Bank. Certain
pro forma financial projections for the years 2000 through 2004 for the pro
forma entity were derived by us based partially upon the projections discussed
above, as well as our own assessment of general economic, market and financial
conditions.

In conducting our review and in arriving at our opinion, we have relied upon and
assumed the accuracy and completeness of the financial and other information
provided to us or publicly available, and we have not assumed any responsibility
for independent verification of the same. We have relied upon the management of
the Bank as to the reasonableness of the financial and operating forecasts and
projections (and the assumptions and bases therefor) provided to us, and we have
assumed that such forecasts and projections reflect the best currently available
estimates and judgments of management. We have also assumed, without assuming
any responsibility for the independent verification of the same, that the
allowance for loan losses for the Bank is adequate to cover such losses. We have
not made or obtained any evaluations or appraisals of the property of the Bank,
nor have we examined any individual loan credit files. Our opinion as expressed
herein is limited to the fairness, from a financial point of view, to all of the
holders of the common shares of the Bank with respect to the sale of less than
30% of


                                      C-1
<PAGE>

the common shares of the Bank to the Company at $15.00 per share and the
transfer of the Park Cities Branch to such selling shareholders of the Bank for
$500,000 plus certain adjustments and does not address the Bank's underlying
business decision to proceed with the proposed transaction.

We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including among others the following: (i)
the historical and current financial position and results of operations of the
Bank, including interest income, interest expense, net interest income, net
interest margin, provision for loan losses, noninterest income, noninterest
expense, earnings, dividends, internal capital generation, book value,
intangible assets, return on assets, return on shareholders' equity,
capitalization, the amount and type of nonperforming assets, loan losses and the
reserve for loan losses, all as set forth in the financial statements for the
Bank; (ii) the assets and liabilities of the Bank, including the loan,
investment and mortgage portfolios, deposits, other liabilities, historical and
current liability sources and costs and liquidity; and (iii) publicly available
information concerning other banks and holding companies, the trading markets
for their securities and the nature and terms of certain other stock offerings
we believe relevant to our inquiry. We have also taken into account our
assessment of general economic, market and financial conditions and our
experience in securities valuation and our knowledge of the banking industry
generally. Our opinion is necessarily based upon conditions as they exist and
can be evaluated on the date hereof and the information made available to us
through the date hereof.

Based upon and subject to the  foregoing,  we are of the  opinion as  investment
bankers that, as of the date hereof,  the terms of the proposed  stock  transfer
and branch sale as previously described is fair, from a financial point of view,
to all of the holders of the common shares of the Bank.

Our opinion is directed to the Board of Directors of the Bank for its
information and assistance in connection with its consideration of the financial
terms of the transaction contemplated by the Agreement and does not constitute a
recommendation to the Board of Directors or to any shareholder of the Bank with
respect to any approval of the proposed transaction. We hereby consent to the
reference to our firm in the proxy statement or prospectus related to the
proposed transaction and to the inclusion of our opinion as an exhibit to the
proxy statement or prospectus related to the proposed transaction.

Respectfully Submitted,


/s/ Hoefer & Arnett, Incorporated

Hoefer & Arnett, Incorporated

                                      C-2
<PAGE>


                                    ANNEX D

                   DEBENTURE AGREEMENT AND FORM OF DEBENTURE


                              DEBENTURE AGREEMENT
                              -------------------


     THIS DEBENTURE AGREEMENT (the "Debenture Agreement"), is made and entered
into effective as of September 30, 2000, by and between ENB Bankshares, Inc.
(the "Company") and ___________________________________ ("Debenture Holder") and
provides as follows:

                                   RECITALS:

     The Company is authorized by law, and deems it necessary, from time to
time, to borrow money for its proper corporate purposes, and to that end, in
exercise of said authority, has duly authorized and directed the issue of its
Debentures under specified terms, and has duly authorized and directed the
execution of this Debenture Agreement for the benefit of the holders of said
Debentures.

     NOW THEREFORE, in consideration of the premises, and of the covenants
herein contained, and of the acquisition and acceptance of the accompanying
Debenture by Debenture Holder, the Company covenants and agrees with Debenture
Holder as follows:

                                   ARTICLE I

                                   ISSUANCE
                                   --------

     1.01  Issuance.  The Company hereby issues to the Debenture Holder its
           --------
Debenture in the principal amount of $_______________ (hereinafter referred to
as the "Debenture"), and the Debenture Holder hereby tenders $______________
cash to the Company in exchange for the Debenture. The Debenture shall be
substantially in the form attached hereto as Exhibit "A".

     1.02  Principal Payments.  Payments of principal in an amount equal to
           ------------------
twenty percent (20%) of the original principal amount of the Debenture, which
pursuant to the terms and conditions contained herein below, shall be due and
payable on December 31, 2006, 2007, 2008, 2009, and the remaining principal
amount and accrued unpaid interest shall be due and payable on December 31, 2010
(the "Maturity Date").

