text: *State Banks*. Banks that are organized as state banks under Texas law are subject to regulation and examination 
  by the Banking Commissioner of the State of Texas. The Commissioner regulates and supervises, and the Texas 
  Banking Department regularly examines, Hereford State Bank and Stephenville Bank and Trust Co. The 
  Commissioner’s supervision and regulation of banks is primarily designed to protect the interests of depositors. 
  Texas law 
  
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  requires each state bank to maintain reserves against deposits, 
  
  restricts the nature and amount of loans that may be made and the interest that may be charged, and 
  
  restricts investments and other activities. 
  
  Because our Texas-chartered banks are members of the FDIC, they are also subject to regulation at the federal 
  level by the FDIC, and are subject to most of the federal laws described below. 
  
  *Deposit Insurance*
  
  Each of our subsidiary banks is a member of the FDIC. The FDIC provides deposit insurance protection that 
  covers all deposit accounts in FDIC-insured depository institutions and generally does not exceed $100,000 per 
  depositor. Our subsidiary banks must pay assessments to the FDIC under a risk-based assessment system for federal 
  deposit insurance protection. FDIC-insured depository institutions that are members of the Bank Insurance Fund pay 
  insurance premiums at rates based on their risk classification. Institutions assigned to higher risk classifications (i.e., 
  institutions that pose a greater risk of loss to their respective deposit insurance funds) pay assessments at higher rates 
  than institutions that pose a lower risk. An institution’s risk classification is assigned based on its capital levels and 
  the level of supervisory concern the institution poses to bank regulators. In addition, the FDIC can impose special 
  assessments to cover the costs of borrowings from the U.S. Treasury, the Federal Financing Bank and the Bank 
  Insurance Fund member banks. As of December 31, 2002, the assessment rate for each of our subsidiary banks is at 
  the lowest level risk-based premium available. 