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


                            FORM 10-Q


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

         For the quarterly period ended:  March 31, 1998

                               OR

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

 For the transition period from _____________ to ______________

                Commission File Number:  0-10196

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


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

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

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

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

                       YES   X    NO      
                          ------     ------

      Indicate the number of shares outstanding of each of
     the issuer's classes of common stock at March 31, 1998.

         Class:  Common Stock, par value $0.25 per share
        Outstanding at March 31, 1998:  1,977,099 shares

<PAGE>

PART I

FINANCIAL INFORMATION


Item 1. Financial Statements. 





















                               -2-

<PAGE>

                  INDEPENDENT BANKSHARES, INC.
                   CONSOLIDATED BALANCE SHEETS
              MARCH 31, 1998 AND DECEMBER 31, 1997
                           (Unaudited)


<TABLE>
<CAPTION>

                                                                                       March 31,    December 31,
ASSETS                                                                                   1998           1997  
                                                                                     ------------   ------------
<S>                                                                                  <C>            <C>
Cash and Cash Equivalents:
  Cash and Due from Banks                                                            $ 16,256,000   $ 14,518,000
  Federal Funds Sold                                                                   35,700,000     24,900,000
                                                                                     ------------   ------------
     Total Cash and Cash Equivalents                                                   51,956,000     39,418,000
                                                                                     ------------   ------------
Securities:
  Available-for-sale                                                                   19,374,000     22,501,000
  Held-to-maturity                                                                     43,763,000     47,293,000
                                                                                     ------------   ------------
     Total Securities                                                                  63,137,000     69,794,000
                                                                                     ------------   ------------
Loans:
  Total Loans                                                                         141,204,000    142,315,000
  Less:
     Unearned Income on Installment Loans                                               1,157,000      1,462,000
     Allowance for Possible Loan Losses                                                 1,121,000      1,173,000
                                                                                     ------------   ------------
       Net Loans                                                                      138,926,000    139,680,000
                                                                                     ------------   ------------
Premises and Equipment                                                                  7,411,000      7,518,000
Goodwill                                                                                3,103,000      3,159,000
Accrued Interest Receivable                                                             2,086,000      2,208,000
Other Real Estate and Other Repossessed Assets                                            417,000        739,000
Other Assets                                                                            2,003,000      2,058,000
                                                                                     ------------   ------------

          Total Assets                                                               $269,039,000   $264,574,000
                                                                                     ============   ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
  Noninterest-bearing Demand Deposits                                                $ 44,294,000   $ 43,868,000
  Interest-bearing Demand Deposits                                                     79,015,000     77,495,000
  Interest-bearing Time Deposits                                                      123,501,000    121,438,000
                                                                                     ------------   ------------
     Total Deposits                                                                   246,810,000    242,801,000
Accrued Interest Payable                                                                  879,000        947,000
Notes Payable                                                                               5,000         57,000
Other Liabilities                                                                         446,000        242,000
                                                                                     ------------   ------------
          Total Liabilities                                                           248,140,000    244,047,000
                                                                                     ------------   ------------

Stockholders' Equity:
Series C Preferred Stock                                                                   55,000         56,000
Common Stock                                                                              494,000        494,000
Additional Paid-in Capital                                                             13,921,000     13,921,000
Retained Earnings                                                                       6,568,000      6,218,000
Accumulated Other Comprehensive Income                                                     48,000         31,000
Unearned ESOP Stock                                                                      (187,000)      (193,000)
                                                                                     ------------   ------------
          Total Stockholders' Equity                                                   20,899,000     20,527,000
                                                                                     ------------   ------------

            Total Liabilities and Stockholders' Equity                               $269,039,000   $264,574,000
                                                                                     ============   ============
</TABLE>



  See Accompanying Notes to Consolidated Financial Statements.



                               -3-

<PAGE>

                  INDEPENDENT BANKSHARES, INC.
   CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
             QUARTERS ENDED MARCH 31, 1998 AND 1997
                           (Unaudited)

<TABLE>
<CAPTION>

                                                                                       Quarter Ended March 31,
                                                                                     ---------------------------
                                                                                         1998           1997  
                                                                                     ------------   ------------
<S>                                                                                  <C>            <C>
Interest Income:
  Interest and Fees on Loans                                                         $ 3,144,000    $ 2,731,000
  Interest on Securities                                                               1,017,000      1,310,000
  Interest on Federal Funds Sold                                                         414,000        255,000
                                                                                     -----------    -----------
     Total Interest Income                                                             4,575,000      4,296,000
                                                                                     -----------    -----------
Interest Expense:
  Interest on Deposits                                                                 2,152,000      2,036,000
  Interest on Notes Payable                                                                1,000         20,000
                                                                                     -----------    -----------
     Total Interest Expense                                                            2,153,000      2,056,000
                                                                                     -----------    -----------
       Net Interest Income                                                             2,422,000      2,240,000
  Provision for Loan Losses                                                              175,000              0
                                                                                     -----------    -----------
          Net Interest Income After Provision for Loan Losses                          2,247,000      2,240,000
                                                                                     -----------    -----------
Noninterest Income:
  Service Charges                                                                        460,000        346,000
  Trust Fees                                                                              47,000         46,000
  Other Income                                                                           152,000         30,000
                                                                                     -----------    -----------
     Total Noninterest Income                                                            659,000        422,000
                                                                                     -----------    -----------
Noninterest Expenses:
  Salaries and Employee Benefits                                                       1,079,000        919,000
  Net Occupancy Expense                                                                  229,000        195,000
  Equipment Expense                                                                      214,000        202,000
  Stationery, Printing and Supplies Expense                                               98,000         86,000
  Professional Fees                                                                       63,000         90,000
  Goodwill Amortization                                                                   56,000         44,000
  Net Cost Applicable to Other Real Estate and Other Repossessed Assets                   26,000          5,000
  Other Expenses                                                                         418,000        349,000
                                                                                     -----------    -----------
     Total Noninterest Expenses                                                        2,183,000      1,890,000
                                                                                     -----------    -----------
          Income Before Federal Income Taxes                                             723,000        772,000
  Federal Income Taxes                                                                   268,000        279,000
                                                                                     -----------    -----------
Net Income                                                                             455,000        493,000
Other Comprehensive Income, Net of Taxes:
    Unrealized Holding Gains (Losses) on Available-for-sale Securities
      Arising During Period                                                               17,000        (64,000)
                                                                                     -----------    -----------
  Comprehensive Income                                                               $   472,000    $   429,000
                                                                                     ===========    ===========

Preferred Stock Dividends                                                            $     6,000    $    14,000
                                                                                     ===========    ===========

Net Income Available to Common Stockholders                                          $   449,000    $   479,000
                                                                                     ===========    ===========

Basic Earnings per Common Share Available to Common Stockholders                     $      0.23    $      0.29
                                                                                     ===========    ===========

Diluted Earnings Per Common Share Available to Common Stockholders                   $      0.22    $      0.26
                                                                                     ===========    ===========

</TABLE>

  See Accompanying Notes to Consolidated Financial Statements.


                               -4-

<PAGE>

                  INDEPENDENT BANKSHARES, INC.
              CONSOLIDATED STATEMENTS OF CASH FLOWS
             QUARTERS ENDED MARCH 31, 1998 AND 1997
                           (Unaudited)

<TABLE>
<CAPTION>

                                                                                         1998           1997  
                                                                                     ------------   ------------
<S>                                                                                  <C>            <C>

Cash Flows from Operating Activities:
  Net Income                                                                         $    455,000   $    493,000
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:    
  Deferred Federal Income Tax Expense                                                     110,000        115,000
  Depreciation and Amortization                                                           201,000        157,000
  Provision for Loan Losses                                                               175,000              0
  Gains on Sales of Other Real Estate and Other Repossessed Assets                         (3,000)        (1,000)
  Writedown of Other Real Estate and Other Repossessed Assets                                   0          2,000
  (Increase) Decrease in Accrued Interest Receivable                                      122,000       (162,000)
  Decrease in Other Assets                                                                 55,000        266,000
  Decrease in Accrued Interest Payable                                                    (68,000)      (196,000)
  Increase (Decrease) in Other Liabilities                                                 94,000        (33,000)
                                                                                     ------------   ------------
       Net Cash Provided by Operating Activities                                        1,141,000        641,000
                                                                                     ------------   ------------

Cash Flows from Investing Activities:
  Proceeds from Maturities of Available-for-sale Securities                             5,156,000        209,000
  Proceeds from Maturities of Held-to-maturity Securities                               8,957,000      6,889,000
  Purchases of Available-for-sale Securities                                           (2,004,000)    (6,046,000)
  Purchases of Held-to-maturity Securities                                             (5,450,000)    (8,021,000)
  Net Decrease in Loans                                                                   234,000        872,000
  Additions to Premises and Equipment                                                      38,000        (25,000)
  Proceeds from Sales of Other Real Estate and Other Repossessed Assets                   614,000        332,000
  Net Cash and Cash Equivalents Paid in Acquisition                                             0     (1,236,000)
                                                                                     ------------   ------------
       Net Cash Provided by (Used in) Investing Activities                              7,545,000     (7,026,000)
                                                                                     ------------   ------------

