##### Table of Contents





U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







|x | Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------

For the Quarterly Period Ended June 30, 2008

Or



| ̈ | Transition Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

Commission file number 000-51920





INDEPENDENT BANCSHARES, INC.

(Exact name of small business issuer as specified in its charter)







|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Florida                                                        |  | 59-2869407                       
|(State or Other Jurisdiction of Incorporation or Organization) |  | (IRS Employer Identification No.)

60 SW 17thStreet

Ocala, Florida 34474

(Address of Principal Executive Offices)

352-622-2377

(Issuers Telephone Number, Including Area Code)



(Former name, former address and former fiscal year, if changed since last
report.)





Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  x    No   ̈

Indicate by check mark whether the registrant is
a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2
of the Exchange Act (Check one):



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  |  ̈
|Non-accelerated filer   |  |  ̈ |  | Smaller reporting company |  | x

(Do not check if a smaller reporting company)

Indicate by check mark whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act:    Yes   ̈    No  x

State the number of shares outstanding of each of
the issuers classes of common equity, as of the latest practicable date:



|                                     |  |                   
|------------------------------------ |  | ------------------
|Common stock, par value $2 per share |  | 1,235,644 shares  
|(class)                              |  | At August 15, 2008

Transitional Small Business Format (check one):    YES   ̈    NO  x









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##### Table of Contents

INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

INDEX



|                                                                                                                |  |                                                                                       |  |      
|--------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------- |  | -----
|                                                                                                                |  |                                                                                       |  | Page 
|Part I. FINANCIAL INFORMATION                                                                                   |  |                                                                                      
|                                                                                                                |  |                                                                                      
|Item 1.                                                                                                         |  | Financial Statements                                                                  |  |      
|                                                                                                                | 
|Condensed Consolidated Balance Sheets - at June 30, 2008 (Unaudited) and at December 31, 2007                   |  | 2                                                                                    
|                                                                                                                | 
|Condensed Consolidated Statements of Operations (Unaudited) - Three and Six months ended June 30, 2008 and 2007 |  | 3                                                                                    
|                                                                                                                | 
|Condensed Consolidated Statements of Stockholders Equity (Unaudited) - Six months ended June 30, 2008 and 2007 |  | 4                                                                                    
|                                                                                                                | 
|Condensed Consolidated Statements of Cash Flows (Unaudited) - Six months ended June 30, 2008 and 2007           |  | 5                                                                                    
|                                                                                                                | 
|Notes to Condensed Consolidated Financial Statements (Unaudited)                                                |  | 6-9                                                                                  
|                                                                                                                |  |                                                                                      
|Item 2.                                                                                                         |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 10-16
|                                                                                                                |  |                                                                                      
|Item 3.                                                                                                         |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 17   
|                                                                                                                |  |                                                                                      
|Item 4T.                                                                                                        |  | Controls and Procedures                                                               |  | 17   
|                                                                                                                | 
|Part II. OTHER INFORMATION                                                                                      |  |                                                                                      
|                                                                                                                |  |                                                                                      
|Item 1.                                                                                                         |  | Legal Proceedings                                                                     |  | 18   
|                                                                                                                |  |                                                                                      
|Item 1A.                                                                                                        |  | Risk Factors                                                                          |  | 18   
|                                                                                                                |  |                                                                                      
|Item 2.                                                                                                         |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 18   
|                                                                                                                |  |                                                                                      
|Item 3.                                                                                                         |  | Defaults upon Senior Securities                                                       |  | 18   
|                                                                                                                |  |                                                                                      
|Item 4.                                                                                                         |  | Submission of Matters to a Vote of Security Holders                                   |  | 18-19
|                                                                                                                |  |                                                                                      
|Item 5.                                                                                                         |  | Other Information                                                                     |  | 19   
|                                                                                                                |  |                                                                                      
|Item 6.                                                                                                         |  | Exhibits                                                                              |  | 19   
|                                                                                                                | 
|SIGNATURES                                                                                                      |  | 20                                                                                   



1



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##### Table of Contents

INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed
Consolidated Balance Sheets

($ in thousands, except share amounts)



|                                                                                                 |  |                |         |   |                    |   |         |  
|------------------------------------------------------------------------------------------------ |  | -------------- | ------- | - | ------------------ | - | ------- | -
|                                                                                                 |  | AtJune 30,2008 |         |   | AtDecember 31,2007 |  
|                                                                                                 |  | (unaudited)    |         |   |                    |  
|Assets                                                                                           |  |                |         |   |                    |   |         |  
|Cash and due from banks                                                                          |  | $              | 3,347   |   |                    | $ | 5,287   |  
|Interest-earning deposits                                                                        |  |                | 71      |   |                    |   | 6       |  
|Federal funds sold                                                                               |  |                | 3,918   |   |                    |   | 3,436   |  
|                                                                                                 |  |                |         |   |                    |   |         |  
|Cash and cash equivalents                                                                        |  |                | 7,336   |   |                    |   | 8,729   |  
|                                                                                                 |  |               
|Securities available for sale                                                                    |  |                | 42,714  |   |                    |   | 41,486  |  
|Loans, net of allowance for loan losses of $1,938 and $1,887                                     |  |                | 150,477 |   |                    |   | 152,092 |  
|Foreclosed real estate                                                                           |  |                | 1,776   |   |                    |   |        |  
|Accrued interest receivable                                                                      |  |                | 945     |   |                    |   | 1,057   |  
|Premises and equipment, net                                                                      |  |                | 8,269   |   |                    |   | 7,841   |  
|Federal Home Loan Bank stock                                                                     |  |                | 925     |   |                    |   | 926     |  
|Federal Reserve Bank stock                                                                       |  |                | 237     |   |                    |   | 237     |  
|Goodwill                                                                                         |  |                | 1,525   |   |                    |   | 1,525   |  
|Customer intangible, net                                                                         |  |                | 340     |   |                    |   | 375     |  
|Other assets                                                                                     |  |                | 1,714   |   |                    |   | 1,447   |  
|                                                                                                 |  |                |         |   |                    |   |         |  
|Total assets                                                                                     |  | $              | 216,258 |   |                    | $ | 215,715 |  
|                                                                                                 |  |                |         |   |                    |   |         |  
|Liabilities and Stockholders Equity                                                             |  |                |         |   |                    |   |         |  
|Liabilities:                                                                                     |  |                |         |   |                    |   |         |  
|Noninterest-bearing demand deposits                                                              |  | $              | 17,073  |   |                    | $ | 18,055  |  
|NOW, money-market and savings deposits                                                           |  |                | 74,612  |   |                    |   | 81,375  |  
|Time deposits                                                                                    |  |                | 91,472  |   |                    |   | 83,737  |  
|                                                                                                 |  |                |         |   |                    |   |         |  
|Total deposits                                                                                   |  |                | 183,157 |   |                    |   | 183,167 |  
|                                                                                                 |  |               
|Federal Home Loan Bank advances                                                                  |  |                | 10,000  |   |                    |   | 10,000  |  
|Junior Subordinated Debenture                                                                    |  |                | 2,062   |   |                    |   | 2,062   |  
|Other borrowings                                                                                 |  |                | 2,653   |   |                    |   | 2,341   |  
|Accrued interest payable and other liabilities                                                   |  |                | 1,518   |   |                    |   | 937     |  
|                                                                                                 |  |                |         |   |                    |   |         |  
|Total liabilities                                                                                |  |                | 199,390 |   |                    |   | 198,507 |  
|                                                                                                 |  |                |         |   |                    |   |         |  
|Stockholders equity:                                                                            |  |                |         |   |                    |   |         |  
|Common stock, $2 par value, 2,000,000 shares authorized, 1,235,644 shares issued and outstanding |  |                | 2,471   |   |                    |   | 2,471   |  
|Additional paid-in capital                                                                       |  |                | 8,831   |   |                    |   | 8,831   |  
|Retained earnings                                                                                |  |                | 5,791   |   |                    |   | 5,969   |  
|Accumulated other comprehensive loss                                                             |  |                | (225    | ) |                    |   | (63     | )
|                                                                                                 |  |                |         |   |                    |   |         |  
|Total stockholders equity                                                                       |  |                | 16,868  |   |                    |   | 17,208  |  
|                                                                                                 |  |                |         |   |                    |   |         |  
|Total liabilities and stockholders equity                                                       |  | $              | 216,258 |   |                    | $ | 215,715 |  
|                                                                                                 |  |                |         |   |                    |   |         |  

See accompanying Notes to Condensed Consolidated Financial Statements.



