<Page>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q

              [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended: June 30, 2001

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

         For the transition period from _____________ to ______________

                         Commission File Number: 0-10196

                          INDEPENDENT BANKSHARES, INC.
                          ----------------------------
             (Exact name of registrant as specified in its charter)

                      Texas                                 75-1717279
                      -----                                 ----------
         (State or other jurisdiction of                 (I.R.S. Employer
         incorporation or organization)                 Identification No.)

                  1617 Broadway
                  P.O. Box 5240
                 Lubbock, Texas                                79408
                 --------------                                -----
    (Address of principal executive offices)                (Zip Code)

                                 (806) 749-1850
                                 --------------
              (Registrant's telephone number, including area code)

            547 Chestnut Street, P.O. Box 3296, Abilene, Texas 79604
            --------------------------------------------------------
                         (Former address of Registrant)

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

                                  YES /X/  NO / /

              Indicate the number of shares outstanding of each of
              the issuer's classes of common stock at June 30, 2001.
                  Class: Common Stock, par value $0.25 per share
                  Outstanding at June 30, 2001: 2,273,647 shares

<Page>

                                     PART I

                              FINANCIAL INFORMATION


Item 1. Financial Statements.
























                                       2
<Page>

                          INDEPENDENT BANKSHARES, INC.
                           CONSOLIDATED BALANCE SHEETS
                       JUNE 30, 2001 AND DECEMBER 31, 2000

<Table>
<Caption>
                                                                                   JUNE 30,         DECEMBER 31,
                                                                                     2001               2000
                                                                                ---------------   -----------------
ASSETS                                                                             UNAUDITED           AUDITED
<S>                                                                             <C>               <C>
Cash and Cash Equivalents:
   Cash and Due from Banks                                                      $    29,896,000   $     45,415,000
   Interest-earning Time Deposits                                                       502,000            500,000
   Federal Funds Sold                                                                80,725,000         39,270,000
                                                                                ---------------    ---------------
       Total Cash and Cash Equivalents                                              111,123,000         85,185,000
                                                                                ---------------   ----------------
Securities:
   Available-for-sale                                                               173,941,000        163,666,000
   Held-to-maturity                                                                           0         13,517,000
                                                                                ---------------   ----------------
       Total Securities                                                             173,941,000        177,183,000
                                                                                ---------------   ----------------
Loans:
   Total Loans                                                                      313,630,000        367,059,000
   Less:
     Unearned Income on Installment Loans                                                58,000            126,000
     Allowance for Possible Loan Losses                                               5,387,000          8,379,000
                                                                                ---------------   ----------------
       Net Loans                                                                    308,185,000        358,554,000
                                                                                ---------------   ----------------
Intangible Assets                                                                    47,043,000         49,176,000
Premises and Equipment                                                               16,103,000         15,855,000
Accrued Interest Receivable                                                           4,930,000          8,014,000
Other Real Estate and Other Repossessed Assets                                          929,000            576,000
Other Assets                                                                         11,699,000          2,653,000
                                                                                ---------------   ----------------
           Total Assets                                                         $   673,953,000   $    697,196,000
                                                                                ===============   ================
LIABILITIES AND STOCKHOLDER'S EQUITY

Liabilities:
Deposits:
   Noninterest-bearing Demand Deposits                                          $    97,075,000   $    100,795,000
   Interest-bearing Demand Deposits                                                 184,075,000        188,952,000
   Interest-bearing Time Deposits                                                   295,457,000        303,224,000
                                                                                ---------------   ----------------
       Total Deposits                                                               576,607,000        592,971,000
Fed Funds Purchased and Securities Sold Under
   Agreement to Repurchase                                                              119,000                  0
Accrued Interest Payable                                                              2,114,000          2,491,000
Other Liabilities                                                                     5,181,000          8,846,000
                                                                                ---------------   ----------------
         Total Liabilities                                                          584,021,000        604,308,000
                                                                                ---------------   ----------------
Guaranteed Preferred Beneficial Interests in the
   Company's Subordinated Debentures                                                 10,911,000         10,904,000
                                                                                ---------------   ----------------
Stockholder's Equity:
Common Stock                                                                            568,000            568,000
Additional Paid-in Capital                                                           80,961,000         81,079,000
Retained Earnings (Deficit)                                                          (5,230,000)        (1,281,000)
Accumulated Other Comprehensive Income                                                2,722,000          1,618,000
                                                                                ---------------   ----------------
         Total Stockholder's Equity                                                  79,021,000         81,984,000
                                                                                ---------------   ----------------
           Total Liabilities and Stockholder's Equity                           $   673,953,000   $    697,196,000
                                                                                ===============   ================
</Table>

          See Accompanying Notes to Consolidated Financial Statements.

                                       3
<Page>

                          INDEPENDENT BANKSHARES, INC.
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
           QUARTERS AND SIX-MONTH PERIODS ENDED JUNE 30, 2001 AND 2000
                                   (UNAUDITED)

<Table>
<Caption>
                                                                                                SIX MONTH PERIOD
                                                            QUARTER ENDED JUNE 30,                ENDED JUNE 30,
                                                       -------------------------------   ------------------------------
                                                                         (PREDECESSOR)                    (PREDECESSOR)
                                                                          (SEE NOTE 2)                     (SEE NOTE 2)
                                                            2001              2000            2001            2000
                                                       --------------    -------------   --------------   -------------
<S>                                                    <C>               <C>             <C>              <C>
Interest Income:
   Interest and Fees on Loans                          $    6,854,000    $   4,368,000   $   14,873,000   $   8,714,000
   Interest on Securities                                   2,642,000        1,498,000        5,604,000       3,056,000
   Interest on Deposits in Other Banks                          7,000                0           14,000               0
   Interest on Federal Funds Sold                             842,000          375,000        1,693,000         621,000
                                                       --------------    -------------   --------------   -------------
     Total Interest Income                                 10,345,000        6,241,000       22,184,000      12,391,000
                                                       --------------    -------------   --------------   -------------
Interest Expense:
   Interest on Deposits                                     5,296,000        2,608,000       11,283,000       5,135,000
   Interest on Federal funds Purchased and
     Securities sold under Agreements to
     Repurchase                                                 1,000                0            2,000               0
                                                       --------------    -------------   --------------   -------------
     Total Interest Expense                                 5,297,000        2,608,000       11,285,000       5,135,000
                                                       --------------    -------------   --------------   -------------
       Net Interest Income                                  5,048,000        3,633,000       10,899,000       7,256,000
   Provision for Loan Losses                                2,930,000          400,000        4,565,000         510,000
                                                       --------------    -------------   --------------   -------------
         Net Interest Income After
           Provision for Loan Losses                        2,118,000        3,233,000        6,334,000       6,746,000
                                                       --------------    -------------   --------------   -------------
Noninterest Income:
   Service Charges                                            860,000          649,000        1,734,000       1,328,000
   Trust Fees                                                 120,000           50,000          268,000         117,000
   Other Income                                               379,000           54,000          627,000         120,000
                                                       --------------    -------------   --------------   -------------
     Total Noninterest Income                               1,359,000          753,000        2,629,000       1,565,000
                                                       --------------    -------------   --------------   -------------
Noninterest Expenses:
   Salaries and Employee Benefits                           2,690,000        1,509,000        5,555,000       3,010,000
   Net Occupancy Expense                                      431,000          293,000          896,000         577,000
   Equipment Expense                                          497,000          302,000          956,000         589,000
   Distributions on Guaranteed Preferred
     Beneficial Interests in the Company's
     Subordinated Debentures                                  279,000          276,000          559,000         552,000
   Amortization of Intangible Assets                        1,022,000          167,000        2,044,000         335,000
   Merger-related Expense                                           0          102,000           51,000         311,000
   Stationery, Printing and Supplies Expense                  136,000          155,000          323,000         294,000
   Professional Fees                                          259,000          118,000          552,000         242,000
   Communication Expense                                      224,000           79,000          443,000         160,000
   Data Processing Expense                                    153,000           39,000          337,000          82,000
   Advertising and Business Development
     Expense                                                  140,000           55,000          280,000         109,000
   Net Costs (Revenues) Applicable to Other Real
      Estate and Other Repossessed Assets                       9,000           11,000          (12,000)         17,000
   Other Expenses                                             802,000          401,000        1,603,000         808,000
                                                       --------------    -------------   --------------   -------------
     Total Noninterest Expenses                             6,642,000        3,507,000       13,587,000       7,086,000
                                                       --------------    -------------   --------------   -------------
         Income (Loss) Before Federal Income
           Taxes                                           (3,165,000)         479,000       (4,624,000)      1,225,000
   Federal Income Tax Expense (Benefit)                      (993,000)         169,000       (1,375,000)        422,000
                                                       ---------------   -------------   ---------------  -------------
              Net Income (Loss)                            (2,172,000)         310,000       (3,249,000)        803,000
Other Comprehensive Income, Net of Taxes:
   Unrealized Holding Gains on
     Available-for-sale Securities Arising
     During the Period                                              0           71,000        1,104,000         148,000
                                                       --------------    -------------   --------------   -------------
              Comprehensive Income (Loss)              $   (2,172,000)   $     381,000   $   (2,145,000)  $     951,000
                                                       ===============   =============   ===============  =============
</Table>

          See Accompanying Notes to Consolidated Financial Statements.

