----

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-Q**

**QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15(d)**

**OF      THE SECURITIES EXCHANGE ACT OF 1934**

**For      the quarterly period ended September 30, 2008**

**T      BANCSHARES, INC.**

| **Texas**                                                                                   |   | **71-0919962**                                |
|---------------------------------------------------------------------------------------------|--------|-----------------------------------------------|
| (State or other jurisdiction ofincorporation or organization) |   | (I.R.S. EmployerIdentification No.) |

| Larger Accelerated Filer  | Yes    ̈ | No   x      |
|-------------------------------------|-----------------------------|----------------------------|
| Accelerated Filer              | Yes    ̈ | No   x      |
| Nonaccelerated Filer           | Yes    ̈ | No   x      |
| Smaller Reporting Company | Yes   x      | No    ̈ |

----

----

**T      BANCSHARES, INC.**

|               |                                                                                                       |   | PAGE |
|-------------------------|---------------------------------------------------------------------------------------------------------------------------|--------|------|
| PART                I.  | FINANCIAL                INFORMATION                                                                                      |   | 3    |
| ITEM                1.  | Financial                Statements                                                                                       |   | 3    |
| ITEM                2.  | Management’s                Discussion and Analysis or Financial Condition and Results of                Operations |   | 17   |
| ITEM                3.  | Quantitative                and Qualitative Disclosures about Market Risk                                                 |   | 29   |
| ITEM                4.  | Controls                and Procedures                                                                                    |   | 31   |
| PART                II. | OTHER                INFORMATION                                                                                          |   | 31   |
| ITEM                1.  | Legal                Proceedings                                                                                          |   | 31   |
| ITEM                2.  | Unregistered                Sales of Equity Securities and Use of Proceeds                                                |   | 31   |
| ITEM                3.  | Defaults                Upon Senior Securities                                                                            |   | 31   |
| ITEM                4.  | Submission                of Matters to a Vote of Security Holders                                                        |   | 31   |
| ITEM                5.  | Other                Information                                                                                          |   | 31   |
| ITEM                6.  | Exhibits                                                                                                                  |   | 32   |

----

**PART      I.**
**FINANCIAL      INFORMATION**

**ITEM      1.** **Financial      Statements**

**T      BANCSHARES, INC.**

**CONSOLIDATED      STATEMENTS OF FINANCIAL CONDITION**

| **(000's)**                                                                                                                        |   | **September 30, 2008** |    | **December 31,****2007** |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|-------------------------------|--------|
|                                                                                                                               |   | **(unaudited)**                  |    |                          |   |
|                                                                                                                               |   |                             |    |                     |   |
| **ASSETS**                                                                                                                         |   |                             |    |                          |   |
|                                                                                                                               |   |                             |    |                          |   |
| Cash                and due from banks                                                                                             |   | $                                | 2,513   |                          | $      | 3,235 |   |
| Federal                funds sold                                                                                                  |   |                             | 6,420   |                          |   | 20,325 |   |
|                                                                                                                               |   |                             |    |                          |   |   |   |
| Total                cash and cash equivalents                                                                                     |   |                             | 8,933   |                          |   | 23,560 |   |
|                                                                                                                               |   |                             |    |                          |   |   |   |
| Investments                restricted, at cost                                                                                     |   |                             | 551     |                          |   | 499 |   |
| Held                to maturity, restricted                                                                                        |   |                             | 1,011   |                          |   | 992 |   |
| Loans,                net of allowance for loan losses of $1,669 and $1,600,                respectively                           |   |                             | 125,995 |                          |   | 119,924 |   |
| Bank                premises and equipment, net                                                                                    |   |                             | 1,287   |                          |   | 1,601 |   |
| Other                assets                                                                                                        |   |                             | 1,715   |                          |   | 939 |   |
|                                                                                                                               |   |                             |    |                          |   |   |   |
| Total                assets                                                                                                        |   | $                                | 139,492 |                          | $      | 147,515 |   |
|                                                                                                                               |   |                             |    |                          |   |   |   |
| **LIABILITIES**                                                                                                                    |   |                             |    |                          |   |   |   |
|                                                                                                                               |   |                             |    |                          |   |   |   |
| Demand                Deposits:                                                                                                    |   |                             |    |                          |   |   |   |
| Noninterest-bearing                                                                                                                |   | $                                | 10,066  |                          | $      | 13,878 |   |
| Interest-bearing                                                                                                                   |   |                             | 40,382  |                          |   | 52,313 |   |
| Time                deposits $100,000 and over                                                                                     |   |                             | 45,249  |                          |   | 41,687 |   |
| Other                time deposits                                                                                                 |   |                             | 28,618  |                          |   | 25,032 |   |
|                                                                                                                               |   |                             |    |                          |   |   |   |
| Total                deposits                                                                                                      |   |                             | 124,315 |                          |   | 132,910 |   |
|                                                                                                                               |   |                             |    |                          |   |   |   |
| Other                liabilities                                                                                                   |   |                             | 1,264   |                          |   | 479 |   |
|                                                                                                                               |   |                             |    |                          |   |   |   |
| Total                liabilities                                                                                                   |   |                             | 125,579 |                          |   | 133,389 |   |
|                                                                                                                               |   |                             |    |                          |   |   |   |
| **Shareholders'                Equity**                                                                                            |   |                             |    |                          |   |   |   |
|                                                                                                                               |   |                             |    |                          |   |   |   |
| Common                Stock, $ .01 par value; 10,000,000 shares authorized; 1,703,801 shares                issued and outstanding |   |                             | 17      |                          |   | 17 |   |
| Additional                paid-in capital                                                                                          |   |                             | 16,879  |                          |   | 16,819 |   |
| Retained                deficit                                                                                                    |   |                             | (2,983  | )                             |   | (2,710 | ) |
|                                                                                                                               |   |                             |    |                          |   |   |   |
| Total                shareholders' equity                                                                                          |   |                             | 13,913  |                          |   | 14,126 |   |
|                                                                                                                               |   |                             |    |                          |   |   |   |
| Total                liabilities and shareholders' equity                                                                          |   | $                                | 139,492 |                          | $      | 147,515 |   |