     1.03  Interest Payments.  Interest on the Debenture will accrue from
           -----------------
September 30, 2000, at the rate equal to nine and one half percent (9.5%) per
year. Accrued interest shall be paid quarterly beginning on March 15, 2001 and
continuing on each June 15, September 15, December 15 and March 15 until the
entire principal amount is paid in full. Principal and interest on each
Debenture will be paid to the person in whose name the Debenture is registered
at the close of business on the first day of the calendar month during which
such payment is to be made and will be paid by check mailed to the registered
address of the holder of the Debenture.

     1.04  Prepayment.  This Debenture may be prepaid, in whole or in part,
           ----------
without penalty at the option of the Company at any time after December 31,
2002. All prepayments are to be applied first to satisfy unpaid interest and
then against principal. To prepay, the Company must first notify the Debenture
Holder of its intention to prepay and of the prepayment date which must be at
least thirty (30) days from the notice of prepayment.

     1.05  Additional Debenture Holders. The Debenture Holder acknowledges and
           ----------------------------
agrees that additional Debentures may be issued to other parties
contemporaneously with the issuance of the Debenture and in the future to other
parties. The Debenture Holder specifically agrees that such other Debentures may
be issued by the Company without the signature, consent, or any other action of
the Debenture Holder, and that the terms and provisions of this Debenture
Agreement shall continue to apply to the Debenture and such other Debentures.


                                      D-1
<PAGE>


                                  ARTICLE II

                                   TRANSFERS
                                   ---------

     2.01  Requirements of Transfer. No transfer of the Debenture shall be valid
           ------------------------
unless and until the transferor executes a separate power of attorney indicating
his intent to transfer ownership, delivers such Debenture to the Company along
with transfer instructions, and such change of ownership is recorded in the
Company's debenture records.

     2.02  Registration of Transfer. Transfer of the Debenture shall be
           ------------------------
registered upon the Company's debenture records following the Company's receipt
of such Debenture, (properly endorsed or accompanied by a notarized separate
power of attorney indicating intent to transfer ownership), and receipt of
written transfer instructions signed by the transferor and the transferee which
shall state the name, mailing and residence address of the transferee, and the
desired effective date of transfer. The above may be either personally delivered
by the transferor or transferee, or mailed to the Company in accordance with
Section 10.02 hereof.

     2.03  Effective Date of Transfer. The effective date of the transfer
           --------------------------
recorded on the Company's debenture records shall be the date requested in the
instructions of transfer; however, the effective date shall not precede the date
of the most recent payment date of principal or interest with respect to such
Debenture. In the event such date precedes the date of the most recent payment
of principal or interest with respect to such Debenture or if the desired date
is omitted from the instructions of transfer, the Company may in its discretion
honor the transfer, and, in such case, the effective date of transfer shall be
the first date at which the Company is in receipt of all of the items required
by Section 2.02 hereof.

     2.04  Issuance of New Certificates. After a transfer has been recorded in
           ----------------------------
the Company's debenture records, the Company shall cancel the old certificate
representing the Debenture being transferred and shall issue a new certificate
in the transferee's name. The terms of such new certificate shall be identical
to those of the former Debenture certificate except as to Debenture Holder's
name. At or prior to delivery of the new Debenture certificate to the
transferee, the Company and transferee shall enter into a Debenture Agreement,
which agreement shall be signed by the Company and transferee, and its
provisions shall be identical to those of this Debenture Agreement except for
the Debenture Holder's name and the date of execution, which date will be the
same as the effective transfer date. Such new Debenture certificate and
Debenture Agreement will be mailed or delivered by other reasonable means to
transferee. In the event transferee's signature is not obtained on the new
Debenture Agreement, transferee's signature on the instructions of transfer will
be deemed to constitute transferee's assent to the terms of the Debenture and of
the Debenture Agreement.

                                  ARTICLE III

                        REPRESENTATIONS AND WARRANTIES
                        ------------------------------

     3.01  Representation and Warranties of the Company. The Company represents
           --------------------------------------------
and warrants to Debenture Holder that it is a duly organized and validly
existing corporation in good standing under the laws of the State of Texas. The
Company has the corporate power, and has been duly authorized by its Board of
Directors, to execute and deliver this instrument and the Debenture, and in so
doing, will not violate any law, its Articles of Incorporation or Bylaws, or any
other agreement or instrument binding upon the Company.