2



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##### Table of Contents

INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share amounts)



|                                                    |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |      
|--------------------------------------------------- |  | -------------------------- | ----- | - | ------------------------ | - | ----- | ---- |  | - | ----- | - |  | - | -----
|                                                    |  | Three Months EndedJune 30, |       |   | Six Months EndedJune 30,
|                                                    |  | 2008                       |       |   | 2007                     |   |       | 2008 |  |   | 2007 
|Interest income:                                    |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |      
|Loans                                               |  | $                          | 2,513 |   |                          | $ | 2,915 |      |  | $ | 5,155 |   |  | $ | 5,785
|Securities                                          |  |                            | 487   |   |                          |   | 439   |      |  |   | 953   |   |  |   | 888  
|Other                                               |  |                            | 42    |   |                          |   | 44    |      |  |   | 87    |   |  |   | 92   
|                                                    |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |      
|Total interest income                               |  |                            | 3,042 |   |                          |   | 3,398 |      |  |   | 6,195 |   |  |   | 6,765
|                                                    |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |      
|Interest expense:                                   |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |      
|Deposits                                            |  |                            | 1,323 |   |                          |   | 1,580 |      |  |   | 2,812 |   |  |   | 3,103
|Borrowings                                          |  |                            | 143   |   |                          |   | 195   |      |  |   | 293   |   |  |   | 382  
|Capitalized interest                                |  |                            | (162  | ) |                          |   |      |      |  |   | (164  | ) |  |   |     
|                                                    |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |      
|Total interest expense                              |  |                            | 1,304 |   |                          |   | 1,775 |      |  |   | 2,941 |   |  |   | 3,485
|                                                    |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |      
|Net interest income                                 |  |                            | 1,738 |   |                          |   | 1,623 |      |  |   | 3,254 |   |  |   | 3,280
|Provision for loan losses                           |  |                            | 238   |   |                          |   | 181   |      |  |   | 560   |   |  |   | 181  
|                                                    |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |      
|Net interest income after provision for loan losses |  |                            | 1,500 |   |                          |   | 1,442 |      |  |   | 2,694 |   |  |   | 3,099
|                                                    |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |      
|Noninterest income:                                 |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |      
|Service charges on deposit accounts                 |  |                            | 115   |   |                          |   | 110   |      |  |   | 238   |   |  |   | 227  
|Brokerage fees                                      |  |                            | 201   |   |                          |   | 189   |      |  |   | 329   |   |  |   | 310  
|Gain on sale of loans                               |  |                            | 19    |   |                          |   | 26    |      |  |   | 45    |   |  |   | 26   
|Gain sale of securities                             |  |                            |      |   |                          |   | 2     |      |  |   |      |   |  |   | 2    
|Other                                               |  |                            | 112   |   |                          |   | 121   |      |  |   | 233   |   |  |   | 237  
|                                                    |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |      
|Total noninterest income                            |  |                            | 447   |   |                          |   | 448   |      |  |   | 845   |   |  |   | 802  
|                                                    |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |      
|Noninterest expense:                                |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |      
|Salaries and employee benefits                      |  |                            | 1,017 |   |                          |   | 1,014 |      |  |   | 2,090 |   |  |   | 2,017
|Occupancy and equipment                             |  |                            | 203   |   |                          |   | 197   |      |  |   | 407   |   |  |   | 372  
|Data processing                                     |  |                            | 144   |   |                          |   | 106   |      |  |   | 312   |   |  |   | 225  
|Advertising and business development                |  |                            | 56    |   |                          |   | 45    |      |  |   | 117   |   |  |   | 90   
|Directors fees                                      |  |                            | 40    |   |                          |   | 42    |      |  |   | 80    |   |  |   | 82   
|Stationery and supplies                             |  |                            | 26    |   |                          |   | 33    |      |  |   | 53    |   |  |   | 68   
|Other                                               |  |                            | 528   |   |                          |   | 391   |      |  |   | 909   |   |  |   | 686  
|                                                    |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |      
|Total noninterest expense                           |  |                            | 2,034 |   |                          |   | 1,828 |      |  |   | 3,968 |   |  |   | 3,540
|                                                    |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |      
|(Loss) earnings before income taxes                 |  |                            | (87   | ) |                          |   | 62    |      |  |   | (429  | ) |  |   | 361  
|Income taxes (benefit)                              |  |                            | (77   | ) |                          |   | (18   | )    |  |   | (251  | ) |  |   | 26   
|                                                    |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |      
|Net (loss) earnings                                 |  | $                          | (10   | ) |                          | $ | 80    |      |  | $ | (178  | ) |  | $ | 335  
|                                                    |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |      
|(Loss) earnings per share  basic                   |  | $                          | (.01  | ) |                          | $ | .06   |      |  | $ | (.14  | ) |  | $ | .27  
|                                                    |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |      

See accompanying Notes to Condensed Consolidated Financial Statements.



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##### Table of Contents

INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders Equity

Six Months Ended June 30, 2008 and 2007

($ in thousands)



