##### Table of Contents

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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



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

For the Quarterly Period Ended June 30, 2007

Or



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

Commission file number 000-51920



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INDEPENDENT BANCSHARES, INC.

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



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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|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.)



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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 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 outstanding as of August 3, 2007:



|                              |  |                 
|----------------------------- |  | ----------------
|Common stock, $2.00 par value |  | 1,235,646 shares

Transitional Small Business Disclosure Format:    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, 2007 (Unaudited) and at December 31, 2006                   |  | 2    
|                                                                                                                | 
|Condensed Consolidated Statements of Earnings (Unaudited) - Three and Six months ended June 30, 2007 and 2006   |  | 3    
|                                                                                                                | 
|Condensed Consolidated Statements of Stockholders Equity (Unaudited) - Six months ended June 30, 2007 and 2006 |  | 4    
|                                                                                                                | 
|Condensed Consolidated Statements of Cash Flows (Unaudited) - Six months ended June 30, 2007 and 2006           |  | 5    
|                                                                                                                | 
|Notes to Condensed Consolidated Financial Statements (Unaudited)                                                |  | 6-8  
|                                                                                                                | 
|Review by Independent Registered Public Accounting Firm                                                         |  | 9    
|                                                                                                                | 
|Report of Independent Registered Public Accounting Firm                                                         |  | 10   
|                                                                                                                | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                   |  | 11-18
|                                                                                                                | 
|Item 3. Controls and Procedures                                                                                 |  | 18   
|                                                                                                                | 
|Part II. OTHER INFORMATION                                                                                      |  |      
|                                                                                                                | 
|Item 1. Legal Proceedings                                                                                       |  | 19   
|                                                                                                                | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                             |  | 19   
|                                                                                                                | 
|Item 3. Defaults upon Senior Securities                                                                         |  | 19   
|                                                                                                                | 
|Item 4. Submission of Matters to a Vote of Security Holders                                                     |  | 19   
|                                                                                                                | 
|Item 5. Other Information                                                                                       |  | 20   
|                                                                                                                | 
|Item 6. Exhibits                                                                                                |  | 20   
|                                                                                                                | 
|SIGNATURES                                                                                                      |  | 21   



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 per share amounts)



|                                                                                                               |  |                 |         |   |                     |   |         |  
|-------------------------------------------------------------------------------------------------------------- |  | --------------- | ------- | - | ------------------- | - | ------- | -
|                                                                                                               |  | At June 30,2007 |         |   | At December 31,2006 |  
|                                                                                                               |  | (unaudited)     |         |   |                     |  
|Assets                                                                                                         |  |                 |         |   |                     |   |         |  
|                                                                                                               |  |                
|Cash and due from banks                                                                                        |  | $               | 4,288   |   |                     | $ | 6,057   |  
|Interest-earning deposits                                                                                      |  |                 | 88      |   |                     |   | 86      |  
|Federal funds sold                                                                                             |  |                 | 3,892   |   |                     |   | 6,134   |  
|                                                                                                               |  |                 |         |   |                     |   |         |  
|Cash and cash equivalents                                                                                      |  |                 | 8,268   |   |                     |   | 12,277  |  
|                                                                                                               |  |                
|Securities available for sale                                                                                  |  |                 | 37,217  |   |                     |   | 40,996  |  
|Loans, net of allowance for loan losses of $1,880 and $ 1,899                                                  |  |                 | 159,182 |   |                     |   | 149,985 |  
|Accrued interest receivable                                                                                    |  |                 | 1,015   |   |                     |   | 925     |  
|Premises and equipment, net                                                                                    |  |                 | 7,980   |   |                     |   | 7,933   |  
|Federal Home Loan Bank stock                                                                                   |  |                 | 926     |   |                     |   | 935     |  
|Federal Reserve Bank stock                                                                                     |  |                 | 237     |   |                     |   | 237     |  
|Goodwill                                                                                                       |  |                 | 1,525   |   |                     |   |        |  
|Customer intangible, net                                                                                       |  |                 | 455     |   |                     |   |        |  
|Other assets                                                                                                   |  |                 | 1,490   |   |                     |   | 1,329   |  
|                                                                                                               |  |                 |         |   |                     |   |         |  
|Total assets                                                                                                   |  | $               | 218,295 |   |                     | $ | 214,617 |  
|                                                                                                               |  |                 |         |   |                     |   |         |  
|Liabilities and Stockholders' Equity                                                                           |  |                 |         |   |                     |   |         |  
|                                                                                                               |  |                
|Liabilities:                                                                                                   |  |                 |         |   |                     |   |         |  
|Noninterest-bearing demand deposits                                                                            |  | $               | 18,870  |   |                     | $ | 19,053  |  
|NOW, money-market and savings deposits                                                                         |  |                 | 82,311  |   |                     |   | 81,005  |  
|Time deposits                                                                                                  |  |                 | 83,076  |   |                     |   | 79,428  |  
|                                                                                                               |  |                 |         |   |                     |   |         |  
|Total deposits                                                                                                 |  |                 | 184,257 |   |                     |   | 179,486 |  
|                                                                                                               |  |                
|Federal Home Loan Bank advances                                                                                |  |                 | 10,000  |   |                     |   | 10,000  |  
|Junior Subordinated Debenture                                                                                  |  |                 | 2,062   |   |                     |   | 2,062   |  
|Other borrowings                                                                                               |  |                 | 3,760   |   |                     |   | 3,528   |  
|Accrued interest payable and other liabilities                                                                 |  |                 | 1,859   |   |                     |   | 3,380   |  
|                                                                                                               |  |                 |         |   |                     |   |         |  
|Total liabilities                                                                                              |  |                 | 201,938 |   |                     |   | 198,456 |  
|                                                                                                               |  |                 |         |   |                     |   |         |  
|Stockholders' equity:                                                                                          |  |                 |         |   |                     |   |         |  
|Common stock, $2 par value, 2,000,000 shares authorized, 1,235,646 and 1,176,975 shares issued and outstanding |  |                 | 2,471   |   |                     |   | 2,354   |  
|Additional paid-in capital                                                                                     |  |                 | 8,831   |   |                     |   | 7,517   |  
|Retained earnings                                                                                              |  |                 | 5,548   |   |                     |   | 6,649   |  
|Accumulated other comprehensive loss                                                                           |  |                 | (493    | ) |                     |   | (359    | )
|                                                                                                               |  |                 |         |   |                     |   |         |  
|Total stockholders' equity                                                                                     |  |                 | 16,357  |   |                     |   | 16,161  |  
|                                                                                                               |  |                 |         |   |                     |   |         |  
|Total liabilities and stockholders' equity                                                                     |  | $               | 218,295 |   |                     | $ | 214,617 |  
|                                                                                                               |  |                 |         |   |                     |   |         |  