     3.02  Representatives and Warranties of the Debenture Holder. Debenture
           ------------------------------------------------------
Holder represents and warrants to the Company the following:

     a.      Debenture Holder is aware of the Risk Factors set forth in the
Proxy Statement and Prospectus dated ______________, 2000 understanding that an
investment in the Debenture involves a high degree of risk and that there are no
assurances that the Debenture Holder will recover his investment or receive any
return on his investment at any time.

     b.      Debenture Holder is aware that there will be no public market for
the Debenture, and accordingly, the Debenture Holder will need to bear the
economic risk of his investment for a indefinite period of time and will not be
readily able to liquidate this investment in case of an emergency.


                                      D-2
<PAGE>


     c.      Debenture Holder is aware that neither the Securities and Exchange
Commission nor any commission of corporations or other agency charged with
enforcement of state securities laws has made any finding or determination
relating to the fairness of an investment in the Debenture and that no such
entity has recommended or endorsed the Debenture.

     d.      Debenture Holder has elected to receive shares of Company common
stock in the reorganization described in the Proxy Statement and Prospectus
dated _____________, 2000.

                                  ARTICLE IV

                           COVENANTS OF THE COMPANY
                           ------------------------

     4.01  Payment.  The Company shall pay the interest on and principal of the
           -------
Debenture at the dates and places and in the manner and upon the terms specified
in the Debenture and this Debenture Agreement.

     4.02  Office of Company. At all times, until the full and complete payment
           -----------------
of the principal and interest of the Debenture, the Company shall keep an office
or agency in the City of Dallas, State of Texas, or at such other place as the
Company may notify Debenture Holder in accordance with Section 10.02 hereof, and
all notices, requests and demands in respect of the Debenture may be served at
such office.

                                   ARTICLE V

                                  CONVERSION
                                  ----------

     5.01  Exchange Ratio.  Unpaid principal and accrued interest owed under the
           --------------
Debenture will be convertible into the Company's common stock at the option of
the Debenture Holder at any time prior to December 31, 2006. After December 31,
2006, the Debenture shall not be convertible into the Company's common stock
except upon the occurrence of an event identified in Sections 5.03(a) and
5.03(b) of this Debenture Agreement. At conversion, the Debenture Holder shall
be entitled to receive a number of shares of common stock of the Company equal
to the quotient of (a) amount of the outstanding principal and accrued interest
being converted, divided by (b) $15.00, rounded down to the next whole share,
all as subject to adjustment as provided in Section 5.03(d).

     5.02  Manner of Exercise.  To exercise the conversion, the Debenture Holder
           ------------------
must surrender to the Company the Debenture along with the attached Form of
Conversion duly executed by him.

     5.03  Other Provisions Regarding Convertibility.  The following provisions
           -----------------------------------------
shall also apply to the convertibility of the Debenture:

     (a)     If the Debenture is called for prepayment, it may be converted into
             shares of common stock of the Company at any time prior to the
             close of business on the fifth (5th) day preceding the date fixed
             for prepayment.

     (b)     In the event of any merger, consolidation, recapitalization, split
             up, spin off, liquidation, sale of substantially all of the assets
             of the Company, or any other business combination or acquisition to
             which the Company may be a party, the Company shall give written
             notice of such event to the Debenture Holder. Upon receipt of such
             notice, the Debenture may be converted into shares of common stock
             of the Company at any time within thirty days of such notice. If
             this Debenture is not so converted, the Debenture Holder shall have
             no further conversion rights into the Company's common stock.

     (c)     To exercise the conversion privilege, the Debenture Holder must
             surrender the Debenture to the Company and must also execute and
             deliver to the Company the Form for Exercising Election to Convert
             at the end of the Debenture.

     (d)     In the event of a stock dividend, stock split, recapitalization, or
             any other change affecting the number of issued and outstanding
             shares of common stock of the Company, an adjustment shall be made
             in the total number and


                                      D-3
<PAGE>


             class of shares and the conversion price so as to reflect such
             change. Any such computation shall be rounded down to the nearest
             whole share and no such modification shall require the issuance of
             fractional shares.

     (e)     The shares of Common Stock into which the Debenture may be
             converted shall only be issued to the Debenture Holder, and the
             Debenture Holder shall not be entitled to any rights or privileges
             as a stockholder of the Company until such time as he shall have
             irrevocably exercised his rights, as set forth above, to convert
             the Debenture into shares of Common Stock.

     (f)     If the Debenture Holder shall exercise his option to convert the
             Debenture into shares of common stock, the Company shall promptly
             issue to the Debenture Holder certificates evidencing the shares of
             common stock into which the Debenture is to be converted. On the
             date the Debenture is surrendered to the Company for conversion,
             the right of the Debenture Holder as a holder thereof shall cease
             and thereafter the Debenture Holder will not be entitled to any
             interest on this Debenture not theretofore due and payable and the
             Debenture Holder shall not be entitled to any principal payments
             with respect to the Debenture.