|                                                                                           |  |              |  |            |       |                  |   |       |                   |   |        |                     |  |   |      |   |  |   |        |  
|------------------------------------------------------------------------------------------ |  | ------------ |  | ---------- | ----- | ---------------- | - | ----- | ----------------- | - | ------ | ------------------- |  | - | ---- | - |  | - | ------ | -
|                                                                                           |  | Common Stock |  | Additional |       | RetainedEarnings |   |       | AccumulatedOther  |   |        | Total               | 
|                                                                                           |  | Shares       |  | ParAmount  |       | Paid-InCapital   |   |       | ComprehensiveLoss |   |        | StockholdersEquity | 
|Balance at December 31, 2006                                                               |  | 1,176,975    |  | $          | 2,354 |                  | $ | 7,517 |                   | $ | 6,649  |                     |  | $ | (359 | ) |  | $ | 16,161 |  
|                                                                                           |  |              |  |            |       |                  |   |       |                   |   |        |                     |  |   |      |   |  |   |        |  
|                                                                                           |  |              |  |            |       |                 
|Comprehensive income:                                                                      |  |              |  |            |       |                  |   |       |                   |   |        |                     |  |   |      |   |  |   |        |  
|Net earnings (unaudited)                                                                   |  |             |  |            |      |                  |   |      |                   |   | 335    |                     |  |   |     |   |  |   | 335    |  
|                                                                                           |  |              |  |            |       |                 
|Change in unrealized loss on securities available for sale, net of tax benefit (unaudited) |  |             |  |            |      |                  |   |      |                   |   |       |                     |  |   | (134 | ) |  |   | (134   | )
|                                                                                           |  |              |  |            |       |                  |   |       |                   |   |        |                     |  |   |      |   |  |   |        |  
|                                                                                           |  |              |  |            |       |                 
|Comprehensive income (unaudited)                                                           |  |              |  |            |       |                  |   |       |                   |   |        |                     |  |   |      |   |  |   | 201    |  
|                                                                                           |  |              |  |            |       |                 
|5% stock dividend (unaudited)                                                              |  | 58,669       |  |            | 117   |                  |   | 1,314 |                   |   | (1,431 | )                   |  |   |     |   |  |   |       |  
|                                                                                           |  |              |  |            |       |                 
|Cash in lieu of shares (unaudited)                                                         |  |             |  |            |      |                  |   |      |                   |   | (5     | )                   |  |   |     |   |  |   | (5     | )
|                                                                                           |  |              |  |            |       |                  |   |       |                   |   |        |                     |  |   |      |   |  |   |        |  
|                                                                                           |  |              |  |            |       |                 
|Balance at June 30, 2007 (unaudited)                                                       |  | 1,235,644    |  | $          | 2,471 |                  | $ | 8,831 |                   | $ | 5,548  |                     |  | $ | (493 | ) |  | $ | 16,357 |  
|                                                                                           |  |              |  |            |       |                  |   |       |                   |   |        |                     |  |   |      |   |  |   |        |  
|                                                                                           |  |              |  |            |       |                 
|Balance at December 31, 2007                                                               |  | 1,235,644    |  | $          | 2,471 |                  | $ | 8,831 |                   | $ | 5,969  |                     |  | $ | (63  | ) |  | $ | 17,208 |  
|                                                                                           |  |              |  |            |       |                  |   |       |                   |   |        |                     |  |   |      |   |  |   |        |  
|                                                                                           |  |              |  |            |       |                 
|Comprehensive loss:                                                                        |  |              |  |            |       |                  |   |       |                   |   |        |                     |  |   |      |   |  |   |        |  
|Net loss (unaudited)                                                                       |  |             |  |            |      |                  |   |      |                   |   | (178   | )                   |  |   |     |   |  |   | (178   | )
|                                                                                           |  |              |  |            |       |                 
|Change in unrealized loss on securities available for sale, net of tax benefit (unaudited) |  |             |  |            |      |                  |   |      |                   |   |       |                     |  |   | (162 | ) |  |   | (162   | )
|                                                                                           |  |              |  |            |       |                  |   |       |                   |   |        |                     |  |   |      |   |  |   |        |  
|                                                                                           |  |              |  |            |       |                 
|Comprehensive loss (unaudited)                                                             |  |              |  |            |       |                  |   |       |                   |   |        |                     |  |   |      |   |  |   | (340   | )
|                                                                                           |  |              |  |            |       |                  |   |       |                   |   |        |                     |  |   |      |   |  |   |        |  
|                                                                                           |  |              |  |            |       |                 
|Balance at June 30, 2008 (unaudited)                                                       |  | 1,235,644    |  | $          | 2,471 |                  | $ | 8,831 |                   | $ | 5,791  |                     |  | $ | (225 | ) |  | $ | 16,868 |  
|                                                                                           |  |              |  |            |       |                  |   |       |                   |   |        |                     |  |   |      |   |  |   |        |  

See accompanying Notes to Condensed Consolidated Financial Statements.



4



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##### Table of Contents

INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)



|                                                                                                                         |  |                          |        |   |      |   |        |  
|------------------------------------------------------------------------------------------------------------------------ |  | ------------------------ | ------ | - | ---- | - | ------ | -
|                                                                                                                         |  | Six Months EndedJune 30, |       
|                                                                                                                         |  | 2008                     |        |   | 2007 |  
|Cash flows from operating activities:                                                                                    |  |                          |        |   |      |   |        |  
|Net (loss) earnings                                                                                                      |  | $                        | (178   | ) |      | $ | 335    |  
|Adjustments to reconcile net (loss) earnings to net cash provided by (used in) operating activities:                     |  |                          |        |   |      |   |        |  
|Depreciation and amortization                                                                                            |  |                          | 182    |   |      |   | 164    |  
|Provision for loan losses                                                                                                |  |                          | 560    |   |      |   | 181    |  
|Net amortization of premiums and discounts on securities                                                                 |  |                          | (79    | ) |      |   | 127    |  
|Gain on sale of securities available for sale                                                                            |  |                          |       |   |      |   | (2     | )
|Amortization of customer intangible                                                                                      |  |                          | 35     |   |      |   | 35     |  
|Net decrease (increase) in accrued interest receivable                                                                   |  |                          | 112    |   |      |   | (90    | )
|Net increase in other assets                                                                                             |  |                          | (169   | ) |      |   | (3     | )
|Net increase (decrease) in accrued interest payable and other liabilities                                                |  |                          | 581    |   |      |   | (1,521 | )
|                                                                                                                         |  |                          |        |   |      |   |        |  
|Net cash provided by (used in) operating activities                                                                      |  |                          | 1,044  |   |      |   | (774   | )
|                                                                                                                         |  |                          |        |   |      |   |        |  
|                                                                                                                         |  |                         
|Cash flows from investing activities:                                                                                    |  |                          |        |   |      |   |        |  
|Purchase of securities available for sale                                                                                |  |                          | (7,642 | ) |      |   | (3,817 | )
|Maturities, sales, and principal repayments of securities available for sale                                             |  |                          | 6,233  |   |      |   | 7,183  |  
|Loans originated, net of principal repayments                                                                            |  |                          | (721   | ) |      |   | (9,378 | )
|Purchase of premises and equipment                                                                                       |  |                          | (610   | ) |      |   | (211   | )
|Redemption of Federal Home Loan Bank stock                                                                               |  |                          | 1      |   |      |   | 9      |  
|Purchase of assets of HKH                                                                                                |  |                          |       |   |      |   | (2,019 | )
|                                                                                                                         |  |                          |        |   |      |   |        |  
|Net cash used in investing activities                                                                                    |  |                          | (2,739 | ) |      |   | (8,233 | )
|                                                                                                                         |  |                          |        |   |      |   |        |  
|                                                                                                                         |  |                         
|Cash flows from financing activities:                                                                                    |  |                          |        |   |      |   |        |  
|Net (decrease) increase in deposits                                                                                      |  |                          | (10    | ) |      |   | 4,771  |  
|Net increase in other borrowings                                                                                         |  |                          | 312    |   |      |   | 232    |  
|Cash in lieu of fractional shares                                                                                        |  |                          |       |   |      |   | (5     | )
|                                                                                                                         |  |                          |        |   |      |   |        |  
|Net cash provided by financing activities                                                                                |  |                          | 302    |   |      |   | 4,998  |  
|                                                                                                                         |  |                          |        |   |      |   |        |  
|                                                                                                                         |  |                         
|Net decrease in cash and cash equivalents                                                                                |  |                          | (1,393 | ) |      |   | (4,009 | )
|                                                                                                                         |  |                         
|Cash and cash equivalents at beginning of period                                                                         |  |                          | 8,729  |   |      |   | 12,277 |  
|                                                                                                                         |  |                          |        |   |      |   |        |  
|Cash and cash equivalents at end of period                                                                               |  | $                        | 7,336  |   |      | $ | 8,268  |  
|                                                                                                                         |  |                          |        |   |      |   |        |  
|                                                                                                                         |  |                         
|Supplemental disclosures of cash flow information:                                                                       |  |                          |        |   |      |   |        |  
|Cash paid during the period for:                                                                                         |  |                          |        |   |      |   |        |  
|Interest, net of capitalized interest of $164 and $0                                                                     |  | $                        | 3,126  |   |      | $ | 3,448  |  
|                                                                                                                         |  |                          |        |   |      |   |        |  
|Taxes                                                                                                                    |  | $                        |       |   |      | $ | 25     |  
|                                                                                                                         |  |                          |        |   |      |   |        |  
|                                                                                                                         |  |                         
|Noncash transactions:                                                                                                    |  |                          |        |   |      |   |        |  
|Accumulated other comprehensive loss, net change in unrealized loss on securities available for sale, net of tax benefit |  | $                        | (162   | ) |      | $ | (134   | )
|                                                                                                                         |  |                          |        |   |      |   |        |  
|Common stock dividend                                                                                                    |  | $                        |       |   |      | $ | 1,431  |  
|                                                                                                                         |  |                          |        |   |      |   |        |  
|Transfer of loan to foreclosed real estate                                                                               |  | $                        | 1,776  |   |      | $ |       |  
|                                                                                                                         |  |                          |        |   |      |   |        |  