Cash Flows from Financing Activities:
  Increase in Deposits                                                                  4,009,000      2,286,000
  Proceeds from Notes Payable                                                                   0      1,300,000
  Repayment of Notes Payable                                                              (52,000)    (2,805,000)
  Net Proceeds from Issuance of Equity Securities                                               0      3,981,000
  Payment of Cash Dividends                                                              (105,000)       (85,000)
                                                                                     ------------   ------------
       Net Cash Provided by Financing Activities                                        3,852,000      4,677,000
                                                                                     ------------   ------------
Net Increase (Decrease) in Cash and Cash Equivalents                                   12,538,000     (1,708,000)
Cash and Cash Equivalents at Beginning of Period                                       39,418,000     29,958,000
                                                                                     ------------   ------------

Cash and Cash Equivalents at End of Period                                           $ 51,956,000   $ 28,250,000
                                                                                     ============   ============

Noncash Investing Activities:
     Additions to Other Real Estate and Other Repossessed Assets 
        Through Foreclosures                                                         $    355,000   $    391,000
     Sales of Other Real Estate and Other Repossessed Assets Financed 
        with Loans                                                                         60,000         54,000
     Increase (Decrease) in Unrealized Gain/Loss on Available-for-sale 
       Securities, Net of Tax                                                              17,000        (64,000)
</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, 1997, 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)  RECENT ACCOUNTING PRONOUNCEMENTS

     In March 1997, the Financial Accounting Standards Board (the
"FASB") issued Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("FAS 128"), which establishes standards for
computing and presenting earnings per share for entities with
publicly held common stock or potential common stock.  FAS 128
simplifies the standards for computing earnings per share
previously found in Accounting Principles Board Opinion No. 15,
"Earnings per Share," and makes them comparable to international
earnings per share accounting standards.  It replaces the
presentation of primary earnings per share with a presentation of
basic earnings per share, which excludes dilution.  It also
requires dual presentation of basic and diluted earnings per share
on the face of the income statement for all entities with complex
capital structures.  The Company adopted FAS 128 on December 31,
1997.

     In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income"
("FAS 130").  FAS 130 establishes standards for reporting and
display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general purpose
financial statements.  FAS 130 requires that all items that are
required to be recognized under accounting standards as components
of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial
statements.  The Company adopted FAS 130 on January 1, 1998.

(3)  ACQUISITION OF SUBSIDIARY BANK

     The Company completed the acquisition of Crown Park
Bancshares, Inc. ("Crown Park") and its wholly owned subsidiary
bank, Western National Bank, Lubbock, Texas ("Western National"),
effective January 28, 1997, for an aggregate cash consideration of
$7,510,000.  On the acquisition date, Crown Park was merged with
and into a wholly owned subsidiary of the Company and Western
National was merged with and into the Company's subsidiary bank,
First State Bank, National Association, Abilene, Texas (the
"Bank").  To obtain funding for the acquisition, the Company sold
an aggregate of 395,312 shares of its common stock in an
underwritten offering at a price of $11.40 per share (the
"Offering").  This included 51,562 shares covered by the
underwriter's over-allotment option.  The above number of shares
and price per share have been adjusted for the 5-for-4 stock split,
effected in the form of a 25% stock dividend, paid to the Company's
shareholders in May 1997. The Company borrowed $800,000 from a
financial institution in Amarillo, Texas (the "Amarillo Bank") to
finance a portion of the cost of acquiring Crown Park. The $800,000
of borrowings was reduced to $400,000 with the proceeds of the sale
of the over-allotment shares. The borrowing was paid off on
December 31, 1997.  At the date of acquisition, Crown Park had
total assets of $60,420,000, total loans, net of unearned income,
of $41,688,000, total deposits of $53,604,000 and stockholders'
equity of $4,238,000.  This acquisition was accounted for using the
purchase method of accounting.  A total of $2,486,000 of goodwill
was recorded as a result of this acquisition.

(4)  FEDERAL INCOME TAXES

     Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("FAS 109"), which required companies to adopt the liability
method for computing income taxes. The Company decreased its
deferred tax asset valuation allowance relating to The Winters
State Bank, 

                               -6-

<PAGE>

Winters, Texas ("Winters State"), and Peoples National Bank, 
Winters, Texas ("Peoples National"), which were acquired in 1993 
and 1996, respectively, by $112,000 during the third quarter of 
1997 based on the Company's trend of positive operating results. 
The Company may reduce or increase its valuation allowance
depending on changes in the expectation of future earnings and
other circumstances.  Deferred income taxes reflect the net effects
of temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes.

(5)  EARNINGS PER SHARE

     Basic earnings per common share is computed by dividing net
income available to common stockholders by the weighted average
number of shares and share equivalents outstanding during the
period.  Because the Company's outstanding Series C Cumulative
Convertible Preferred Stock (the "Series C Preferred Stock") is
cumulative, the dividends allocable to such preferred stock reduces
income available to common stockholders in the basic earnings per
share calculations. In computing diluted earnings per common share
for the quarters ended March 31, 1998 and 1997, the conversion of
the Series C Preferred Stock was assumed, as the effects are
dilutive.  The weighted average common shares outstanding used in
computing basic earnings per common share for the quarters ended
March 31, 1998 and 1997, was 1,960,000 and 1,630,000 shares,
respectively.  The weighted average common shares outstanding used
in computing diluted earnings per common share for the quarters
ended March 31, 1998 and 1997, was 2,085,000 and 1,960,000 shares,
respectively.  

(6)  UNEARNED ESOP STOCK

     The Company's Employee Stock Ownership/401(k) Plan (the
"Plan") purchased 18,750 shares, adjusted for the 5-for-4 stock
split, effected in the form of a 25% stock dividend, paid to
stockholders in May 1997, of the Company's common stock (the
"Common Stock") in the Company's public stock offering (the
"Offering") in January 1997 for $214,000.  The funds used for the
purchase were borrowed from the Company.  The note evidencing such
borrowing is due in eighty-four equal monthly installments of
$4,000, including interest, and matures on February 27, 2004.  The
note bears interest at the Company's floating base rate plus 1%
(9.50% at March 31, 1998).  The note is collateralized by the stock
purchased in the Offering.

     As a result of the lending arrangement between the Company and
the Plan, the shares are considered "unearned."  The shares are
"earned" on a pro rata basis as principal payments are made on the
note.  The shares are included in the Company's earnings per share
calculations only as they are earned.  At March 31, 1998, a total
of 16,444 shares with an original cost of $187,000 are considered
to be unearned.

(7)  ACCUMULATED OTHER COMPREHENSIVE INCOME

     An analysis of accumulated other comprehensive income for
the quarters ended March 31, 1998 and 1997, is as follows:

                                 Unrealized Gains (Losses) on
                                 Available-for-sale Securities
                                 -----------------------------
                                     1998              1997
                                 ------------     ------------
     Balance, at January 1         $     31        $      25
     Current period change               17              (64)
                                 ------------     ------------
       Balance, at March 31        $     48        $     (39)
                                 ============     ============


                               -7-

<PAGE>

(8)  SUBSEQUENT EVENT

     Subsequent to March 31, 1998, holders of a total of 444 shares
of the Company's Series C Preferred Stock converted such shares
into 10,197 shares of Common Stock.  As of the date of filing of
this report, the Company had 5,066 shares of Series C Preferred
Stock and 1,987,296 shares of Common Stock issued and outstanding.















                               -8-

<PAGE>

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

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

THE COMPANY

     The Company is a bank holding company that, at March 31, 1998,
owned 100% of Independent Financial Corp. ("Independent Financial")
which, in turn, owned 100% of First State Bank, National
Association, Abilene, Texas (the "Bank").  The Bank currently
operates full-service banking locations in the West Texas cities of
Abilene (three locations), Lubbock, Odessa (three locations), San
Angelo, Stamford and Winters.  The Bank acquired its two branches
in Stamford and Winters when two of the Company's former subsidiary
banks, The First National Bank in Stamford, Stamford, Texas ("First
National"), and The Winters State Bank, Winters, Texas ("Winters
State"), were merged into the Bank, effective November 1, 1994.

     The Bank acquired Peoples National Bank, Winters, Texas
("Peoples National") effective January 1, 1996.  The existing
location of Peoples National was subsequently closed, the land and
building were sold and Peoples National was merged with and into
the existing branch facility in Winters. Effective May 27, 1996,
the Bank also acquired the San Angelo branch of Coastal Banc ssb
("Coastal Banc - San Angelo").  Coastal Banc - San Angelo was
merged with and into and became a branch of the Bank.

