Tarrant County is the third most populous county in Texas with a total population of 1.6 million that is projected to grow 11.1% over the next five years compared to 6.3% for the United States. Aerospace companies and defense contractors , as well as cattle and agricultural companies, have a significant role in the economic foundation of Tarrant County. With more than $17.0 billion in aggregate deposits as of June 30, 2004, Tarrant County is the third largest of the Texas banking markets.

The West Texas market is an eight-county area surrounding the cities of Lubbock, Odessa, and Abilene with a combined population of approximately 716,000 as of the beginning of 2005. Lubbock has a diverse economy consisting of natural resources, healthcare, farming and ranching, electronic manufacturing, and higher education. Odessa is located in Ector County in the heart of the Permian Basin. The Permian Basin, an area of approximately 100,000 square miles in West Texas, is the largest single source of oil and gas deposits in the United States. Abilene is located in west central Texas near the geographic center of the state, with a primary economic base in agriculture, oil and gas and higher education.

Rio Grande Market is comprised primarily of El Paso, Texas and Las Cruces, New Mexico. El Paso is situated on the border of Mexico and two U.S. states and is the fifth largest city in Texas with a population of approximately 595,000. El Paso's proximity to Mexico presents an opportunity for businesses to capitalize on the maquiladora industry and NAFTA.

Las Cruces, New Mexico, located only 25 miles from El Paso, is the second largest city in New Mexico with a population of approximately 81,000. Las Cruces topped the 2002 Forbes/Milken Institute ranking as the best small metro area (populations below 177,000) for business and careers. The rankings are based on job growth and earned income, plus a measure of activity in critical technologies that foster future growth.

The Company’s commercial loans are primarily made within its market area and are underwritten on the basis of the borrower's ability to service the debt from cash flow. As a general practice, these loans are secured by current assets of the borrower, including accounts receivable and inventory, and by equipment or other assets owned by the borrower.

The Company’s largest loan category is real estate loans. Significant groups within this category include commercial rental properties, owner occupied properties, interim construction loans for both residential and commercial structures, and development loans. Commercial rental property loans finance the purchase of income producing real estate properties. These loans often involve higher loan principal amounts and repayment is dependent in large part on sufficient income from the properties securing the loans to cover operating expenses and debt service. As a general practice, the Company requires its commercial real estate loans to be secured by income producing properties with margins meeting its criteria and to be guaranteed by financially capable, responsible individuals.

In addition to commercial and real estate loans, the Company makes agriculture loans and consumer loans. The Company provides various kinds of operating and term loans to agricultural producers in its market areas, including annual crop production loans, equipment financing loans, and cattle secured loans. These notes are normally secured by crops, equipment, accounts, various kinds of support payments, cattle, and hedge accounts. Inspections are performed on crop production and cattle loans to monitor outstanding loan balances to the Company’s collateral.

The Company provides a wide variety of trust and wealth management services to its customers. As of March 31, 2005, the Company had over $200.0 million of trust and wealth assets under management. The Company’s trust services include estate administration, personal trust administration, charitable trust administration, employee benefit administration, investment management and farm and ranch management.

Tax equivalent net interest income was $14.7 million for the three months ended March 31, 2005, an increase of $2.8 million, or 24.0%, from $11.9 million for the same period in 2004.

Total interest expense increased by 32.6% to $2.7 million for the three months ended March 31, 2005, compared to $2.1 million for the same period during 2004.

Noninterest income was $4.4 million for the three months ended March 31, 2005, a 15.1% increase from $3.8 million for the same period in 2004.

Total noninterest expense increased 22.8% to $13.4 million for the three months ended March 31, 2005, compared to $10.9 million for the same period in 2004.