See accompanying Notes to Condensed Consolidated Financial Statements.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)



|1. | Basis of Presentation.In the opinion of the management of Independent BancShares, Inc. (the Holding Company), the accompanying condensed
consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position at June 30, 2008, the results of operations for the three- and six-month periods ended
June 30, 2008 and 2007 and the cash flows for the six-month periods ended June 30, 2008 and 2007. The results of operations for the three- and six-month periods ended June 30, 2008, are not necessarily indicative of results that may
be expected for the year ending December 31, 2008.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Holding Company owns 100% of the outstanding common stock of
Independent National Bank (the Bank) and HKH Financial Center, Inc., doing business as Independent Financial Partners (IFP) (collectively, the Company). The Holding Companys primary business activity is the
operation of the Bank and IFP. The Bank is a nationally-chartered commercial bank and its deposits are insured up to the applicable limits by the Federal Deposit Insurance Corporation (FDIC). The Bank offers a variety of financial
services to individual and corporate customers through its five banking offices located in Marion and Sumter Counties, Florida. IFP is a financial services company registered with the National Association of Securities Dealers (NASD).
IFP has an established product and brokering agreement with Raymond James Financial Services, Inc.



|2. | Loans.The components of loans are summarized as follows (in thousands):
|-- | -----------------------------------------------------------------------



|                                        |  |                           |         |            |        |         |                |        |  
|--------------------------------------- |  | ------------------------- | ------- | ---------- | ------ | ------- | -------------- | ------ | -
|                                        |  |                           |         | AtJune 30, |        |         | AtDecember 31, |       
|                                        |  |                           |         | 2008       |        |         | 2007           |       
|Commercial real estate                  |  | $                         | 69,912  |            |        | 65,251  |               
|Residential real estate and home equity |  |                           | 52,447  |            |        | 49,154  |               
|Construction and land development       |  |                           | 19,658  |            |        | 27,379  |               
|Commercial                              |  |                           | 7,668   |            |        | 9,456   |               
|Consumer                                |  |                           | 2,825   |            |        | 2,866   |               
|                                        |  |                           |         |            |        |         |                |        |  
|Total loans                             |  |                           | 152,510 |            |        | 154,106 |               
|Deduct:                                 |  | Allowance for loan losses |         |            | (1,938 | )       |                | (1,887 | )
|                                        |  | Deferred loan costs, net  |         |            | (95    | )       |                | (127   | )
|                                        |  |                           |         |            |        |         |                |        |  
|Loans, net                              |  | $                         | 150,477 |            |        | 152,092 |               
|                                        |  |                           |         |            |        |         |                |        |  



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|3. | Loan Impairment and Loan Losses.An analysis of the change in the allowance for loan losses follows (in thousands):
|-- | ------------------------------------------------------------------------------------------------------------------



|                                  |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|--------------------------------- |  | -------------------------- | ----- | - | ------------------------ | - | ----- | ---- |  | - | ----- | - |  | - | ----- | -
|                                  |  | Three Months EndedJune 30, |       |   | Six Months EndedJune 30, |  
|                                  |  | 2008                       |       |   | 2007                     |   |       | 2008 |  |   | 2007  |  
|Beginning balance                 |  | $                          | 1,755 |   |                          | $ | 1,896 |      |  | $ | 1,887 |   |  | $ | 1,899 |  
|Provision for loan losses         |  |                            | 238   |   |                          |   | 181   |      |  |   | 560   |   |  |   | 181   |  
|Net, (charge-offs) and recoveries |  |                            | (55   | ) |                          |   | (197  | )    |  |   | (509  | ) |  |   | (200  | )
|                                  |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|Ending balance                    |  | $                          | 1,938 |   |                          | $ | 1,880 |      |  | $ | 1,938 |   |  | $ | 1,880 |  
|                                  |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  

Nonaccrual and past due loans are as follows (in thousands):



|                                             |  |                 |       |                     |   |    
|-------------------------------------------- |  | --------------- | ----- | ------------------- | - | ---
|                                             |  | At June 30,2008 |       | At December 31,2007
|Nonaccrual loans                             |  | $               | 1,125 |                     | $ | 751
|Past due ninety days or more, still accruing |  |                 |      |                     |   |   
|                                             |  |                 |       |                     |   |    
|                                             |  | $               | 1,125 |                     | $ | 751
|                                             |  |                 |       |                     |   |    

Collateral dependent impaired loans are as follows (in thousands):



|                                                                  |  |   |     |   |  |   |       |  
|----------------------------------------------------------------- |  | - | --- | - |  | - | ----- | -
|Gross loans with a related allowance for loan loss recorded       |  | $ | 261 |   |  | $ | 2,328 |  
|Less: Allowance on these loans                                    |  |   | (13 | ) |  |   | (164  | )
|Gross loans for which there is no related allowance for loan loss |  |   | 681 |   |  |   |      |  
|                                                                  |  |   |     |   |  |   |       |  
|Net investment in impaired loans                                  |  | $ | 929 |   |  | $ | 2,164 |  
|                                                                  |  |   |     |   |  |   |       |  

There was no interest collected or recognized on impaired loans during the three or six months
ended June 30, 2008 or 2007.



|4. | (Loss) Earnings Per Share. Basic (loss) earnings per share has been computed on the basis of the weighted-average number of shares of common stock outstanding
during the periods, which was 1,235,644 during the three- and six-month periods ended June 30, 2008 and 2007. There is no dilution to basic (loss) earnings per share because the Company does not have any common stock equivalents.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|5. | Regulatory Capital.The Bank is required to maintain certain minimum regulatory capital requirements. The following is a summary at June 30, 2008
and December 31, 2007 of the Banks actual capital and related capital ratios.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                              |  |             |        |       |                                                  |   |             |   |        |  |      |  
|--------------------------------------------- |  | ----------- | ------ | ----- | ------------------------------------------------ | - | ----------- | - | ------ |  | ---- | -
|                                              |  | Actual      |        |       | Minimum Amountand Ratio toRemain
WellCapitalized |  
|                                              |  | Amount      |        | Ratio |                                                  |   | Amount      |   | Ratio  | 
|                                              |  | (Thousands) |        |       |                                                  |   | (Thousands) |   |        | 
|As of June 30, 2008:                          |  |             |        |       |                                                  |   |             |   |        |  |      |  
|Total Capital (to Risk-Weighted Assets) Bank  |  | $           | 18,690 |       | 11.10                                            | % |             | $ | 16,438 |  | 10.0 | %
|                                              |  |             |        |       |                                                  |   |             |   |        |  |      |  
|Tier 1 Capital (to Risk-Weighted Assets) Bank |  | $           | 17,093 |       | 10.15                                            | % |             | $ | 9,863  |  | 6.0  | %
|                                              |  |             |        |       |                                                  |   |             |   |        |  |      |  
|Tier 1 Capital (to Average Assets) Bank       |  | $           | 17,093 |       | 7.82                                             | % |             | $ | 10,783 |  | 5.0  | %
|                                              |  |             |        |       |                                                  |   |             |   |        |  |      |  
|                                              |  |             |        |      
|As of December 31, 2007:                      |  |             |        |       |                                                  |   |             |   |        |  |      |  
|Total Capital (to Risk-Weighted Assets) Bank  |  | $           | 19,116 |       | 12.1                                             | % |             | $ | 15,750 |  | 10.0 | %
|                                              |  |             |        |       |                                                  |   |             |   |        |  |      |  
|Tier 1 Capital (to Risk-Weighted Assets) Bank |  | $           | 17,229 |       | 10.9                                             | % |             | $ | 9,450  |  | 6.0  | %
|                                              |  |             |        |       |                                                  |   |             |   |        |  |      |  
|Tier 1 Capital (to Average Assets) Bank       |  | $           | 17,229 |       | 8.0                                              | % |             | $ | 10,803 |  | 5.0  | %
|                                              |  |             |        |       |                                                  |   |             |   |        |  |      |  