----

**T      BANCSHARES, INC.**

**CONSOLIDATED      STATEMENTS OF INCOME**

**(Unaudited)**

|                                                       |   | **Three Months Ended September 30,** |      | **Nine Months Ended September 30,** |   |
|----------------------------------------------------------------------|--------|----------------------------------------------------------|-----------|---------------------------------------------------------|--------|
| **(000's)**                                                          |   | **2008**                                                 |      | **2007**                                                |   | **2008** |   | **2007** |   |
|                                                                 |   |                                                |      |                                               |   |                      |   |   |   |
| **Interest                  Income**                                 |   |                                                     |           |                                                    |   |  |   |   |  |   |   |  |   |
|                                                                 |   |                                                     |           |                                                    |   |  |   |   |  |   |   |  |   |
| Loan,                  including fees                                |   | $                                                        | 2,323     |                                                    | $      | 2,402 |   | $ | 7,294 |   | $ | 6,671 |   |
| Securities,                  restricted                              |   |                                                     | 15        |                                                    |   | 19 |   |   | 39 |   |   | 59 |   |
| Federal                  funds sold                                  |   |                                                     | 77        |                                                    |   | 174 |   |   | 271 |   |   | 894 |   |
| Total                  interest income                               |   |                                                     | 2,415     |                                                    |   | 2,595 |   |   | 7,604 |   |   | 7,624 |   |
| **Interest                  Expense**                                |   |                                                     |           |                                                    |   |  |   |   |  |   |   |  |   |
|                                                                 |   |                                                     |           |                                                    |   |  |   |   |  |   |   |  |   |
| Deposits                                                             |   |                                                     | 1,261     |                                                    |   | 1,207 |   |   | 3,871 |   |   | 3,654 |   |
|                                                                 |   |                                                     |           |                                                    |   |  |   |   |  |   |   |  |   |
| Net                  interest income                                 |   |                                                     | 1,154     |                                                    |   | 1,388 |   |   | 3,733 |   |   | 3,970 |   |
| Provision                  for loan losses                           |   |                                                     | 177       |                                                    |   | 150 |   |   | 476 |   |   | 450 |   |
|                                                                 |   |                                                     |           |                                                    |   |  |   |   |  |   |   |  |   |
| Net                  interest income after provision for loan losses |   |                                                     | 977       |                                                    |   | 1,238 |   |   | 3,257 |   |   | 3,520 |   |
|                                                                 |   |                                                     |           |                                                    |   |  |   |   |  |   |   |  |   |
| **Noninterest                  Income**                              |   |                                                     |           |                                                    |   |  |   |   |  |   |   |  |   |
|                                                                 |   |                                                     |           |                                                    |   |  |   |   |  |   |   |  |   |
| Trust                  income                                        |   |                                                     | 2,298     |                                                    |   | 2,475 |   |   | 7,970 |   |   | 6,890 |   |
| Service                  fees                                        |   |                                                     | 27        |                                                    |   | 155 |   |   | 80 |   |   | 1,330 |   |
| Total                  noninterest income                            |   |                                                     | 2,325     |                                                    |   | 2,630 |   |   | 8,050 |   |   | 8,220 |   |
|                                                                 |   |                                                     |           |                                                    |   |  |   |   |  |   |   |  |   |
| **Noninterest                  Expense**                             |   |                                                     |           |                                                    |   |  |   |   |  |   |   |  |   |
|                                                                 |   |                                                     |           |                                                    |   |  |   |   |  |   |   |  |   |
| Salaries                  and employee benefits                      |   |                                                     | 762       |                                                    |   | 733 |   |   | 2,279 |   |   | 2,077 |   |
| Occupancy                  and equipment                             |   |                                                     | 280       |                                                    |   | 287 |   |   | 978 |   |   | 791 |   |
| Trust                  consulting services                           |   |                                                     | 2,023     |                                                    |   | 2,203 |   |   | 6,974 |   |   | 6,469 |   |
| Professional                  fees                                   |   |                                                     | 167       |                                                    |   | 192 |   |   | 513 |   |   | 492 |   |
| Other                                                                |   |                                                     | 293       |                                                    |   | 475 |   |   | 836 |   |   | 1,357 |   |
| Total                  noninterest expense                           |   |                                                     | 3,525     |                                                    |   | 3,890 |   |   | 11,580 |   |   | 11,186 |   |
|                                                                 |   |                                                     |           |                                                    |   |  |   |   |  |   |   |  |   |
| **Net                  Income (Loss)**                               |   | $                                                        | (223      | )                                             | $      | (22 | )   | $ | (273 | )   | $ | 554 |   |
|                                                                 |   |                                                     |           |                                                    |   |  |   |   |  |   |   |  |   |
| **Earning                  (loss) per common share:**                |   |                                                     |           |                                                    |   |  |   |   |  |   |   |  |   |
| Basic                                                                |   |                                                     | (0.13     | )                                                       |   | (0.01 | ) |   | (0.16 | ) |   | 0.33 |   |
| Diluted                                                              |   |                                                     | -         |                                                    |   | - |   |   | - |   |   | 0.32 |   |
|                                                                 |   |                                                     |           |                                                    |   |  |   |   |  |   |   |  |   |
| Weighted                  average common shares outstanding          |   |                                                     | 1,703,801 |                                                    |   | 1,695,848 |   |   | 1,703,801 |   |   | 1,695,750 |   |
| Weighted                  average diluted shares outstanding         |   |                                                     | 1,703,801 |                                                    |   | 1,695,848 |   |   | 1,703,801 |   |   | 1,738,980 |   |

----

**T      BANCSHARES, INC.**

**CONSOLIDATED      STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY**

**(Unaudited)**

|                                               |   |                  |         | **Additional** |   |                      |   |      |   |
|----------------------------------------------------|--------|-----------------------|--------------|----------------|--------|---------------------------|--------|-----------|--------|
|                                               |   |                  |         | **Paid-in**    |   |                      |   |      |   |
| **(000's)**                                        |   | **Common Stock** |         | **Capital**    |   | **Retained Deficit** |   | **Total** |   |
|                                               |   |                  |         |           |   |                      |   |      |   |
| **BALANCE,                  December 31, 2006**    |   | $                     | 17           |           | $      | 16,572                    |   | $         | (3,511 | ) | $ | 13,078 |   |
|                                               |   |                  |         |           |   |                      |   |      |   |   |   |   |   |
| Comprehensive                  income:             |   |                  |         |           |   |                      |   |      |   |   |   |   |   |
| Net                  income — YTD            |   |                  |         |           |   |                      |   |      | 554    |   |   | 554 |   |
| Total                  comprehensive income        |   |                  |         |           |   |                      |   |      |   |   |   | 554 |   |
|                                               |   |                  |         |           |   |                      |   |      |   |   |   |   |   |
| Exercise                  of warrants              |   |                  |         |           |   | 98                        |   |      |   |   |   | 98 |   |
| Exercise                  of stock options         |   |                  |         |           |   | 10                        |   |      |   |   |   | 10 |   |
| Stock                  based compensation          |   |                  |         |           |   | 55                        |   |      |   |   |   | 55 |   |
|                                               |   |                  |         |           |   |                      |   |      |   |   |   |   |   |
| **BALANCE,                  September 30, 2007**   |   | $                     | 17           |           | $      | 16,735                    |   | $         | (2,957 | ) | $ | 13,795 |   |
|                                               |   |                  |         |           |   |                      |   |      |   |   |   |   |   |
| **BALANCE,                  December 31, 2007**    |   | $                     | 17           |           | $      | 16,819                    |   | $         | (2,710 | ) | $ | 14,126 |   |
|                                               |   |                  |         |           |   |                      |   |      |   |   |   |   |   |
| Comprehensive                  income:             |   |                  |         |           |   |                      |   |      |   |   |   |   |   |
| Net                  loss — YTD              |   |                  |         |           |   |                      |   |      | (273   | ) |   | (273 | ) |
| Total                  comprehensive income (loss) |   |                  |         |           |   |                      |   |      |   |   |   | (273 | ) |
|                                               |   |                  |         |           |   |                      |   |      |   |   |   |   |   |
| Stock                  based compensation          |   |                  |    |           |   | 60                        |   |      |   |   |   | 60 |   |
|                                               |   |                  |         |           |   |                      |   |      |   |   |   |   |   |
| **BALANCE,                  September 30, 2008**   |   | $                     | 17           |           | $      | 16,879                    |   | $         | (2,983 | ) | $ | 13,913 |   |