     (g)     The Company covenants that it will at all times reserve and keep
             available out of its authorized common stock, solely for the
             purpose of issue upon conversion of the Debenture, the maximum
             number of shares of Common Stock remaining issuable upon conversion
             of the Debenture.

     (h)     The Company further covenants that, in the event the Debenture
             Holder converts the Debenture into shares of common stock, all
             shares of common stock which shall be issued to the Debenture
             Holder shall be, when issued, duly and validly issued and fully
             paid and nonassessable.

                                  ARTICLE VI

                     CONSOLIDATION, MERGER AND CONVEYANCE
                     ------------------------------------

     6.01  Continuation of Terms of Debenture Agreement. Nothing contained in
           --------------------------------------------
this Debenture Agreement or in the accompanying Debenture shall prevent any
consolidation or merger of the Company with or into any other corporation, or
any conveyance of the business, assets and properties of the Company as a whole
or substantially as a whole, to any other corporation or other entity, provided,
that all terms and conditions of this Debenture Agreement, including payment, to
be observed and performed by the Company shall be expressly assumed by the
successor entity formed by or resulting from any such merger or consolidation,
or to which any such conveyance shall have been made.

     6.02  Rights of Successor Company.  In the event the Company or any
           ---------------------------
successor entity shall be consolidated or merged with or into, or shall make a
conveyance to, any other corporation or other entity, the entity formed by or
resulting from such consolidation or merger or to which such conveyance shall
have been made, shall succeed to and be substituted for the Company, with the
same force and effect as if it had been named in, and had executed, this
Debenture Agreement, and shall have and possess and may exercise, subject to the
terms and conditions of this Debenture Agreement, each and every power,
authority and right herein reserved to or conferred upon the Company.

     6.03  Construction.  For every purpose of this Debenture Agreement,
           ------------
including the execution, issue and use of Debentures, the term the "Company"
includes and means (unless the context otherwise requires) not only the
corporation which has executed this Debenture Agreement, but also any such
successor entity in accordance with the provisions of this Article VI.

                                  ARTICLE VII

                                    DEFAULT
                                    -------

     7.01  Event of Default. As used in this Debenture Agreement and the
           ----------------
Debenture, the term "event of default" shall mean any one of the following:

                                      D-4
<PAGE>


     (a)     default by the Company in the payment of the principal of the
             Debenture as and when the same shall become due and payable and the
             continuance of such default for 180 days;

     (b)     default by the Company in the payment of any installment of
             interest on the Debenture as and when the same shall become due and
             payable and the continuance of such default for 180 days; or

     (c)     institution of voluntary or involuntary bankruptcy proceedings by
             or against the Company.

     7.02   Acceleration.  After the occurrence of an event of default,
            ------------
Debenture Holder, upon ten business days prior written notice to the Company,
shall have the right to accelerate the maturity of the unpaid principal and
interest of the Debenture and make demand on the Company for payment in full.

                                 ARTICLE VIII

                                  DEFEASANCE
                                  ----------

     If, when the accompanying Debenture shall have become due and payable
(whether by elapse of time or by declaration by the exercise of the right to
accelerate as provided in Article VII hereof), the Company shall pay, or cause
to be paid, the whole amount of the principal monies and interest due upon the
Debenture, then and in that case, this Debenture Agreement shall terminate and
be of no force and effect, and the Debenture shall be marked "paid" and canceled
in the debenture records of the Company.

                                  ARTICLE IX

                     STOCKHOLDERS, OFFICERS AND DIRECTORS
                     ------------------------------------

     No recourse shall be had for the payment of the principal of the Debenture
or of the interest thereon, or for any claim based thereon or otherwise in
respect thereof, or arising from this Debenture Agreement, against any
incorporator, or against any past, present or future stockholder, director,
officer, employee or agent of the Company, as such, whether by virtue of any
constitution, statute, or rule of law, or by the enforcement of any assessment
or penalty; all such liability being by the acceptance of the accompanying
Debenture and as part of the consideration of the issuance thereof expressly
waived and released by Debenture Holder and by any subsequent owners of the
Debenture.


                                   ARTICLE X

                                 SUBORDINATION
                                 -------------

     The payment of principal and interest on this Debenture is subordinated in
right of payment to the prior payment in full of all senior indebtedness of the
Company, whether outstanding on this date or thereafter. Senior indebtedness is
defined as the principal of, and premium and interest on, indebtedness of the
Company for money borrowed from person, firms or corporations that regularly
engage in the business of lending money. In the event of any insolvency,
bankruptcy, receivership, liquidation, or any other marshaling of the assets and
liabilities of the Company, the holders of senior indebtedness will be entitled
to receive payment in full of all principal and interest on all senior
indebtedness before the holder of this Debenture is entitled to receive any
payment on account of principal or interest.