                                       4
<Page>

                          INDEPENDENT BANKSHARES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 SIX MONTH PERIODS ENDED JUNE 30, 2001 AND 2001
                                   (UNAUDITED)

<Table>
<Caption>
                                                                                              2001            2000
                                                                                         ------------     -------------
                                                                                                          (PREDECESSOR)
                                                                                                           (SEE NOTE 2)
<S>                                                                                     <C>               <C>
Cash Flows from Operating Activities:
     Net Income (Loss)                                                                  $  (3,249,000)    $     803,000
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by
   (Used in) Operating Activities:
     Depreciation and Amortization                                                          2,468,000           701,000
     Provision for Loan Losses                                                              4,565,000           510,000
     Gains on Sales of Securities                                                                   0            (1,000)
     Gains on Sales of Premises and Equipment                                                 (34,000)                0
     Gains on Sales of Other Real Estate and Other Repossessed Assets                         (30,000)                0
     (Gain)/Loss on Sale of Investments                                                         1,000                 0
     Writedown of Other Real Estate and Other Repossessed Assets                               13,000             3,000
     Decrease in Accrued Interest Receivable                                                3,084,000           141,000
     (Increase) in Other Assets                                                            (9,936,000)         (154,000)
     Increase (Decrease) in Accrued Interest Payable                                         (377,000)           23,000
     Increase (Decrease) in Other Liabilities                                              (5,223,000)          152,000
                                                                                        --------------    -------------
         Net Cash Provided by (used in) Operating Activities                               (8,718,000)        2,178,000
                                                                                        --------------    -------------

Cash Flows from Investing Activities:
     Proceeds from Maturities of Available-for-sale Securities                             40,661,000        10,128,000
     Proceeds from Maturities of Held-to-maturity Securities                                        0         3,923,000
     Proceeds from Sales of Available-for-sale Securities                                  59,919,000         3,000,000
     Purchases of Available-for-sale Securities                                           (95,323,000)       (4,891,000)
     Purchases of Held-to-maturity Securities                                                       0        (5,836,000)
     Net Decrease in Loans                                                                 45,769,000         3,033,000
     Proceeds from Sales of Premises and Equipment                                            340,000                 0
     Net Additions to Premises and Equipment                                               (1,312,000)          (79,000)
     Proceeds from Sales of Other Real Estate and Other Repossessed Assets                    547,000           317,000
                                                                                       --------------     -------------
          Net Cash Provided by Investing Activities                                        50,601,000         9,595,000
                                                                                       --------------     -------------

Cash Flows from Financing Activities:
     Decrease in Deposits                                                                 (16,364,000)       (7,541,000)
     Increase in Federal Funds Purchased and Securities Sold
       Under Agreement to Repurchase                                                          119,000                 0
     Advances from Parent Company                                                           1,000,000                 0
     Payment of Cash Dividends                                                               (700,000)         (273,000)
                                                                                       --------------     -------------
          Net Cash Used in Financing Activities                                           (15,945,000)       (7,814,000)
                                                                                       --------------     -------------
Net Increase in Cash and Cash Equivalents                                                  25,938,000         3,959,000
Cash and Cash Equivalents at Beginning of Period                                           85,185,000        38,760,000
                                                                                       --------------     -------------

Cash and Cash Equivalents at End of Period                                             $  111,123,000     $  42,719,000
                                                                                       ==============     =============

Noncash Investing Activities:
     Additions to Other Real Estate and Other Repossessed
          Assets Through Foreclosures                                                  $      884,000     $     309,000
</Table>

          See Accompanying Notes to Consolidated Financial Statements.

                                       5
<Page>

                          INDEPENDENT BANKSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         For information with regard to significant accounting policies,
reference is made to Notes to Consolidated Financial Statements included in
the Annual Report on Form 10-K for the year ended December 31, 2000, which
was filed with the Securities and Exchange Commission pursuant to Section 13
or 15(d) of the Securities and Exchange Act of 1934, as amended.

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

(2)      BANK MERGERS

         On October 24, 2000, State National Bancshares, Inc., Lubbock, Texas
("State National"), the Company's parent corporation, contributed its
ownership interest in United Bank & Trust, Abilene, Texas ("UB&T") to the
Company. The Company, in turn, contributed to Independent Financial Corp., a
Delaware subsidiary of the company, all of the capital stock of UB&T. On
November 10, 2000, UB&T was merged (the "UB&T Merger") with and into First
State Bank, National Association, Abilene, Texas ("First State"), an indirect
wholly owned subsidiary of the Company. At the time of the UB&T Merger, the
name of the resulting bank was changed to State National Bank of West Texas,
Abilene, Texas (the "Abilene Bank"). There was no consideration paid as,
prior to the transaction, First State and UB&T were both direct or indirect
subsidiaries of State National. The transaction was accounted for similar to
a pooling of interests. As a result of the transaction, the balance sheet and
results of operations of UB&T have been included in the Company's
consolidated financial statements since August 11, 2000, the date of the
acquisition of the Company by State National (the "Acquisition"). At August
11, 2000, UB&T had total assets of $112,806,000, total deposits of
$93,946,000, total loans of $70,230,000 and total stockholder's equity of
$16,729,000.

         On February 28, 2001, State National contributed its ownership
interest in State National Bank of West Texas, Lubbock, Texas (the "Lubbock
Bank"), an indirect wholly owned subsidiary of State National, to the
Company. The Company, in turn, contributed to Independent Financial Corp., a
Delaware subsidiary of the Company, all of the capital stock of the Lubbock
Bank. On March 9, 2001, the Abilene Bank, an indirect wholly owned subsidiary
of the Company, was merged (the "Lubbock Merger") with and into the Lubbock
Bank. The Lubbock Bank continued as the surviving entity in the merger (the
"Bank") and is an indirect wholly owned subsidiary of the Company. There was
no merger consideration paid as, prior to the transaction, the Abilene Bank
and the Lubbock Bank were both direct or indirect subsidiaries of State
National. The transaction was accounted for similar to a pooling of interests.

         As a result of the transaction, the consolidated balance sheet for
the Company at December 31, 2000, has been restated to reflect the Lubbock
Merger. The results of operations of UB&T and the Lubbock Bank are included
in the results of operations of the Company from August 11, 2000, the date of
the Acquisition. At December 31, 2000, the Lubbock Bank had total assets of
$216,721,000, total deposits of $196,689,000, total loans of $124,118,000 and
stockholder's equity of $18,664,000.

         Collectively, the UB&T Merger and the Lubbock Merger are referred to
as the Bank Mergers.

                                       6
<Page>

         State National accounted for the Acquisition as a purchase business
combination and purchase accounting adjustments, including goodwill, have
been pushed down and reflected in the consolidated financial statements of
the Company subsequent to August 11, 2000. The consolidated financial
statements of the Company for the periods ended before August 12, 2000
(predecessor), were prepared using the Company's historical basis of
accounting. The comparability of operating results for these periods and the
periods encompassing push down accounting is affected by the purchase
accounting adjustments, including the amortization of goodwill (straight-line
method) and core deposit intangibles (accelerated method) over a period of 20
and 10 years, respectively.

(3)      ACCUMULATED OTHER COMPREHENSIVE INCOME

         An analysis of accumulated other comprehensive income for the
quarters and six-month periods ended June 30, 2001 and 2000, is as follows:

<Table>
<Caption>
                                              Unrealized Gain (Loss) on Available-for-sale Securities
                                          ----------------------------------------------------------------
                                                                                  Six-month Period
                                              Quarter Ended June 30,               Ended June 30,
                                          -------------------------------  -------------------------------
                                                2001            2000            2001             2000
                                          --------------   --------------  --------------   --------------
                                                                   (In thousands)
<S>                                       <C>              <C>             <C>              <C>
Balance, beginning of period                 $ 2,722           $  (266)       $ 1,618          $  (343)
Current period change                              0                71          1,104              148
                                          --------------   --------------  --------------   --------------
   Balance, at June 30                       $ 2,722           $  (195)       $ 2,722          $  (195)
                                          ==============   ==============  ==============   ==============
</Table>

(4)      PENDING ADOPTION OF ACCOUNTING STANDARDS

         In June 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 141, BUSINESS COMBINATIONS,
and No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS, effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill
[and intangible assets deemed to have indefinite lives] will no longer be
amortized but will be subject to annual impairment tests in accordance with
the Statements. Other intangible assets will continue to be amortized over
their useful lives.

         The Company will apply the new rules on accounting for goodwill and
other intangible assets beginning in the first quarter of 2002. Application
of the nonamortization provisions of the Statement is expected to result in
an increase in net income preliminarily estimated to be $2 million per year.
During 2002, the Company will perform the first of the required impairment
tests of goodwill and indefinite lived intangible assets as of January 1,
2002 and has not yet been determined what the effect of these tests will be
on the earnings and financial position of the company.



                                       7
<Page>

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

         THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS AND INFORMATION RELATING TO INDEPENDENT BANKSHARES, INC. (THE
"COMPANY") AND ITS SUBSIDIARIES THAT ARE BASED ON THE BELIEFS OF THE
COMPANY'S MANAGEMENT AS WELL AS ASSUMPTIONS MADE BY AND INFORMATION CURRENTLY
AVAILABLE TO THE COMPANY'S MANAGEMENT. WHEN USED IN THIS REPORT, THE WORDS
"ANTICIPATE," "BELIEVE," "ESTIMATE," "EXPECT" AND "INTEND" AND WORDS OR
PHRASES OF SIMILAR IMPORT, AS THEY RELATE TO THE COMPANY OR ITS SUBSIDIARIES
OR COMPANY MANAGEMENT, ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
SUCH STATEMENTS REFLECT THE CURRENT VIEW OF THE COMPANY WITH RESPECT TO
FUTURE EVENTS AND ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS
RELATED TO CERTAIN FACTORS, MANY OF WHICH ARE BEYOND THE COMPANY'S ABILITY TO
CONTROL OR INFLUENCE, INCLUDING, WITHOUT LIMITATION, COMPETITIVE FACTORS,
GENERAL ECONOMIC CONDITIONS, CUSTOMER RELATIONS, THE INTEREST RATE
ENVIRONMENT, GOVERNMENTAL REGULATION AND SUPERVISION, NONPERFORMING ASSET
LEVELS, LOAN CONCENTRATIONS, CHANGES IN INDUSTRY PRACTICES, ONE TIME EVENTS
AND OTHER FACTORS DESCRIBED HEREIN. BASED UPON CHANGING CONDITIONS, SHOULD
ANY ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD ANY
UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY
FROM THOSE DESCRIBED HEREIN AS ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED OR
INTENDED. THE COMPANY DOES NOT INTEND TO UPDATE THESE FORWARD-LOOKING
STATEMENTS.

THE COMPANY

         The Company is a bank holding company headquartered in Lubbock,
Texas. The Company is an indirect wholly owned subsidiary of State National
Bancshares, Inc., Lubbock, Texas ("State National"). State National acquired
the Company at the close of business on August 11, 2000, in an all cash
transaction (the "Acquisition"). At June 30, 2001, the Company owned all of
the common securities of Independent Capital Trust ("Independent Capital")
and indirectly owned through a Delaware subsidiary, Independent Financial
Corp. ("Independent Financial"), 100% of the stock of State National Bank of
West Texas, Lubbock, Texas (the "Bank"). At June 30, 2001, the Bank operated
full-service banking locations in the Texas cities of Abilene (five
locations), Azle (two locations), Bangs, Big Spring, Lubbock (3 locations),
Odessa (two locations), Plainview, San Angelo, Stamford, Trent and Winters.

ANALYSIS OF RESULTS OF OPERATIONS

GENERAL

         The following discussion and analysis presents the more significant
factors affecting the Company's financial condition at June 30, 2001, and
December 31, 2000, and results of operations for each of the quarters and
six-month periods ended June 30, 2001 and 2000. This discussion and analysis
should be read in conjunction with the Consolidated Financial Statements,
notes thereto and other financial information appearing elsewhere in this
quarterly report.