----

**T      BANCSHARES, INC.**

**CONSOLIDATED      STATEMENT OF CASH FLOWS**

**(Unaudited)**

|                                                                                                                   |   | **Nine Months Ended September 30,** |    |
|------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|---------|
| **(000's)**                                                                                                            |   | **2008**                                                |    | **2007** |   |
|                                                                                                                   |   |                                                    |    |   |   |
| **Cash                Flows from Operating Activities**                                                                |   |                                               |    |   |   |
| Net                Income (loss)                                                                                       |   | $                                                       | (273    | ) | $ | 554 |   |
|                                                                                                                   |   |                                                    |    |   |   |   |   |
| Adjustments                to reconcile net income (loss) to net cash provided by operating                activities: |   |                                                    |    |   |   |   |   |
|                                                                                                                   |   |                                                    |    |   |   |   |   |
| Provision                for loan losses                                                                               |   |                                                    | 476     |   |   | 450 |   |
| Depreciation                and amortization                                                                           |   |                                                    | 342     |   |   | 399 |   |
| Accretion                of discount                                                                                   |   |                                                    | (16     | ) |   | (12 | ) |
| Stock                based compensation                                                                                |   |                                                    | 60      |   |   | 55 |   |
| Net                change in other assets                                                                              |   |                                                    | (776    | ) |   | 381 |   |
| Net                change in other liabilities                                                                         |   |                                                    | 785     |   |   | 501 |   |
|                                                                                                                   |   |                                                    |    |   |   |   |   |
| Net                cash provided by operating activities                                                               |   |                                                    | 598     |   |   | 2,328 |   |
|                                                                                                                   |   |                                                    |    |   |   |   |   |
| **Cash                Flows from Investing Activities**                                                                |   |                                                    |    |   |   |   |   |
| Purchase                of securities held to maturity                                                                 |   |                                                    | (3,003  | ) |   | (991 | ) |
| Proceeds                from maturity of securities                                                                    |   |                                                    | 3,000   |   |   | 1,000 |   |
| Purchase                of Federal Home Loan Bank stock                                                                |   |                                                    | (52     | ) |   | (31 | ) |
| Net                change in loans                                                                                     |   |                                                    | (6,547  | ) |   | (24,287 | ) |
| Purchases                of premises and equipment                                                                     |   |                                                    | (28     | ) |   | (408 | ) |
|                                                                                                                   |   |                                                    |    |   |   |   |   |
| Net                cash used in investing activities                                                                   |   |                                                    | (6,630  | ) |   | (24,717 | ) |
|                                                                                                                   |   |                                                    |    |   |   |   |   |
| **Cash                Flows from Financing Activities**                                                                |   |                                                    |    |   |   |   |   |
| Net                change in demand deposits                                                                           |   |                                                    | (15,743 | ) |   | (13,187 | ) |
| Net                change in time deposits                                                                             |   |                                                    | 7,148   |   |   | 13,673 |   |
| Exercise                of stock options                                                                               |   |                                                    | -       |   |   | 10 |   |
| Exercise                of warrants                                                                                    |   |                                                    | -       |   |   | 98 |   |
|                                                                                                                   |   |                                                    |    |   |   |   |   |
| Net                cash provided (used) by financing activities                                                        |   |                                                    | (8,595) |   |   | 594 |   |
|                                                                                                                   |   |                                                    |    |   |   |   |   |
| Net                change in cash and cash equivalents                                                                 |   |                                                    | (14,627 | ) |   | (21,795 | ) |
| Cash                and cash equivalents at beginning of period                                                        |   |                                                    | 23,560  |   |   | 37,766 |   |
|                                                                                                                   |   |                                                    |    |   |   |   |   |
| Cash                and cash equivalents at end of period                                                              |   | $                                                       | 8,933   |   | $ | 15,971 |   |
|                                                                                                                   |   |                                                    |    |   |   |   |   |
| Supplemental                disclosures of cash flow information                                                       |   |                                                    |    |   |   |   |   |
| Cash                paid during the period for                                                                         |   |                                                    |    |   |   |   |   |
| Interest                                                                                                               |   | $                                                       | 3,845   |   | $ | 3,615 |   |
| Income                taxes                                                                                            |   | $                                                       | 20      |   | $ | - |   |

----

**T      BANCSHARES, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE      1.**
**BASIS      OF PRESENTATION**

**Organization      and Nature of Operations**

**NOTE      2. ADOPTION OF NEW ACCOUNTING POLICIES**

*Accounting      for Uncertainty in Income Taxes - An interpretation of FASB Statement      109*
*Accounting      for Income Taxes*

----

**NOTE      3.**
**      LOANS**

| **(000's)**                                          |   | **September 30,****2008** |    | **December 31,****2007** |   |
|------------------------------------------------------|--------|--------------------------------|---------|-------------------------------|--------|
|                                                 |   |                           |    |                          |   |
| Commercial                and industrial             |   | $                              | 83,070  |                          | $      | 81,811 |   |
| Consumer                installment                  |   |                           | 3,509   |                          |   | 3,183 |   |
| Real                estate — mortgage     |   |                           | 19,490  |                          |   | 23,542 |   |
| Real                estate — construction |   |                           | 21,741  |                          |   | 13,177 |   |
| Other                                                |   |                           | 10      |                          |   | 13 |   |
|                                                 |   |                           |    |                          |   |   |   |
|                                                 |   |                           | 127,820 |                          |   | 121,726 |   |
|                                                 |   |                           |    |                          |   |   |   |
| Less                allowance for loan losses        |   |                           | 1,669   |                          |   | 1,600 |   |
| Less                deferred loan fees               |   |                           | 156     |                          |   | 202 |   |
|                                                 |   |                           |    |                          |   |   |   |
| Net                loans                             |   | $                              | 125,995 |                          | $      | 119,924 |   |

| **(000's)**                                               |   | **September 30,****2008** |   | **December 31,****2007** |   |
|-----------------------------------------------------------|--------|--------------------------------|--------|-------------------------------|--------|
|                                                      |   |                           |   |                          |   |
| Balance                at beginning of period             |   | $                              | 1,600  |                          | $      | 1,000 |   |
| Provision                charged to operations            |   |                           | 476    |                          |   | 600 |   |
| Loans                charged off                          |   |                           | (451   | )                             |   | - |   |
| Recoveries                of loans previously charged off |   |                           | 44     |                          |   | - |   |
|                                                      |   |                           |   |                          |   |   |   |
| Balance                at end of period                   |   | $                              | 1,669  |                          | $      | 1,600 |   |

----

**NOTE      4.**
**SECURITIES**

|                     |   | **September 30, 2008** |   |
|------------------------------------|--------|----------------------------------|--------|
| **(000's)**                        |   | **Amortized****Cost**            |   | **Unrealized****Gains** |   | **Unrealized****Losses** |   | **Estimated****Fair Value** |   |
|                               |   |                             |   |   |   |   |   |   |   |
| Government                Agencies |   | $                                | 1,011  |   | $ | - |   | $ | - |   | $ | 1,011 |   |
| U.S.                Treasury Notes |   |                             | -      |   |   | - |   |   | - |   |   | - |   |
| Net                Securities      |   | $                                | 1,011  |   | $ | - |   | $ | - |   | $ | 1,011 |   |

|                     |   | **December 31, 2007** |   |
|------------------------------------|--------|---------------------------------|--------|
| **(000's)**                        |   | **Amortized****Cost**           |   | **Unrealized****Gains** |   | **Unrealized****Losses** |   | **Estimated****Fair Value** |   |
|                               |   |                            |   |   |   |   |   |   |   |
| Government                Agencies |   | $                               | -      |   | $ | - |   | $ | - |   | $ | - |   |
| U.S.                Treasury Notes |   |                            | 992    |   |   | - |   |   | - |   |   | 992 |   |
| Net                Securities      |   | $                               | 992    |   | $ | - |   | $ | - |   | $ | 992 |   |

**NOTE      5.**
**RELATED      PARTIES**

**NOTE      6.**
**BANK      PREMISES AND EQUIPMENT**

| **(000's)**                                   |   | **September 30,****2008** |   | **December 31,****2007** |   |
|-----------------------------------------------|--------|--------------------------------|--------|-------------------------------|--------|
| Leasehold                improvements         |   | $                              | 929    |                          | $      | 931 |   |
| Furniture                and equipment        |   |                           | 1,788  |                          |   | 1,758 |   |
|                                          |   |                           | 2,717  |                          |   | 2,689 |   |
| Less:                accumulated depreciation |   |                           | 1,430  |                          |   | 1,088 |   |
| Balance                at end of period       |   | $                              | 1,287  |                          | $      | 1,601 |   |