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 Earnings (Unaudited)

(In thousands, except per share amounts)



|                                                    |  |                            |       |                          |      |   |       |  |      |       |  |   |      
|--------------------------------------------------- |  | -------------------------- | ----- | ------------------------ | ---- | - | ----- |  | ---- | ----- |  | - | -----
|                                                    |  | Three Months EndedJune 30, |       | Six Months EndedJune 30,
|                                                    |  | 2007                       |       |                          | 2006 |   | 2007  |  | 2006
|Interest income:                                    |  |                            |       |                          |      |   |       |  |      |       |  |   |      
|Loans                                               |  | $                          | 2,915 |                          |      | $ | 2,824 |  | $    | 5,785 |  | $ | 5,481
|Securities                                          |  |                            | 439   |                          |      |   | 307   |  |      | 888   |  |   | 618  
|Other                                               |  |                            | 44    |                          |      |   | 99    |  |      | 92    |  |   | 172  
|                                                    |  |                            |       |                          |      |   |       |  |      |       |  |   |      
|Total interest income                               |  |                            | 3,398 |                          |      |   | 3,230 |  |      | 6,765 |  |   | 6,271
|                                                    |  |                            |       |                          |      |   |       |  |      |       |  |   |      
|Interest expense:                                   |  |                            |       |                          |      |   |       |  |      |       |  |   |      
|Deposits                                            |  |                            | 1,580 |                          |      |   | 1,105 |  |      | 3,103 |  |   | 2,058
|Borrowings                                          |  |                            | 195   |                          |      |   | 168   |  |      | 382   |  |   | 358  
|                                                    |  |                            |       |                          |      |   |       |  |      |       |  |   |      
|Total interest expense                              |  |                            | 1,775 |                          |      |   | 1,273 |  |      | 3,485 |  |   | 2,416
|                                                    |  |                            |       |                          |      |   |       |  |      |       |  |   |      
|Net interest income                                 |  |                            | 1,623 |                          |      |   | 1,957 |  |      | 3,280 |  |   | 3,855
|                                                    |  |                            |       |                         
|Provision for loan losses                           |  |                            | 181   |                          |      |   | 5     |  |      | 181   |  |   | 28   
|                                                    |  |                            |       |                          |      |   |       |  |      |       |  |   |      
|Net interest income after provision for loan losses |  |                            | 1,442 |                          |      |   | 1,952 |  |      | 3,099 |  |   | 3,827
|                                                    |  |                            |       |                          |      |   |       |  |      |       |  |   |      
|Noninterest income:                                 |  |                            |       |                          |      |   |       |  |      |       |  |   |      
|Service charges on deposit accounts                 |  |                            | 110   |                          |      |   | 111   |  |      | 227   |  |   | 231  
|Brokerage fees                                      |  |                            | 189   |                          |      |   |      |  |      | 310   |  |   |     
|Gain on sale of loans                               |  |                            | 26    |                          |      |   |      |  |      | 26    |  |   |     
|Gain sale of securities                             |  |                            | 2     |                          |      |   |      |  |      | 2     |  |   |     
|Other                                               |  |                            | 121   |                          |      |   | 140   |  |      | 237   |  |   | 260  
|                                                    |  |                            |       |                          |      |   |       |  |      |       |  |   |      
|Total noninterest income                            |  |                            | 448   |                          |      |   | 251   |  |      | 802   |  |   | 491  
|                                                    |  |                            |       |                          |      |   |       |  |      |       |  |   |      
|Noninterest expense:                                |  |                            |       |                          |      |   |       |  |      |       |  |   |      
|Salaries and employee benefits                      |  |                            | 1,014 |                          |      |   | 880   |  |      | 2,017 |  |   | 1,599
|Occupancy and equipment                             |  |                            | 197   |                          |      |   | 157   |  |      | 372   |  |   | 313  
|Data processing                                     |  |                            | 106   |                          |      |   | 76    |  |      | 225   |  |   | 151  
|Advertising and business development                |  |                            | 45    |                          |      |   | 69    |  |      | 90    |  |   | 118  
|Directors fees                                      |  |                            | 42    |                          |      |   | 38    |  |      | 82    |  |   | 75   
|Stationery and supplies                             |  |                            | 33    |                          |      |   | 38    |  |      | 68    |  |   | 79   
|Other                                               |  |                            | 391   |                          |      |   | 262   |  |      | 686   |  |   | 510  
|                                                    |  |                            |       |                          |      |   |       |  |      |       |  |   |      
|Total noninterest expense                           |  |                            | 1,828 |                          |      |   | 1,520 |  |      | 3,540 |  |   | 2,845
|                                                    |  |                            |       |                          |      |   |       |  |      |       |  |   |      
|Earnings before income taxes                        |  |                            | 62    |                          |      |   | 683   |  |      | 361   |  |   | 1,473
|                                                    |  |                            |       |                         
|Income taxes (benefit)                              |  |                            | (18   | )                        |      |   | 232   |  |      | 26    |  |   | 512  
|                                                    |  |                            |       |                          |      |   |       |  |      |       |  |   |      
|Net earnings                                        |  | $                          | 80    |                          |      | $ | 451   |  | $    | 335   |  | $ | 961  
|                                                    |  |                            |       |                          |      |   |       |  |      |       |  |   |      
|Earnings per share  basic                          |  | $                          | .06   |                          |      | $ | .36   |  | $    | .27   |  | $ | .78  
|                                                    |  |                            |       |                          |      |   |       |  |      |       |  |   |      
|Cash dividends per share                            |  | $                          |      |                          |      | $ |      |  |      |      |  |   |     
|                                                    |  |                            |       |                          |      |   |       |  |      |       |  |   |      

See accompanying Notes to Condensed Consolidated Financial Statements.