NET INCOME (LOSS)

         Net loss for the quarter ended June 30, 2001 amounted to $2,172,000
compared to net income of $310,000 for the quarter ended June 30, 2000. Net
loss for the six-month period ended June 30, 2001, was $3,249,000 compared to
net income of $803,000 for the six-month period ended June 30, 2000. The loss
was primarily due to (i) a $2.93 million provision for loan losses that was
made in the second quarter, increasing the total provision in the first half
of 2001 to $4.57 million, (ii) the increase in the amortization of intangible
assets ($855,000 increase in the second quarter of 2001 compared to the same
quarter in 2000 and $1,709,000 increase for the first six months of 2001
compared to the same period of 2000) related to the

                                       8
<Page>

Acquisition, and (iii) the fact that United Bank & Trust, Abilene, Texas
("UB&T") and the State National Bank of West Texas, Lubbock, Texas (the
"Lubbock Bank"), as discussed above were not included in the Company's
Predecessor operations for the June 30, 2000, quarter. See "Provision for
Loan Losses" herein.

NET INTEREST INCOME

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

         Net interest income amounted to $5,048,000 for the second quarter of
2001, an increase of $1,415,000, or 38.9%, from the second quarter of 2000.
Net interest income for the second quarter of 2000 was $3,633,000. Net
interest income for the first six months of 2001 was $10,899,000, an increase
of $3,643,000, or 50.2%, from net interest income of $7,256,000 for the first
six months of 2000. The increases in 2001 were primarily due to the addition
of interest-earning assets resulting from the merger of UB&T, a wholly owned
subsidiary of State National, with and into First State Bank, National
Association, a wholly owned subsidiary of the Company, which, at the time of
such merger, changed its name to State National Bank of West Texas, Abilene,
Texas, (the "Abilene Bank"), and the merger of the Abilene Bank with and into
State National Bank of West Texas, Lubbock, Texas (the "Lubbock Bank")
(collectively, the "Bank Mergers") partially offset by a decline in net
interest margins. The net interest margin on a fully taxable equivalent basis
decreased to 3.54% and 3.77% for the second quarter and first six months of
2001, respectively, from 4.68% for the second quarter and the first six
months of 2000. The decrease in the net interest margin from the second
quarter of 2000 and the first six months of 2001 is due primarily to
reductions in the prime interest rate from 9.5% at June 30, 2000 to 6.75% as
of June 30, 2001.

         At June 30, 2001, approximately $134,348,000, or 42.8%, of the
Company's total loans, net of unearned income, were loans with floating
interest rates. Approximately 50.3% of loans, excluding loans to individuals,
which are almost exclusively fixed rate in nature, were loans with floating
interest rates thereby subjecting 50.3% of loans, excluding loans to
individuals to rapidly declining interest rates. In addition, total loans,
net of discount, decreased $53,361,000 since December 31, 2000. The decreases
related to loans were offset by increases in yields on securities. Subsequent
to the acquisition of the Company, certain investment securities were sold
and the proceeds reinvested into higher yielding, longer maturity
investments. Thus the security yields for the six month and three-month
periods of 2001 are higher than the comparable 2000 period. These net changes
caused the yield on interest-earning assets to decrease from 7.94% in the
first six months of 2000 to 7.63% in the first six months of 2001. Average
overall rates paid for various types of certificates of deposit increased
from the first half of 2000 to the first half of 2001. For example, the
average rate paid for certificates of deposit less than $100,000 increased
from 5.19% for the first half of 2000 to 5.79% for the first half of 2001,
while the average rate paid by the Company for certificates of deposit of
$100,000 or more also increased from 5.41% during the first six months of
2000 to 6.09% during the first six months of 2001. Rates for certificates of
deposits increased for the six month period and three month period of 2001 as
compared to the same period in 2000 primarily due to a lag effect in
certificate of deposit pricing in an environment of rapidly declining market
rates. Rates on other types of deposits, such as interest-bearing demand,
savings and money market deposits, increased from an average of 2.04% during
the first half of 2000 to an average of 2.37% during the first half of 2001.
These changes caused the Company's overall cost of interest-bearing deposits
to increase from 3.99% for the first six months of 2000 to 4.57% for the
first six months of 2001.

                                       9
<Page>

         The following table presents the average balance sheets of the
Company for the quarters and six-month periods ended June 30, 2001 and 2000,
and indicates the interest earned or paid on the major categories of
interest-earning assets and interest-bearing liabilities on a fully
taxable-equivalent basis and the average rates earned or paid on each major
category. This analysis details the contribution of interest-earning assets
and the impact of the cost of funds on overall net interest income.

<Table>
<Caption>
                                                                      Quarter Ended June 30,
                                                ----------------------------------------------------------------
                                                             2001(1)                             2000
                                                -------------------------------     ----------------------------
                                                              Interest                         Interest
                                                  Average      Income/   Yield/      Average   Income/    Yield/
                                                  Balance     Expense     Rate       Balance   Expense     Rate
                                                ------------  --------  -------     -------  ---------  --------
ASSETS                                                                (Dollars in thousands)
<S>                                            <C>          <C>         <C>       <C>        <C>        <C>
Interest-earning assets:
   Loans, net of unearned income (2)           $ 329,721    $   6,854     8.31%   $  184,810   $   4,368     9.45%
   Securities (3)                                166,101        2,702     6.51       106,537       1,558     5.85
   Interest-earning time deposits in other
     banks                                           502            7     5.58             0           0     0.00
   Federal funds sold                             80,441          842     4.19        24,138         375     6.21
                                               ---------    ---------   ------    ----------   ---------   ------
       Total interest-earning assets             576,765       10,405     7.22       315,485       6,301     7.99
                                               ---------    ---------   ------    ----------   ---------   ------
Noninterest-earning assets:
   Cash and due from banks                        32,132                              18,408
   Intangible assets                              47,274                               9,905
   Premises and equipment                         16,170                               9,589
   Accrued interest receivable
     and other assets                             12,073                               6,229
   Allowance for possible loan losses             (9,210)                             (1,847)
                                               ---------                          ----------
       Total noninterest-earning assets           98,439                              42,284
                                               ---------                          ----------
           Total assets                        $ 675,204                          $  357,769
                                               =========                          ==========

LIABILITIES AND STOCKHOLDER'S EQUITY
Interest-bearing liabilities:
   Savings and money market deposits           $ 183,460    $     923     2.01%   $  101,339   $     518     2.05%
   Time deposits                                 303,767        4,373     5.76       154,734       2,090     5.40
   Federal funds purchased and securities
     sold under agreements to repurchase             116            1     3.45             0           0     0.00
                                               ---------    ---------   ------    ----------   ---------   ------
       Total interest-bearing liabilities        487,343        5,297     4.35       256,073       2,608     4.08
                                               ---------    ---------   ------    ----------   ---------   ------
Noninterest-bearing liabilities:
   Demand deposits                                95,510                              60,352
   Accrued interest payable and
     other liabilities                             5,263                               2,135
                                               ---------                          ----------
       Total noninterest-bearing liabilities     100,773                              62,487
                                               ---------                          ----------
           Total liabilities                     588,116                             318,560
Guaranteed preferred beneficial interests
   in the Company's subordinated debentures       10,917                              13,000
Stockholder's equity                              76,171                              26,209
                                               ---------                          ----------
              Total liabilities and
                stockholder's equity           $ 675,204                          $  357,769
                                               =========                          ==========

Net interest income                                         $   5,108                          $   3,693
                                                            =========                          =========
Interest rate spread (4)                                                  2.87%                            3.91%
                                                                          ====                             ====
Net interest margin (5)                                                   3.54%                            4.68%
                                                                          ====                             ====
</Table>
------------------------------
(1)  The Average Balance and Interest Income/Expense columns include the balance
     sheet and income statement accounts of the Lubbock Bank beginning on
     January 1, 2001
(2)  Nonaccrual loans are included in the Average Balance columns, and income
     recognized on these loans, if any, is included in the Interest
     Income/Expense columns. Interest income on loans includes fees on loans,
     which are not material in amount.
(3)  Nontaxable interest income on securities was adjusted to a taxable yield
     assuming a tax rate of 34%.
(4)  The interest rate spread is the difference between the average yield on
     interest-earning assets and the average cost of interest-bearing
     liabilities.
(5)  The net interest margin is equal to net interest income, on a fully
     taxable-equivalent basis, divided by average interest-earning assets.

                                       10
<Page>

<Table>
<Caption>
                                                                 Six-Month Period Ended June 30,
                                               -------------------------------------------------------------------
                                                             2001(1)                             2000
                                               -------------------------------    --------------------------------
                                                            Interest                           Interest
                                                Average      Income/    Yield/     Average      Income/    Yield/
                                                Balance      Expense     Rate      Balance      Expense     Rate
                                               ---------    ---------   ------    ----------   ---------   ------
ASSETS                                                                (Dollars in thousands)
<S>                                            <C>          <C>        <C>        <C>          <C>         <C>
Interest-earning assets:
   Loans, net of unearned income (2)           $ 342,646    $  14,873     8.68%   $  185,486   $   8,714     9.40%
   Securities (3)                                170,029        5,726     6.74       109,015       3,174     5.82
   Interest-earning time deposits in
     other banks                                     502           14     5.58             0           0     0
   Federal funds sold                             71,483        1,693     4.74        20,797         621     5.97
                                               ---------    ---------   ------    ----------   ---------   ------
       Total interest-earning assets             584,660       22,306     7.63       315,298      12,509     7.94
                                               ---------    ---------   ------    ----------   ---------   ------
Noninterest-earning assets:
   Cash and due from banks                        34,010                              19,419
   Intangible assets                              47,887                               9,989
   Premises and equipment                         16,020                               9,661
   Accrued interest receivable
     and other assets                             12,151                               6,097
   Allowance for possible loan losses             (8,374)                             (1,825)
                                               ---------                          ----------
       Total noninterest-earning assets          101,694                              43,341
                                               ---------                          ----------
         Total assets                          $ 686,354                          $  358,639
                                               =========                          ==========

LIABILITIES AND STOCKHOLDER'S EQUITY
Interest-bearing liabilities:
   Savings and money market deposits           $ 185,218    $   2,192     2.37%   $  102,210   $   1,043     2.04%
   Time deposits                                 308,034        9,091     5.90       155,478       4,092     5.26
   Federal funds purchased and securities
     sold under agreement to repurchase               96            2     4.17             0           0     0.00
                                               ---------    ---------   ------    ----------   ---------   ------
       Total interest-bearing liabilities        493,348       11,285     4.57       257,688       5,135     3.99
                                               ---------    ---------   ------    ----------   ---------   ------
Noninterest-bearing liabilities:
   Demand deposits                                95,362                              59,922
   Accrued interest payable and
     other liabilities                             7,711                               2,102
                                               ---------                          ----------
       Total noninterest-bearing liabilities     103,073                              62,024
                                               ---------                          ----------
          Total liabilities                      596,421                             319,712
Guaranteed preferred beneficial interests
   in the Company's subordinated debentures       10,911                              13,000
Stockholder's equity                              79,022                              25,927
                                               ---------                          ----------
            Total liabilities and
              stockholder's equity             $ 686,354                          $  358,639
                                               =========                          ==========

Net interest income                                         $  11,021                          $   7,374
                                                            =========                          =========
Interest rate spread (4)                                                  3.06%                            3.95%
                                                                          ====                             ====
Net interest margin (5)                                                   3.77%                            4.68%
                                                                          ====                             ====
</Table>

------------------------------
(1)  The Average Balance and Interest Income/Expense columns include the balance
     sheet and income statement accounts of the Lubbock Bank beginning on
     January 1, 2001.
(2)  Nonaccrual loans are included in the Average Balance columns, and income
     recognized on these loans, if any, is included in the Interest
     Income/Expense columns. Interest income on loans includes fees on loans,
     which are not material in amount.
(3)  Nontaxable interest income on securities was adjusted to a taxable yield
     assuming a tax rate of 34%.
(4)  The interest rate spread is the difference between the average yield on
     interest-earning assets and the average cost of interest-bearing
     liabilities.
(5)  The net interest margin is equal to net interest income, on a fully
     taxable-equivalent basis, divided by average interest-earning assets.