     As noted in "Note 3:  Acquisition of Subsidiary Bank," the
Company acquired Crown Park Bancshares, Inc. ("Crown Park") and its
wholly owned subsidiary bank, Western National Bank, Lubbock, Texas
("Western National"), on January 28, 1997.  Western National was
merged with and into and became a branch of the Bank.

RESULTS OF OPERATIONS

General
-------

     The following discussion and analysis presents the more
significant factors affecting the Company's financial condition at
March 31, 1998, and December 31, 1997, and results of operations
for each of the quarters ended March 31, 1998 and 1997.  This
discussion and analysis should be read in conjunction with the
Consolidated Financial Statements, notes thereto and other
financial information appearing elsewhere in this quarterly report.

Net Income
----------

     Net income for the quarter ended March 31, 1998, amounted to
$455,000 ($0.23 basic and $0.22 diluted earnings per common share,
respectively) compared to net income of $493,000 ($0.29 basic and
$0.26 diluted earnings per common share, respectively) for the
quarter ended March 31, 1997.  Net income and earnings per share 
decreased in 1998 primarily due to the difference between the
$175,000 provision for loan losses recorded during the first
quarter of 1998 compared to no provision during the first quarter
of 1997.



                               -9-

<PAGE>

Net Interest Income
-------------------

     Net interest income represents the amount by which interest
income on interest-earning assets, including securities and loans,
exceeds interest paid on interest-bearing liabilities, including
deposits and notes payable.  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 $2,422,000 for the first
quarter of 1998, an increase of $182,000, or 8.1%, from the first
quarter of 1997.  Net interest income for the first quarter of 1997
was $2,240,000. The increase in 1998 was due to the acquisition of
Crown Park effective January 28, 1997.  The net interest margin on
a fully taxable-equivalent basis, increased from 4.00% for the
first quarter of 1997, to 4.10% for the first quarter of 1998,
which was a decrease from the 4.22% recorded during the fourth
quarter of 1997.  The increase in the net interest margin from the
first quarter of 1997 to the first quarter of 1998 is due primarily
to the increase in the Company's loan-to-deposit ratio as a result
of the acquisition of Crown Park.  The decrease in the net interest
margin from the fourth quarter of 1997 to the first quarter of 1998
was primarily a result of securities balances averaging
approximately $9 million less than in the fourth quarter of 1997
and federal funds sold balances averaging approximately $11.6
million more than the fourth quarter of 1997.  The average yields
for securities and federal funds sold for the first quarter of 1998
were 6.12% and 5.46%, respectively.

     At March 31, 1998, approximately $32,273,000, or 23.0%, of the
Company's total loans, net of unearned income, were tied to
fluctuations in the prime interest rate.  Average overall rates
paid for various types of certificates of deposit were relatively
stable from March 31, 1997, to March 31, 1998. For example, the
average rate paid for certificates of deposit less than $100,000
was 5.29% for both in the first quarter of 1997 and 1998; however,
the average rate paid by the Company for certificates of deposit of
$100,000 or more decreased slightly to 5.37% during the first
quarter of 1998 from 5.47% during the first quarter of 1997.  Rates
on other types of deposits, such as interest-bearing demand,
savings and money market deposits, increased slightly from an
average of 2.65% during the first quarter of 1997 to an average of
2.69% during the first quarter of 1998.  These changes caused the
Company's overall cost of interest-bearing deposits to decrease
from 4.31% for the first three months of 1997 to 4.29% for the
first three months of 1998. 

     The following table presents the average balance sheets of the
Company for the quarters ended March 31, 1998 and 1997, 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.









                              -10-

<PAGE>


<TABLE>
<CAPTION>
                                                                   Quarter Ended March 31,
                                                  --------------------------------------------------------
                                                             1998                          1997
                                                  --------------------------    --------------------------
                                                            Interest                      Interest
                                                  Average   Income/   Yield/    Average   Income/   Yield/
                                                  Balance   Expense   Rate      Balance   Expense   Rate
                                                  --------  --------  ------    --------  --------  ------
<S>                                               <C>       <C>       <C>       <C>       <C>       <C>
ASSETS(1)                                                           (Dollars in thousands)
Interest-earning assets:
  Loans, net of unearned income (2)               $139,643  $  3,144    9.01%   $118,161  $  2,731    9.25%
  Securities (3)                                    66,584     1,018    6.12      86,561     1,311    6.06
  Federal funds sold                                30,325       414    5.46      19,164       255    5.32
                                                  --------  --------  ------    --------  --------  ------
     Total interest-earning assets                 236,552     4,576    7.74     223,886     4,297    7.68
                                                  --------  --------  ------    --------  --------  ------

Noninterest-earning assets:
  Cash and due from banks                           14,019                         9,237
  Premises and equipment                             7,473                         6,097
  Goodwill                                           3,130                         2,802
  Accrued interest receivable
    and other assets                                 4,921                         4,884
  Allowance for possible loan losses                (1,103)                       (1,040)
                                                  --------                      --------
     Total noninterest-earning assets               28,440                        21,980
                                                  --------                      --------
       Total assets                               $264,992                      $245,866
                                                  ========                      ========

LIABILITIES AND STOCKHOLDERS' EQUITY(1)
Interest-bearing liabilities:
  Demand, savings and money
    market deposits                               $ 78,258  $    527    2.69%   $ 71,905  $    477    2.65%
  Time deposits                                    122,320     1,625    5.31     116,909     1,559    5.33
                                                  --------  --------  ------    --------  --------  ------
     Total interest-bearing deposits               200,578     2,152    4.29     188,814     2,036    4.31
  Notes payable                                          6         1    7.84         898        20    8.91
                                                  --------  --------  ------    -------   --------  ------
     Total interest-bearing liabilities            200,584     2,153    4.29     189,712     2,056    4.34
                                                  --------  --------  ------    --------  --------  ------

Noninterest-bearing liabilities:
  Demand deposits                                   42,135                        37,356
  Accrued interest payable and
     other liabilities                               1,458                         1,215
                                                  --------                      --------
     Total noninterest-bearing liabilities          43,593                        38,571
                                                  --------                      --------
       Total liabilities                           244,177                       228,283

Stockholders' equity                                20,815                        17,583
                                                  --------                      --------
          Total liabilities and
            stockholders' equity                  $264,992                      $245,866
                                                  ========                      ========

Net interest income                                         $  2,423                      $  2,241
                                                            ========                      ========
Interest rate spread (4)                                                3.45%                         3.34%
                                                                      ======                        ======
Net interest margin (5)                                                 4.10%                         4.00%
                                                                      ======                        ======

______________________________
(1)  The Average Balance and Interest Income/Expense columns
     include the balance sheet and income statement accounts of
     Crown Park from January 28, 1997, the date of acquisition of
     such company.
(2)  Nonaccrual loans are included in the Average Balance columns,
     and income recognized on these loans, if any, is included in
     the Interest Income/Expense columns.  Interest income on loans
     includes fees on loans, which are not material in amount.
(3)  Nontaxable interest income on securities was adjusted to a
     taxable yield assuming a tax rate of 34%.
(4)  The interest rate spread is the difference between the average
     yield on interest-earning assets and the average cost of
     interest-bearing liabilities.
(5)  The net interest margin is equal to net interest income, on a
     fully taxable-equivalent basis, divided by average interest-
     earning assets.

</TABLE>


                              -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>

                                                  March 31, 1998 vs 1997(1)
                                                  --------------------------
                                                  Increase (Decrease) Due To
                                                           Changes In
                                                  --------------------------
                                                  Volume     Rate      Total
                                                  ------    ------    ------
                                                        (In thousands)
<S>                                               <C>       <C>       <C>
Interest-earning assets:
  Loans, net of unearned income (2)               $  497    $  (84)   $  413
  Securities (3)                                    (303)       10      (293)
  Federal funds sold                                 148        11       159
                                                  ------    ------    ------
     Total interest income                           342       (63)      279
                                                  ------    ------    ------

Interest-bearing liabilities:
  Deposits:
    Demand, savings and money market deposits         42         8        50
    Time deposits                                     72        (6)       66
                                                  ------    ------    ------
     Total interest-bearing deposits                 114         2       116
   Notes payable                                     (19)       --       (19)
                                                  ------    ------    ------
        Total interest expense                        95         2        97
                                                  ------    ------    ------

Increase (decrease) in net interest income        $  247    $  (65)   $  182
                                                  ======    ======    ======
______________________________
(1)  Income statement items include the income statement accounts
     of Crown Park beginning January 28, 1997, the date of
     acquisition of such company.
(2)  Nonaccrual loans have been included in average assets for the
     purposes of the computations, thereby reducing yields.
(3)  Information with respect to tax-exempt securities is provided
     on a fully taxable-equivalent basis assuming a tax rate of
     34%.