3



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##### Table of Contents

INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES



Condensed Consolidated Statements of Stockholders Equity

Six Months Ended June 30, 2007 and 2006

($ in thousands)



|                                                                                                            |  |              |  |            |       |                            |   |                   |  |   |                                        |   |  |                            |      |   |  |   |        |  
|----------------------------------------------------------------------------------------------------------- |  | ------------ |  | ---------- | ----- | -------------------------- | - | ----------------- |  | - | -------------------------------------- | - |  | -------------------------- | ---- | - |  | - | ------ | -
|                                                                                                            |  |              |  |            |       | Additional Paid-In Capital |   | Retained Earnings |  |   | Accumulated Other Compre- hensive Loss |   |  | Total Stockholders' Equity |     
|                                                                                                            |  |              |  |            |       |                            |   |                  
|                                                                                                            |  | Common Stock |  |            |       |                           
|                                                                                                            |  | Shares       |  | Par Amount |       |                            |   |                  
|                                                                                                            |  |              |  |            |       |                           
|Balance at December 31, 2005                                                                                |  | 1,119,791    |  | $          | 2,240 |                            | $ | 5,936             |  | $ | 6,782                                  |   |  | $                          | (476 | ) |  | $ | 14,482 |  
|                                                                                                            |  |              |  |            |       |                            |   |                   |  |   |                                        |   |  |                            |      |   |  |   |        |  
|Comprehensive income:                                                                                       |  |              |  |            |       |                            |   |                   |  |   |                                        |   |  |                            |      |   |  |   |        |  
|Net earnings (unaudited)                                                                                    |  |             |  |            |      |                            |   |                  |  |   | 961                                    |   |  |                            |     |   |  |   | 961    |  
|                                                                                                            |  |              |  |            |       |                           
|Change in unrealized loss on securities available for sale, net of tax benefit (unaudited) -                |  |             |  |            |      |                            |   |                  |  |   |                                       |   |  |                            | (134 | ) |  |   | (134   | )
|                                                                                                            |  |              |  |            |       |                            |   |                   |  |   |                                        |   |  |                            |      |   |  |   |        |  
|Comprehensive income (unaudited)                                                                            |  |              |  |            |       |                            |   |                   |  |   |                                        |   |  |                            |      |   |  |   | 827    |  
|                                                                                                            |  |              |  |            |       |                           
|Proceeds from shares issued in connection with purchases under the Employee Stock Purchase Plan (unaudited) |  | 1,373        |  |            | 2     |                            |   | 18                |  |   |                                       |   |  |                            |     |   |  |   | 20     |  
|                                                                                                            |  |              |  |            |       |                           
|5% stock dividend (unaudited)                                                                               |  | 55,811       |  |            | 112   |                            |   | 1,563             |  |   | (1,675                                 | ) |  |                            |     |   |  |   |       |  
|                                                                                                            |  |              |  |            |       |                           
|Cash in lieu of shares (unaudited)                                                                          |  |             |  |            |      |                            |   |                  |  |   | (7                                     | ) |  |                            |     |   |  |   | (7     | )
|                                                                                                            |  |              |  |            |       |                            |   |                   |  |   |                                        |   |  |                            |      |   |  |   |        |  
|Balance at June 30, 2006 (unaudited)                                                                        |  | 1,176,975    |  | $          | 2,354 |                            | $ | 7,517             |  | $ | 6,061                                  |   |  | $                          | (610 | ) |  | $ | 15,322 |  
|                                                                                                            |  |              |  |            |       |                            |   |                   |  |   |                                        |   |  |                            |      |   |  |   |        |  
|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)                                                                               |  | 58,671       |  |            | 117   |                            |   | 1,314             |  |   | (1,431                                 | ) |  |                            |     |   |  |   |       |  
|                                                                                                            |  |              |  |            |       |                           
|Cash in lieu of shares (unaudited)                                                                          |  |             |  |            |      |                            |   |                  |  |   | (5                                     | ) |  |                            |     |   |  |   | (5     | )
|                                                                                                            |  |              |  |            |       |                            |   |                   |  |   |                                        |   |  |                            |      |   |  |   |        |  
|Balance at June 30, 2007 (unaudited)                                                                        |  | 1,235,646    |  | $          | 2,471 |                            | $ | 8,831             |  | $ | 5,548                                  |   |  | $                          | (493 | ) |  | $ | 16,357 |  
|                                                                                                            |  |              |  |            |       |                            |   |                   |  |   |                                        |   |  |                            |      |   |  |   |        |  