|6. | Fair Value Measurements.Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 157,
Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to
all other accounting pronouncements that require or permit fair value measurements. This standard does not apply to measurements related to share-based payments. Fair value is defined under SFAS 157 as the exchange price that would be received for
an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Subsequent changes in fair value of these
financial assets and liabilities are recognized in operations when they occur.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SFAS 157 also establishes a fair value
hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1  inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2  inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are
observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3
 inputs to the valuation methodology are unobservable and significant to the fair value measurement.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|6. | Fair Value Measurements, Continued.Financial assets subject to fair value measurements on a recurring basis are as follows (in thousands):
|-- | ------------------------------------------------------------------------------------------------------------------------------------------



|                              |  |                                                 |        |                                                           |   |                                           |  |                                        |        |  |   |  
|----------------------------- |  | ----------------------------------------------- | ------ | --------------------------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | ------ |  | - | -
|                              |  | Fair Value Measurements at Reporting Date Using
|                              |  | Fair Valueas ofJune 30,2008                     |        | Quoted PricesIn ActiveMarkets forIdenticalAssets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level
3)
|Available for sale securities |  | $                                               | 42,714 |                                                           | $ |                                          |  | $                                      | 42,714 |  | $ | 
|                              |  |                                                 |        |                                                           |   |                                           |  |                                        |        |  |   |  

The fair values of the Companys securities available for sale are determined by third party
service providers utilizing various methods dependent upon the specific type of investment. Where quoted prices are available in an active market, securities are classified within level 1 of the valuation hierarchy. Level 1 securities include highly
liquid government bonds, certain mortgage products and exchange-traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices or securities with similar characteristics, or
discounted cash flows. Examples of such instruments, which would generally be classified within level 2 of the valuation hierarchy, include certain collateralized mortgage and debt obligations and certain high-yield debt securities. In certain cases
where there is limited activity or less transparency around inputs to the valuation, securities are classified within level 3 of the valuation hierarchy. Securities classified within level 3 include certain residual interests in securitizations and
other less liquid securities.

Financial assets and liabilities subject to fair value measurements on a nonrecurring basis are as follows
(in thousands):



|               |  |                                                 |     |                                                         |   |                                           |  |                                        |   |                    |   |     |                                 |   |     |   |  |   |     |  
|-------------- |  | ----------------------------------------------- | --- | ------------------------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | - | ------------------ | - | --- | ------------------------------- | - | --- | - |  | - | --- | -
|               |  | Fair Value Measurements at Reporting Date Using |    
|               |  | CarryingValueas ofJune 30,2008                  |     | QuotedPricesIn ActiveMarketsforIdenticalAssets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level 3) |   | TotalGains(Losses) |   |     | TotalGains(Losses) inOperations |  
|Impaired loans |  | $                                               | 929 |                                                         | $ |                                          |  | $                                      |  |                    | $ | 929 |                                 | $ | (29 | ) |  | $ | (29 | )
|               |  |                                                 |     |                                                         |   |                                           |  |                                        |   |                    |   |     |                                 |   |     |   |  |   |     |  

SFAS No. 157 applies to loans measured for impairment using the practical expedients
permitted by SFAS 114, Accounting by Creditors for Impairment of a Loan, including impaired loans measured at an observable market price, or at the fair value of the loans collateral, if the loan is collateral dependent. If a loan is
determined to be collateral dependent, the fair value of the collateral is determined by appraisals or independent valuation adjusted for costs related to the liquidation of the collateral.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

Certain statements made
in this report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this report, the words may, will, should,
would, anticipate, estimate, expect, plan, believe, intend, and similar expressions identify forward-looking statements. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by such forward-looking
statements. Factors that might cause such a difference include, but are not limited to: (1) the impact of current economic conditions, including disruptions in the housing and credit markets, either national or in the markets in which the
Company does business; (2) changes in the interest rate environment that reduce net interest margin; (3) charge-offs and loan loss provisions; (4) the ability of the Bank to maintain required capital levels and adequate sources of
funding and liquidity; (5) the impact of problems affecting issuers of investment securities the Bank holds (6) changes and trends in capital markets; (7) competitive pressures among depository institutions that increase
significantly; (8) effects of critical accounting policies and judgments; (9) changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies; (10) legislative
or regulatory changes or actions, or significant litigation that adversely affect the Company or the business in which the Company is engaged; (11) ability to attract and retain key personnel; (12) ability to secure confidential
information through the use of computer systems and telecommunications network; and (13) the impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity, and other
factors described in our periodic reports filed with the SEC. We may update that discussion in this or another periodic report we file with the SEC thereafter. We undertake no obligation to release revisions to these forward-looking statements or to
reflect events or conditions occurring after the date of this report, except as required in our periodic reports.

General

The Holding Company owns 100% of the outstanding common stock of Independent National Bank (the Bank) and HKH Financial Center, Inc., doing
business as Independent Financial Partners (IFP) (collectively, the Company). The Holding Companys primary business activity is the operation of the Bank and IFP. The Bank is a nationally-chartered commercial bank and
its deposits are insured up to the applicable limits by the Federal Deposit Insurance Corporation (FDIC). The Bank offers a variety of financial services to individual and corporate customers through its five banking offices located in
Marion and Sumter Counties, Florida. IFP is a financial services company registered with the National Association of Securities Dealers (NASD). IFP has an established product and brokering agreement with Raymond James Financial Services,
Inc.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Liquidity and Capital Resources

The Companys
primary source of cash during the six months ended June 30, 2008 was from maturities, sales and principal repayments of securities available for sale of $6.2 million, and an increase in other borrowings of $312,000. Cash was used primarily to
fund loans, net of principal repayments of $721,000, to purchase securities available for sale of $7.6 million. At June 30, 2008 the Bank exceeded its regulatory liquidity requirements.

Off-Balance Sheet Arrangements

The Company is a
party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include undisbursed lines of credit and construction loans, commitments to extend
credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amounts recognized in the condensed consolidated balance sheet. The contract or notional amounts of those
instruments reflect the extent of the Companys involvement in particular classes of financial instruments.

The Companys
exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making
commitments as it does for on-balance-sheet instruments.

Commitments to extend credit, including undisbursed lines of credit and
construction loans, are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.
Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customers credit worthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary by the Company, upon extension of credit is based on managements credit evaluation of the counterparty.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These letters of credit are primarily issued to support third-party borrowing
arrangements and generally have expiration dates within one year of issuance. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The Company generally holds collateral
supporting these commitments.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

A summary of the amounts of the Company's financial instruments, with off-balance-sheet risk at June 30, 2008 follows (in thousands):



|                                                   |  |                |      
|-------------------------------------------------- |  | -------------- | -----
|                                                   |  | ContractAmount
|Undisbursed lines of credit and construction loans |  | $              | 5,233
|                                                   |  |                |      
|Commitments to extend credit                       |  | $              | 9,807
|                                                   |  |                |      
|Standby letters of credit                          |  | $              | 147  
|                                                   |  |                |      

Management believes that the Company has adequate resources to fund all its commitments, that a
majority of all of its existing commitments will be funded within 12 months and, if so desired, that the Company can adjust the rates and terms on time deposits and other deposit accounts to retain or obtain new deposits in a changing interest rate
environment.