----

**NOTE      7. OTHER ASSETS**

| **(000's)**                                |   | **September 30,****2008** |                         | **December 31,****2007** |   |
|--------------------------------------------|--------|--------------------------------|------------------------------|-------------------------------|--------|
|                                       |   |                           |                         |                          |   |
| Accrued                interest receivable |   | $                              | 501                          |                          | $      | 561 |   |
| Prepaid                assets              |   |                           | 319                          |                          |   | 239 |   |
| Accounts                receivable         |   |                           | 770                          |                          |   | 132 |   |
| Other                                      |   |                           | 125                          |                          |   | 7 |   |
|              |   |                           |                    |                          |   |     |   |
|                                       |   | $                              | 1,715                        |                          | $      | 939 |   |

**NOTE      8.**
**DEPOSITS**

| **(000's)**                                                  |   | **As of September 30, 2008** |    | **As of December 31, 2007** |   |
|--------------------------------------------------------------|--------|--------------------------------------------------|---------|-------------------------------------------------|--------|
|                                                         |   |                                             |    |                                            |   |   |   |   |   |
| Noninterest                bearing demand                    |   | $                                                | 10,066  |                                            |   | 8.1 | %   | $ | 13,878 |   |   | 10.4 | % |
| Interest                bearing demand (NOW)                 |   |                                             | 1,576   |                                            |   | 1.3 | % |   | 1,781 |   |   | 1.3 | % |
| Money                market accounts                         |   |                                             | 38,636  |                                            |   | 31.1 | % |   | 50,353 |   |   | 37.9 | % |
| Savings                accounts                              |   |                                             | 170     |                                            |   | 0.1 | % |   | 179 |   |   | 0.1 | % |
| Certificates                of deposit, less than $100,000   |   |                                             | 28,618  |                                            |   | 23.0 | % |   | 25,032 |   |   | 18.9 | % |
| Certificates                of deposit, $100,000 and greater |   |                                             | 45,249  |                                            |   | 36.4 | % |   | 41,687 |   |   | 31.4 | % |
|                                                         |   | $                                                | 124,315 |                                            |   | 100 | % | $ | 132,910 |   |   | 100.0 | % |

| **(000’s)** |   |   |   |
|-------------------|--------|--------|--------|
| 2008              |   | $      | 34,255 |   |
| 2009              |   |   | 12,912 |   |
| 2010              |   |   | 4,512  |   |
| 2011              |   |   | 14,271 |   |
| 2012              |   |   | 6,836  |   |
| 2013              |   |   | 1,081  |   |
|              |   |   |        |   |
| Total             |   | $      | 73,867 |   |

----

**Note      9.**
**Other      liabilities**

| **(000's)**                                   |   | **September 30,****2008** |   | **December 31,****2007** |   |
|-----------------------------------------------|--------|--------------------------------|--------|-------------------------------|--------|
|                                          |   |                           |   |                          |   |
| Trust                Advisor Fees Payable     |   | $                              | 673    |                          | $      | - |   |
| Interest                Payable               |   |                           | 181    |                          |   | 155 |   |
| Audit                Fees                     |   |                           | 146    |                          |   | 136 |   |
| Incentive                Compensation         |   |                           | 74     |                          |   | - |   |
| Legal                                         |   |                           | 122    |                          |   | 113 |   |
| Franchise                & Property Taxes |   |                           | 28     |                          |   | 21 |   |
| Other                Accruals                 |   |                           | 40     |                          |   | 54 |   |
|                                          |   | $                              | 1,264  |                          | $      | 479 |   |

**NOTE      10.**
**INCOME      TAXES**

**NOTE      11.**
**STOCK      OPTIONS**

----

|                                           |   | **Number of****Shares****Underlying****Options** |    | **Weighted****Average****Exercise****Prices** |   |
|-----------------------------------------------------|--------|-------------------------------------------------------|---------|-----------------------------------------------|--------|
|                                                |   |                                                  |    |                                          |   |
| Outstanding                at beginning of the year |   |                                                  | 196,000 |                                          | $      | 10.44 |   |
| Granted                                             |   |                                                  | 12,000  |                                          |   | 7.42 |   |
| Exercised                                           |   |                                                  | -       |                                          |   | - |   |
| Expired                / forfeited                  |   |                                                  | 15,000  |                                          |   | 10.08 |   |
|                                                |   |                                                  |    |                                          |   |   |   |
| Outstanding                at end of period         |   |                                                  | 193,000 |                                          | $      | 10.28 |   |
| Exercisable                at end of period         |   |                                                  | 98,100  |                                          | $      | 10.19 |   |
| Available                for grant at end of period |   |                                                  | 56,000  |                                          |   |    |   |

|                                      |   | **Shares** |    | **Weighted****Average****Grant Date****Fair Value** |   |
|------------------------------------------------|--------|------------|---------|---------------------------------------------------------------|--------|
|                                           |   |       |    |                                                          |   |
| Nonvested                at January 1, 2008    |   |       | 101,900 |                                                          | $      | 2.15 |   |
| Granted                                        |   |       | 12,000  |                                                          |   | 1.83 |   |
| Vested                                         |   |       | 8,500   |                                                          |   | 4.02 |   |
| Forfeited                                      |   |       | 15,000  |                                                          |   | 2.64 |   |
|                                           |   |       |    |                                                          |   |   |   |
| Nonvested                at September 30, 2008 |   |       | 94,900  |                                                          | $      | 2.75 |   |

**NOTE      12.**
**STOCK      WARRANTS**

----

**NOTE      13.**
**COMMITMENTS      AND CONTINGENCIES**

**Employment      Agreements**

**NOTE      14.**
**REGULATORY      MATTERS**

----

|                                          |   | **Actual** |                   | **For Capital Adequacy Purposes** |   | **To Be Well Capitalized Under****Prompt Corrective Action****Provisions** |          |
|---------------------------------------------------------|--------|------------|------------------------|--------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------|---------------|
| **(000's)**                                             |   | **Amount** |                   | **Ratio**                                        |   | **Amount**                                                                                               |          | **Ratio** |   | **Amount** |   | **Ratio** |   |
|                                                    |   |       |                   |                                             |   |                                                                                                     |          |   |   |   |   |   |   |
| **As                of September 30, 2008**             |   |       |                   |                                             |   |                                                                                                     |          |   |   |   |   |   |   |
| Total                Capital (to Risk Weighted Assets)  |   | $          | 14,                534 |                                             |   | 11.86                                                                                                    | %   | $ | 9,801 | ≥   |   | 8.00 | %   | $ | 12,251 | ≥   |   | 10.00 | % |
| Tier                1 Capital (to Risk Weighted Assets) |   |       | 13,001                 |                                             |   | 10.61                                                                                                    | %             |   | 4,900 | ≥ |   | 4.00 | % |   | 7,                351 | ≥ |   | 6.00 | % |
|                                                    |   |       |                   |                                             |   |                                                                                                     |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                1 Capital (to Average Assets)       |   |       | 13,001                 |                                             |   | 8.32                                                                                                     | %             |   | 6,250 | ≥ |   | 4.00 | % |   | 7,812 | ≥ |   | 5.00 | % |
|                                                    |   |       |                   |                                             |   |                                                                                                     |          |   |   |   |   |   |   |   |   |   |   |   |   |
| **As                of December 31, 2007**              |   |       |                   |                                             |   |                                                                                                     |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                Capital (to Risk Weighted Assets)  |   | $          | 14,499                 |                                             |   | 13.00                                                                                                    | %             | $ | 8,921 | ≥ |   | 8.00 | % | $ | 11,151 | ≥ |   | 10.00 | % |
|                                                    |   |       |                   |                                             |   |                                                                                                     |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                1 Capital (to Risk Weighted Assets) |   |       | 13,093                 |                                             |   | 11.74                                                                                                    | %             |   | 4,460 | ≥ |   | 4.00 | % |   | 6,691 | ≥ |   | 6.00 | % |
|                                                    |   |       |                   |                                             |   |                                                                                                     |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                1 Capital (to Average Assets)       |   |       | 13,093                 |                                             |   | 9.45                                                                                                     | %             |   | 5,540 | ≥ |   | 4.00 | % |   | 6,925 | ≥ |   | 5.00 | % |