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, |       
|                                                                                                                         |  | 2007                     |        |   | 2006 |  
|Cash flows from operating activities:                                                                                    |  |                          |        |   |      |   |        |  
|Net earnings                                                                                                             |  | $                        | 335    |   |      | $ | 961    |  
|Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:                            |  |                          |        |   |      |   |        |  
|Depreciation and amortization                                                                                            |  |                          | 164    |   |      |   | 110    |  
|Provision for loan losses                                                                                                |  |                          | 181    |   |      |   | 28     |  
|Net amortization of premiums and discounts on securities                                                                 |  |                          | 127    |   |      |   | 128    |  
|Gain on sale of securities available for sale                                                                            |  |                          | (2     | ) |      |   |       |  
|Amortization of customer intangible                                                                                      |  |                          | 35     |   |      |   |       |  
|Net increase in accrued interest receivable                                                                              |  |                          | (90    | ) |      |   | (40    | )
|Net (increase) decrease in other assets                                                                                  |  |                          | (3     | ) |      |   | 9      |  
|Net decrease in accrued interest payable and other liabilities                                                           |  |                          | (1,521 | ) |      |   | (693   | )
|                                                                                                                         |  |                          |        |   |      |   |        |  
|Net cash (used in) provided by operating activities                                                                      |  |                          | (774   | ) |      |   | 503    |  
|                                                                                                                         |  |                          |        |   |      |   |        |  
|Cash flows from investing activities:                                                                                    |  |                          |        |   |      |   |        |  
|Purchase of securities available for sale                                                                                |  |                          | (3,817 | ) |      |   | (2,860 | )
|Maturities, sales, and principal repayments of securities available for sale                                             |  |                          | 7,183  |   |      |   | 4,308  |  
|Loans originated, net of principal repayments                                                                            |  |                          | (9,378 | ) |      |   | (4,630 | )
|Purchase of premises and equipment                                                                                       |  |                          | (211   | ) |      |   | (886   | )
|Redemption (purchase) of Federal Home Loan Bank stock                                                                    |  |                          | 9      |   |      |   | (46    | )
|Purchase of Federal Reserve Bank stock                                                                                   |  |                          |       |   |      |   | (3     | )
|Purchase of assets of HKH                                                                                                |  |                          | (2,019 | ) |      |   |       |  
|                                                                                                                         |  |                          |        |   |      |   |        |  
|Net cash used in investing activities                                                                                    |  |                          | (8,233 | ) |      |   | (4,117 | )
|                                                                                                                         |  |                          |        |   |      |   |        |  
|Cash flows from financing activities:                                                                                    |  |                          |        |   |      |   |        |  
|Net increase in deposits                                                                                                 |  |                          | 4,771  |   |      |   | 6,607  |  
|Principal repayments on notes payable                                                                                    |  |                          |       |   |      |   | (286   | )
|Net increase in other borrowings                                                                                         |  |                          | 232    |   |      |   | 1,239  |  
|Proceeds from sale of common stock                                                                                       |  |                          |       |   |      |   | 20     |  
|Cash in lieu of fractional shares                                                                                        |  |                          | (5     | ) |      |   | (7     | )
|                                                                                                                         |  |                          |        |   |      |   |        |  
|Net cash provided by financing activities                                                                                |  |                          | 4,998  |   |      |   | 7,573  |  
|                                                                                                                         |  |                          |        |   |      |   |        |  
|Net (decrease) increase in cash and cash equivalents                                                                     |  |                          | (4,009 | ) |      |   | 3,959  |  
|                                                                                                                         |  |                         
|Cash and cash equivalents at beginning of period                                                                         |  |                          | 12,277 |   |      |   | 8,268  |  
|                                                                                                                         |  |                          |        |   |      |   |        |  
|Cash and cash equivalents at end of period                                                                               |  | $                        | 8,268  |   |      | $ | 12,227 |  
|                                                                                                                         |  |                          |        |   |      |   |        |  
|Supplemental disclosures of cash flow information:                                                                       |  |                          |        |   |      |   |        |  
|Cash paid during the period for:                                                                                         |  |                          |        |   |      |   |        |  
|Interest                                                                                                                 |  | $                        | 3,448  |   |      | $ | 2,468  |  
|                                                                                                                         |  |                          |        |   |      |   |        |  
|Taxes                                                                                                                    |  | $                        | 25     |   |      | $ | 878    |  
|                                                                                                                         |  |                          |        |   |      |   |        |  
|Noncash transactions:                                                                                                    |  |                          |        |   |      |   |        |  
|Accumulated other comprehensive loss, net change in unrealized loss on securities available for sale, net of tax benefit |  | $                        | (134   | ) |      | $ | (134   | )
|                                                                                                                         |  |                          |        |   |      |   |        |  
|Common stock dividend                                                                                                    |  | $                        | 1,431  |   |      | $ | 1,675  |  
|                                                                                                                         |  |                          |        |   |      |   |        |  

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, 2007, the results of operations for the three- and six-month periods ended June 30, 2007 and 2006 and the cash flows for
the six-month periods ended June 30, 2007 and 2006. The results of operations for the three- and six-month periods ended June 30, 2007, are not necessarily indicative of results that may be expected for the year ending December 31,
2007.

The Holding Company owns 100% of the outstanding common stock of Independent National Bank (the Bank) and HKH Financial
Center, Inc. (HKH) (collectively, the Company). The Holding Companys primary business activity is the operation of the Bank and HKH. 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.
HKH is a financial services company registered with the National Association of Securities Dealers (NASD). HKH has an established product and brokering agreement with Raymond James Financial Services, Inc.

2.Business Combination.On January 2, 2007, the Holding Company purchased
the assets of HKH a financial services company for $2,019,000. HKH is registered with NASD, and has an established product and brokering agreement with Raymond James Financial Services, Inc. Since January 2, 2007, HKH has operated as a
wholly-owned subsidiary of the Holding Company. The acquisition of HKH provides the Company with the ability to provide additional services to its customers.

Assets acquired included intangible assets of approximately $2,015,000, consisting of goodwill of $1,525,000, customer intangibles of $490,000 and premises and equipment of $4,000. The principal factors considered in
valuing the customer list included (1) existing customer revenues, (2) estimated customer attrition and (3) pricing increases based on an inflationary rate for services to be rendered. The customer list intangible is being amortized
on the straight-line method over a seven year period. Goodwill and the customer intangible will be evaluated periodically for impairment.

The following table presents unaudited pro forma results incorporating HKH for the three and six months ended June 30, 2006. Since no consideration is given to operational efficiencies and expanded products and services, the pro forma
summary information does not necessarily reflect the results of operations as they would have been, if the acquisition had occurred on January 1, 2006. The following amounts (except the per share amount) are in thousands.



|                         |  |                    |       |                  |   |      
|------------------------ |  | ------------------ | ----- | ---------------- | - | -----
|                         |  | Three Months Ended |       | Six Months Ended
|                         |  | June 30, 2006      |       | June 30, 2006   
|Total revenues           |  | $                  | 3,555 |                  | $ | 7,066
|                         |  |                    |       |                  |   |      
|Net earnings             |  | $                  | 442   |                  | $ | 953  
|                         |  |                    |       |                  |   |      
|Earnings per basic share |  | $                  | .36   |                  | $ | .77  
|                         |  |                    |       |                  |   |      



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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 Ended |       | Six Months Ended
|                                  |  | June 30,           |       | June 30,        
|                                  |  | 2007               |       |                  | 2006 |   | 2007  |  |   | 2006 
|Beginning balance                 |  | $                  | 1,896 |                  |      | $ | 1,900 |  | $ | 1,899 |   |  | $ | 1,877
|Provision for loan losses         |  |                    | 181   |                  |      |   | 5     |  |   | 181   |   |  |   | 28   
|Net, (charge-offs) and recoveries |  |                    | (197  | )                |      |   | 6     |  |   | (200  | ) |  |   | 6    
|                                  |  |                    |       |                  |      |   |       |  |   |       |   |  |   |      
|Ending balance                    |  | $                  | 1,880 |                  |      | $ | 1,911 |  | $ | 1,880 |   |  | $ | 1,911
|                                  |  |                    |       |                  |      |   |       |  |   |       |   |  |   |      