Selected Ratios

The following table
shows selected ratios for the periods ended or at the dates indicated:



|                                                        |  |                             |    |  |                            |   |  |                             |  
|------------------------------------------------------- |  | --------------------------- | -- |  | -------------------------- | - |  | --------------------------- | -
|                                                        |  | Six MonthsEndedJune 30,2008 |    |  | Year EndedDecember 31,2007 |   |  | Six MonthsEndedJune 30,2007 |  
|Average equity as a percentage of average assets        |  | 7.84                        | %  |  | 7.65                       | % |  | 7.54                        | %
|Total equity to total assets at end of period           |  | 7.80                        | %  |  | 7.98                       | % |  | 7.49                        | %
|Return on average assets (1)                            |  | (0.16                       | )% |  | .35                        | % |  | .31                         | %
|Return on average equity (1)                            |  | (2.08                       | )% |  | 4.54                       | % |  | 4.10                        | %
|Noninterest expense to average assets (1)               |  | 3.64                        | %  |  | 3.39                       | % |  | 3.27                        | %
|Nonperforming loans to total loans at end of period (2) |  | 0.74                        | %  |  | .35                        | % |  | 1.55                        | %



| | (1) | Annualized for the six months ended June 30, 2008 and 2007.
| | --- | -----------------------------------------------------------

| | (2) | Nonperforming loans consist of nonaccrual loans. There are no loans contractually past due ninety days or more that are still accruing interest.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Results of Operations

The following table sets forth, for the
periods indicated, information regarding (i) the total dollar amount of interest and dividend income of the Company from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on
interest-bearing liabilities and the resultant average costs; (iii) net interest/dividend income; (iv) interest-rate spread; and (v) net interest margin. Yields and costs were derived by dividing annualized income or expense by the
average balance of assets or liabilities, respectively, for the periods shown. The yields and costs include certain fees which are considered to constitute adjustments to yields (dollars in thousands).



|                                                                 |  |                             |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|---------------------------------------------------------------- |  | --------------------------- | ------- | -------------------- | ---- | ----- | ----------------- |  | ---- | -------------- |  | -------------------- | ------- | ----------------- | - | ----- |  | ---- | -
|                                                                 |  | Three Months Ended June 30, |        
|                                                                 |  | 2008                        |         |                      | 2007 |      
|                                                                 |  | AverageBalance              |         | InterestandDividends |      |       | AverageYield/Rate |  |      | AverageBalance |  | InterestandDividends |         | AverageYield/Rate |  
|                                                                 |  | ($ in thousands)            |        
|Interest-earning assets:                                         |  |                             |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Loans                                                            |  | $                           | 149,482 |                      | $    | 2,513 |                   |  | 6.72 | %              |  | $                    | 154,489 |                   | $ | 2,915 |  | 7.55 | %
|Securities                                                       |  |                             | 43,193  |                      |      | 487   |                   |  | 4.50 |                |  |                      | 42,432  |                   |   | 439   |  | 4.14 |  
|Other interest-earning assets (1)                                |  |                             | 7,001   |                      |      | 42    |                   |  | 2.40 |                |  |                      | 3,093   |                   |   | 44    |  | 5.69 |  
|                                                                 |  |                             |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-earning assets                                    |  |                             | 199,676 |                      |      | 3,042 |                   |  | 6.09 |                |  |                      | 200,014 |                   |   | 3,398 |  | 6.80 |  
|                                                                 |  |                             |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Noninterest-earning assets                                       |  |                             | 19,489  |                      |      |       |                   |  |      |                |  |                      | 15,716  |                   |   |       |  |      |  
|                                                                 |  |                             |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total assets                                                     |  | $                           | 219,165 |                      |      |       |                   |  |      |                |  | $                    | 215,730 |                   |   |       |  |      |  
|                                                                 |  |                             |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-bearing liabilities:                                    |  |                             |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Savings, NOW and money-market deposits                           |  | $                           | 75,456  |                      | $    | 288   |                   |  | 1.53 |                |  | $                    | 83,394  |                   | $ | 565   |  | 2.71 |  
|Time deposits                                                    |  |                             | 92,162  |                      |      | 1,035 |                   |  | 4.49 |                |  |                      | 77,738  |                   |   | 1,015 |  | 5.22 |  
|                                                                 |  |                             |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-bearing deposits                                  |  |                             | 167,618 |                      |      | 1,323 |                   |  | 3.16 |                |  |                      | 161,132 |                   |   | 1,580 |  | 3.92 |  
|Borrowed funds                                                   |  |                             | 14,698  |                      |      | 143   |                   |  | 3.89 |                |  |                      | 13,603  |                   |   | 195   |  | 5.73 |  
|                                                                 |  |                             |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Capitalized interest                                             |  |                             |         |                      |      | (162  | )                 |  |      |                |  |                      |         |                   |   |      |  |      |  
|                                                                 |  |                             |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-bearing liabilities                               |  |                             | 182,316 |                      |      | 1,304 |                   |  | 2.86 |                |  |                      | 174,735 |                   |   | 1,775 |  | 4.06 |  
|                                                                 |  |                             |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Noninterest-bearing demand deposits                              |  |                             | 18,526  |                      |      |       |                   |  |      |                |  |                      | 22,048  |                   |   |       |  |      |  
|Noninterest-bearing liabilities                                  |  |                             | 1,335   |                      |      |       |                   |  |      |                |  |                      | 2,510   |                   |   |       |  |      |  
|Stockholders equity                                             |  |                             | 16,988  |                      |      |       |                   |  |      |                |  |                      | 16,437  |                   |   |       |  |      |  
|                                                                 |  |                             |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total liabilities and stockholders equity                       |  | $                           | 219,165 |                      |      |       |                   |  |      |                |  | $                    | 215,730 |                   |   |       |  |      |  
|                                                                 |  |                             |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest income                                              |  |                             |         |                      | $    | 1,738 |                   |  |      |                |  |                      |         |                   | $ | 1,623 |  |      |  
|                                                                 |  |                             |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-rate spread                                             |  |                             |         |                      |      |       |                   |  | 3.23 | %              |  |                      |         |                   |   |       |  | 2.73 | %
|                                                                 |  |                             |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest margin (2)                                          |  |                             |         |                      |      |       |                   |  | 3.48 | %              |  |                      |         |                   |   |       |  | 3.24 | %
|                                                                 |  |                             |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Ratio of interest-earning assets to interest-bearing liabilities |  |                             | 1.10    |                      |      |       |                   |  |      |                |  |                      | 1.14    |                   |   |       |  |      |  
|                                                                 |  |                             |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  



|(1) | Includes interest-earning deposits, federal funds sold and Federal Home Loan Bank and Federal Reserve Bank stock.
|--- | -----------------------------------------------------------------------------------------------------------------

|(2) | Net interest margin is annualized net interest income divided by average interest-earning assets.
|--- | -------------------------------------------------------------------------------------------------



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest and dividend income of the Company from
interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average costs; (iii) net interest/dividend income; (iv) interest-rate spread;
and (v) net interest margin. Yields and costs were derived by dividing annualized income or expense by the average balance of assets or liabilities, respectively, for the periods shown. The yields and costs include certain fees which are
considered to constitute adjustments to yields (dollars in thousands).