**NOTE      15.**
**PARENT      COMPANY CONDENSED FINANCIAL STATEMENTS**

**T      BANCSHARES, INC.**

**CONDENSED      BALANCE SHEET**

**(Unaudited)**

| **(000's)**                                    |   | **September 30,****2008** |   | **December 31,****2007**  |   |
|------------------------------------------------|--------|--------------------------------|--------|--------------------------------|--------|
|                                           |   |                           |   |                           |   |
| **ASSETS**                                     |   |                      |   |                      |   |
|                                           |   |                      |   |                      |   |
| Cash                  and due from banks       |   | $                              | 537    |                           | $      | 743 |   |
| Due                  from subsidiary           |   |                           | 290    |                           |   | 290 |   |
| Other                  Assets                  |   |                           | 85     |                           |   | - |   |
| Investment                  in subsidiary      |   |                           | 13,001 |                           |   | 13,093 |   |
|                                           |   |                           |   |                           |   |   |   |
| Total                  Assets                  |   | $                              | 13,913 |                           | $      | 14,126 |   |
|                                           |   |                           |   |                           |   |   |   |
| **LIABILITIES                  AND CAPITAL**   |   |                           |   |                           |   |   |   |
|                                           |   |                           |   |                           |   | - |   |
| Capital                                        |   |                           | 13,913 |                           |   | 14,126 |   |
|                                           |   |                           |   |                           |   |   |   |
| Total                  Liabilities and Capital |   | $                              | 13,913 |                           | $      | 14,126 |   |

----

**T      BANCSHARES, INC.**

**CONDENSED      STATEMENT OF INCOME**

**(Unaudited)**

|                                         |   | **Three Months Ended September 30,** |   | **Nine Months Ended September 30,** |   |
|--------------------------------------------------------|--------|----------------------------------------------------------|--------|---------------------------------------------------------|--------|
| **(000's)**                                            |   | **2008**                                                 |   | **2007**                                                |   | **2008** |   | **2007** |   |
|                                                   |   |                                                     |   |                                                    |   |   |   |   |   |   |   |   |   |
| Equity                in income (loss) from subsidiary |   | $                                                        | (195   | )                                                  | $      | 33 |   | $ | (92 | )  | $ | 709 |   |
|                                                   |   |                                                     |   |                                                    |   |   |   |   |   |   |   |   |   |
| Noninterest                expense:                    |   |                                                     |   |                                                    |   |   |   |   |   |   |   |   |   |
| Professional                and administrative         |   |                                                     | 14     |                                                    |   | 35 |   |   | 121 |   |   | 100 |   |
| Stock                options                           |   |                                                     | 14     |                                                    |   | 20 |   |   | 60 |   |   | 55 |   |
| Total                noninterest expenses              |   |                                                     | 28     |                                                    |   | 55 |   |   | 181 |   |   | 155 |   |
|                                                   |   |                                                     |   |                                                    |   |   |   |   |   |   |   |   |   |
| Net                income (loss)                       |   | $                                                        | (223   | )                                                       | $      | (22 | )  | $ | (273 | ) | $ | 554 |   |

----

**T      BANCSHARES, INC.**

**CONDENSED      STATEMENT OF CASH FLOWS**

**(Unaudited)**

|                                                                                                                     |   | **Nine Months Ended September 30,** |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|--------|
| **(000's)**                                                                                                                   |   | **2008**                                                |   | **2007** |   |
|                                                                                                                          |   |                                                    |   |   |   |
| **Cash                Flows from Operating Activities**                                                                       |   |                                                    |   |   |   |
|                                                                                                                          |   |                                                    |   |   |   |
| Net                Income (Loss)                                                                                              |   | $                                                       | (273   | ) | $ | 554 |   |
| Adjustments                to reconcile net income (loss) to net cash provided (used) by operating                activities: |   |                                                    |   |   |   |   |   |
|                                                                                                                          |   |                                                    |   |   |   |   |   |
| Equity                in (earnings) loss of Bank                                                                              |   |                                                    | 92     |   |   | (709 | ) |
| Stock                based compensation                                                                                       |   |                                                    | 60     |   |   | 55 |   |
| Net                change in other assets                                                                                     |   |                                                    | (85    | )  |   | - |   |
| Net                change in other liabilities                                                                                |   |                                                    | -      |   |   | - |   |
|                                                                                                                          |   |                                                    |   |   |   |   |   |
| Net                cash provided (used) by operating activities                                                               |   |                                                    | (206   | ) |   | (100 | ) |
|                                                                                                                          |   |                                                    |   |   |   |   |   |
| **Cash                Flows from Investing Activities**                                                                       |   |                                                    |   |   |   |   |   |
|                                                                                                                          |   |                                                    |   |   |   |   |   |
| Proceeds                from sale of premises and equipment                                                                   |   |                                                    | -      |   |   | - |   |
|                                                                                                                          |   |                                                    |   |   |   |   |   |
| Net                cash used in investing activities                                                                          |   |                                                    | -      |   |   | - |   |
|                                                                                                                          |   |                                                    |   |   |   |   |   |
| **Cash                Flows from Financing Activities**                                                                       |   |                                                    |   |   |   |   |   |
|                                                                                                                          |   |                                                    |   |   |   |   |   |
| Exercise                of warrants                                                                                           |   |                                                    | -      |   |   | 108 |   |
|                                                                                                                          |   |                                                    |   |   |   |   |   |
| Net                cash provided by financing activities                                                                      |   |                                                    | -      |   |   | 108 |   |
|                                                                                                                          |   |                                                    |   |   |   |   |   |
| Net                change in cash and cash equivalents                                                                        |   |                                                    | (206   | ) |   | 8 |   |
| Cash                and cash equivalents at beginning of period                                                               |   |                                                    | 743    |   |   | 727 |   |
|                                                                                                                          |   |                                                    |   |   |   |   |   |
| Cash                and cash equivalents at end of period                                                                     |   | $                                                       | 537    |   | $ | 735 |   |
|                                                                                                                          |   |                                                    |   |   |   |   |   |
| Supplemental                disclosures of cash flow information                                                              |   |                                                    |   |   |   |   |   |
| Cash                paid during the period for                                                                                |   |                                                    |   |   |   |   |   |
| Interest                                                                                                                      |   | $                                                       | -      |   | $ | - |   |
| Income                taxes                                                                                                   |   | $                                                       | -      |   | $ | - |   |

----

**ITEM      2.**
**Management’s      Discussion and Analysis of Financial Condition and Results of      Operations**

|   | · | we                have limited operating history upon which to base an estimate of                our                future financial performance; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | if                we are unable to implement our business plan and strategies, we will                be                hampered in our ability to develop business and serve our customers,                which, in turn, could have an adverse effect on our financial                performance; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | we                are subject to significant government regulation and legislation                that                increases the cost of doing business and inhibits our ability to                compete; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | if                we fail to retain our key employees, growth and profitability could                be                adversely affected; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | we                face substantial competition in our primary market                area; |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | if                we fail to sustain attractive investment returns to our Trust customers,                our growth and profitability in our Trust services could be adversely                affected; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | we                have a significant dental industry loan concentration in which economic                or                regulatory changes could adversely affect the ability of those customers                to fulfill their loan obligations; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | if                we fail to adequately address informal administrative actions with                the                Office of the Comptroller of the Currency, this may have an adverse                impact                on the Company’s operating results or financial                condition; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | we                compete in an industry that continually experiences technological                change,                and we may not be able to compete effectively with other banking                institutions with greater                resources; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                Bank’s current legally mandated lending limits are lower than those of                our                competitors, which may impair our ability to attract                borrowers; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | an                economic downturn, especially one affecting our primary service area,                may                have an adverse effect on our financial                performance; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | changes                in governmental economic and monetary policies, the Internal Revenue                Code                and banking and credit regulations, as well as other factors, will                affect                the demand for loans and the ability of the Bank to attract                deposits; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | changes                in the general level of interest rates and other economic factors                can                affect the Bank’s interest income by affecting the spread between                interest-earning assets and interest-bearing                liabilities; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | we                have no current intentions of paying cash                dividends; |
|--------|--------|---------------------------------------------------------------------------------------|

|   | · | we                may not be able to raise additional capital on terms favorable to                us;                and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|

|   | · | our                directors and executive officers beneficially own a significant portion                of                our outstanding common stock. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