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



|                                                                  |  |             |       |                 |   |     |  
|----------------------------------------------------------------- |  | ----------- | ----- | --------------- | - | --- | -
|                                                                  |  | At June 30, |       | At December 31, |  
|                                                                  |  | 2007        |       | 2006            |  
|Nonaccrual loans                                                  |  | $           | 2,497 |                 | $ | 137 |  
|Past due ninety days or more, still accruing                      |  |             |      |                 |   |    |  
|                                                                  |  |             |       |                 |   |     |  
|                                                                  |  | $           | 2,497 |                 | $ | 137 |  
|                                                                  |  |             |       |                 |   |     |  
|Impaired loans are as follows (in thousands):                     |  |             |       |                 |   |     |  
|Gross loans with a related allowance for loan loss recorded       |  | $           |      |                 | $ | 70  |  
|Less: Allowance on these loans                                    |  |             |      |                 |   | (13 | )
|Gross loans for which there is no related allowance for loan loss |  | $           | 2,372 |                 |   |    |  
|                                                                  |  |             |       |                 |   |     |  
|Net investment in impaired loans                                  |  | $           | 2,372 |                 | $ | 57  |  
|                                                                  |  |             |       |                 |   |     |  

There was no interest collected or recognized on impaired loans during the three or six months
ended June 30, 2007 or 2006.

4.Earnings Per Share. Basic 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 1,235,646 during the three- and six-month periods ended June 30, 2007 and 2006. There is no dilution to basic earnings
per share because the Company does not have any common stock equivalents. All per share amounts reflect the 5% stock dividend of 58,671 and 55,811 shares issued in March 2007 and April 2006, respectively.



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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, 2007 and December 31, 2006 of the Banks actual capital and related capital ratios.



|                                              |  |             |        |       |                                                     |   |             |   |        |  |      |  
|--------------------------------------------- |  | ----------- | ------ | ----- | --------------------------------------------------- | - | ----------- | - | ------ |  | ---- | -
|                                              |  | Actual      |        |       | Minimum Amount and Ratio to Remain
Well Capitalized |  
|                                              |  | Amount      |        | Ratio |                                                     |   | Amount      |   | Ratio  | 
|                                              |  | (Thousands) |        |       |                                                     |   | (Thousands) |   |        | 
|As of June 30, 2007:                          |  |             |        |       |                                                     |   |             |   |        |  |      |  
|Total Capital (to Risk-Weighted Assets) Bank  |  | $           | 18,553 |       | 11.3                                                | % |             | $ | 16,438 |  | 10.0 | %
|                                              |  |             |        |       |                                                     |   |             |   |        |  |      |  
|Tier 1 Capital (to Risk-Weighted Assets) Bank |  | $           | 16,673 |       | 10.1                                                | % |             | $ | 9,863  |  | 6.0  | %
|                                              |  |             |        |       |                                                     |   |             |   |        |  |      |  
|Tier 1 Capital (to Average Assets) Bank       |  | $           | 16,673 |       | 7.7                                                 | % |             | $ | 10,783 |  | 5.0  | %
|                                              |  |             |        |       |                                                     |   |             |   |        |  |      |  
|                                              |  |             |        |      
|As of December 31, 2006:                      |  |             |        |       |                                                     |   |             |   |        |  |      |  
|Total Capital (to Risk-Weighted Assets) Bank  |  | $           | 18,180 |       | 11.7                                                | % |             | $ | 15,557 |  | 10.0 | %
|                                              |  |             |        |       |                                                     |   |             |   |        |  |      |  
|Tier 1 Capital (to Risk-Weighted Assets) Bank |  | $           | 16,281 |       | 10.4                                                | % |             | $ | 9,334  |  | 6.0  | %
|                                              |  |             |        |       |                                                     |   |             |   |        |  |      |  
|Tier 1 Capital (to Average Assets) Bank       |  | $           | 16,281 |       | 7.7                                                 | % |             | $ | 10,630 |  | 5.0  | %
|                                              |  |             |        |       |                                                     |   |             |   |        |  |      |  



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES



Review by Independent Registered Public Accounting Firm

Hacker, Johnson & Smith PA, the Companys independent
registered public accounting firm, have made a limited review of the financial data as of June 30, 2007, and for the three- and six-month periods ended June 30, 2007 and 2006 presented in this document, in accordance with standards
established by the Public Company Accounting Oversight Board (United States).

Their report furnished pursuant to Article 10 of Regulation S-X is included
herein.



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Report of Independent Registered Public Accounting Firm

Independent BancShares, Inc.

Ocala, Florida:

We have reviewed the accompanying condensed
consolidated balance sheet of Independent BancShares, Inc. and Subsidiaries (the Company) as of June 30, 2007, the related condensed consolidated statements of earnings for the three- and six-month periods ended June 30, 2007
and 2006, and the related condensed statements of stockholders equity and cash flows for the six-month periods ended June 30, 2007 and 2006. These interim condensed financial statements are the responsibility of the Companys
management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A
review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance
with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be
in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the
Public Company Accounting Oversight Board, the consolidated balance sheet as of December 31, 2006, and the related consolidated statements of earnings, stockholders equity and cash flows for the year then ended (not presented herein); and
in our report dated March 30, 2007, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31,
2006, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.



|                              
|------------------------------
|/s/ Hacker, Johnson & Smith PA
|                              
|HACKER, JOHNSON & SMITH PA    
|Tampa, Florida                
|August 7, 2007                



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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

This Form
10-QSB may contain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on managements current expectations and are subject to risks and
uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. Among these risks are regional and national economic conditions, competitive and regulatory factors, legislative changes,
mortgage-interest rates, cost and availability of borrowed funds, our ability to sell mortgages in the secondary market, and housing sales and values. These risks and uncertainties are contained in the Companys filings with the SEC, available
via EDGAR. The Company assumes no obligation to update forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such forward-looking statements.

General

The Holding Company owns 100% of the
outstanding common stock of Independent National Bank (the Bank) and HKH Financial Center, Inc. (HKH) (collectively, the Company). The Holding Companys primary business activity is the operation of the Bank and HKH. 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. HKH is a financial services company registered with the National Association of Securities Dealers (NASD). HKH has an established product and
brokering agreement with Raymond James Financial Services, Inc. The Holding Companys common stock is trading on the Over-the-Counter Bulletin Board under the symbol IBFL.

Liquidity and Capital Resources

The Companys
primary source of cash during the six months ended June 30, 2007 was from a net increase in deposits of $4.8 million, $7.2 million from maturities, sales and principal repayments of securities available for sale, and an increase in other
borrowings of $232,000. Cash was used primarily to fund loans, net of principal repayments of $9.4 million, to purchase securities available for sale of $3.8 million and acquire a 100% ownership interest in HKH effective January 1, 2007 for
$2.0 million. At June 30, 2007, 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.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES



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.