                                       11
<Page>

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

<Table>
<Caption>
                                                      Quarters Ended                     Six-month Periods Ended
                                                  June 30, 2001 vs. 2000                  June 30, 2001 vs. 2000
                                           -----------------------------------     ----------------------------------
                                                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 (1)        $  3,013    $   (527)      $ 2,486      $  6,827    $   (668)    $  6,159
   Securities (2)                                968         176         1,144         2,051         501        2,552
   Interest-earning time deposits in
     Other banks                                   7           0             7            14           0           14
   Federal funds sold                            591        (122)          469         1,200        (128)       1,072
                                            --------    ---------      -------      --------    ---------    --------
         Total interest income                 4,579        (473)        4,106        10,092        (295)       9,797
                                            --------    ---------      -------      --------    ---------    --------

Interest-bearing liabilities:
   Deposits:
     Savings and money market deposits           415         (10)          405           980         169        1,149
     Time deposits                             2,144         139         2,283         4,501         498        4,999
     Federal Funds purchased and
       Securities sold under
       Agreements to repurchase                    1           0             1             2           0            2
                                            --------    --------       -------      --------    --------     --------
         Total interest expense                2,560         129         2,689         5,483         667        6,150
                                            --------    --------       -------      --------    --------     --------

Increase in net interest income             $  2,019    $   (602)      $ 1,417      $  4,609    $   (962)    $  3,647
                                            ========    =========      =======      ========    =========    ========
</Table>

------------------------------
(1) Nonaccrual loans have been included in average assets for the purposes of
    the computations, thereby reducing yields.
(2) Information with respect to tax-exempt securities is provided on a fully
    taxable-equivalent basis assuming a tax rate of 34%.

PROVISION FOR LOAN LOSSES

         The amount of the provision for loan losses is based on periodic
(not less than quarterly) evaluations of the loan portfolio, especially
nonperforming and other potential problem loans. During these evaluations,
consideration is given to such factors as: management's evaluation of
specific loans; the level and composition of nonperforming loans; historical
loss experience; results of examinations by regulatory agencies; an internal
asset review process conducted by the Company; expectations of economic
conditions and their impact on particular industries and individual
borrowers; the market value of collateral; the strength of available
guarantees; concentrations of credits; and other judgmental factors. The
provisions for loan losses made for the quarter and six-month period ended
June 30, 2001, were $2,930,000 and $4,565,000, respectively, compared to
$400,000 and $510,000 for the quarter and six-month period ended June 30,
2000, respectively. These represent increases of $2,530,000, and $4,055,000,
respectively. The primary reason for the substantially larger provisions was
the further deterioration of the Bank's collateral position on two particular
large borrowing relationships which existed at the date of the Acquisition.
The outstanding loan balances associated with these relationships have been
reduced, through loan charge-offs, to estimated net realizable balances of
the underlying collateral.

                                       12
<Page>

NONINTEREST INCOME

         Total noninterest income increased $606,000, or 80.5%, from $753,000
during the second quarter of 2000 to $1,359,000 during the second quarter of
2001. Total noninterest income also increased $1,064,000, or 67.9%, from
$1,565,000 for the first six months of 2000 to $2,629,000 for the first six
months of 2001.

         Service charges on deposit accounts and on other types of services
are the major source of noninterest income to the Company. This source of
income increased $211,000, or 32.5%, from $649,000 during the second quarter
of 2000 to $860,000 during the second quarter of 2001, and increased
$406,000, or 30.6%, from $1,328,000 for the first six months of 2000 to
$1,734,000 for the first six months of 2001. The increase was primarily due
to the Bank Mergers.

         Trust fees from the operation of the trust department of the Bank
increased $70,000, or 140.0%, from $50,000 during the second quarter of 2000
to $120,000 during the same period in 2001, and increased $151,000, or
129.1%, from $117,000 for the first six months of 2000 to $268,000 for the
first six months of 2001. The increase was primarily the result of the
purchase of the management of approximately $33,000,000 in trust assets from
another trust company during the fourth quarter of 2000.

         Other income is the sum of several components of noninterest income
including other customer service fees, brokerage service fees, credit and
debit card income, safe deposit box rental income and other sources of
miscellaneous income. Other income increased $325,000, or 601.9%, from
$54,000 during the second quarter of 2000 to $379,000 during the second
quarter of 2001, and increased $507,000, or 422.5%, from $120,000 for the
first six months of 2000 to $627,000 for the corresponding period in 2001.
The increase was primarily due to the Bank Mergers.

NONINTEREST EXPENSES

         Total noninterest expenses increased $3,135,000, or 89.4%, from
$3,507,000 during the second quarter of 2000 to $6,642,000 during the second
quarter of 2001, and increased $6,501,000, or 91.7%, from $7,086,000 during
the first six months of 2000 to $13,587,000 during the first six months of
2001.

         Salaries and employee benefits, the largest single component of
noninterest expense, rose $1,181,000, or 78.3%, from $1,509,000 for the
second quarter of 2000 to $2,690,000 for the corresponding period of 2001,
and increased $2,545,000, or 84.6%, from $3,010,000 for the six-month period
ended June 30, 2000, to $5,555,000 for the corresponding period of 2001. The
increase was primarily a result of the Bank Mergers.

         Net occupancy expense increased $138,000, or 47.1%, from $293,000
for the second quarter of 2000 to $431,000 for the same period in 2001, and
increased $319,000, or 55.3%, from $577,000 for the first six months of 2000
to $896,000 for the first six months of 2001. The increase was primarily a
result of the Bank Mergers.

         Equipment expense increased from $302,000 for the second quarter of
2000 to $497,000 for the corresponding period in 2001, representing an
increase of $195,000, or 64.6%. These expenses also increased $367,000, or
62.3%, from $589,000 for the first six months of 2000 to $956,000 for the
first six months of 2001. The increase was primarily due to the Bank Mergers.

         Distributions on guaranteed preferred beneficial interests in the
Company's subordinated debentures totaled $276,000 for the second quarter of
2000, and $279,000 for the second quarter 2001, an increase of 1.1%

                                       13
<Page>

and totaled $552,000 for the first six month of 2000 and $559,000 for the
first six months of 2001, an increase of 1.3%. The increase was due to the
accretion into expense of the purchase accounting discount recorded on the
Company's Trust Preferred Securities in connection with the Acquisition.

         Amortization of intangible assets increased $855,000, or 512.0%,
from $167,000 during the second quarter of 2000 to $1,022,000 during the
second quarter of 2001, and increased $1,709,000, or 510.1%, from $335,000
for the first six months of 2000 to $2,044,000 for the first six months of
2001. The increase is due to the Acquisition and the Bank Mergers.
Unamortized intangible assets increased from $9,746,000 immediately prior to
the Acquisition to $47,043,000 at June 30, 2001.

         Stationery, printing and supplies expense decreased $19,000, or
12.3%, from $155,000 for the second quarter of 2000 to $136,000 for the
second quarter of 2001, but increased $29,000, or 9.9%, from $294,000 for the
first six months of 2000 to $323,000 for the first six months of 2001. The
overall increase in stationery, printing and supplies expense is due
primarily to the Bank Mergers.

         Professional fees, which include legal, accounting and other
professional fees, increased $141,000, or 119.5%, from $118,000 during the
second quarter of 2000 to $259,000 during the second quarter of 2001, and
increased $310,000, or 128.1%, from $242,000 during the first six months of
2000 to $552,000 for the corresponding period of 2001, due primarily to an
increase in accounting fees associated with various regulatory filings that
were required as a result of the Bank Mergers.

         Communication expense increased $145,000 or 183.5% from $79,000 in
the second quarter of 2000 to $224,000 in the second quarter of 2001, and
increased $283,000 or 176.9% from $160,000 in the first six months of 2000 to
$443,000 for the corresponding period of 2001. The increase was due to
enhanced voice and data communication capacity necessary to support a larger
number of Bank branch locations as a result of the Bank Mergers.

         Data processing expense increased $114,000 or 292.3% from $39,000 in
the second quarter of 2000 to $153,000 in the second quarter of 2001, and
increased $255,000 or 311.0% from $82,000 in the first six months of 2000 to
$337,000 for the corresponding period of 2001. The increase was due to
several data processing conversions that were performed as a result of the
Acquisition and the Bank Mergers and the fact that State National outsources
the Company's data processing function, which had previously been performed
by the Company in-house prior to the Acquisition.

         Advertising and business development expense increased $85,000 or
154.5% from $55,000 in the second quarter of 2000 to $140,000 in the second
quarter of 2001, and increased $171,000 or 156.9% from $109,000 in the first
six months of 2000 to $280,000 for the corresponding period of 2001 due
primarily to the Bank Mergers and the more aggressive advertising and public
relations campaign employed by State National as compared to the Company
prior to the Acquisition.

         Net costs applicable to other real estate and other repossessed
assets consist of expenses associated with holding and maintaining
repossessed assets, the net gain or loss on the sales of such assets, the
write-down of the carrying value of the assets and any rental income that is
credited as a reduction in expense. The Company recorded net costs of $9,000
in the second quarter of 2001 as compared to net costs of $11,000 in the
second quarter of 2000 and recorded net revenue of $ 12,000 for the first six
months of 2001 as compared to net costs of $17,000 for the same period in
2000. The net revenue recorded for the first six months of 2001 was a result
of a gain of approximately $30,000 on the sale of other real estate during
that time period.

