text: **ITEM 2.** **PROPERTIES**
  
  Our principal office is located in the First National Bank Building at 400 Pine Street in downtown Abilene, 
  Texas. We lease two spaces in a building owned by First National Bank of Abilene. The lease for approximately 
  2,300 square feet of space expires December 31, 2004. The lease for approximately 1,100 square feet of space 
  expires May 31, 2006. Our subsidiary banks collectively own 22 banking facilities, some of which are detached 
  drive-ins, and they also lease six banking facilities. Our management considers all of our existing locations to be 
  well-suited for conducting the business of banking. We believe that our existing facilities are adequate to meet our 
  requirements and our subsidiary banks’ requirements for the foreseeable future. 
  
  **ITEM 3.** **LEGAL PROCEEDINGS**
  
  From time to time we and our subsidiary banks are parties to lawsuits arising in the ordinary course of our 
  banking business. However, there are no material pending legal proceedings to which we, our subsidiary banks or 
  our other direct and indirect subsidiaries, or any of their properties, are currently subject. Other than regular, routine 
  examinations by state and federal banking authorities, there are no proceedings pending or known to be 
  contemplated by any governmental authorities. 