A summary of the amounts of the Company's financial instruments, with off-balance-sheet risk at June 30, 2007 follows (in thousands):



|                                                   |  |                 |       
|-------------------------------------------------- |  | --------------- | ------
|                                                   |  | Contract Amount
|                                                  
|Undisbursed lines of credit and construction loans |  | $               | 3,701 
|                                                   |  |                 |       
|Commitments to extend credit                       |  | $               | 14,509
|                                                   |  |                 |       
|Standby letters of credit                          |  | $               | 812   
|                                                   |  |                 |       

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.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES



Selected Ratios

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



|                                                        |  |                                |   |  |                              |   |  |                                |  
|------------------------------------------------------- |  | ------------------------------ | - |  | ---------------------------- | - |  | ------------------------------ | -
|                                                        |  | Six Months Ended June 30, 2007 |   |  | Year Ended December 31, 2006 |   |  | Six Months Ended June 30, 2006 |  
|                                                        |  |                               
|                                                        |  |                               
|                                                        |  |                               
|Average equity as a percentage of average assets        |  | 7.54                           | % |  | 7.46                         | % |  | 7.31                           | %
|                                                        |  |                                |  
|Total equity to total assets at end of period           |  | 7.49                           | % |  | 7.53                         | % |  | 7.46                           | %
|                                                        |  |                                |  
|Return on average assets (1)                            |  | .31                            | % |  | .75                          | % |  | .94                            | %
|                                                        |  |                                |  
|Return on average equity (1)                            |  | 4.10                           | % |  | 10.03                        | % |  | 12.90                          | %
|                                                        |  |                                |  
|Noninterest expense to average assets (1)               |  | 3.27                           | % |  | 2.91                         | % |  | 2.79                           | %
|                                                        |  |                                |  
|Nonperforming loans to total loans at end of period (2) |  | 1.55                           | % |  | .009                         | % |  | .24                            | %

---

|(1) | Annualized for the six months ended June 30, 2007 and 2006.
|--- | -----------------------------------------------------------

|(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, |        
|                                                                 |  | 2007                        |         |                      | 2006 |                  
|                                                                 |  | AverageBalance              |         | InterestandDividends |      | AverageYield/Rate |  |      | AverageBalance |  | InterestandDividends |         | AverageYield/Rate |  
|Interest-earning assets:                                         |  |                             |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Loans                                                            |  | $                           | 154,489 |                      | $    | 2,915             |  | 7.55 | %              |  | $                    | 150,972 |                   | $ | 2,824 |  | 7.48 | %
|Securities                                                       |  |                             | 42,432  |                      |      | 439               |  | 4.14 |                |  |                      | 34,074  |                   |   | 307   |  | 3.60 |  
|Other interest-earning assets (1)                                |  |                             | 3,093   |                      |      | 44                |  | 5.69 |                |  |                      | 6,304   |                   |   | 99    |  | 6.28 |  
|                                                                 |  |                             |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-earning assets                                    |  |                             | 200,014 |                      |      | 3,398             |  | 6.80 |                |  |                      | 191,350 |                   |   | 3,230 |  | 6.75 |  
|                                                                 |  |                             |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Noninterest-earning assets                                       |  |                             | 15,716  |                      |      |                   |  |      |                |  |                      | 14,258  |                   |   |       |  |      |  
|                                                                 |  |                             |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total assets                                                     |  | $                           | 215,730 |                      |      |                   |  |      |                |  | $                    | 205,608 |                   |   |       |  |      |  
|                                                                 |  |                             |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-bearing liabilities:                                    |  |                             |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Savings, NOW and money-market deposits                           |  | $                           | 83,394  |                      | $    | 565               |  | 2.71 |                |  | $                    | 79,028  |                   | $ | 404   |  | 2.04 |  
|Time deposits                                                    |  |                             | 77,738  |                      |      | 1,015             |  | 5.22 |                |  |                      | 67,327  |                   |   | 701   |  | 4.16 |  
|                                                                 |  |                             |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-bearing deposits                                  |  |                             | 161,132 |                      |      | 1,580             |  | 3.92 |                |  |                      | 146,355 |                   |   | 1,105 |  | 3.02 |  
|Borrowed funds                                                   |  |                             | 13,603  |                      |      | 195               |  | 5.73 |                |  |                      | 17,577  |                   |   | 168   |  | 3.82 |  
|                                                                 |  |                             |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-bearing liabilities                               |  |                             | 174,735 |                      |      | 1,775             |  | 4.06 |                |  |                      | 163,932 |                   |   | 1,273 |  | 3.11 |  
|                                                                 |  |                             |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Noninterest-bearing demand deposits                              |  |                             | 22,048  |                      |      |                   |  |      |                |  |                      | 25,398  |                   |   |       |  |      |  
|Noninterest-bearing liabilities                                  |  |                             | 2,510   |                      |      |                   |  |      |                |  |                      | 1,152   |                   |   |       |  |      |  
|Stockholders' equity                                             |  |                             | 16,437  |                      |      |                   |  |      |                |  |                      | 15,126  |                   |   |       |  |      |  
|                                                                 |  |                             |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total liabilities and stockholders' equity                       |  | $                           | 215,730 |                      |      |                   |  |      |                |  | $                    | 205,608 |                   |   |       |  |      |  
|                                                                 |  |                             |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest income                                              |  |                             |         |                      | $    | 1,623             |  |      |                |  |                      |         |                   | $ | 1,957 |  |      |  
|                                                                 |  |                             |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-rate spread                                             |  |                             |         |                      |      |                   |  | 2.73 | %              |  |                      |         |                   |   |       |  | 3.64 | %
|                                                                 |  |                             |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest margin (2)                                          |  |                             |         |                      |      |                   |  | 3.24 | %              |  |                      |         |                   |   |       |  | 4.09 | %
|                                                                 |  |                             |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Ratio of interest-earning assets to interest-bearing liabilities |  |                             | 1.14    |                      |      |                   |  |      |                |  |                      | 1.17    |                   |   |       |  |      |  
|                                                                 |  |                             |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  