|                                                                 |  |                           |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|---------------------------------------------------------------- |  | ------------------------- | ------- | -------------------- | ---- | ----- | ----------------- |  | ---- | -------------- |  | -------------------- | ------- | ----------------- | - | ----- |  | ---- | -
|                                                                 |  | Six Months Ended June 30, |        
|                                                                 |  | 2008                      |         |                      | 2007 |      
|                                                                 |  | AverageBalance            |         | InterestandDividends |      |       | AverageYield/Rate |  |      | AverageBalance |  | InterestandDividends |         | AverageYield/Rate |  
|                                                                 |  | ($ in thousands)          |        
|Interest-earning assets:                                         |  |                           |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Loans                                                            |  | $                         | 150,235 |                      | $    | 5,155 |                   |  | 6.86 | %              |  | $                    | 156,894 |                   | $ | 5,785 |  | 7.37 | %
|Securities                                                       |  |                           | 42,354  |                      |      | 953   |                   |  | 4.50 |                |  |                      | 41,329  |                   |   | 888   |  | 4.30 |  
|Other interest-earning assets (1)                                |  |                           | 6,281   |                      |      | 87    |                   |  | 2.77 |                |  |                      | 3,012   |                   |   | 92    |  | 6.11 |  
|                                                                 |  |                           |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-earning assets                                    |  |                           | 198,870 |                      |      | 6,195 |                   |  | 6.23 |                |  |                      | 201,235 |                   |   | 6,765 |  | 6.72 |  
|                                                                 |  |                           |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Noninterest-earning assets                                       |  |                           | 19,299  |                      |      |       |                   |  |      |                |  |                      | 15,438  |                   |   |       |  |      |  
|                                                                 |  |                           |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total assets                                                     |  | $                         | 218,169 |                      |      |       |                   |  |      |                |  | $                    | 216,673 |                   |   |       |  |      |  
|                                                                 |  |                           |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-bearing liabilities:                                    |  |                           |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Savings, NOW and money-market deposits                           |  | $                         | 76,901  |                      | $    | 706   |                   |  | 1.84 |                |  | $                    | 83,047  |                   | $ | 1,125 |  | 2.71 |  
|Time deposits                                                    |  |                           | 90,040  |                      |      | 2,106 |                   |  | 4.68 |                |  |                      | 78,821  |                   |   | 1,978 |  | 5.02 |  
|                                                                 |  |                           |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-bearing deposits                                  |  |                           | 166,941 |                      |      | 2,812 |                   |  | 3.37 |                |  |                      | 161,868 |                   |   | 3,103 |  | 3.83 |  
|Borrowed funds                                                   |  |                           | 14,421  |                      |      | 293   |                   |  | 1.79 |                |  |                      | 14,227  |                   |   | 382   |  | 5.37 |  
|                                                                 |  |                           |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Capitalized interest                                             |  |                           |         |                      |      | (164  | )                 |  |      |                |  |                      |         |                   |   |      |  |      |  
|                                                                 |  |                           |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-bearing liabilities                               |  |                           | 181,362 |                      |      | 2,941 |                   |  | 3.24 |                |  |                      | 176,095 |                   |   | 3,485 |  | 3.96 |  
|                                                                 |  |                           |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Noninterest-bearing demand deposits                              |  |                           | 18,560  |                      |      |       |                   |  |      |                |  |                      | 21,702  |                   |   |       |  |      |  
|Noninterest-bearing liabilities                                  |  |                           | 1,144   |                      |      |       |                   |  |      |                |  |                      | 2,531   |                   |   |       |  |      |  
|Stockholders equity                                             |  |                           | 17,103  |                      |      |       |                   |  |      |                |  |                      | 16,345  |                   |   |       |  |      |  
|                                                                 |  |                           |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total liabilities and stockholders equity                       |  | $                         | 218,169 |                      |      |       |                   |  |      |                |  | $                    | 216,673 |                   |   |       |  |      |  
|                                                                 |  |                           |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest income                                              |  |                           |         |                      | $    | 3,254 |                   |  |      |                |  |                      |         |                   | $ | 3,280 |  |      |  
|                                                                 |  |                           |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-rate spread                                             |  |                           |         |                      |      |       |                   |  | 2.99 | %              |  |                      |         |                   |   |       |  | 2.76 | %
|                                                                 |  |                           |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest margin (2)                                          |  |                           |         |                      |      |       |                   |  | 3.27 | %              |  |                      |         |                   |   |       |  | 3.26 | %
|                                                                 |  |                           |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Ratio of interest-earning assets to interest-bearing liabilities |  |                           | 1.10    |                      |      |       |                   |  |      |                |  |                      | 1.14    |                   |   |       |  |      |  
|                                                                 |  |                           |         |                      |      |       |                   |  |      |                |  |                      |         |                   |   |       |  |      |  



|(1) | Includes interest-earning deposits, federal funds sold and Federal Home Loan Bank and Federal Reserve Bank stock.
|--- | -----------------------------------------------------------------------------------------------------------------

|(2) | Net interest margin is annualized net interest income divided by average interest-earning assets.
|--- | -------------------------------------------------------------------------------------------------



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Comparison of the Three-Month Periods Ended June 30, 2008 and 2007

General Operating Results.Net loss for the quarter ended June, 2008 was ($10,000) or ($0.01) per basic share compared to net earnings of $80,000, or $0.06 per basic share for the quarter ended
June 30, 2007. The second quarter 2008 loss was caused by credit  related expenses including a $238,000 provision for loan losses prompted by partial charge offs on two real estate secured loans and due to expenses associated with
foreclosed property in the amount of $120,000 included in other expense.

The Company does not have any sub-prime securities in its investment portfolio.
The sustained level of liquidity and conservative nature of investments helps offset the increased level of risk in the loan portfolio. The Company does not use brokered deposits and its loan to deposit ratio is 81.75%.

Interest Income.Interest income declined $356,000 to $3.0 million for the three-month period ended June 30, 2008, compared to $3.4 million for the
three-month period ended June 30, 2007. The decline in interest income is primarily due to the decline in the average yield over the past year.

Interest Expense.Interest expense decreased $473,000 from $1.7 million for the three-month period ended June 30, 2007, to $1.3 million for the three-month period ended June 30, 2008. The lower expense was due
primarily to the decline in average rate paid on interest-bearing liabilities and to $162,000 of capitalization of interest on the Companys future main office and operations center. The capitalized interest of $162,000 for the quarter includes
prior period amounts of $55,000 for the year ended December 31, 2006 and $66,000 for the year ended December 31, 2007. Management believes these amounts are immaterial to the presentation of the financial statements for all periods concerned.

Provision for Loan Losses.The provision for loan loss is a current period expense charged to operations to bring the total loan loss
allowance to a level deems appropriate by management. The provision is based upon the volume and type of lending conducted by the Company, general economic conditions, particularly as they relate to the Companys market area, and other factors
related to the collectibility of the Companys loan portfolio. The Company recorded provisions of $238,000 and $181,000, for the three-month periods ended June 30, 2008 and 2007, respectively. During the three month period ending
June 30, 2008, the Company posted net charge offs of $55,000 to the allowance for loan losses, due primarily to loans that were written down to the market value of the collateral. At June 30, 2008, the allowance for loan losses was
$1,938,000 or 1.27% of gross loans. In response to market conditions, the Companys allowance for loan losses has increased from 1.17% of loans at June 30, 2007 to 1.27% of loans at June 30, 2008. Management is aggressively working on
its collection effort and continues to increase the level of monitoring for commercial real estate and investment real estate. The Company has never participated in any type of subprime lending. Management believes the allowance for loan losses of
$1,938,000 at June 30, 2008, is adequate.