                                       14
<Page>

         Merger-related expenses decreased from $102,000 in the second
quarter of 2000 to $0 in the second quarter of 2001 and decreased from
$311,000 in the first six months of 2000 to $51,000 in the corresponding
period for 2001. The total in 2000 related to the Acquisition, while the
total in 2001 related to the Lubbock Merger.

         Other noninterest expense includes, among many other items, postage,
loan and collection expenses, armored car and courier fees, travel,
insurance, ATM transaction expenses, regulatory examinations, franchise taxes
dues and subscriptions, Federal Deposit Insurance Corporation ("FDIC")
insurance expense and directors' fees. These expenses increased $401,000, or
100.0%, from $401,000 during the second quarter of 2000 to $802,000 during
the second quarter of 2001, and increased $795,000, or 98.4%, from $808,000
for the first six months of 2000 to $1,603,000 for the first half of 2001
primarily as a result of the Bank Mergers.

FEDERAL INCOME TAXES

         The Company recorded a federal income tax benefit of $993,000 in the
second quarter of 2001 compared to $169,000 in federal income tax expense in
the second quarter of 2000 and recorded a federal income tax benefit of
$1,375,000 in the first six months of 2001 as compared to $422,000 in federal
income tax expense in the same period for 2000. The benefit recorded during
the first six months of 2001 was due to the net loss incurred during the
first six months of 2001.

IMPACT OF INFLATION

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

ANALYSIS OF FINANCIAL CONDITION

ASSETS

         Total assets decreased $23,243,000, or 3.3%, from $697,196,000 at
December 31, 2000, to $673,953,000 at June 30, 2001, due primarily to
decreases in net loans and cash and due from banks during the first six
months of 2001. These decreases were somewhat offset by an increase in
Federal Funds sold.

CASH AND CASH EQUIVALENTS

         The amount of total cash and cash equivalents increased $25,938,000,
or 30.4%, from $85,185,000 at December 31, 2000, to $111,123,000 at June 30,
2001. The increases in total cash and cash equivalents is due primarily to a
decrease in the outstanding loan balance which was partially offset by the
decrease in the total deposit balance. The inflow of cash received from loan
repayments was partially used to fund the outflow of cash with the decrease
in deposits.

                                       15
<Page>

SECURITIES

         Securities decreased $3,242,000, or 1.8%, from $177,183,000 at
December 31, 2000, to $173,941,000 at June 30, 2001. The decrease in 2001 is
due to securities that matured during the second quarter of 2001 which was
partially offset by reinvestment of those proceeds.

         The Board of Directors of the Bank reviews all securities
transactions monthly and the securities portfolio periodically. The Company's
current investment policy provides for the purchase of U.S. Treasury
securities, federal agency securities and mortgage-backed securities having
average maturities of twelve years or less and for the purchase of state,
county and municipal agencies' securities with maximum maturities of 10
years. The Company's policy is to maintain a securities portfolio with
staggered maturities to meet its overall liquidity needs. Municipal
securities must be rated A or better. Certain school district issues,
however, are acceptable with a Baa rating. All securities totaling
$173,941,000, are classified as available-for-sale and are carried at fair
value at June 30, 2001. The decision to sell securities classified as
available-for-sale is based upon management's assessment of changes in
economic or financial market conditions.

         Certain of the Company's securities are pledged to secure public and
trust fund deposits and for other purposes required or permitted by law. At
June 30, 2001, the book value of U.S. Treasury and other U.S. Government
agency securities so pledged amounted to $49,435,000, or 28.4% of the total
securities portfolio.

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

<Table>
<Caption>
                                                                       June 30, 2001           December 31, 2000
                                                                  ---------------------      --------------------
                                                                    Amount          %          Amount        %
                                                                  ----------     ------      ----------   -------
                                                                               (Dollars in thousands)
<S>                                                               <C>          <C>           <C>          <C>
Carrying value:
   U.S. Treasury securities and obligations of U.S.
     Government agencies and corporations                         $  101,628       58.4%     $  129,040      72.8%
   Mortgage-backed securities and collateralized
         mortgage obligations                                         60,732       34.9          36,671      20.7
   Obligations of states and political subdivisions                    8,343        4.8           8,334       4.7
   Other securities                                                    3,238        1.9           3,138       1.8
                                                                  ----------     ------      ----------   -------

Total carrying value of securities                                $  173,941      100.0%     $  177,183     100.0%
                                                                  ==========     ======      ==========   =======

Total fair value of securities                                    $  173,941                 $  177,161
                                                                  ==========                 ==========
</Table>

         The market value of securities classified as held-to-maturity is
usually different from the reported carrying value of such securities due to
interest rate fluctuations that cause market valuations to change. There were
no securities classified as held-to-maturity at June 30, 2001.

         The following table provides the maturity distribution and weighted
average interest rates of the Company's total securities portfolio at June
30, 2001. The yield has been computed by relating the forward income stream
on the securities, plus or minus the anticipated amortization of premiums or
accretion of discounts, to the carrying value of the securities. The book
value of previous securities classified as held-to-maturity was their cost,
adjusted for previous amortization or accretion. The restatement of the
yields on tax-exempt securities to a fully taxable-equivalent basis has been
computed assuming a tax rate of 34%.

                                       16
<Page>

<Table>
<Caption>
                                                                                         Estimated       Weighted
Type and Maturity Grouping                                  Principal      Carrying        Fair           Average
      at June 30, 2001                                        Amount        Value         Value            Yield
-------------------------------                            -----------    ----------    -----------     ----------
                                                                           (Dollars in thousands)
<S>                                                        <C>            <C>           <C>             <C>
U.S. Treasury securities and obligations of U.S.
   Government agencies and corporations:
   Within one year                                         $   25,024     $   25,453    $    25,453        6.51%
   After one but within five years                             55,892         58,213         58,213        6.69
   After five but within ten years                             17,386         17,962         17,962        6.37
                                                           ----------     ----------    -----------      ------
     Total U.S. Treasury securities and obligations of
       U.S. Government agencies and corporations               98,302        101,628        101,628        6.60
                                                            ---------     ----------    -----------      ------

Mortgage-backed securities and collateralized
     mortgage                                                  60,059         60,732         60,732        6.05
                                                           ----------     ----------    -----------      ------

Obligations of states and political subdivisions:
   Within one year                                              1,529          1,535          1,535        6.96
   After one but within five years                              5,055          5,125          5,125        7.01
   After five but within ten years                              1,514          1,554          1,554        6.80
   After ten years                                                120            129            129        8.22
                                                           ----------     ----------    -----------      ------
     Total obligations of states and political
       subdivisions                                             8,218          8,343          8,343        6.98
                                                           ----------     ----------    -----------      ------

Other securities:
   Within one year                                                  0              0              0          --
   After one but within five years                                  0              0              0          --
   After five but within ten years                                  0              0              0          --
   After ten years                                              3,238          3,238          3,238        3.05
                                                           ----------     ----------    -----------      ------
     Total other securities                                     3,238          3,238          3,238        3.05
                                                           ----------     ----------    -----------      ------

       Total securities                                    $  169,817     $  173,941    $   173,941        6.37%
                                                           ==========     ==========    ===========      ======
</Table>

LOAN PORTFOLIO

         Total loans, net of unearned income, decreased $53,361,000, or
14.5%, from $366,933,000 at December 31, 2000, to $313,572,000 at June 30,
2001. The decrease during the first six months of 2001 was primarily a result
of a decrease in (i) commercial loans associated with a restructuring of the
general loan portfolio, due to the acquisition, (ii) loans to individuals and
(iii) agriculture-related loans due to seasonality of these types of loans.

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

                                       17
<Page>

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

<Table>
<Caption>
                                                                            June 30,          December 31,
                                                                              2001                 2000
                                                                          ------------        ------------
                                                                                  (In thousands)
<S>                                                                       <C>                 <C>
         Real estate loans                                                $    126,257        $    127,510
         Commercial loans                                                      108,916             127,205
         Loans to individuals                                                   46,660              53,308
         Other loans                                                            31,797              59,036
                                                                          ------------        ------------
           Total loans                                                         313,630             367,059
         Less unearned income                                                       58                 126
                                                                          ------------        ------------
           Loans, net of unearned income                                  $    313,572        $    366,933
                                                                          ============        ============
</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 Company had no concentrations of loans at June 30, 2001, except for those
described in the above table. The Bank had no loans outstanding to foreign
countries or borrowers headquartered in foreign countries at June 30, 2001.

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

         The following table presents the distribution of the maturity of the
Company's loans and the interest rate sensitivity of those loans, excluding
loans to individuals, at June 30, 2001. The table also presents the portion
of loans that have fixed interest rates or interest rates that fluctuate over
the life of the loans in accordance with changes in the money market
environment as represented by the prime rate.

<Table>
<Caption>
                                                                       One to          Over           Total
                                                       One Year         Five           Five         Carrying
                                                       and Less         Years          Years          Value
                                                     -----------     -----------    ----------    -----------
                                                                           (In thousands)
<S>                                                  <C>             <C>            <C>           <C>
         Real estate loans                            $   51,214     $   62,631     $   12,412    $   126,257
         Commercial loans                                 84,863         23,045          1,008        108,916
         Other loans                                      29,481          2,246             70         31,797
                                                      ----------     ----------     ----------    -----------
           Total loans                                $  165,558     $   87,922     $   13,490    $   266,970
                                                      ==========     ==========     ==========    ===========

         With fixed interest rates                    $   34,637     $   85,512     $   12,473    $   132,622
         With variable interest rates                    130,921          2,410          1,017        134,348
                                                      ----------     ----------     ----------    -----------
           Total loans                                $  165,558     $   87,992     $   13,490    $   266,970
                                                      ==========     ==========     ==========    ===========
</Table>

ALLOWANCE FOR LOAN LOSSES

         Implicit in the Company's lending activities is the fact that loan
losses will be experienced and that the risk of loss will vary with the type
of loan being made and the creditworthiness of the borrower over the term of
the loan. To reflect the currently perceived risk of loss associated with the
Company's loan portfolio, additions are made to the Company's allowance for
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 loan losses. See "Results of Operations - Provision for
Loan Losses" above.

                                       18
<Page>

         The amount of the allowance equals the cumulative total of the loan
loss provisions made from time to time, reduced by loan charge-offs, and
increased by recoveries of loans previously charged off. The Company's
allowance was $5,387,000, or 1.72% of loans, net of unearned income, at June
30, 2001, compared to $8,379,000, or 2.28% of loans, net of unearned income,
at December 31, 2000.