</TABLE>

Provision for Loan Losses
-------------------------

     The amount of the provision for loan losses is based on
periodic (not less than quarterly) evaluations of the loan
portfolio, especially nonperforming and other potential problem
loans.  During these evaluations, consideration is given to such
factors as: management's evaluation of specific loans; the level
and composition of nonperforming loans; historical loss experience;
results of examinations by regulatory agencies; an internal asset
review process conducted by the Company that is independent of the
management of the Bank; expectations of future economic conditions
and their impact on particular industries and individual borrowers;
the market value of collateral; the strength of available
guarantees; concentrations of credits; and other judgmental
factors.  There was no provision for loan losses made for the
quarter ended March 31, 1997, compared to $175,000 for the quarter
ended March 31, 1998. No provision for loan losses was made during
the first quarter of 1997 due to the fact that the Company had net
recoveries of previously charged off loans of $124,000 during that
period.  The provision for the first quarter of 1998 was larger
than normal due to a higher level of charge-offs.  Of the total
charge-offs of $240,000 during the first quarter of 1998, $185,000,
or 77.1%, were indirect installment loans.  Of the $185,000 in
indirect loan charge-offs, $108,000, or 58.4% were originated at
the Bank's Lubbock location. The Bank is continuing to make 
indirect installment loans; however, the Company is attempting to
reduce its reliance on such loans.  See "Analysis of Financial
Condition - Loan Portfolio" below.  In management's opinion, the 
overall quality of the Company's loan portfolio has continued to 
improve.


                              -12-

<PAGE>

Noninterest Income
------------------

     Noninterest income increased $237,000, or 56.2%, from $422,000
during the first quarter of 1997 to $659,000 during the first
quarter of 1998.

     Service charges on deposit accounts and on other types of
services are the major source of noninterest income to the Company. 
This source of income increased from $346,000 during the first
three months of 1997 to $460,000 during the first three months of
1998, a $114,000, or 32.9%, increase.  The increase was due to the
acquisition of Crown Park during January 1997, service charges on
the accounts of seven (7) Albertson's grocery stores which began 
in October 1997 and an increase in rates on selected charges during
the first quarter of 1998.

     Trust fees from the operation of the trust department of the
Bank increased $1,000, or 2.2%, from $46,000 during the first three
months of 1997 to $47,000 during the same period in 1998, primarily
as a result of an overall increase in the value of assets under
management of the trust department.

     Other income is the sum of several components of noninterest
income including insurance premiums earned on automobiles financed
through the Company's indirect installment loan program, check
printing income, bank card royalty income and other sources of
miscellaneous income.  Other income increased $122,000, or 406.7%,
from $30,000 during the first quarter of 1997 to $152,000 during
the first quarter of 1998, primarily due to a significant increase
in insurance premiums received during the first quarter of 1998 on
automobiles financed primarily during the third and fourth quarters
of 1997 and an increase in check printing income.

Noninterest Expenses
--------------------

     Noninterest expenses increased $293,000, or 15.5%, from
$1,890,000 during the first quarter of 1997 to $2,183,000 during
the first quarter of 1998.  The increase from 1997 to 1998 was due
primarily to the acquisition of Crown Park effective January 28,
1997, and the overall internal growth of the Company.

     Salaries and employee benefits increased $160,000, or 17.4%,
from $919,000 for the first quarter of 1997 to $1,079,000 for the
corresponding period of 1998.  The increase was a result of the
acquisition of Crown Park effective January 28, 1997, the opening
of two grocery store branch locations in October 1997 and overall
salary increases.

     Net occupancy expense was $229,000 for the first three months
of 1998, an increase of $34,000, or 17.4%, from the $195,000 in
expense recorded during the first three months of 1997.  A $25,000
increase was a result of the opening of two additional branches and
the remainder was a result of the Crown Park acquisition.

     Equipment expense increased from $202,000 for the first
quarter of 1997 to $214,000 for the corresponding period in 1998,
representing an increase of $12,000, or 5.9%.  Two-thirds of the
increase was due to the acquisitions of Crown Park and one-third
was due to the additional grocery store branches opened in October
1997.

     Stationery, printing and supplies expense increased $12,000,
or 14.0%, from $86,000 for the first three months of 1997 to
$98,000 for the first three months of 1998.  Approximately 75% of
the increase was a result of the acquisition and the opening of the
two additional branches noted above.

     Professional fees, which include legal and accounting fees,
decreased $27,000, or 30.0%, from $90,000 during the first quarter
of 1997 to $63,000 during the same period of 1998.  The decrease
was a result of increased legal fees related to Crown Park loans
incurred immediately after the acquisition and legal fees incurred
that were related to settlement of litigation which result in a
recovery of approximately $108,000 of a previously charged off loan
during the first quarter of 1997.

     Goodwill amortization increased $12,000, or 27.3%, from
$44,000 for the first quarter of 1997 to $56,000 for the first
quarter of 1998 due to the acquisition of Crown Park.


                              -13-

<PAGE>

     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 $26,000 during the first quarter
of 1998 and $5,000 during the first quarter of 1997.  The $21,000,
of 420%, increase is due to the increased number of automobiles
which were repossessed during the first quarter of 1998.

     Other noninterest expense includes, among many other items,
postage, advertising, data processing, insurance, directors' fees,
dues and subscriptions, regulatory examinations, travel and
entertainment, due from bank account charges and Federal Deposit
Insurance Corporation ("FDIC") insurance expense.  These expenses
increased $69,000, or 19.8%, from $349,000 for the first quarter of
1997 to $418,000 for the first quarter of 1998.  Increases in due
from bank accounts charges, armored car fees, loan expenses,
postage and advertising all contributed to the overall increase,
caused primarily by the Company's expansion.

Federal Income Taxes
--------------------

     The Company accrued $268,000 and $279,000 in federal income
taxes in the first quarter of 1998 and 1997, respectively.  As a
result of the recording of $2,486,000 in goodwill from the Crown
Park acquisition which is not deductible for federal income tax
purposes, the Company's effective tax rate increased from
approximately 36% during the first quarter of 1997 to approximately
37% during the first quarter of 1998.

Impact of Inflation
-------------------

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

ANALYSIS OF FINANCIAL CONDITION

Assets
------

     Total assets increased $4,465,000, or 1.7%, from $264,574,000
at December 31, 1997, to $269,039,000 at March 31, 1998, due to the
overall growth in deposits during the first three months of 1998.

Cash and Cash Equivalents
-------------------------

     The amount of cash and cash equivalents increased $12,538,000,
or 31.8%, from $39,418,000 at December 31, 1997, to $51,956,000 at
March 31, 1998, due to maturities of securities during the first
quarter of 1998 and an increased amount of funds from deposits
which were invested temporarily in federal funds sold at March 31,
1998.

Securities
----------

     Securities decreased $6,657,000, or 9.5%, from $69,794,000 at
December 31, 1997, to $63,137,000 at March 31, 1998.  The decrease
in 1998 is due to funds from maturities of securities being
invested temporarily in federal funds sold as noted above.

     The Board of Directors of the Bank reviews all securities
transactions monthly and the securities portfolio periodically. 
The Company's current investment policy provides for the purchase
of U.S. Treasury securities, federal agency securities and
mortgage-backed securities having maturities of five years or less
and for the purchase of state, county and municipal agencies'
securities with maximum maturities of 10 years.  The Company's
policy is to maintain a securities portfolio with staggered
maturities to meet its overall liquidity needs.  Municipal
securities must be rated A or better.  Certain school district
issues, however, are acceptable with a Baa rating.  Securities
totaling $19,374,000 are


                              -14-

<PAGE>

classified as available-for-sale and are carried at fair value at
March 31, 1998.  Securities totaling $43,763,000 are classified as
held-to-maturity and are carried at amortized cost.  The decision
to sell securities classified as available-for-sale is based upon
management's assessment of changes in economic or financial market
conditions.  

     Certain of the Company's securities are pledged to secure
public and trust fund deposits and for other purposes required or
permitted by law.  At March 31, 1998, the book value of U.S.
Treasury and other U.S. Government agency securities so pledged
amounted to $10,469,000, or 16.6% of the total securities
portfolio.