**Executive      Overview**

***Introduction***

**Recent      Developments**

***Consent      Order***

----

***Rights      Offering***

***Application      for Capital Purchase Program***

**Results      of Operations**

***Net      Interest Income and Net Interest Margin***

***Key      Performance Indicators at September 30, 2008***

|   |   ·   | total                assets decreased to $139.5 million at the end of the third quarter                of                2008, representing a decrease of $8.0 million, or -5.4%, from $147.5                million at the end of 2007; |
|--------|--------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   ·   | total                loans, net of allowance for loan losses, grew to $126.0 million at                the end                of the third quarter of 2008, representing an increase of $6 million,                or                5.0%, from $120.0 million at the end of                2007; |
|--------|--------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   |   · | total                deposits decreased to $124.3 million at the end of the third quarter                of                2008, representing and decrease of $8.6 million, or -6.5%, from $132.9                million at the end of 2007; |
|--------|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   ·   | total                revenue was $15.7 million for the nine months ended September 30,                2008,                compared to $15.8 million for the same period in the prior year,                representing a decrease of 0.6%;                and |
|--------|--------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   ·   | net                loss was $273,000 for the nine months ended September 30, 2008, compared                to net income of $554,000 for the same period in the prior                year. |
|--------|--------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**FINANCIAL      SUMMARY**

**Consolidated      Daily Average Balances, Average Yields and Rates**

|                                                              |   | **Nine Months Ended September 30,** |    |
|-------------------------------------------------------------------|--------|---------------------------------------------------------|---------|
|                                                              |   | **2008**                                                |    | **2007** |   |
| **(000's)**                                        |   | **Average****Balance**                                  |    | **Interest** |   | **Average****Yield** |   | **Average****Balance** |   | **Interest** |   | **Average****Yield** |   |
|                                                              |   |                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Interest-earning                assets**                        |   |                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                         |   |                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans,                net of reserve                         |   | $                                                       | 132,304 |   | $ | 7,294 |   |   | 7.4 | % | $ | 101,306 |   | $ | 6,671 |   |   | 8.8 | % |
| Federal                funds sold                            |   |                                                    | 15,305  |   |   | 271 |   |   | 2.4 | % |   | 23,102 |   |   | 894 |   |   | 5.2 | % |
| Securities                                                   |   |                                                    | 1,547   |   |   | 39 |   |   | 3.4 | % |  | 1,478 |   |   | 59 |   |   | 5.3 | % |
| Total                earning assets                          |   |                                                    | 149,156 |   |   | 7,604 |   |   | 6.8 | % |   | 125,886 |   |   | 7,624 |   |   | 8.1 | % |
| Cash                and other assets                         |   |                                                    | 4,610   |   |   |   |   |   |   |   |   | 5,273 |   |   |   |   |   |   |   |
| Total                assets                                  |   | $                                                       | 153,766 |   |   |   |   |   |   |   | $ | 131,159 |   |   |   |   |   |   |   |
|                                                         |   |                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Interest-bearing                liabilities**              |   |                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                accounts                                  |   | $                                                       | 1,785   |   | $ | 14 |   |   | 1.0 | %   | $ | 1,698 |   | $ | 16 |   |   | 1.2 | % |
| Money                market accounts                         |   |                                                    | 47,017  |   |   | 956 |   |   | 2.7 | % |   | 62,300 |   |   | 2,095 |   |   | 4.5 | % |
| Savings                accounts                              |   |                                                    | 159     |   |   | 2 |   |   | 1.4 | % |   | 338 |   |   | 3 |   |   | 1.3 | % |
| Certificates                of deposit less than $100,000    |   |                                                    | 28,654  |   |   | 1,086 |   |   | 5.1 | % |   | 14,437 |   |   | 572 |   |   | 5.3 | % |
| Certificates                of deposit $100,000 or greater   |   |                                                    | 47,768  |   |   | 1,813 |   |   | 5.1 | % |  | 24,116 |   |   | 968 |   |   | 5.4 | % |
| Total                interest bearing deposits               |   |                                                    | 125,383 |   |   | 3,871 |   |   | 4.1 | % |  | 102,889 |   |   | 3,654 |   |   | 4.7 | % |
| Noninterest                bearing deposits                  |   |                                                    | 14,171  |   |   |   |   |   |   |   |  | 14,889 |   |   |   |   |   |   |   |
| Other                liabilities                             |   |                                                    | 1,005   |   |   |   |   |   |   |   |   | 624 |   |   |   |   |   |   |   |
| Stockholders                equity                           |   |                                                    | 13,207  |   |   |   |   |   |   |   |  | 12,757 |   |   |   |   |   |   |   |
| Total                liabilities and stockholders' equity    |   | $                                                       | 153,766 |   |   |   |   |   |   |   | $ | 131,159 |   |   |   |   |   |   |   |
|                                                         |   |                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income                           |   |                                                    |    |   |   | 3,733 |   |   |   |   |   |   |   |   | 3,970 |   |   |   |   |
| Net                interest spread                           |   |                                                    |    |   |   |   |   |   | 2.7 | % |   |   |   |   |   |   |   | 3.3 | % |
| Net                interest margin                           |   |                                                    |    |   |   |   |   |   | 3.2 | % |   |   |   |   |   |   |   | 4.2 | % |
|                                                         |   |                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision                for loan loss                       |   |                                                    |    |   |   | 476 |   |   |   |   |   |   |   |   | 450 |   |   |   |   |
| Non-interest                income                           |   |                                                    |    |   |   | 8,050 |   |   |   |   |   |   |   |   | 8,220 |   |   |   |   |
| Non-interest                expense                          |   |                                                    |    |   |   | 11,580 |   |   |   |   |   |   |   |   | 11,186 |   |   |   |   |
| Income                (loss) before income taxes                  |        |                                                    |    |   |   | (273 | ) |   |   |   |   |   |   |   | 554 |   |   |   |   |
| Income                taxes expense (benefit)                |   |                                                    |    |   |   | - |   |   |   |   |   |   |   |   | - |   |   |   |   |
| Net                income (loss)                             |   |                                                    |    |   | $ | (273 | ) |   |   |   |   |   |   | $ | 554 |   |   |   |   |
|                                                         |   |                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings                (loss) per share                     |   |                                                    |    |   |   | (0.16 | ) |   |   |   |   |   |   |   | 0.33 |   |   |   |   |
| Return                on average equity                      |   |                                                    |    |   |   | (2.76 | )% |   |   |   |   |   |   |   | 5.8 | % |   |   |   |
| Return                on average assets                      |   |                                                    |    |   |   | (0.24 | )% |   |   |   |   |   |   |   | 1.69 | % |   |   |   |
| Equity                to assets ratio                        |   |                                                    |    |   |   | 8.59 | % |   |   |   |   |   |   |   | 9.73 | % |   |   |   |