         Credit and loan decisions are made by management and the Board of
Directors of the Bank in conformity with loan policies established by the
Board of Directors of the Company. The Company's practice is to charge off
any loan or portion of a loan when it is determined by management to be
uncollectible due to the borrower's failure to meet repayment terms, the
borrower's deteriorating or deteriorated financial condition, the
depreciation of the underlying collateral, the loan's classification as a
loss by regulatory examiners or for other reasons. The Company charged off
$6,957,000 and $7,786,000 in loans during the second quarter and first six
months of 2001, respectively. Recoveries during the second quarter and first
six months of 2001 were $158,000 and $229,000, respectively.

         The following table presents the provisions for loan losses, loans
charged off and recoveries on loans previously charged off, the amount of the
allowance, the average loans outstanding and certain pertinent ratios for the
quarters and six-month periods ended June 30, 2001 and 2000.

<Table>
<Caption>
                                                                       Quarter Ended            Six-month Period
                                                                         June 30,                Ended June 30,
                                                                  -----------------------    -----------------------
                                                                      2001         2000         2001         2000
                                                                  ----------    ---------    ----------   ----------
                                                                                 (Dollars in thousands)
<S>                                                               <C>           <C>          <C>          <C>
         Analysis of allowance for loan losses:
         Balance, beginning of period                             $    9,256    $   1,866    $    8,379   $    1,833
           Provision for loan losses                                   2,930          400         4,565          510
                                                                  ----------    ---------    ----------   ----------
                                                                      12,186        2,266        12,944        2,343
                                                                  ----------    ---------    ----------   ----------
         Loans charged off:
           Real estate loans                                               0            0             0            0
           Commercial loans                                            3,789           21         4,259           50
           Loans to individuals                                          401           64           635          138
           Other loans                                                 2,767            0         2,892            6
                                                                  ----------    ---------    ----------   ----------
              Total charge-offs                                        6,957           85         7,786          194
                                                                  ----------    ---------    ----------   ----------
         Recoveries of loans previously charged off:
           Real estate loans                                               2            1             2            1
           Commercial loans                                              110            1           141            6
           Loans to individuals                                           40           20            80           46
           Other loans                                                     6            0             6            1
                                                                  ----------    ---------    ----------   ----------
              Total recoveries                                           158           22           229           54
                                                                  ----------    ---------    ----------   ----------
                Net loan charge-offs                                   6,799           63         7,557          140
                                                                  ----------    ---------    ----------   ----------
         Balance, end of period                                   $    5,387    $   2,203    $    5,387   $    2,203
                                                                  ==========    =========    ==========   ==========

         Average loans outstanding, net of unearned income        $  329,721    $ 184,810    $  342,646   $  185,486
                                                                  ==========    =========    ==========   ==========
         Ratio of net loan charge-offs to average
           loans outstanding, net of unearned income
           (annualized)                                                 8.25%        0.09%         4.41%        0.15%
                                                                        ====         ====          ====         ====
         Ratio of allowance for loan losses to total
           loans, net of unearned income, at end of period              1.72%        1.20%         1.72%        1.20%
                                                                        ====         ====          ====         ====
</Table>

                                       19
<Page>

         The increase in the balance of the allowance from June 30, 2000 to
June 30, 2001, is primarily due to the recording of an additional $3,028,000
in allowance through purchase accounting adjustments in conjunction with the
Acquisition, the fact that UB&T had $1,562,000 in allowance at the date of
the Acquisition, the fact that the Lubbock Bank had $1,481,000 in allowance
at December 31, 2000, and the $4,565,000 provision that was made during the
first half of 2001. The increase is partially offset by loans which have been
charged off in the first half of 2001.

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

         The amount of the allowance is established by management, based upon
estimated risks inherent in the existing loan portfolio. The allowance is
comprised of three components: specific reserves on specific problem loans,
historical loss percentages applied to pools of loans with similar
characteristics, and an unallocated portion. Management reviews the loan
portfolio on a continuing basis to evaluate potential problem loans. This
review encompasses management's estimate of current economic conditions and
the potential impact on various industries, prior loan loss experience and
the financial conditions of individual borrowers. Loans that have been
specifically identified as problem or nonperforming loans are reviewed on at
least a quarterly basis, and management critically evaluates the prospect of
ultimate losses arising from such loans, based on the borrower's financial
condition and the value of available collateral. When a risk can be
specifically quantified for a loan, that amount is specifically allocated in
the allowance. In addition, the Company allocates the allowance based upon
the historical loan loss experience of the different types of loans. Despite
such allocation, both the allocated and unallocated portions of the allowance
are available for charge-offs for all loans.

         The following table shows the allocations in the allowance and the
respective percentages of each loan category to total loans at June 30, 2001,
and December 31, 2000.

<Table>
<Caption>
                                                        June 30, 2001                    December 31, 2000
                                               ------------------------------     ------------------------------
                                                                 Percent of                         Percent of
                                                                  Loans by                           Loans by
                                                 Amount of       Category to       Amount of        Category to
                                                 Allowance      Loans, Net of      Allowance       Loans, Net of
                                               Allocated to       Unearned        Allocated to        Unearned
                                                 Category          Income           Category           Income
                                               -------------    -------------     -------------    -------------
                                                                     (Dollars in thousands)
<S>                                            <C>              <C>               <C>              <C>
Real estate loans                                  $    939           40.3%          $    685            34.7%
Commercial loans                                      1,719           34.7              3,434            34.7
Loans to individuals                                    926           14.9              1,248            14.5
Other loans                                             441           10.1              1,819            16.1
                                                   --------        -------           --------          ------
   Total allocated                                    4,025          100.0%             7,186           100.0%
                                                                   =======                             ======
Unallocated                                           1,362                             1,193
                                                   --------                          --------
Total allowance for possible loan losses           $  5,387                          $  8,379
                                                   ========                          ========
</Table>

                                       20
<Page>

LOAN REVIEW PROCESS

         The Company follows a loan review program to evaluate the credit
risk in its loan portfolio. Through the loan review process, the Bank
maintains an internally classified loan list that, along with the list of
nonperforming loans discussed herein, helps management assess the overall
quality of the loan portfolio and the adequacy of the allowance. Loans
classified as "substandard" are those loans with clear and defined weaknesses
such as highly leveraged positions, unfavorable financial ratios, uncertain
repayment sources, involvement in bankruptcy proceedings 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
usually in the process of being charged off. At June 30, 2001, substandard
loans totaled $9,366,000, of which $7,463,000 were loans designated as
nonaccrual or 90 days past due. Doubtful loans totaled $2,105,000 of which
$1,070,000 were designated as nonaccrual or 90 days past due. There were no
loans designated as loss at June 30, 2001. Substandard and doubtful loans at
December 31, 2000, were $15,082,000 and $1,742,000, respectively.

         In addition to the internally classified loans, the Bank also has a
"watch list" of loans that further assists the Bank in monitoring its loan
portfolio. A loan is included on the watch list if it demonstrates one or
more deficiencies requiring attention in the near term or if the loan's
ratios have weakened to a point where more frequent monitoring is warranted.
These loans do not have all the characteristics of a classified loan
(substandard, doubtful or loss), but do have weakened elements as compared
with those of a satisfactory credit. Management of the Bank reviews these
loans in assessing the adequacy of the allowance. At June 30, 2001, watch
list loans totaled $2,303,000. Substantially all of the loans on the watch
list at June 30, 2001, were current and paying in accordance with loan terms.
See "Nonperforming Assets" herein.

NONPERFORMING ASSETS

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

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

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

                                       21
<Page>

        The following table lists nonaccrual, past due and restructured loans
and other real estate and other repossessed assets at June 30, 2001, and
December 31, 2000.

<Table>
<Caption>
                                                                            June 30,         December 31,
                                                                              2001               2000
                                                                          ------------      ---------------
                                                                                  (In thousands)
<S>                                                                       <C>              <C>
         Nonaccrual loans                                                  $  6,865            $  3,337
         Accruing loans contractually past due over 90 days                   1,668               2,572
         Restructured loans                                                      37                 119
         Other real estate and other repossessed assets                         929                 576
                                                                           --------            --------

         Total nonperforming assets                                        $  9,499            $  6,604
                                                                           ========            ========
</Table>

         The gross interest income that would have been recorded during the
second quarter and first six months of 2001 on the Company's nonaccrual loans
if such loans had been current, in accordance with the original terms thereof
and outstanding throughout the period or, if shorter, since origination, was
approximately $201,000 and $309,000, respectively. No interest income was
actually recorded (received) on loans that were on nonaccrual during the six
month period ended June 30, 2001.

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

INTANGIBLE ASSETS

         Intangible assets decreased $2,133,000, or 4.3%, from $49,176,000 at
December 31, 2000, to $47,043,000 at June 30, 2001. This decrease was due
entirely to core deposit intangible and goodwill amortization expense
recorded during the first six months of 2001.

PREMISES AND EQUIPMENT

         Premises and equipment increased $248,000, or 1.6%, during the first
six months of 2001, from $15,855,000 at December 31, 2000, to $16,103,000 at
June 30, 2001. The increase was due to the purchase of additional software
and equipment. This increase was partially offset by depreciation expense of
$758,000, which was recorded during the first six months of 2001.

ACCRUED INTEREST RECEIVABLE

         Accrued interest receivable consists of interest that has accrued on
securities and loans, but is not yet payable under the terms of the related
agreements. The balance of accrued interest receivable decreased $3,084,000,
or 38.5%, from $8,014,000 at December 31, 2000, to $4,930,000 at June 30,
2001. The decrease was primarily a result of a decrease in loans, primarily
agricultural, on which significant principal and interest payments are
normally received after December 31 and the reclassification during the
period of certain loans to nonaccrual status where interest previously
accrued is reversed. Of the total balance at June 30, 2001, $2,909,000, or
59.0%, was interest accrued on loans and $2,021,000, or 41.0%, was interest
accrued on securities. The amounts of accrued interest receivable and
percentages attributable to loans and securities at December 31, 2000, were
$5,568,000, or 69.5%, and $2,446,000, or 30.5%, respectively.

                                       22
<Page>

OTHER REAL ESTATE AND OTHER REPOSSESSED ASSETS

         Other real estate and other repossessed assets consist of real
property and other assets unrelated to banking premises or facilities. Income
derived from other real estate and other repossessed assets, if any, is
generally less than that which would have been earned as interest at the
original contract rates on the related loans. At June 30, 2001, and December
31, 2000, other real estate and other repossessed assets had an aggregate
book value of $929,000 and $576,000, respectively. Other real estate and
other repossessed assets increased $353,000, or 61.3%, during the first six
months of 2001, primarily due to the repossession of one parcel of real
estate, foreclosure on one residential home and repossession of a business
property.