                                  ARTICLE XI

                                 MISCELLANEOUS
                                 -------------

     11.01 Binding Debenture Agreement. This Debenture Agreement shall be
           ---------------------------
binding upon and inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, legal representatives, successors and assigns,
except as otherwise expressly provided herein.

     11.02 Notices. Unless otherwise provided herein, any notice, tender, or
           -------
delivery to be given hereunder by either party to the other may be effected by
(a) personal


                                      D-5
<PAGE>


delivery in writing, or (b) by registered or certified mail, postage prepaid,
return receipt requested, and such notice, tender or delivery shall be deemed
made or received as of the earlier of actual delivery or two business days after
the date of mailing. Notices may be given to the parties hereto at the following
addresses:

     To Debenture Holder:

     ________________________
     ________________________
     ________________________

     To Company:

     ENB Bankshares, Inc.
     5006 Verde Valley
     Dallas, Texas 75240

or addressed to either party at such other address as such party shall hereafter
furnish to the other party in writing. The address for any purpose hereof of the
Company  or  Debenture  Holder  may be changed at any time and shall be the most
recent address furnished in writing to the other party.

     11.03  Governing Law. This Debenture Agreement shall be construed in
            -------------
accordance with and governed by the laws of the State of Texas, and all
obligations of the parties created hereunder are performable in Dallas, Dallas
County, Texas.

     11.04 Severability. In case any one or more of the provisions contained in
           ------------
this Debenture Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions hereof and this Debenture Agreement shall
be construed as if such invalid, illegal or unenforceable provisions had never
been contained herein.

     11.05 Entire Debenture Agreement. This Debenture Agreement and the
           --------------------------
accompanying Debenture constitute the sole and only agreements of the parties
hereto and supersede any prior understandings or written or oral agreements
between the parties respecting the within subject matter.

     11.06 Headings.  The captions used in conjunction with this Debenture
           --------
Agreement are for convenience only, and shall not be deemed a part of this
Debenture Agreement or used to construe any provision hereof.

     11.07 Inclusive of Debenture. Reference is made to the accompanying
           ----------------------
Debenture dated of even date herewith. The provisions of such Debenture shall be
deemed incorporated into this Debenture Agreement, and for all purposes shall
have the same effect as though fully set forth on the face hereof.

     11.08 Usury Savings Clause.  All agreements between the Company and the
           --------------------
holder hereof, whether now existing or hereafter arising, and whether written or
oral, are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of the maturity hereof or
otherwise, shall the amount paid, or agreed to be paid, to the holder hereof for
the use, forbearance, or detention of the money loaned hereunder or otherwise or
for the payment or performance of any covenant or obligations contained herein
or in any document evidencing, securing or pertaining to the indebtedness
evidenced hereby, exceed the maximum amount permissible under applicable law.
If, from any circumstances whatsoever, fulfillment of any provision hereof or
other document at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by law, then, ipso facto,
the obligation to be fulfilled shall be reduced to the limit of such validity,
and if from any such circumstance the holder hereof should ever receive any
amount deemed interest by applicable law which shall exceed the highest lawful
rate, such amount which would be excessive interest shall be characterized as
expense, to the extent permitted by this Debenture and the agreements governing,
securing or relating to the indebtedness evidenced by this Debenture, rather
than interest, or be applied to the reduction of the principal amount owing
hereunder or on account of any other principal indebtedness of the Company to
the holder hereof, and not to the payment of interest, or if such excessive
payment cannot be characterized as an expense, and exceeds the unpaid balance of
principal hereof and such other indebtedness, the excess shall be refunded to
the Company. All sums paid or agreed to be paid by the



                                      D-6
<PAGE>


Company for the use, forbearance or detention of the indebtedness of the Company
to the holder hereof shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness until payment in full. The terms and provisions of this paragraph
shall control and supersede every other provision of all agreements between the
Company and holder hereof.

     IN WITNESS WHEREOF, the parties hereto have caused this Debenture Agreement
to be duly executed as of the day and year first above written.

                                                COMPANY:

                                                ENB BANKSHARES, INC.


                                                By:    ________________________
                                                Title: ________________________

                                                DEBENTURE HOLDER:

                                                _______________________________


                                      D-7
<PAGE>

                             ENB BANKSHARES, INC.

                             CONVERTIBLE DEBENTURE
                             ---------------------

                         Certificate Number __________



$______________________                               _________________, 2000




     ENB Bankshares, Inc. (the "Company"), a Texas corporation, for value
received, hereby promises to pay to _________________________________ (the
"Debenture Holder") or registered assigns at its principal place of business,
5006 Verde Valley, Dallas, Texas 75240, the principal sum of _______ DOLLARS
($______________).  The outstanding principal amount of this Debenture shall
bear interest until payment in full of the outstanding principal amount hereof
at the rate of nine and one half percent (9.5%) per year.