----

***Provision      for Loan Losses***

***Non-interest      Income***

***Noninterest      Expense***

***Income      Taxes***

**Financial      Condition**

----

***Short-Term      Investments and Interest-bearing Deposits in Other Financial      Institutions***

***Investment      Securities***

***Loan      Portfolio***

|                                                 |   | **As of**                   |    | **As of**                  |   |
|------------------------------------------------------|--------|----------------------------------|---------|---------------------------------|--------|
| **(000's)**                                          |   | **September 30, 2008** |    | **December 31, 2007** |   |
|                                                 |   |                             |    |                            |   |   |   |
| Commercial                and industrial             |   | $                                | 83,070  |                            | $      | 81,811 |   |
| Consumer                installment                  |   |                             | 3,509   |                            |   | 3,183 |   |
| Real                estate — mortgage     |   |                             | 19,490  |                            |   | 23,542 |   |
| Real                estate — construction |   |                             | 21,741  |                            |   | 13,177 |   |
| Other                                                |   |                             | 10      |                            |   | 13 |   |
|                                                 |   |                             | 127,820 |                            |   | 121,726 |   |
|                                                 |   |                             |    |                            |   |   |   |
| Less                allowance for loan losses        |   |                             | 1,669   |                            |   | 1,600 |   |
| Less                deferred loan fees               |   |                             | 156     |                            |   | 202 |   |
|                                                 |   | $                                | 125,995 |                            | $      | 119,924 |   |

----

|                                                         |   | **As of September 30, 2008** |   |
|--------------------------------------------------------------|--------|--------------------------------------------------|--------|
|                                                         |   |                                             |   | **Over 1 Year through****5 Years** |   | **Over 5 Years** |   |   |   |
| **(000's)**                                   |   | **One Year****or****Less**                  |   | **Fixed Rate** |   | **Floating or                Adjustable****Rate** |   | **Fixed Rate** |   | **Floating or                Adjustable****Rate** |   | **Total** |   |
|                                                         |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                and industrial                |   | $                                                | 13,729 |   | $ | 8,542 |   | $ | 634 |   | $ | 45,882 |   | $ | 14,283 |   | $ | 83,070 |   |
| Consumer                installment                     |   |                                             | 694    |   |   | 910 |   |   | - |   |   | 1,905 |   |   | - |   |   | 3,509 |   |
|                                                         |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real                estate — mortgage*       |   |                                             | 3,274  |   |   | 7,238 |   |   | 935 |   |   | 4,383 |   |   | 3,661 |   |   | 19,491 |   |
|                                                         |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real                estate — construction*   |   |                                             | 18,080 |   |   | 633 |   |   | 837 |   |   | 2,190 |   |   | - |   |   | 21,740 |   |
| Other                                                   |   |                                             | 10     |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 10 |   |
| Total                                                   |   | $                                                | 35,787 |   | $ | 17,323 |   | $ | 2,406 |   | $ | 54,360 |   | $ | 17,944 |   | $ | 127,820 |   |

***Nonperforming      Loans and Assets***

----

***Allowance      for Loan Losses***

| **(000's)**                                          |   | **As of****September 30, 2008** |   | **As of****December 31, 2007**    |   |
|------------------------------------------------------|--------|------------------------------------------------|--------|--------------------------------------------------|--------|
| **Allocated:**                                       |   | **Amount**                                     |   | **Loan****Category to****Gross Loans** |   | **Amount** |   | **Loan****Category to****Gross Loans** |   |
|                                                 |   |                                           |   |                                             |   |   |   |   |   |   |   |   |   |
| Commercial                and industrial             |   | $                                              | 1,085  |                                             |   | 65.0 | % | $ | 1,076 |   |   | 67.2 | % |
| Consumer                installment                  |   |                                           | 46     |                                             |   | 2.8 | % |   | 42 |   |   | 2.6 | % |
| Real                estate — mortgage     |   |                                           | 254    |                                             |   | 15.2 | % |   | 309 |   |   | 19.3 | % |
| Real                estate — construction |   |                                           | 284    |                                             |   | 17.0 | % |   | 173 |   |   | 10.8 | % |
| Total                allowance for loan losses       |   | $                                              | 1,669  |                                             |   | 100.0 | % | $ | 1,600 |   |   | 100.0 | % |

***Nonearning      Assets***

----

***Deposits***

|                                                        |   | **For the nine months ended** |    |
|-------------------------------------------------------------|--------|---------------------------------------------------|---------|
| **(000's)**                                                 |   | **September 30, 2008**                  |    | **September 30, 2007** |   |
|                                                        |   | **Average****Balance**                            |    | **Percent of                Deposits** |   | **Average****Rate** |   | **Average****Balance** |   | **Percent of                Deposits** |   | **Average****Rate** |   |
|                                                        |   |                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest                bearing deposits                 |   | $                                                 | 14,171  |   |   | 10.2 | % |   | 0.0 | % | $ | 14,889 |   |   | 12.6 | % |   | 0.0 | % |
| NOW                accounts                                 |   |                                              | 1,785   |   |   | 1.3 | % |   | 1.0 | % |   | 1,698 |   |   | 1.4 | % |   | 1.2 | % |
| Money                market accounts                        |   |                                              | 47,017  |   |   | 33.7 | % |   | 2.7 | % |   | 62,300 |   |   | 52.9 | % |   | 4.5 | % |
| Savings                accounts                             |   |                                              | 159     |   |   | .1 | % |   | 1.4 | % |   | 338 |   |   | 0.3 | % |   | 1.3 | % |
| Certificates                of deposit, less than $100,000  |   |                                              | 28,654  |   |   | 20.5 | % |   | 5.1 | % |   | 14,437 |   |   | 12.3 | % |   | 5.3 | % |
| Certificates                of deposit, $100,000 or greater |   |                                              | 47,768  |   |   | 34.2 | % |   | 5.1 | % |   | 24,116 |   |   | 20.5 | % |   | 5.4 | % |
|                                                        |   |                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                deposits                               |   | $                                                 | 139,554 |   |   | 100.0 | % |   | 3.7 | % | $ | 117,778 |   |   | 100.0 | % |   | 4.7 | % |

| **(000's)**                                        |   | **September 30,****2008** |   | **December 31,****2007** |   |
|----------------------------------------------------|--------|--------------------------------|--------|-------------------------------|--------|
|                                               |   |                           |   |                          |   |   |   |
| Three                months or less                |   | $                              | 21,373 |                          | $      | 2,034 |   |
| Over                three months through 12 months |   |                           | 5,987  |                          |   | 25,049 |   |
| Over                one year through three years   |   |                           | 10,196 |                          |   | 11,650 |   |
| Over                three years                    |   |                           | 7,693  |                          |   | 2,954 |   |
|                                               |   |                           |   |                          |   |   |   |
| Total                                              |   | $                              | 45,249 |                          | $      | 41,687 |   |

***Off-Balance      Sheet Arrangements***

***Borrowings***

----

|                                   |   | **As of September 30, 2008** |   |
|----------------------------------------|--------|--------------------------------------------------|--------|
| **(000's)**                            |   | **Less than One****Year**              |   | **One to Three****Years** |   | **Over Three to****Five Years** |   | **Over Five****Years** |   |
|                                   |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Operating                leases        |   | $                                                | 283    |   | $ | 584 |   | $ | 534 |   | $ | 310 |   |
|                                   |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Certificates                of deposit |   | $                                                | 45,587 |   | $ | 16,516 |   | $ | 11,764 |   | $ | - |   |