OTHER ASSETS

         The balance of other assets increased $9,046,000, or 341.0% to
$11,699,000 at June 30, 2001, from $2,653,000 at December 31, 2000, as a
result of the purchase of bank owned life insurance on various officers of
the Bank.

DEPOSITS

         The Bank's lending and investing activities are funded almost
entirely by core deposits, 48.8% of which are demand, savings and money
market deposits at June 30, 2001. Total deposits decreased $16,364,000, or
2.8%, from $592,971,000 at December 31, 2000, to $576,607,000 at June 30,
2001. The decrease was primarily due to decreases in interest rates provided
for deposit accounts. The Bank does not have any brokered deposits.

         The following table presents the average amounts of, and the average
rates paid on, deposits of the Company for the quarters and six-month periods
ended June 30, 2001 and 2000.

<Table>
<Caption>
                                 Quarter Ended June 30,                         Six-Month Period Ended June 30,
                      ---------------------------------------------    ---------------------------------------------
                               2001                     2000                   2001                    2000
                      ---------------------    --------------------    ---------------------   ---------------------
                        Average     Average     Average     Average     Average     Average     Average     Average
                        Amount       Rate       Amount       Rate       Amount       Rate       Amount       Rate
                      ---------    --------    --------    --------    ---------   ---------   ---------   ---------
                                                          (Dollars in thousands)
<S>                   <C>          <C>         <C>         <C>         <C>         <C>         <C>         <C>
Noninterest-bearing
  demand deposits     $  95,510        --%     $ 60,352         --%    $  95,362       --%     $  59,922        --%
Interest-bearing
  demand, savings
  and money
  market deposits       183,460      2.01       101,339       2.05       185,218     2.37        102,210      2.04
Time deposits of less
  than $100,000         188,594      5.62       103,697       5.33       192,233     5.79        103,948      5.19
Time deposits of
  $100,000 or more      115,173      5.98        51,037       5.56       115,801     6.09         51,530      5.41
                      ---------     -----      --------      -----     ---------    -----      ---------     -----
   Total deposits     $ 582,737      3.64%     $316,425       3.30%    $ 588,614     3.83%     $ 317,610      3.23%
                      =========     =====      ========      =====     =========    =====      =========     =====
</Table>

         The maturity distribution of time deposits of $100,000 or more at
June 30, 2001 is presented below.

<Table>
<Caption>
                                                                         At June 30, 2001
                                                                         ----------------
                                                                          (In thousands)
<S>                                                                      <C>
                  3 months or less                                       $     37,513
                  Over 3 through 6 months                                      25,741
                  Over 6 through 12 months                                     33,431
                  Over 12 months                                               14,058
                                                                         ------------

                     Total time deposits of $100,000 or more             $    110,743
                                                                         ============
</Table>

                                       23
<Page>

         Time deposits of $100,000 or more are a more volatile and costly
source of funds than other deposits and are most likely to affect the
Company's future earnings because of interest rate sensitivity. At June 30,
2001, and December 31, 2000, deposits of $100,000 or more represented
approximately 16.4% and 15.5%, respectively, of the Company's total assets.

ACCRUED INTEREST PAYABLE

         Accrued interest payable consists of interest that has accrued on
deposits, but is not yet payable under the terms of the related agreements.
The balance of accrued interest payable decreased $377,000, or 15.1%, from
$2,491,000 at December 31, 2000, to $2,114,000 at June 30, 2001, due to a
decrease in interest rates being paid on interest-bearing time deposits.

OTHER LIABILITIES

         The most significant components of other liabilities are amounts
accrued for various types of expenses and current and deferred federal income
taxes payable. The balance of other liabilities decreased $3,665,000 or
41.4%, from $8,846,000 at December 31, 2000, to $5,181,000 at June 30, 2001,
primarily due to the growth of the Company's deferred tax asset associated
with the net loss of the company for the periods, applied against its
deferred tax liability at June 30, 2001.

INTEREST RATE SENSITIVITY

         Interest rate risk arises when an interest-earning asset matures or
when its rate of interest changes in a time frame different from that of the
supporting interest-bearing liability. The Company seeks to minimize the
difference between the amount of interest-earning assets and the amount of
interest-bearing liabilities that could change interest rates in the same
time frame in an attempt to reduce the risk of significant adverse effects on
the Company's net interest income caused by interest rate changes. The
Company does not attempt to match each interest-earning asset with a specific
interest-bearing liability. Instead, as shown in the following table below,
it aggregates all of its interest-earning assets and interest-bearing
liabilities to determine the difference between the two in specific time
frames. This difference is known as the rate-sensitivity gap. A positive gap
indicates that more interest-earning assets than interest-bearing liabilities
mature in a time frame, and a negative gap indicates the opposite.
Maintaining a balanced position will reduce risk associated with interest
rate changes, but it will not guarantee a stable interest rate spread because
the various rates within a time frame may change by differing amounts and
occasionally change in different directions. Management regularly monitors
the interest sensitivity position and considers this position in its
decisions in regard to interest rates and maturities for interest-earning
assets acquired and interest-bearing liabilities accepted.

         In adjusting the Company's asset/liability position, management
attempts to manage the Company's interest rate risk while enhancing net
interest margins. The rates, terms and interest rate indices of the Company's
interest-earning assets result primarily from the Company's strategy of
investing in loans and securities, which permit the Company to limit its
exposure to interest rate risk, together with credit risk, while at the same
time achieving a positive and relatively stable interest rate spread from the
difference between the income earned on interest-earning assets and the cost
of interest-bearing liabilities.

         The Company's ratios of interest-sensitive assets to
interest-sensitive liabilities, as shown in the following table, are 83.4% at
the 90-day interval, 77.2% at the 180-day interval and 75.9% at the 365-day
interval at June 30 , 2001. Currently, the Company is in a
liability-sensitive position at the three intervals. However, the Company had
$184,075,000 of interest-bearing demand, savings and money market deposits at

                                       24
<Page>

June 30 , 2001, on which, from the Company's experience, interest rates
change more slowly. Therefore, excluding these types of deposits, the
Company's interest-sensitive assets to interest-sensitive liabilities ratio
at the 365-day interval would have been 130.6% at June 30, 2001. The interest
sensitivity position is presented as of a point in time and can be modified
to some extent by management as changing conditions dictate.

         The following table shows the interest rate sensitivity position of
the Company at June 30, 2001.

<Table>
<Caption>
                                                                                            Volumes
                                                        Cumulative Volumes                Subject to
                                                    Subject to Repricing Within           Repricing
                                             -----------------------------------------       After
                                              90 Days        180 Days       365 Days        1 Year         Total
                                             ----------     -----------    -----------    ----------     ----------
<S>                                          <C>            <C>            <C>            <C>            <C>
Interest-earning assets:                                             (Dollars in thousands)
   Federal funds sold                        $   80,725     $    80,725    $    80,725    $        0     $   80,725
   Securities                                    18,648          32,241         71,197       102,744        173,941
   Loans, net of unearned income                135,230         153,550        181,480       132,150        313,630
                                             ----------     -----------    -----------    ----------     ----------
     Total interest-earning assets              234,603         266,516        333,402       234,894        568,296
                                             ----------     -----------    -----------    ----------     ----------
Interest-bearing liabilities:
   Demand, savings and money market
     deposits                                   184,075         184,075        184,075             0        184,075
   Securities sold under agreement to
     Repurchase                                     119             119            119             0            119
   Time deposits                                 97,215         160,855        255,185        40,272        295,457
                                             ----------     -----------    -----------    ----------     ----------
     Total interest-bearing liabilities         281,409         345,049        439,379        40,272        479,651
                                             ----------     -----------    -----------    ----------     ----------
Rate-sensitivity gap(1)                      $  (46,806)    $   (78,533)   $  (105,977)   $  194,622     $   88,645
                                             ==========     ===========    ===========    ==========     ==========

Rate-sensitivity ratio(2)                          83.4%           77.2%          75.9%
                                             ==========     ===========    ===========
</Table>

------------------------------
(1) Rate-sensitive interest-earning assets less rate-sensitive interest-bearing
    liabilities.
(2) Rate-sensitive interest-earning assets divided by rate-sensitive
    interest-bearing liabilities.


                                       25
<Page>

SELECTED FINANCIAL RATIOS

         The following table presents selected financial ratios (annualized)
for the quarters and six-month periods ended June 30, 2001 and 2000.

<Table>
<Caption>
                                                                     Quarter Ended              Six-month Period
                                                                       June 30,                   Ended June 30,
                                                               -----------------------       ----------------------
                                                                  2001         2000            2001          2000
                                                               ---------    ----------       --------     ---------
<S>                                                            <C>          <C>              <C>          <C>
Net income (loss) to:
     Average assets                                             (1.29)%        0.35%          (0.95)%       0.45%
     Average interest-earning assets                            (1.51)         0.39           (1.11)        0.51
     Average stockholder's equity                              (11.41)         4.73           (8.22)        6.19
Dividend payout (1) to:
     Net income                                                   N/A         43.87             N/A        34.00
     Average stockholder's equity                                 N/A          2.08             N/A         2.11
Average stockholder's equity to:
     Average total assets                                       11.28          7.33           11.51         7.23
     Average loans (2)                                          23.10         14.18           23.06        13.98
     Average total deposits                                     13.07          8.28           13.43         8.16
Average interest-earning assets to:
     Average total assets                                       85.42         88.18           85.18        87.92
     Average total deposits                                     98.98         99.70           99.33        99.27
     Average total liabilities                                  98.07         99.03           98.03        98.62
Ratio to total average deposits of:
     Average loans (2)                                          56.58         58.41           58.21        58.40
     Average noninterest-bearing deposits                       16.39         19.07           16.20        18.87
     Average interest-bearing deposits                          83.61         80.93           83.80        81.13
Total interest expense to total interest income                 51.20         41.79           50.87        41.44
Efficiency ratio (3)                                            83.22         69.61           81.28        70.08
</Table>
-------------------------
(1)  Dividends on Common Stock only.
(2)  Before allowance for possible loan losses.
(3)  Calculated as noninterest expense less distributions on guaranteed
     preferred beneficial interests in the Company's subordinated debentures,
     amortization of intangibles and expenses related to other real estate and
     other repossessed assets divided by the sum of net interest income before
     provision for loan losses and total noninterest income, excluding
     securities gains and losses.