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


                                                        March 31, 1998          December 31, 1997
                                                       -----------------        -----------------
                                                        Amount      %            Amount      %
                                                       --------  -------        --------  -------
                                                                (Dollars in thousands)
<S>                                                    <C>         <C>          <C>         <C>
Carrying value:
  U.S. Treasury securities                             $ 17,365     27.5%       $ 21,292     30.5%
  Obligations of other U.S. Government 
    agencies and corporations                            34,132     54.1          36,122     51.8
  Mortgage-backed securities                             10,502     16.6          11,622     16.7
  Obligations of states and political subdivisions          554      0.9             175      0.2
  Other securities                                          584      0.9             583      0.8
                                                       --------  -------        --------  -------

Total carrying value of securities                     $ 63,137    100.0%       $ 69,794    100.0%
                                                       ========  =======        ========  =======

Total fair value of securities                         $ 63,332                 $ 69,877
                                                       ========                 ========
</TABLE>


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

     The following table provides the maturity distribution and
weighted average interest rates of the Company's total securities
portfolio at March 31, 1998.  The yield has been computed by
relating the forward income stream on the securities, plus or minus
the anticipated amortization of premiums or accretion of discounts,
to the carrying value of the securities.  The book value of
securities classified as held-to-maturity is their cost, adjusted
for previous amortization or accretion.  The restatement of the
yields on tax-exempt securities to a fully taxable-equivalent basis
has been computed assuming a tax rate of 34%.



                              -15-

<PAGE>

<TABLE>
<CAPTION>
                                                                                     Estimated       Weighted
Type and Maturity Grouping                             Principal       Carrying        Fair          Average
    at March 31, 1998                                    Amount         Value          Value          Yield
--------------------------                             ---------      ---------      ---------      ---------
<S>                                                    <C>            <C>            <C>               <C>
                                                                       (Dollars in thousands)
U.S. Treasury securities:
  Within one year                                      $   8,250      $   8,292      $   8,249         5.70%
  After one but within five years                          9,000          9,073          9,121         5.88
                                                       ---------      ---------      ---------      -------
     Total U.S. Treasury securities                       17,250         17,365         17,370         5.79
                                                       ---------      ---------      ---------      -------
Obligations of other U.S. Government
 agencies and corporations:
     Within one year                                       2,500          2,479          2,496         6.54
     After one but within five years                      31,600         31,653         31,740         6.32
                                                       ---------      ---------      ---------      -------
       Total obligations of U.S. Government
         agencies and corporations                        34,100         34,132         34,236         6.33
                                                       ---------      ---------      ---------      -------

Mortgage-backed securities                                10,378         10,502         10,580         6.20
                                                       ---------      ---------      ---------      -------

Obligations of states and political subdivisions:
  Within one year                                              0              0              0           --
  After one but within five years                              0              0              0           --
  After five but within ten years                            555            554            562         7.29
                                                       ---------      ---------      ---------      -------
     Total obligations of states and political
       subdivisions                                          555            554            562         7.29
                                                       ---------      ---------      ---------      -------

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                                            584            584            584         3.96
                                                       ---------      ---------      ---------      -------
     Total other securities                                  584            584            584         3.96
                                                       ---------      ---------      ---------      -------

       Total securities                                $  62,867      $  63,137      $  63,332         6.13%
                                                       =========      =========      =========      =======
</TABLE>

Loan Portfolio
--------------

     Total loans, net of unearned income, decreased $806,000, or
0.6%, from $140,853,000 at December 31, 1997, to $140,047,000 at
March 31, 1998.  The decrease during the first quarter of 1998 was
a result of a significant amount of payoffs received on the
Company's indirect installment loans.  These payoffs resulted in a
decrease of $5,333,000 in loans to individuals.  This decrease was
partially offset by a $3,798,000 increase in commercial and
industrial loans and a $566,000 increase in real estate loans
during the first three months of 1998.

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

     Due to diminished loan demand in most areas, the Bank
instituted an installment loan program whereby it began to purchase
automobile loans from automobile dealerships in the Abilene and
Odessa/Midland, Texas areas.  The Company expanded this program
into the San Angelo and Lubbock markets with the acquisitions of
Coastal Banc-San Angelo and Crown Park.  Under this program, an
automobile dealership will agree to make a loan to a prospective
customer to finance the purchase of a new or used automobile.  The
different financial institutions that have a pre-established
relationship with the particular dealership review the transaction,
including the credit history of the


                              -16-

<PAGE>

prospective borrower, and decide if they would agree to purchase 
the loan from the dealership and, if so, at what rate of interest.  
The dealership selects the financial institution to which it 
decides to sell the loan.  The financial institution purchasing 
the loan has a direct loan to the borrower collateralized by the 
automobile, and the dealership realizes a profit based on the 
difference between the interest rate quoted to the buyer by the 
dealership and the interest rate at which the loan is purchased 
by the financial institution.  At March 31, 1998, the Company 
had approximately $44,962,000, net of unearned income, of this 
type of loan outstanding compared to approximately $50,052,000 of 
this type loan at December 31, 1997, a decrease of $5,090,000, or 
10.2%.  The Company is attempting to decrease its reliance on 
these loans by generating additional commercial and real estate
loans.

     The following table presents the Company's loan balances at
the dates indicated separated by loan types.
<TABLE>
<CAPTION>
                                          March 31,   December 31,   
                                            1998           1997 
                                        ------------  ------------
                                              (In thousands)
     <S>                                <C>           <C>
     Loans to individuals               $     61,815  $     67,453
     Real estate loans                        45,135        44,569
     Commercial and industrial loans          27,982        24,184
     Other loans                               6,272         6,109
                                        ------------  ------------
       Total loans                           141,204       142,315
     Less unearned income                      1,157         1,462
                                        ------------  ------------
       Loans, net of unearned income    $    140,047  $    140,853
                                        ============  ============
</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 March 31, 1998 except for those described in the above
table.  The Bank had no loans outstanding to foreign countries or
borrowers headquartered in foreign countries at March 31, 1998.

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

     The following table presents the distribution of the maturity
of the Company's loans and the interest rate sensitivity of those
loans, excluding loans to individuals, at March 31, 1998.  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                  $  6,319       $ 30,754       $  8,062       $ 45,135
     Commercial and industrial loans      13,743          9,348          4,891         27,982
     Other loans                           5,701            421            150          6,272
                                        --------       --------       --------       --------
          Total loans                   $ 25,763       $ 40,523       $ 13,103       $ 79,389
                                        ========       ========       ========       ========

     With fixed interest rates          $ 11,135       $ 29,825       $  6,156       $ 47,116
     With variable interest rates         14,628         10,698          6,947         32,273
                                        --------       --------       --------       --------
          Total loans                   $ 25,763       $ 40,523       $ 13,103       $ 79,389
                                        ========       ========       ========       ========
</TABLE>

Allowance for Possible Loan Losses
----------------------------------

     Implicit in the Company's lending activities is the fact that
loan losses will be experienced and that the risk of loss will vary
with the type of loan being made and the creditworthiness of the
borrower over the term of the loan.  To 


                              -17-

<PAGE>

reflect the currently perceived risk of loss associated with the
Company's loan portfolio, additions are made to the Company's
allowance for possible loan losses (the "allowance").  The
allowance is created by direct charges against income (the
"provision" for loan losses), and the allowance is available to
absorb possible loan losses.  See "Results of Operations -
Provision for Loan Losses" above.

     The amount of the allowance equals the cumulative total of the
loan loss provisions made from time to time, reduced by loan
charge-offs, and increased by recoveries of loans previously
charged off.  The Company's allowance was $1,121,000, or 0.80% of
loans, net of unearned income, at March 31, 1998, compared to
$1,173,000, or 0.83% of loans, net of unearned income, at December
31, 1997.  The decrease in the allowance and the percentage of the
allowance to loans, net of unearned income, during the first
quarter of 1998 is due to a larger than normal amount of charge-
offs, primarily in the indirect lending area, particularly at the
Bank's Lubbock location.  See "Results of Operations - Provision
for Loan Losses" above.  Charge-offs on indirect installment loans
accounted for $185,000, or 77.1%, of total charge-offs during the
first quarter of 1998.

     Credit and loan decisions are made by management and the Board
of Directors of the Bank in conformity with loan policies
established by the Board of Directors of the Company.  The
Company's practice is to charge off any loan or portion of a loan
when it is determined by management to be uncollectible due to the
borrower's failure to meet repayment terms, the borrower's
deteriorating or deteriorated financial condition, the depreciation
of the underlying collateral, the loan's classification as a loss
by regulatory examiners or for other reasons.  The Company charged
off $240,000 in loans during the first quarter of 1998.  Recoveries
during the first quarter of 1998 were $13,000.

     The following table presents the provisions for loan losses,
loans charged off and recoveries on loans previously charged off,
the amount of the allowance, the average loans outstanding and
certain pertinent ratios for the quarters ended March 31, 1998 and
1997.