---

|(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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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, |        
|                                                                 |  | 2007                      |         |                        | 2006 |                    
|                                                                 |  | Average Balance           |         | Interest and Dividends |      | Average Yield/ Rate |  |      | Average Balance |  | Interest and Dividends |         | Average Yield/ Rate |  
|                                                                 |  |                           |         |                        |     
|                                                                 |  |                           |         |                        |     
|Interest-earning assets:                                         |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Loans                                                            |  | $                         | 156,894 |                        | $    | 5,785               |  | 7.37 | %               |  | $                      | 150,905 |                     | $ | 5,481 |  | 7.26 | %
|Securities                                                       |  |                           | 41,329  |                        |      | 888                 |  | 4.30 |                 |  |                        | 34,455  |                     |   | 618   |  | 3.59 |  
|Other interest-earning assets (1)                                |  |                           | 3,012   |                        |      | 92                  |  | 6.11 |                 |  |                        | 5,814   |                     |   | 172   |  | 5.92 |  
|                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Total interest-earning assets                                    |  |                           | 201,235 |                        |      | 6,765               |  | 6.72 |                 |  |                        | 191,174 |                     |   | 6,271 |  | 6.56 |  
|                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Noninterest-earning assets                                       |  |                           | 15,438  |                        |      |                     |  |      |                 |  |                        | 12,658  |                     |   |       |  |      |  
|                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Total assets                                                     |  | $                         | 216,673 |                        |      |                     |  |      |                 |  | $                      | 203,832 |                     |   |       |  |      |  
|                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Interest-bearing liabilities:                                    |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Savings, NOW and money-market deposits                           |  | $                         | 83,047  |                        | $    | 1,125               |  | 2.71 |                 |  | $                      | 80,246  |                     | $ | 789   |  | 1.97 |  
|Time deposits                                                    |  |                           | 78,821  |                        |      | 1,978               |  | 5.02 |                 |  |                        | 64,844  |                     |   | 1,269 |  | 3.91 |  
|                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Total interest-bearing deposits                                  |  |                           | 161,868 |                        |      | 3,103               |  | 3.83 |                 |  |                        | 145,090 |                     |   | 2,058 |  | 2.84 |  
|Borrowed funds                                                   |  |                           | 14,227  |                        |      | 382                 |  | 5.37 |                 |  |                        | 16,997  |                     |   | 358   |  | 4.21 |  
|                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Total interest-bearing liabilities                               |  |                           | 176,095 |                        |      | 3,485               |  | 3.96 |                 |  |                        | 162,087 |                     |   | 2,416 |  | 2.98 |  
|                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Noninterest-bearing demand deposits                              |  |                           | 21,702  |                        |      |                     |  |      |                 |  |                        | 25,514  |                     |   |       |  |      |  
|Noninterest-bearing liabilities                                  |  |                           | 2,531   |                        |      |                     |  |      |                 |  |                        | 1,329   |                     |   |       |  |      |  
|Stockholders' equity                                             |  |                           | 16,345  |                        |      |                     |  |      |                 |  |                        | 14,902  |                     |   |       |  |      |  
|                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Total liabilities and stockholders' equity                       |  | $                         | 216,673 |                        |      |                     |  |      |                 |  | $                      | 203,832 |                     |   |       |  |      |  
|                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Net interest income                                              |  |                           |         |                        | $    | 3,280               |  |      |                 |  |                        |         |                     | $ | 3,855 |  |      |  
|                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Interest-rate spread                                             |  |                           |         |                        |      |                     |  | 2.76 | %               |  |                        |         |                     |   |       |  | 3.58 | %
|                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Net interest margin (2)                                          |  |                           |         |                        |      |                     |  | 3.26 | %               |  |                        |         |                     |   |       |  | 4.03 | %
|                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  
|Ratio of interest-earning assets to interest-bearing liabilities |  |                           | 1.14    |                        |      |                     |  |      |                 |  |                        | 1.18    |                     |   |       |  |      |  
|                                                                 |  |                           |         |                        |      |                     |  |      |                 |  |                        |         |                     |   |       |  |      |  

---

|(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, 2007 and 2006

General Operating Results.Net earnings for the quarter ended June 30, 2007 declined to $80,000 or $.06 per basic
share from $451,000 or $.36 per basic share for the quarter ended June 30, 2006. The decline in net earnings is the result of the following events:



| |  |  | The compression in net interest margin due to the flattening of the yield curve, which resulted in a decrease of $334,000 in net interest income. Although interest
income increased $168,000, interest expense did as well by $502,000.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An increase in compensation expense due to the opening of the new 14thStreet office, which will not have a positive effect on earnings until the office is given the opportunity to mature and reach a profitable asset size, and the acquisition of HKH.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An increase in other non-interest expense, also due to the opening of the 14thStreet banking office, an increase in the number of employees due to the overall growth of the Company, and normal compensation merit increases.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Interest Income.Interest income increased $168,000 to $3.4 million for the three-month period ended June 30,
2007, compared to $3.2 million for the three-month period ended June 30, 2006. The increase was due to an increase in the average yield earned on interest-earning assets from 6.75% for the three months ended June 30, 2006 to 6.80% for the
three months ended June 30, 2007 and a $8.7 million increase in average interest-earning assets outstanding for the three months ended June 30, 2007 compared to the 2006 period.

Interest Expense.Interest expense increased $502,000 from $1.3 million for the three-month period ended June 30,
2006 to $1.8 million for the three-month period ended June 30, 2007. The increase was primarily due to an increase of $10.8 million in average interest-bearing liabilities outstanding and an increase in the average cost of interest-bearing
liabilities from 3.11% for the three months ended June 30, 2006 to 4.06% for the comparable 2007 period. Average interest-bearing deposits increased from $146.4 million outstanding during the three months ended June 30, 2006 to $161.1
million outstanding during the comparable period for 2007.

Provision for Loan Losses.The provision for
loan losses is charged to earnings 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 collectibility of the Companys loan portfolio. The Company recorded provisions for loan losses for the three-month periods ended
June 30, 2007 and 2006 of $181,000 and $5,000, respectively. Management believes that the allowance for loan losses, which was $1,880,000 or 1.17% of gross loans at June 30, 2007 is adequate.