***Capital      Resources and Capital Adequacy Requirements***

----

|                                                    |   | **Actual** |   | **For Capital Adequacy****Purposes** |   | **To Be Well Capitalized****Under Prompt Corrective****Action Provisions** |          |
|---------------------------------------------------------|--------|------------|--------|------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------|---------------|
| **(000's)**                                             |   | **Amount** |   | **Ratio**                                      |   | **Amount**                                                                                               |          | **Ratio** |   | **Amount** |   | **Ratio** |   |
|                                                    |   |       |   |                                           |   |                                                                                                     |          |   |   |   |   |   |   |   |   |   |   |   |   |
| **As                of September 30, 2008**             |   |       |   |                                           |   |                                                                                                     |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                Capital (to Risk Weighted Assets)  |   | $          | 14,534 |                                           |   | 11.86                                                                                                    | %   | $ | 9,801 | ≥  |   | 8.00 | %   | $ | 12,251 | ≥    |   | 10.00 |  % |
|                                                    |   |       |   |                                           |   |                                                                                                     |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                1 Capital (to Risk Weighted Assets) |   |       | 13,001 |                                           |   | 10.61                                                                                                    | %             |   | 4,900 | ≥  |   | 4.00 | % |   | 7,351 | ≥  |   | 6.00 | % |
|                                                    |   |       |   |                                           |   |                                                                                                     |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                1 Capital (to Average Assets)       |   |       | 13,001 |                                           |   | 8.32                                                                                                     | %             |   | 6,250 | ≥ |   | 4.00 | % |   | 7,812 | ≥ |   | 5.00 | % |
|                                                    |   |       |   |                                           |   |                                                                                                     |          |   |   |   |   |   |   |   |   |   |   |   |   |
| **As                of December 31, 2007**              |   |       |   |                                           |   |                                                                                                     |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                Capital (to Risk Weighted Assets)  |   | $          | 14,499 |                                           |   | 13.00                                                                                                    | %             | $ | 8,921 | ≥ |   | 8.00 | % | $ | 11,151 | ≥ |   | 10.00 | % |
|                                                    |   |       |   |                                           |   |                                                                                                     |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                1 Capital (to Risk Weighted Assets) |   |       | 13,093 |                                           |   | 11.74                                                                                                    | %             |   | 4,460 | ≥ |   | 4.00 | % |   | 6,691 | ≥ |   | 6.00 | % |
|                                                    |   |       |   |                                           |   |                                                                                                     |          |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier                1 Capital (to Average Assets)       |   |       | 13,093 |                                           |   | 9.45                                                                                                     | %             |   | 5,540 | ≥ |   | 4.00 | % |   | 6,925 | ≥  |   | 5.00 | % |

**Liquidity      Management**

*Capital      Resources and Capital Adequacy Requirements*

----

**ITEM      3. Quantitative and Qualitative Disclosures about Market      Risk**

|                                           |   | **Change in Future Net Interest Income****as of September                30, 2008** |     |
|------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------|----------|
|                                           |   | **Dollar Change**                                                                                                 |     | **Percentage****Change** |   |
|                                           |   |                                                                                                                   |     |   |   |   |   |
| +200                basis points over one year |   | $                                                                                                                      | 151,000  |   |   | 3.47 | % |
| +100                basis points over one year |   |                                                                                                                   | 80,000   |   |   | 1.84 | % |
| -100                basis points over one year |   |                                                                                                                   | (139,000 | ) |   | -3.19 | % |
| -200                basis points over one year |   |                                                                                                                   | (315,000 | ) |   | -7.23 | % |

----

|                                                                                                                       |   | **As of September 30, 2008**            |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|--------|
|                                                                                                                       |   | **Volumes Subject to Repricing Within** |   |
|                                                                                                                       |   | **0 - 1****Days**                                 |   | **2 - 90****Days** |   | **91 - 364                  Days** |   | **1 - 3****Years** |   | **Over 3                  Years** |   | **Non-interest****    Sensitive    ** |   | **Total** |   |
| **Assets**                                                                                                            |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                  |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Short-term                  investments and federal funds sold                                                        |   | $                                                           | 6,420  |   | $ | - |   | $ | - |   | $ | - |   | $ | - |   | $ | 2,513 |   | $ | 8,933 |   |
| Investment                  securities                                                                                |   |                                                        | -      |   |   | 51 |   |   | 152 |   |   | 46 |   |   | 1,313 |   |   | - |   |   | 1,562 |   |
| Loans                                                                                                                 |   |                                                        | 32,075 |   |   | 8,369 |   |   | 22,873 |   |   | 19,514 |   |   | 43,164 |   |   | - |   |   | 125,995 |   |
| Fixed                  and other assets                                                                               |   |                                                        | -      |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 3,002 |   |   | 3,002 |   |
|                                                                                                                  |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  assets                                                                                         |   | $                                                           | 38,495 |   | $ | 8,420 |   | $ | 23,025 |   | $ | 19,560 |   | $ | 44,477 |   | $ | 5,515 |   | $ | 139,492 |   |
|                                                                                                                  |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                  and Shareholders' Equity**                                                             |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                  |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing,                  interest-bearing checking, savings and money market accounts                    |   | $                                                           | 9,985  |   | $ | - |   | $ | - |   | $ | 30,397 |   | $ | - |   | $ | 10,066 |   | $ | 50,448 |   |
| Certificates                  of deposit                                                                              |   |                                                        | -      |   |   | 34,218 |   |   | 11,369 |   |   | 16,515 |   |   | 11,765 |   |   | - |   |   | 73,867 |   |
| Borrowed                  funds                                                                                       |   |                                                        | -      |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Other                  liabilities                                                                                    |   |                                                        | -      |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 1,264 |   |   | 1,264 |   |
| Shareholders'                  equity                                                                                 |   |                                                        | -      |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 13,913 |   |   | 13,913 |   |
|                                                                                                                  |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  liabilities and shareholders' equity                                                           |   | $                                                           | 9,985  |   | $ | 34,218 |   | $ | 11,369 |   | $ | 46,912 |   | $ | 11,765 |   | $ | 25,243 |   | $ | 139,492 |   |
|                                                                                                                  |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Period                  gap                                                                                           |   |                                                        | 28,510 |   |   | (25,798 |  ) |   | 11,656 |   |   | (27,352 | ) |   | 32,712 |   |   |   |   |   |   |   |
| Cumulative                  gap                                                                                       |   |                                                        | 28,510 |   |   | 2,712 |   |   | 14,368 |   |   | (12,984 | ) |   | 19,728 |   |   |   |   |   |   |   |
|                                                                                                                  |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Period                  gap to total assets                                                                           |   |                                                        | 20.44  | % |   | -18.49 | % |   | 8.36 | % |   | -19.61 | % |   | 23.45 | % |   |   |   |   |   |   |
|                                                                                                                  |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative                  gap to total assets                                                                       |   |                                                        | 20.44  | % |   | 1.94 | % |   | 10.30 | % |   | -9.31 | % |   | 14.14 | % |   |   |   |   |   |   |

----

**ITEM      4.**
**Controls      and Procedures**

**PART      II.**
**OTHER      INFORMATION**

**ITEM      1.**
**Legal      Proceedings**

**ITEM      2. Unregistered Sales of Equity Securities and Use of      Proceeds**

**ITEM      3.**
**Defaults      Upon Senior Securities**

**ITEM      4.**
**Submission      of Matters to a Vote of Security Holders**

None

**ITEM      5.**
**Other      Information**

----

**ITEM      6.**
**Exhibits**

| **Exhibit Number** |   | **Description of Exhibit**                                                                                                                                 |
|-------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1                    |   | Rule                13a-14(a) Certification of Chief Executive Officer.                                                                                              |
|                    |   |                                                                                                                                                                 |
| 31.2                    |   | Rule                13a-14(a) Certification of Chief Financial Officer.                                                                                              |
|                    |   |                                                                                                                                                                 |
| 32.1                    |   | Certification                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002. |

----

**SIGNATURES**

|                                   | T                BANCSHARES, INC. |
|----------------------------------------|-----------------------------------|
|                              |                         |                    |
| Date:                November 14, 2008 | By:                     | /s/                Patrick G. Adams |
|                              |                              |    |
|                                   |                              | Patrick                G. AdamsPresident                and Chief Executive OfficerPrincipal                Executive Officer |

| Date:                November 14, 2008 | By:    | /s/                Terry Purchal                                   |
|----------------------------------------|--------|--------------------------------------------------------------------|
|                                   |   |                                                               |
|                                   |   | Terry                PurchalChief                Financial Officer |
|                                   |   | Principal                Financial Officer                         |

----