Noninterest Income.Noninterest income was flat during the second quarter of 2008, compared
to 2007. Increases in brokerage fees and service charges were offset by reductions in the gain on sale of loans and other noninterest income.

Noninterest Expense.Noninterest expense increased $206,000, from $1.8 million for the three month period ending June 30, 2007, to $2.0 million for the three-month period ended June 30, 2008. The increase was
attributable to an increase in expenses related to foreclosed property and expenses related to facilities and data processing.

Income Taxes.The Company benefited from an income tax credit of $18,000 for the first quarter of 2007, compared to income tax credit of $77,000 for the three-month period ended June 30, 2007. The tax credit for 2007 was related to an affordable
housing donation by the Company.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Comparison of the Six-Month Periods Ended June 30, 2008 and 2007

General Operating Results.Net losses for the six-month period ended June 30, 2008 was ($178,000) or ($0.14) per basic share compared to net income of $335,000 of $0.27 per basic share for the
comparable period in 2007. The net loss was the result of a provision for loan losses of $560,000, and the expense to carry foreclosed real estate of $120,000.

The Company does not have any sub-prime securities in its investment portfolio. The sustained level of liquidity and conservative nature of investments helps offset the increased level of risk in the loan portfolio. The Company does not use
brokered deposits and its loan to deposit ratio is 81.75%.

Interest Income.Interest income decreased $570,000 to $6.2 million for the
six-month period ended June 30, 2008, compared to $6.8 million for the six-month period ended June 30, 2007. The decrease was due to a drop in the average yield of earning assets from 6.72% to 6.23%, a decrease in average loans outstanding
of $6.7 million, and the reversal of interest on nonaccrual loans of $125,000.

Interest Expense.Interest expense decreased $544,000 to $2.9
million for the six-month period ended June 30, 2008, compared to $3.4 million for the six-month period ended June 30, 2007. The decrease was due to repricing of deposits, which lowered the average rate paid to 3.24% from 3.96% and from
$164,000 in capitalized interest on the Companys future main office and operations center.

Provision for Loan Losses.The provision
for loan losses is charged to operations to bring the total loan loss allowance to a level deemed appropriate by management. The provision is based upon the volume and type of lending conducted by the Company, industry standards, general economic
conditions, particularly as they relate to the Companys market area, and other factors related to the Companys loan portfolio. The Company recorded provisions for loan losses for the six-month periods ended June 30, 2008 and 2007 of
$560,000 and $181,000, respectively. During the six month period ending June 30, 2008, the Company posted net charge offs of $509,000 to the allowance for loan losses, due primarily to charge-offs on loans transferred to foreclosed real estate.
At June 30, 2008, the allowance for loan losses was $1,938,000 or 1.27% of gross loans. In response to market conditions, the Companys allowance for loan losses has increased from 1.17% of loans at June 30, 2007 to 1.27% of loans at
June 30, 2008. Management is aggressively working on its collection effort and continues to increase the level of monitoring for commercial real estate and investment real estate. The Company has never participated in any type of subprime
lending. Management believes that the allowance for loan losses of $1,938,000 at June 30, 2008 is adequate.

Noninterest Income.Noninterest income increased $43,000 during the 2008 period. The increase was due to increased brokerage fees of $19,000, and gain on sale of loans of $19,000.

Noninterest Expense.Noninterest expense increased $428,000 to $4.0 million for the six-month period ended June 30, 2008, as compared to $3.5 million for the same period in 2007. The increase
in expenses can be attributed to foreclosed real estate expenses of $120,000, FDIC and OCC assessments of $83,000, salaries and personnel expense of $67,000, consulting fees of $41,000, and $25,000 for advertising to promote the Companys 20
year anniversary.

Income Taxes.The Company benefited from an income tax credit of $251,000 for the six-month period ended June 30,
2008, compared to income tax expense of $26,000 for the six-month period ended June 30, 2007.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

None applicable



|Item 4T. | Controls and Procedures
|-------- | -----------------------

Evaluation of Disclosure Controls and
Procedures

The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports
that the Company files or submits under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon
managements evaluation of those controls and procedures performed within the 90 days preceding the filing of this Report, the Chief Executive Officer and Chief Financial Officer of the Company concluded that, subject to the limitations noted
below, the Companys disclosure controls and procedures (as defined in Rule 13a-14 under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by the Company in the reports that it files or
submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms.

Changes in Internal Controls Over Financial Reporting

There have been no changes in the Companys internal control over financial reporting during the first six months of 2008 that have materially affected or are reasonably likely to materially affect the Companys internal control
over financial reporting.

Limitations on the Effectiveness of Controls

Our management (including our Chief Executive Officer and Chief Financial Officer) does not expect that our financial reporting, disclosure controls and
other internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because
of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override or the control.

The design of the system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.



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##### Table of Contents

INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Part II - OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

There are no material pending
legal proceeding to which the Holding Company or any of its subsidiaries is a party or to which any of their property is subject.



|Item 1A. | Risk Factors
|-------- | ------------

None applicable



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

None applicable



|Item 3. | Defaults upon Senior Securities
|------- | -------------------------------

None applicable



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

The Annual
Meeting of Shareholders (the "Annual Meeting") of the Holding Company was held on June 18, 2008, to elect eleven directors of the Company to serve in such capacity for the next year, and to ratify the appointment of Hacker, Johnson &
Smith PA, as the Companys independent auditors for the year ending December 31, 2008. At the Annual Meeting, 1,075,706 shares were present, in person or by proxy, out of a total of 1,235,644 issued and outstanding as of the record date.
Listed below are the results of the matters subject to a vote of security holders:

Proposal 1: Election of Directors



|                               |  |           |  |         |  |         
|------------------------------ |  | --------- |  | ------- |  | --------
|Name of Nominee                |  | For       |  | Against |  | Withhold
|Charles H. Deters              |  | 1,061,208 |  |        |  | 7,400   
|Jeremy J. Deters               |  | 1,063,208 |  |        |  | 5,400   
|David A. Dizney                |  | 1,068,608 |  |        |  |        
|Robert A. Ellinor              |  | 1,058,388 |  |        |  | 413     
|Billy G. Gadd                  |  | 1,056,801 |  |        |  | 2,000   
|Digvijay L. Gaekwad            |  | 1,068,297 |  |        |  | 311     
|Mark A. Imes                   |  | 1,059,813 |  |        |  | 311     
|Deborah A. Klugger             |  | 1,061,208 |  |        |  | 1,000   
|John L. Peterson, D.V.M.       |  | 1,068,208 |  |        |  |        
|Lanford T. Slaughter, D.D.S.   |  | 1,057,801 |  |        |  | 1,000   
|Frank E. Stafford, Jr., C.P.A. |  | 1,068,608 |  |        |  |        



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Proposal 2: Ratification of Hacker, Johnson & Smith PA



|        |  |               
|------- |  | --------------
|        |  | Voting Results
|For     |  | 1,057,979     
|Against |  | 8,315         
|Abstain |  |              



|Item 5. | Other Information
|------- | -----------------

None applicable



|Item 6. | Exhibits
|------- | --------



|            |  |                                                                                                                                             
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                                      
|31.1        |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - President and Chief Executive Officer                             
|            | 
|31.2        |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Financial Officer                                           
|            | 
|32.1        |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  President and Chief Executive Officer, and Chief Financial Officer



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

SIGNATURES

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

Date: August 27, 2008



INDEPENDENT BANCSHARES, INC.(Registrant)By:

/s/ Mark A. ImesName:

Mark A. Imes, President andChief Executive Officer(Principal Executive Officer)By:

/s/ Nicholas J. PanicaroName:

Nicholas J. Panicaro, Chief Financial Officer(Principal Financial and Accounting Officer)




20