Noninterest Income.Noninterest income increased $197,000 during the 2007 period. The increase is primarily attributable
to $189,000 in brokerage income of HKH, which became a wholly-owned subsidiary effective January 2, 2007.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES



Comparison of the Three-Month Periods Ended June 30, 2007 and 2006, Continued



Noninterest Expense.Noninterest expense increased $308,000 from $1.5
million for the three-month period ended June 30, 2006 to $1.8 million for the three-month period ended June 30, 2007. The increase was attributable to an increase of $134,000 in salaries and employee benefits, and $174,000 in other
noninterest expense. Of the increase in other non-interest expense, approximately $61,000 is attributable to expenses of HKH during the second quarter of 2007. The remaining increase relates to the overall growth of the Company and the opening of a
new banking office.

Income Taxes.Income tax was a benefit of $18,000 for the three-month period ended
June 30, 2007 compared to an income tax expense of $232,000 for the corresponding period in 2006. The reduction in the effective tax rate is attributable to increased tax-exempt interest income in relation to taxable income, and a credit
against the state income tax resulting from a charitable donation to a state-qualified organization.

Comparison of the Six-Month Periods
Ended June 30, 2007 and 2006

General Operating Results.Net earnings for the six-month period
ended June 30, 2007 declined to $335,000 or $.27 per basic share from $961,000 or $.78 per basic share for the comparable period in 2006. The decline in net earnings is the result of the following events:



| |  |  | The compression in net interest margin due to the flattening of the yield curve, which resulted in a decrease of $575,000 in net interest income. Although interest
income increased $494,000, interest expense did as well by $1,069,000.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An increase in compensation expense due to the opening of the new 14thStreet office, which will not have a positive effect on earnings until the office is given the opportunity to mature and reach a profitable asset size, and the acquisition of HKH.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An increase in other non-interest expense, also due to the opening of the 14thStreet banking office, an increase in the number of employees due to the overall growth of the Company, and normal compensation merit increases.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Interest Income.Interest income increased $494,000 to $6.8 million for the six-month period ended June 30, 2007,
compared to $6.3 million for the six-month period ended June 30, 2006. The increase was due to an increase in the average yield earned on interest-earning assets from 6.56% for the six months ended June 30, 2006 to 6.72% for the six months
ended June 30, 2007 and a $10.1 million increase in average interest-earning assets outstanding for the six months ended June 30, 2007 compared to the 2006 period.

Interest Expense.Interest expense increased $1,069,000 from $2.4 million for the six-month period ended June 30,
2006 to $3.5 million for the six-month period ended June 30, 2007. The increase was due in part to an increase of $14.0 million in average interest-bearing liabilities outstanding and, additionally, an increase in the average cost of
interest-bearing liabilities from 2.98% for the six months ended June 30, 2006 to 3.96% for the comparable 2007 period. Average interest-bearing deposits increased from $145.1 million outstanding during the six months ended June 30, 2006
to $161.9 million outstanding during the comparable period for 2007.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES



Comparison of the Six-Month Periods Ended June 30, 2007 and 2006, Continued



Provision for Loan Losses.The provision for loan losses is charged to
earnings 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 collectibility of the Companys loan portfolio. The Company recorded provisions for loan losses for the six-month periods ended June 30, 2007 and 2006 of $181,000
and $28,000, respectively. Management believes that the allowance for loan losses, which was $1,880,000 or 1.17% of gross loans at June 30, 2007 is adequate.

Noninterest Income.Noninterest income increased $311,000 during the 2007 period. The increase is almost entirely
attributable to $310,000 in brokerage income of HKH, which became a wholly-owned subsidiary effective January 2, 2007.

Noninterest Expense.Noninterest expense increased $695,000 from $2.8 million for the six-month period ended June 30, 2006 to $3.5 million for the six-month period ended June 30, 2007. The increase was attributable
to an increase of $418,000 in salaries and employee benefits, and $277,000 in other non-interest expense. Of the $277,000 increase, approximately $115,000 is attributable to expenses of HKH during the first quarter of 2007. The remaining increase
relates to the overall growth of the Company and the opening of a new banking office.

Income Taxes.Income
tax expense was $26,000 for the six-month period ended June 30, 2007 (an effective tax rate of 7.2%) compared to $512,000 (an effective tax rate of 34.8%) for the corresponding period in 2006. The reduction in the effective tax rate is
attributable to increased tax-exempt interest income in relation to taxable income, and a credit against the state income tax resulting from a charitable donation to a state-qualified organization.



|Item 3. | Controls and Procedures
|------- | -----------------------

The Company, with the
participation of its management, including its Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15 and
15d-15 under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation and as of the end of the period covered by this report, the Companys Chief Executive Officer and Chief Financial
Officer concluded that the Companys disclosure controls and procedures are effective in timely alerting them to information required to be disclosed in its reports that the Company files or submits to the Securities and Exchange Commission
under the Securities Exchange Act of 1934. There have been no changes in the Companys internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to
materially affect, the Companys internal controls over financial reporting.



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

Not applicable



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

Not 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 May 16, 2007, to elect twelve directors of the company to serve in such capacity for the next year, and to ratify the appointment of Hacker,
Johnson & Smith, P.A., as the companys independent auditors for the year ending December 31, 2007. At the Annual Meeting, 840,392 shares were present, in person or by proxy, out of a total of 1,235,646 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              |  | 840,392 |  |        |  |        
|Jeremy J. Deters               |  | 840,392 |  |        |  |        
|David A. Dizney                |  | 840,392 |  |        |  |        
|Robert A. Ellinor              |  | 840,392 |  |        |  |        
|Billy G. Gadd                  |  | 840,392 |  |        |  |        
|Digvijay L. Gaekwad            |  | 840,392 |  |        |  |        
|Mark A. Imes                   |  | 840,392 |  |        |  |        
|Deborah A. Klugger             |  | 840,392 |  |        |  |        
|John L. Peterson, D.V.M.       |  | 840,392 |  |        |  |        
|Lanford T. Slaughter, D.D.S.   |  | 840,392 |  |        |  |        
|Frank E. Stafford, Jr., C.P.A. |  | 840,392 |  |        |  |        
|Michael J. Webb, M.D.          |  | 840,392 |  |        |  |        



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES



Proposal 2: Ratification of Hacker, Johnson & Smith, P.A.



|        |  |               
|------- |  | --------------
|        |  | Voting Results
|For     |  | 840,392       
|Against |  |              
|Abstain |  |              



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

Not 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 7, 2007



INDEPENDENT BANCSHARES, INC.(Registrant)By:

/s/ Mark A. ImesName:

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

/s/ Dennis M. ClarkeName:

Dennis M. Clarke, Chief Financial Officer(Principal Financial and Accounting Officer)




21