     Payments of principal in an amount equal to twenty percent (20%) of the
original principal amount of this Debenture shall be due and payable on each of
December 31, 2006, 2007, 2008, 2009, and the remaining principal amount and
accrued unpaid interest shall be due and payable on December 31, 2010 (the
"Maturity Date").

     Accrued interest shall begin to accrue on September 30, 2000 and shall be
payable quarterly beginning on March 15, 2001 and continuing on each June 15,
September 15, December 15 and March 15 until the Debenture is paid in full.

     THIS DEBENTURE IS CONVERTIBLE INTO SHARES OF COMMON STOCK OF THE COMPANY AS
PROVIDED IN THE DEBENTURE AGREEMENT ENTERED INTO BETWEEN THE COMPANY AND THE
DEBENTURE HOLDER WITH AN EFFECTIVE DATE OF EVEN DATE HEREWITH (THE "DEBENTURE
AGREEMENT").  REFERENCE IS MADE TO THE DEBENTURE AGREEMENT, AND THE PROVISIONS
OF SUCH AGREEMENT SHALL BE DEEMED INCORPORATED INTO THIS DEBENTURE, AND FOR ALL
PURPOSES, SHALL HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH ON THE FACE
HEREOF.

     Principal and interest on this Debenture will be paid to the person in
whose name this Debenture is registered at the close of business on the 1st day
of the calendar month during which such payment is to be paid and will be paid
by check mailed to the registered address of the person entitled thereto.

     If the Company (i) defaults under the terms of this Debenture and the
Debenture Agreement, (ii) the Debenture Holder satisfies the notice requirement
in the Debenture Agreement, and (iii) the default remains uncured for the period
specified in the Debenture Agreement, then the outstanding principal balance of
and all interest due on this Debenture will forthwith become due and payable and
the Company shall immediately pay the same.

     Issued and effective as of September 30, 2000.

                                   ENB BANKSHARES, INC.



                                   By:__________________________________________
                                   Title:_______________________________________

                                      D-8
<PAGE>

                    FORM FOR EXERCISING ELECTION TO CONVERT
                    ---------------------------------------

     The undersigned holder of the attached ENB Bankshares, Inc. Convertible
Debenture (the "Debenture") surrenders $___________________ aggregate principal
amount of accrued interest and unpaid principal due under the Debenture for
conversion on the terms and conditions set forth in the Debenture, and requests
that the shares issuable on such conversion be issued to him.

     Date: ______________________.



                                        ________________________________________


Address of Holder:


________________________________
________________________________

Social Security Number or
Taxpayer Identification Number
of holder: __________________

                                      D-9
<PAGE>


Until ___________, 2000 (90 days after the date of this proxy
statement/prospectus) all dealers that effect transactions in these securities,
whether or not participating in the offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.


<PAGE>

                PART II. INFORMATION NOT REQUIRED IN PROSPECTUS


Item 13.  Other Expenses of Issuance and  Distribution.
--------  --------------------------------------------

     Set forth below are the expenses in connection with the issuance and
distribution of the securities being registered hereby. All amounts are
estimated except the Securities and Exchange Commission fees.

<TABLE>
  <S>                                                                         <C>
  Securities and Exchange Commission registration fee.......................  $  2,012.54
  Legal fees and expenses (other than Blue Sky fees and expenses)...........    70,000.00
  Blue Sky fees and expenses................................................     2,000.00
  Printing and engraving expenses...........................................    27,000.00
  Accounting fees and expenses..............................................    10,000.00
  Miscellaneous.............................................................     5,000.00
                                                                              -----------
  Total.....................................................................  $116,012.54
                                                                              ===========
</TABLE>

The holding company will bear all of the foregoing fees and expenses.

Item 14.  Indemnification of Directors and Officers.
--------  -----------------------------------------

     Article 2.02-1 of the Texas Business Corporations Act ("TBCA") authorizes a
court to award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article III, Section 14 of the holding
company's bylaws provides for mandatory indemnification of its directors,
officers, employees and agents to the maximum extent permitted by the TBCA.

     Article VII of the holding company's Articles of Incorporation provides for
mandatory indemnification of its directors and officers and former directors and
officers and other persons who may have served in another capacity of another
entity under certain circumstances. This provision in the Articles of
Incorporation does not eliminate the directors' fiduciary duty, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Texas law. In addition, each
director will continue to be subject to liability for breach of faith or
involving intentional misconduct, for knowing violations of law for actions
leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are unlawful
under Texas law.

     The holding company intends to purchase directors' and officers' liability
insurance that covers the directors and officers of the holding company.

     Insofar has indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or other persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.

Item 15.  Sales of Unregistered Securities.
--------  --------------------------------

     Since May 18, 2000 (Inception), the registrant has not sold or issued any
securities.