<TABLE>
<CAPTION>

                                                                              March 31,
                                                                      -----------------------
                                                                        1998          1997(1)
                                                                      --------       --------
                                                                       (Dollars in thousands)
     <S>                                                              <C>            <C>
     Analysis of allowance for possible loan losses:
     Balance, at January 1                                            $  1,173       $    793
       Acquisition of subsidiary bank                                        0            395
       Provision for loan losses                                           175              0
                                                                      --------       --------
                                                                         1,348          1,188
                                                                      --------       --------
     Loans charged off:
       Loans to individuals                                                200             77
       Real estate loans                                                    40              0
       Commercial and industrial loans                                       0             35
       Other loans                                                           0              4
                                                                      --------       --------
          Total charge-offs                                                240            116
                                                                      --------       --------
     Recoveries of loans previously charged off:
       Loans to individuals                                                  7             13
       Real estate loans                                                     0             33
       Commercial and industrial loans                                       6            194
       Other loans                                                           0              0
                                                                      --------       --------
          Total recoveries                                                  13            240
                                                                      --------       --------
            Net loans charge-offs (recoveries)                             227           (124)
                                                                      --------       --------
     Balance, at March 31                                             $  1,121       $  1,312
                                                                      ========       ========

     Average loans outstanding, net of unearned income                $139,643       $118,161
                                                                      ========       ========
     Ratio of net loan charge-offs (recoveries) to average loans 
       outstanding, net of unearned income (annualized)                   0.65%         (0.42)%
                                                                      ========       ========
     Ratio of allowance for possible loan losses to total loans,
       net of unearned income, at March 31                                0.80%          0.99%
                                                                      ========       ========


                              -18-

<PAGE>

______________________________
(1)  Average loans, net of unearned income, for 1997 include the
     average loans, net of unearned income, of Crown Park from
     January 28, 1997, the date of acquisition of such company.
</TABLE>

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

     As the economies of the Bank's market areas have recovered and
stabilized over the past several years, there has been a steady
reduction in the ratio of nonperforming assets to total assets and
in the amount it takes to maintain an adequate balance in the
allowance.  This reflects not only the loan loss trend, but
management's assessment of the continued reduction of credit risks
associated with the loan portfolio.

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

     On January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan" ("FAS 114").  In accordance with FAS 114, any
change in the present value of such loans is recognized as an
adjustment to the Company's allowance.

     The following table shows the allocations in the allowance and
the respective percentages of each loan category to total loans at
March 31, 1998, and December 31, 1997.
<TABLE>
<CAPTION>


                                                    March 31, 1998            December 31, 1997   
                                             ----------------------------  ----------------------------
                                                             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>
Loans to individuals                             $    589        43.3%        $     570        46.8%
Real estate loans                                      74        32.2                52        31.6
Commercial and industrial loans                       150        20.0               193        17.2
Other loans                                            25         4.5                28         4.4
                                                ---------       -----         ---------       -----
  Total allocated                                     838       100.0%              843       100.0%
                                                                =====                         =====
Unallocated                                           283                           330
                                                ---------                     ---------
Total allowance for possible loan losses        $   1,121                     $   1,173
                                                =========                     =========

</TABLE>

Loan Review Process

     The Company follows a loan review program to evaluate the
credit risk in its loan portfolio.  Through the loan review
process, the Bank maintains an internally classified loan list
that, along with the list of nonperforming loans


                              -19-

<PAGE>

discussed below, helps management assess the overall quality of 
the loan portfolio and the adequacy of the allowance.  Loans
classified as "substandard" are those loans with clear and defined
weaknesses such as highly leveraged positions, unfavorable
financial ratios, uncertain repayment sources or poor financial
condition, which may jeopardize recoverability of the loan.  Loans
classified as "doubtful" are those loans that have characteristics
similar to substandard loans, but also have an increased risk that
a loss may occur or at least a portion of the loan may require a
charge-off if liquidated at present.  Although loans classified as
substandard do not duplicate loans classified as doubtful, both
substandard and doubtful loans may include some loans that are past
due at least 90 days, are on nonaccrual status or have been
restructured.  Loans classified as "loss" are those loans that are
in the process of being charged off.  At March 31, 1998, substandard
loans totaled $843,000, of which $102,000 were loans designated as
nonaccrual, 90 days past due or restructured, doubtful loans totaled 
$16,000 and loss loans totaled $18,000.  The $18,000 loan classified 
as loss is an indirect installment loan that is 120 days past due and,
according to regulatory guidelines, must be classified as a loss.
Substandard, doubtful and loss loans at December 31, 1997, were
$941,000, $16,000 and $0, 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.  Substantially all of the loans on the watch list at
March 31, 1998, were current and paying in accordance with loan
terms.  At March 31, 1998, watch list loans totaled $1,268,000
(including $502,000 of loans guaranteed by U.S. governmental
agencies). Of the total loans on the watch list, $581,000 of the 
loans involved borrowers who had filed Chapter 13 bankruptcy and
the Bank was awaiting finalization of the individual borrowers'
bankruptcy plans.  In addition, at March 31, 1998, $107,000 of
loans not classified and not on the watch list were designated as
nonaccrual, 90 days past due or restructured loans.  See
"Nonperforming Assets" below.

Nonperforming Assets
--------------------

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

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

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


                              -20-

<PAGE>

     The following table lists nonaccrual, past due and
restructured loans and other real estate and other repossessed
assets at March 31, 1998, and December 31, 1997.

<TABLE>
<CAPTION>
                                                             March 31,     December 31,   
                                                                1998          1997
                                                            ------------   ------------
                                                                   (In thousands)
     <S>                                                    <C>                 <C>
     Nonaccrual loans                                       $    63             $    70
     Accruing loans contractually past due over 90 days          53                 121
     Restructured loans                                          98                 104
     Other real estate and other repossessed assets             417                 739
                                                            -------             -------

     Total nonperforming assets                             $   631             $ 1,034
                                                            =======             =======
</TABLE>

     The gross interest income that would have been recorded during
the first quarter of 1998 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 $2,000.  No interest income was
actually recorded (received) on loans that were on nonaccrual
during the first quarter of 1998.

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

Premises and Equipment
----------------------

     Premises and equipment decreased $107,000, or 1.4%, during the
first quarter of 1998, from $7,518,000 at December 31, 1997, to
$7,411,000 at March 31, 1998.  The decrease was due to depreciation
expense of $143,000 which was recorded during the first quarter of
1998.  This decrease was partially offset by purchases of small
amounts of equipment during the first quarter of 1998.

Goodwill
--------

     Goodwill decreased $56,000, or 1.8%, from $3,159,000 at
December 31, 1997, to $3,103,000 at March 31, 1998.  This decrease
was due entirely to goodwill amortization expense recorded during
the first quarter of 1998.  The goodwill recorded from all of the
recent acquisitions made by the Company is being amortized over a
period of 15 years.

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 $122,000, or 5.5%, from $2,208,000 at December
31, 1997, to $2,086,000 at March 31, 1998.  The decrease was
primarily a result of the decrease in securities, on which interest
is normally collected semiannually, and an increase in federal
funds sold, on which interest is payable daily.  Of the total
balance at March 31, 1998, $1,195,000, or 57.3%, was interest
accrued on loans and $891,000, or 42.7%, was interest accrued on
securities.  The amounts of accrued interest receivable and
percentages attributable to loans and securities at December 31,
1997, were $1,220,000, or 55.3%, and $988,000, or 44.7%,
respectively.

Other Real Estate and Other Repossessed Assets
----------------------------------------------

     Other real estate and other repossessed assets consist of real
property and other assets unrelated to banking premises or
facilities.  Income derived from other real estate and other
repossessed assets, if any, is generally less than


                              -21-

<PAGE>

that which would have been earned as interest at the original
contract rates on the related loans.  At March 31, 1998, and
December 31, 1997, other real estate and other repossessed assets
had an aggregate book value of $417,000 and $739,000, respectively. 
Other real estate and other repossessed assets decreased $322,000,
or 43.6%, during the first three months of 1998, primarily due to
the sale of a parcel of real estate for $357,000.  No gain or loss
was recorded as a result of such sale.  Of the March 31, 1998,
balance, $312,000 represented thirty-three (33) repossessed
automobiles and $105,000 represented three commercial properties. 


Other Assets
------------

     The most significant component of other assets at March 31,
1998, is a net deferred tax asset of $1,171,000.  The balance of
other assets decreased $52,000, or 2.5%, to $2,003,000 at March 31,
1998, from $2,058,000 at December 31, 1997, as a result of a
decrease in the Company's net deferred tax asset due principally to
the utilization of a portion of the Company's tax credit
carryforwards.

Deposits
--------

     The Bank's lending and investing activities are funded almost
entirely by core deposits, 50.0% of which are demand, savings and
money market deposits at March 31, 1998.  Total deposits increased
$4,009,000, or 1.7%, from $242,801,000 at December 31, 1997, to
$246,810,000 at March 31, 1998.  The increase is due to internal
growth of the Bank.  The Bank does not have any brokered deposits.