LIQUIDITY

THE BANK

         Liquidity with respect to a financial institution is the ability to
meet its short-term needs for cash without suffering an unfavorable impact on
its on-going operations. The need for the Bank to maintain funds on hand
arises principally from maturities of short-term borrowings, deposit
withdrawals, customers' borrowing needs and the maintenance of reserve
requirements. Liquidity with respect to a financial institution can be met
from either assets or liabilities. On the asset side, the primary sources of
liquidity are cash and due from banks, federal funds sold, maturities of
securities and scheduled repayments and maturities of loans. The Bank
maintains adequate levels of cash and near-cash investments to meet its
day-to-day needs. Cash and due from banks averaged $32,132,000 and
$34,010,000 during the second quarter and first six months of 2001,
respectively, and $18,408,000 and $19,419,000 during the second quarter and

                                       26
<Page>

first six months of 2000, respectively. These amounts comprised 4.8% and 5.0%
of average total assets during the second quarter and first six months of
2001, respectively, and 5.1% and 5.4% of average total assets during the
second quarter and first six months of 2000, respectively.

         The average level of securities, interest-earning time deposits in
other banks and federal funds sold was $247,044,000 and $242,014,000 during
the second quarter and first six months of 2001, respectively, and
$130,675,000 and $129,812,000 during the second quarter and first six months
of 2000, respectively. The increases in average balances from 2000 to 2001
were primarily due to the Bank Mergers.

         A total of $59,919,000 of securities classified as
available-for-sale were sold during the quarter and six-month period ended
June 30, 2001, and a total of $1,000,000 and $3,000,000 of securities
classified as available-for-sale were sold during the quarter and six-month
period ended June 30, 2000, respectively. At June 30, 2001, $26,998,000, or
23.8%, of the Company's securities portfolio, excluding mortgage-backed
securities, matured within one year, and $63,338,000, or 55.9%, excluding
mortgage-backed securities, matured after one but within five years. The
Bank's commercial and real estate lending activities are concentrated in
loans with maturities of less than five years with both fixed and adjustable
interest rates, while its installment lending activities are concentrated in
loans with maturities of three to five years and with primarily fixed
interest rates. At June 30, 2001, approximately $181,413,000, or 57.9%, of
the Company's loans, net of unearned income, matured within one year and/or
had adjustable interest rates. Approximately $165,558,000, or 52.9%, of the
Company's loans (excluding loans to individuals) matured within one year
and/or had adjustable interest rates. See "Analysis of Financial Condition -
Loan Portfolio" above.

         On the liability side, the principal sources of liquidity are
deposits, borrowed funds and the accessibility to money and capital markets.
Customer deposits are by far the largest source of funds. During the second
quarter and first six months of 2001, the Company's average deposits were
$582,737,000 and $588,614,000, or 86.3% and 85.8%, of average total assets,
respectively, compared to $316,425,000 and $317,610,000, or 88.4% and 88.6%
of average total assets, respectively, during the second quarter and first
six months of 2000. The Company attracts its deposits primarily from
individuals and businesses located within the market areas served by the
Bank. See "Analysis of Financial Condition - Deposits" above.

THE COMPANY

         The Company depends on the Bank for liquidity in the form of cash
flow, primarily to meet distribution requirements on Independent Capital's
Trust Preferred Securities and to cover other operating expenses. Prior to
the Acquisition, this cash flow came from three sources: (1) dividends
resulting from earnings of the Bank, (2) current tax liabilities generated by
the Bank, and (3) management and service fees for services performed for the
Bank. Subsequent to the Acquisition, the Company ceased charging management
fees to the Bank. Any of the Company's immediate liquidity needs can also be
satisfied by advances from the Company's parent company.

         The payment of dividends to the Company is subject to applicable law
and the scrutiny of regulatory authorities. Dividends paid by the Bank to
Independent Financial during the second quarter and first six months of 2001
were $0 and $700,000, respectively; in turn, Independent Financial and
Independent Capital paid dividends to the Company totaling $8,000 and
$717,000, respectively, during the same time periods of 2001. Dividends paid
by the Bank to Independent Financial during the second quarter and first six
months of 2000 were $450,000 and $900,000, respectively; in turn, Independent
Financial and Independent Capital paid dividends to the Company of $459,000
and $918,000, respectively, during the same time periods. At

                                       27
<Page>

June 30, 2001, there were no dividends available for payment to Independent
Financial by the Bank without regulatory approval.

         There were no current tax liabilities generated by the Bank during
the second quarter and the six month period ended June 30, 2001 due to the
pre-tax loss incurred by the Bank. The payment of current tax liabilities
generated by the Bank and management and service fees constituted 47.8% and
2.6% respectively, of the Company's cash flow during the second quarter of
2000. These percentages were 48.2% and 3.3%, respectively, for the first six
months of 2000. Pursuant to a tax-sharing agreement, the Bank pays to the
Company an amount equal to its individual tax liability on the accrual method
of federal income tax reporting. The accrual method generates more timely
payments of current tax liabilities by the Bank to the Company, increasing
the regularity of cash flow and shifting the time value of such funds to the
Company. In the event that the Bank incurs losses, the Company may be
required to refund tax liabilities previously collected. Current tax
liabilities totaling $900,000 were paid by the Bank to the Company during the
first six months of 2000.

         Prior to the Acquisition, the Bank paid management fees to the
Company for services performed. These services included, but were not limited
to, financial and accounting consultation, attendance at the Bank's board
meetings, audit and loan review services and related expenses. The Bank paid
a total of $25,000 and $63,000 in management fees to the Company during the
second quarter and first six months of 2000, respectively. The Company's fees
had to be reasonable in relation to the management services rendered, and the
Bank was prohibited from paying management fees to the Company if the Bank
would have been under capitalized after any such distribution or payment.

CAPITAL RESOURCES

         At June 30, 2001, stockholders' equity totaled $79,021,000, or 11.7%
of total assets, compared to $81,984,000, or 11.8% of total assets, at
December 31, 2000.

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

         Banking regulators also have leverage ratio requirements. The
leverage ratio requirement is measured as the ratio of Tier 1 capital to
adjusted quarterly average assets. The leverage ratio standards require all
banking companies to have a minimum leverage ratio of at least 4% and to be
designated as well-capitalized, the banking company must have a leverage
ratio of at least 5%. The following table provides a calculation of the
Company's risk-based capital and leverage ratios and a comparison of the
Company's and the Bank's risk-based capital ratios and leverage ratios to the
minimum regulatory and well-capitalized minimum requirements at June 30, 2001.

                                       28
<Page>

<Table>
<Caption>
     The Company                                                                           June 30, 2001
     -----------                                                                           -------------
                                                                                          (In thousands)
<S>                                                                                       <C>
     Tier 1 capital:
       Common stockholder's equity, excluding unrealized
         loss on available-for-sale securities                                              $    76,299
       Qualifying guaranteed preferred beneficial interests
         in the Company's subordinated debentures(1)                                             10,911
       Intangible assets, net of deferred tax liability associated
         with the core deposit intangible                                                       (42,283)
       Deferred tax asset disallowed for regulatory purposes                                     (1,850)
                                                                                          -------------
         Total Tier 1 capital                                                                    43,077
                                                                                          -------------

     Tier 2 capital:
       Allowance for possible loan losses (2)                                                     4,583
                                                                                          -------------
         Total Tier 2 capital                                                                     4,583
                                                                                          -------------

           Total capital                                                                  $      47,660
                                                                                          =============

     Net risk-weighted assets                                                             $     365,833
                                                                                          =============

     Adjusted quarterly average assets                                                    $     640,157
                                                                                          =============
</Table>

<Table>
<Caption>
                                                               Regulatory       Well-capitalized     Actual Ratios at
The Company                                                      Minimum            Minimum            June 30, 2001
-----------                                                   -------------     ----------------    ------------------
<S>                                                           <C>               <C>                 <C>
Tier 1 capital to risk-weighted assets ratio                      4.00%               6.00%               11.78%
Total capital to risk-weighted assets ratio                       8.00               10.00                13.03
Leverage ratio                                                    4.00                5.00                 6.73

THE BANK

Tier 1 capital to risk-weighted assets ratio                      4.00%               6.00%               12.01%
Total capital to risk-weighted assets ratio                       8.00               10.00                13.26
Leverage ratio                                                    4.00                5.00                 6.86
</Table>

---------------------------
(1)  Limited to 25% of total Tier 1 capital, with any remainder qualifying
     as Tier 2 capital.
(2)  Limited to 1.25% of risk-weighted assets.

         The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") requires each federal banking agency to revise its risk-based
capital standards to ensure that those standards take adequate account of
interest rate risk, concentration of credit risk and the risks of
non-traditional activities, as well as reflect the actual performance and
expected risk of loss on multi-family mortgages. This law also requires each
federal banking agency to specify the levels at which an insured institution
would be considered "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized." Under the FDIC's regulations, the Company and the Bank
were both "well capitalized" at June 30, 2001.

                                       29
<Page>

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

         The payment of dividends on the Common Stock is determined by the
Company's Board of Directors in light of circumstances and conditions then
existing, including the earnings of the Company and the Bank, funding
requirements and financial condition and applicable laws and regulations. The
Company's ability to pay cash dividends is restricted by the requirement that
it maintain a certain level of capital as discussed above in accordance with
regulatory guidelines. The Federal Reserve Board has promulgated a policy
prohibiting bank holding companies from paying dividends on common stock
unless such bank holding company can pay such dividends from current earnings.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         There has been no material change in the Company's market risk
profile from the information disclosed in the Company's Form 10-K for the
year ended December 31, 2000.








                                       30
<Page>

                                     PART II

                                OTHER INFORMATION

Item 1.  Legal Proceedings.

         Reference is made to Part II, Item 1 of the Company's quarterly
report on Form 10-Q for the quarter ended March 31, 2001 for a discussion
regarding existing legal proceedings.

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

Item 2.  Changes in Securities.

         None

Item 3.  Defaults upon Senior Securities.

         None

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

         None

Item 5.  Other Information.

         Effective June 30, 2001, the Company's address has changed from 547
Chestnut Street, P.O. Box 3296, Abilene, Texas 79604, telephone number
915-677-5550, to 1617 Broadway, P.O. Box 5240, Lubbock, Texas 79408,
telephone number 806-749-1850.

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

         (a)      Exhibits

                  None

         (b)      Reports on Form 8-K

                  Current Report on form 8-K/A dated May 11, 2001, amending the
                  Current Report on Form 8-K dated March 23, 2001, reporting the
                  merger by and between State National Bank of West Texas,
                  Abilene, Texas and State National Bank of West Texas.


                                       31
<Page>

                                    SIGNATURE


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







Date:  August 13, 2001         Independent Bankshares, Inc.
                               (Registrant)



                               By: /s/ Don E. Cosby
                                   --------------------------------------------
                                   Don E. Cosby
                                   Executive Vice President & Chief Financial
                                   Officer (Duly authorized Officer and
                                   Principal Financial Officer)



                                       32