Item 16.  Exhibits and Financial Statement Schedules.
--------  ------------------------------------------

(a)  Exhibits:

          2.1  Agreement and Plan of Reorganization dated as of __________,
               2000, between Eagle National Bank and New Eagle Bank and joined
               in by ENB


                                      II-1
<PAGE>

               Bankshares, Inc. (included as Annex A to the Proxy
               Statement/Prospectus contained herein).

          3.1  Articles of Incorporation of Registrant.*

          3.2  Bylaws of Registrant.*

          4.1  Form of Debenture Agreement and Convertible Debenture (included
               as Annex D to the Proxy Statement/Prospectus contained herein)
                  -------

          4.2  Form of stock certificate of Registrant's common stock.**

          5.1  Opinion of Haynie Rake & Repass, P.C., Special Counsel to
               Registrant, dated August 25, 2000, as to the legality of the
               shares of Registrant's common stock being registered.**

          10.1 Stock Transfer and Branch Sale Agreement dated May 31, 2000
               between Eagle National Bank, Randy Pack, Jon Roy Reid, John
               Yeaman and Tom Youngblood.**

          23.1 Consent of Haynie, Rake & Repass, P.C., Special Counsel to
               Registrant (included in their opinion filed as Exhibit 5.1).

          23.2 Consent of Fisk & Robinson, P.C., Certified Public Accountants.**

          24.1 Power of Attorney given by the Officers and Directors of the
               Registrant (included on Signature Page of the original filing of
               the Registration Statement).

          99.1 Letter to Shareholders of Eagle National Bank.***

          99.2 Notice of Annual Meeting of Shareholders of Eagle National
               Bank.***

          99.3 Form of Proxy for use by the Shareholders of Eagle National
               Bank.***

          99.4 Form of Shareholder Election***

          99.5 Statutes Relating to Dissenters' Rights (included as Annex B to
               the Proxy Statement/Prospectus contained herein).

*    Previously filed.

**   Filed herewith.

***  Filed herewith; amended exhibit.

(b)  Financial Statement Schedules:

     None required.

(c)  Opinions:

     The opinion of Haynie, Rake & Repass, P.C., Special Counsel to Registrant,
is included as Exhibit 5.1.

Item 17.  Undertakings.
-------   -------------

(a)  Undertakings furnished pursuant to Item 512 of the Commission's Regulation
S-K:

          (1)  The undersigned Registrant hereby undertakes:

               (A)  To file, during any period in which offers or sales are
                    being made, a post-effective amendment to this registration
                    statement:

                                      II-2
<PAGE>

                    (i)     To include any prospectus required by section
                            10(a)(3) of the Securities Act;

                    (ii)    To reflect in the Proxy Statement/Prospectus any
                            facts or events arising after the effective date of
                            the registration statement (or the most recent post-
                            effective amendment thereof) which, individually or
                            in the aggregate, represent a fundamental change in
                            the information set forth in the registration
                            statement. Notwithstanding the foregoing, any
                            increase or decrease in volume of securities offered
                            (if the total dollar value of securities offered
                            would not exceed that which was registered) and any
                            deviation from the low or high end of the estimated
                            maximum offering range may be reflected in the form
                            of prospectus filed with the Commission pursuant to
                            Rule 424(b) (Section 230.424(b) of this chapter) if,
                            in the aggregate, the changes in volume and price
                            represent no more than a 20% change in the maximum
                            aggregate offering price set forth in the
                            "Calculation of Registration Fee" table in the
                            effective registration statement;

                    (iii)   To include any material information with respect to
                            the plan of distribution not previously disclosed in
                            the registration statement or any material change to
                            such information in the registration statement;

               (B)  That, for the purpose of determining any liability under the
                    Securities Act, each such post-effective amendment shall be
                    deemed to be a new registration statement relating to the
                    securities offered therein, and the offering of such
                    securities at that time shall be deemed to be the initial
                    bona fide offering thereof.

               (C)  To remove from registration by means of a post-effective
                    amendment any of the securities being registered which
                    remain unsold at the termination of the offering.

(g)  (1)  The undersigned Registrant hereby undertakes as follows: That prior to
          any public reoffering of the securities registered hereunder through
          use of a prospectus which is a part of this registration statement, by
          any person or party who is deemed to be an underwriter within the
          meaning of Rule 145(c), the issuer undertakes that such reoffering
          prospectus will contain the information called for by the applicable
          registration form with respect to reofferings by persons who may be
          deemed underwriters, in addition to the information called for by the
          other Items of the applicable form.