     The following table presents the average amounts of, and the
average rates paid on, deposits of the Company for the quarters
ended March 31, 1998 and 1997.
<TABLE>
<CAPTION>

                                                            Quarter Ended March 31, 
                                             -----------------------------------------------------
                                                      1998                          1997(1)
                                             -----------------------       -----------------------
                                             Average        Average        Average        Average
                                              Amount          Rate          Amount          Rate
                                             --------       --------       --------       --------
                                                              (Dollars in thousands)
<S>                                          <C>               <C>         <C>               <C>
Noninterest-bearing demand deposits          $ 42,135            --%       $ 37,356            --%
Interest-bearing demand, savings and 
  money market deposits                        78,258          2.69          71,905          2.65
Time deposits of less than $100,000            82,904          5.29          82,608          5.29
Time deposits of $100,000 or more              39,416          5.37          34,301          5.47
                                             --------       -------        --------       -------
     Total deposits                          $242,713          3.55%       $226,170          3.60%
                                             ========       =======        ========       =======

______________________________
(1)  The average amounts of, and average rates paid on, deposits
     for the quarter ended March 31, 1997, include the averages for
     Crown Park from January 28, 1997, the date of acquisition of
     such company.
</TABLE>

     The maturity distribution of time deposits of $100,000 or more
at March 31, 1998, is presented below.

                                                  At March 31, 1998
                                                  -----------------
                                                    (In thousands)
          3 months or less                             $ 13,327
          Over 3 through 6 months                         9,859
          Over 6 through 12 months                       15,056
          Over 12 months                                  2,559
                                                       --------

            Total time deposits of $100,000 or more    $ 40,801
                                                       ========

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


                              -22-

<PAGE>

represented approximately 15.2% of the Company's total assets,
compared to 14.5% of total assets at December 31, 1997.

Accrued Interest Payable
------------------------

     Accrued interest payable consists of interest that has accrued
on deposits and notes payable, but is not yet payable under the
terms of the related agreements.  The balance of accrued interest
payable decreased $68,000, or 7.2%, from $947,000 at December 31,
1997, to $879,000 at March 31, 1998, due to a decrease in accrued
interest payable on certificates of deposit at the Bank's Abilene
locations which had a significant amount of time deposits of
$100,000 or more that matured in the first quarter of 1998.

Notes Payable
-------------

     The Company's notes payable decreased $52,000, or 91.2%, from
$57,000 at December 31, 1997, to $5,000 at March 31, 1998. The
decrease was due to the payment of  the last installment on one of
the notes payable to the current and former directors.  

Other Liabilities
-----------------

     The most significant components of other liabilities are
amounts accrued for various types of expenses.  The balance of
other liabilities increased $204,000, or 84.3%, from $242,000 at
December 31, 1997, to $446,000 at March 31, 1998, due to an
increase in the amount of insurance premiums on indirect automobile
loans that had been collected from loan customers and were payable
to the insurance company, an increase in unearned safe deposit
income because most customer contracts for such services are on a
calendar year basis and increases in other accrued liabilities such
as property taxes that are normally paid on or around December 31.

Interest Rate Sensitivity
-------------------------

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

     The Company's objective is to maintain a ratio of interest-
sensitive assets to interest-sensitive liabilities that is as
balanced as possible.  The following table shows that ratio to be
66.8% at the 90-day interval, 57.4% at the 180-day interval and
50.1% at the 365-day interval at March 31, 1998.  Currently, the
Company is in a liability-sensitive position at the three
intervals; however, the Company had $79,015,000 of interest-bearing
demand, savings and money market deposits at March 31, 1998, that
are somewhat less rate-sensitive.  Excluding these types of
deposits, the Company's interest-sensitive assets to interest-
sensitive liabilities ratio at the 365-day interval would have been
85.5% at March 31, 1998.  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.


                              -23-

<PAGE>

     The following table shows the interest rate sensitivity
position of the Company at March 31, 1998.
<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                         $ 35,700  $ 35,700  $ 35,700       $        0     $  35,700
  Securities                                    3,996     6,745    10,729           52,408        63,137
  Loans, net of unearned income                38,682    42,159    49,217           90,830       140,047
                                             --------  --------  --------       ----------     ---------
     Total interest-earning assets             78,378    84,604    95,646          143,238       238,884
                                             --------  --------  --------       ----------     ---------
Interest-bearing liabilities:
  Demand, savings and money market
   deposits                                    79,015    79,015    79,015                0        79,015
  Time deposits                                38,400    68,481   111,848           11,653       123,501
  Notes payable                                     1         2         5                0             5
                                             --------  --------  --------       ----------     ---------
     Total interest-bearing liabilities       117,416   147,498   190,868           11,653       202,521
                                             --------  --------  --------       ----------     ---------
Rate-sensitivity gap(1)                      $(39,038) $(62,894) $(95,222)      $  131,585     $  36,363
                                             ========  ========  ========       ==========     =========

Rate-sensitivity ratio(2)                        66.8%     57.4%     50.1%
                                                 ====      ====      ====
______________________________
(1)  Rate-sensitive interest-earning assets less rate-sensitive
     interest-bearing liabilities.
(2)  Rate-sensitive interest-earning assets divided by rate-
     sensitive interest-bearing liabilities.

</TABLE>

Selected Financial Ratios
-------------------------

     The following table presents selected financial ratios
(annualized) for the quarters ended March 31, 1998 and 1997.

                                                    Quarter Ended
                                                      March 31,
                                                  -----------------
                                                  1998      1997(1)
Net income to:
     Average assets                                0.69%     0.80%
     Average interest-earning assets               0.77      0.88
     Average stockholders' equity                  8.74     11.22
Dividend payout (2) to:
     Net income                                   21.75     14.40
     Average stockholders' equity                  1.90      1.62
Average stockholders' equity to:
     Average total assets                          7.85      7.15
     Average loans (3)                            14.91     14.88
     Average total deposits                        8.58      7.77
Average interest-earning assets to:
     Average total assets                         89.27     91.06
     Average total deposits                       97.46     98.99
     Average total liabilities                    96.88     98.07
Ratio to total average deposits of:
     Average loans (3)                            57.53     52.24
     Average noninterest-bearing deposits         17.36     16.52
     Average interest-bearing deposits            82.64     83.48
Total interest expense to total interest income   47.06     47.86
Efficiency ratio (4)                              68.19     69.16


                              -24-

<PAGE>

_________________________
(1)  Average balance sheet and income statement items for 1997
     include the averages for Crown Park from January 28, 1997, the
     date of acquisition of such company.
(2)  Dividends on Common Stock only.
(3)  Before allowance for possible loan losses.
(4)  Calculated as a noninterest expense less 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
$14,019,000 during the first quarter of 1998 and $9,237,000 during
the first quarter of 1997.  These amounts comprised 5.3% and 3.8%
of average total assets during the first three months of 1998 and
1997, respectively.  The average level of securities and federal
funds sold was $96,909,000 during the first quarter of 1998 and
$105,725,000 during the first quarter of 1997. The decrease from
the first quarter of 1997 to the first quarter of 1998 was due to
the increase in average loans.

     There were no sales of securities during the quarters ended
March 31, 1998 and 1997.  At March 31, 1998, $10,771,000, or 17.1%,
of the Company's securities portfolio, excluding mortgage-backed
securities, matured within one year and $40,726,000, or 64.5%,
excluding mortgage-backed securities, matured after one but within
five years.  The Bank's commercial lending activities are
concentrated in loans with maturities of less than five years and
with both fixed and adjustable interest rates, while its
installment lending activities are concentrated in loans with
maturities of three to five years and with fixed interest rates. 
The Bank's experience, however, has been that these installment
loans are paid off in an average of approximately thirty months. 
At March 31, 1998, approximately $49,217,000, or 35.1%, of the
Company's loans, net of unearned income, matured within one year
and/or had adjustable interest rates.  Approximately $38,592,000,
or 48.6%, of the Company's loans (excluding loans to individuals)
matured within one year and/or had adjustable interest rates.  See
"Analysis of Financial Condition - Loan Portfolio" above.

     On the liability side, the principal sources of liquidity are
deposits, borrowed funds and the accessibility to money and capital
markets.  Customer deposits are by far the largest source of funds. 
During the first quarter of 1998, the Company's average deposits
were $242,713,000, or 91.6% of average total assets, compared to
$226,170,000, or 92.0% of average total assets, during the first
quarter of 1997.  The Company attracts its deposits primarily from
individuals and businesses located within the market areas served
by the Bank.  See "Analysis of Financial Condition - Deposits"
above.

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

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

     The Company depends on the Bank for liquidity in the form of
cash flow, primarily to meet debt service and dividend requirements
and to cover other operating expenses.  This cash flow comes from
three sources: (1) dividends 


                              -25-

<PAGE>

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.