     (2)  The Registrant undertakes that every prospectus (i) that is filed
          pursuant to paragraph (1) immediately preceding, or (ii) that purports
          to meet the requirements of section 10(a)(3) of the Act and is used in
          connection with an offering of securities subject to Rule 415
          (ss.230.415 of this chapter), will be filed as part of an amendment to
          the registration statement and will not be used until such amendment
          is effective, and that, for the purposes of determining any liability
          under the Securities Act, each such post-effective amendment shall be
          deemed to be a new registration statement relating to the securities
          offered therein, and the offering of such securities at that time
          shall be deemed to be the initial bona fide offering thereof.

(h)  Request for acceleration of effective date.

     Insofar as indemnification for liabilities arising under the Securities Act
     may be permitted to directors, officers and controlling persons of the
     registrant pursuant to the foregoing provisions, or otherwise, the
     registrant has been advised that in the opinion of the Securities and
     Exchange Commission such indemnification is against public policy as
     expressed in the Securities Act and is, therefore, unenforceable. In the
     event that a claim for indemnification against such liabilities (other than
     the payment by the registrant of expenses incurred or paid

                                      II-3
<PAGE>


     by a director, officer or, controlling person of the registrant in the
     successful defense of any action, suit or proceeding) is asserted by such
     director, officer or controlling person in connection with the securities
     being registered hereunder the registrant will, unless in the opinion of
     its counsel the matter has been settled by controlling precedent, submit to
     a court of appropriate jurisdiction the question whether such
     indemnification by it is against public policy as expressed in the
     Securities Act and will be governed by the final adjudication of such
     issue.

(i)  Rule 430A. The undersigned registrant hereby undertakes that:

     (1)  For purposes of determining any liability under the Securities Act,
          the information omitted from the form of prospectus filed as a part of
          this registration statement in reliance upon Rule 430A and contained
          in a form of prospectus filed by the registrant pursuant to Rule
          424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
          be part of this registration statement as of the time it was declared
          effective.

     (2)  For purposes of determining any liability under the Securities Act,
          each post-effective amendment that contains a form of prospectus shall
          be deemed to be a new registration statement relating to the
          securities offered therein, and the offering of such securities at
          that time shall be deemed to be the initial bona fide offering
          thereof.

                                      II-4
<PAGE>

                                  SIGNATURES

      Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Dallas, Dallas County, State of
Texas, on the 25th day of August, 2000.

                                        ENB BANKSHARES, INC.
                                        (Registrant)


                                        By:  /s/ Harold L. Campbell
                                             ----------------------------------
                                             Harold L. Campbell,
                                             President

      Pursuant to the requirements of the Securities Act, this amendment to the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.


         Signature                     Title                       Date
   ---------------------  --------------------------------  -------------------

   /s/ Harold L. Campbell President (Principal Executive    August 25, 2000
   ______________________
   Harold L. Campbell     Officer) and Director


   /s/ Patrick G. Adams   Vice President, Secretary and     August 25, 2000
   ______________________
   Patrick G. Adams       Director (Principal Accounting
                          and Financial Officer)


                               INDEX TO EXHIBITS

Exhibit
Number
-------

2.1   Agreement and Plan of Reorganization dated as of August __, 2000, between
      Eagle National Bank and New Eagle Bank and joined in by ENB Bankshares,
      Inc.(included as Annex A to the Proxy Statement/Prospectus contained
                       -------
      herein).

3.1   Articles of Incorporation of Registrant.*

3.2   Bylaws of Registrant.*

4.1   Form of Debenture Agreement and Convertible Debenture(included as Annex D
                                                                        -------
      to the Proxy Statement/Prospectus contained herein)

4.2   Form of stock certificate of Registrant's common stock.**

5.1   Opinion of Haynie Rake & Repass, P.C., Special Counsel to Registrant,
      dated August 25, 2000, as to the legality of the shares of Registrant's
      common stock being registered.**

10.1  Stock Transfer and Branch Sale Agreement dated May 31, 2000 between Eagle
      National Bank, Randy Pack, Jon Roy Reid, John Yeaman and Tom Youngblood.**

23.1  Consent of Haynie, Rake & Repass, P.C., Special Counsel to Registrant
      (included in their opinion filed as Exhibit 5.1).

23.2  Consent of Fisk & Robinson, P.C., Certified Public Accountants.**

24.1  Power of Attorney given by the Officers and Directors of the Registrant
      (included on Signature Page of the original filing of the Registration
      Statement).

                                      II-5
<PAGE>


99.1  Letter to Shareholders of Eagle National Bank.***

99.2  Notice of Annual Meeting of Shareholders of Eagle National Bank.***

99.3  Form of Proxy for use by the Shareholders of Eagle National Bank.***

99.4  Form of Shareholder Election***

99.5  Statutes Relating to Dissenters' Rights (included as Annex B to the Proxy
                                                           -------
      Statement/Prospectus contained herein).


*     Previously filed.
**    Filed herewith.
***   Filed herewith; amended exhibit.


                                      II-6