     The payment of dividends to the Company is subject to
applicable law and the scrutiny of regulatory authorities.  There
were no dividends paid by the Bank to Independent Financial during
the first quarter of 1998; in turn, Independent Financial paid no
dividends to the Company during the same time period. Dividends
paid by the Bank to Independent Financial during the first quarter
of 1997 were $200,000; in turn, Independent Financial paid
dividends to the Company totaling $200,000 during the same time
period of 1997.  At March 31, 1998, there were approximately
$2,607,000 in dividends available for payment to Independent
Financial by the Bank without regulatory approval.

     The payment of current tax liabilities generated by the Bank
and management and service fees constituted 86.0% and 11.0%,
respectively, of the Company's cash flow from the Bank during the
first quarter of 1998. 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 $312,000 were paid by the Bank to
the Company during the first three months of 1998, compared to a
total of $294,000 during the first three months of 1997.

     From January 1, 1989, through December 31, 1995, the Company
collected federal income taxes from the Bank based on an effective
tax rate of approximately 34% and paid taxes to the federal
government at the rate of approximately 2% as a result of the
utilization of the Company's net operating loss carryforwards for
both regular tax and alternative minimum tax purposes.  At December
31, 1995, the Company's net operating loss carryforwards for
alternative tax purposes had been fully utilized.  As a result, the
Company began paying federal income taxes at the effective tax rate
of approximately 20% during the first quarter of 1996. The net
operating loss carryforwards available for regular federal income
tax purposes were fully utilized by December 31, 1997.   The
Company still has net tax credit carryforwards available for
alternative minimum tax purposes which should not be fully utilized
before December 31, 1998.

     The Bank pays management fees to the Company for services
performed.  These services include, but are not limited to,
financial and accounting consultation, attendance at the Bank's
board meetings, audit and loan review services and related
expenses.  The Bank paid a total of $40,000 and $42,000 in
management fees to the Company in the first quarter of 1998 and
1997, respectively.  The Company's fees must be reasonable in
relation to the management services rendered, and the Bank is
prohibited from paying management fees to the Company if the Bank
would be undercapitalized after any such distribution or payment.

CAPITAL RESOURCES

     At March 31, 1998, stockholders' equity totaled $20,899,000,
or 7.8% of total assets, compared to $20,527,000, or 7.8% of total
assets, at December 31, 1997.

     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 8% and 10%,
respectively. For the Company, Tier 1 capital includes common
stockholders' equity and qualifying perpetual preferred stock,
reduced by goodwill. For the Company, Tier 2 capital is comprised
of all of the allowance for possible loan losses.

     Banking regulators also have leverage ratio requirements.  The
leverage ratio requirement is measured as the ratio of Tier 1
capital to adjusted quarterly average assets.  The leverage ratio
standards require all banking companies to have a minimum leverage
ratio of at least 3% and to be designated as well-capitalized, the
banking company must have a leverage ratio of at least 6%.  The 
following table provides a calculation of the Company's risk-based 
capital and 

                              -26-

<PAGE>

leverage ratios and a comparison of the Company's and the Bank's 
risk-based capital ratios and leverage ratios to the minimum 
regulatory and well-capitalized minimum requirements at 
March 31, 1998.

<TABLE>
<CAPTION>

     The Company                                                              March 31, 1998
     -----------                                                              --------------
                                                                           (Dollars in thousands)
     <S>                                                                        <C>
     Tier 1 capital:
          Common stockholders' equity, excluding unrealized gain on
            available-for-sale securities                                       $  20,621
          Preferred stockholders' equity (1)                                          231
          Goodwill                                                                 (3,103)
                                                                                ---------
               Total Tier 1 capital                                                17,749
                                                                                ---------

     Tier 2 capital:
          Allowance for possible loan losses (2)                                    1,121
                                                                                ---------
               Total Tier 2 capital                                                 1,121
                                                                                ---------

                    Total capital                                               $  18,870
                                                                                =========

     Risk-weighted assets                                                       $ 153,378
                                                                                =========

     Adjusted quarterly average assets                                          $ 261,862
                                                                                =========
</TABLE>

<TABLE>
<CAPTION>
                                                  Regulatory     Well-capitalized    Actual Ratios at
The Company                                         Minimum          Minimum          March 31, 1998
-----------                                       ----------     ----------------    ----------------
<S>                                                 <C>               <C>                 <C>
Tier 1 capital to risk-weighted assets ratio        4.00%              8.00%              11.57%
Total capital to risk-weighted assets ratio         8.00              10.00               12.30
Leverage ratio                                      3.00               6.00                6.78

The Bank
--------

Tier 1 capital to risk-weighted assets ratio        4.00%              8.00%              10.64%
Total capital to risk-weighted assets ratio         8.00              10.00               11.37
Leverage ratio                                      3.00               6.00                6.30

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

</TABLE>

     The Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA") requires each federal banking agency to revise its
risk-based capital standards to ensure that those standards take
adequate account of interest rate risk, concentration of credit
risk and the risks of non-traditional activities, as well as
reflect the actual performance and expected risk of loss on multi-
family mortgages.  This law also requires each federal banking
agency to specify the levels at which an insured institution would
be considered "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and
"critically undercapitalized."  Under the FDIC's regulations, the
Company and the Bank were both "well capitalized" at March 31,
1998.

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

     The payment of dividends on the Common Stock and Series C
Cumulative Convertible Preferred Stock (the "Series C Preferred
Stock") is determined by the Company's Board of Directors in light
of circumstances and conditions then existing, including the 
earnings of the Company and the Bank, funding requirements and 
financial 

                            -27-

<PAGE>

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

     The Company began paying quarterly cash dividends of $0.03 per
share on the Common Stock during the second quarter of 1994. The
Company also paid a 4-for-3 stock split, effected in the form of a
33-1/3% stock dividend, on May 31, 1995. The Company's Board of
Directors increased the Company's quarterly Common Stock cash
dividend to $0.05 per share during the second quarter of 1996.  In
addition, the Company paid a 5-for-4 stock split, effected in the
form of a 25% stock dividend, on May 30, 1997.

     At its meeting on April 15, 1998, the Board of Directors of
the Company approved the payment of the regular quarterly cash
dividend of $0.05 per share on May 29, 1998, to shareholders of
record of the Common Stock on May 15, 1998.  

     Subsequent to March 31, 1998, holders of a total of 444 shares
of the Company's Series C Preferred Stock converted such shares
into 10,197 shares of Common Stock.  As of the date of filing of
this report, the Company had 5,066 shares of Series C Preferred
Stock and 1,987,296 shares of Common Stock issued and outstanding.

YEAR 2000 COMPLIANCE

     The inability of computers, software and other equipment
utilizing microprocessors to recognize and properly process data
fields containing a four digit year is commonly referred to as the
Year 2000 Compliance issue.  As the year 2000 approaches, such
systems may be unable to accurately process certain date-based
information.

     The Company believes it has identified all significant
applications that will require modification to ensure Year 2000
Compliance.  Internal and external resources are being used to make
the required modifications and test Year 2000 Compliance.  The
modification process of all significant applications by outside
hardware and software suppliers is substantially complete.  The
Company plans on completing the testing process of all significant
applications by December 31, 1998.

     The Company leases virtually all of its computer hardware
under leases that expire during the first six months of 1998.  The
Company has scheduled the replacement of this hardware, as well as
the software used for its main operating system and major banking
applications, during this same time period.  All such hardware and
software will be Year 2000 compliant.

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

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


                              -28-

<PAGE>

                             PART II

                        OTHER INFORMATION

Item 1.   Legal Proceedings.

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

Item 2.   Changes in Securities.

          None

Item 3.   Defaults upon Senior Securities.

          None

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

          At the Company's Annual Meeting of Shareholders held on
Tuesday, April 28, 1998, the following members were elected to the
Board of Directors:

                              Votes For      Votes Withheld
                              ---------      --------------

     John L. Beckham          1,624,916          8,903
     Nancy E. Jones           1,624,916          8,903
     Bryan W. Stephenson      1,626,166          7,653
     Scott L. Taliaferro      1,625,966          7,853
     C.G. Whitten             1,625,591          8,228

     Continuing directors not standing for re-election until the
1999 and 2000 Annual Meetings of Shareholders are Mrs. Wm. R.
(Amber) Cree (1999), Tommy McAlister (1999), James D. Webster, M.D.
(1999), John A .Wright (1999), Lee Caldwell (2000), Randal N.
Crosswhite (2000), Louis S. Gee (2000) and Marshal M. Kellar (2000).

Item 5.   Other Information.

          None

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

          (a)  Exhibits

               27.1 Financial Data Schedule

          (b)  Reports on Form 8-K

               None



                              -29-

<PAGE>

                            SIGNATURE


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







Date:  May 15, 1998                Independent Bankshares, Inc.
                                   (Registrant)



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








                               -30-