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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







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

For the Quarterly Period Ended March 31, 2008

Or



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

Commission File Number: 000-51920





INDEPENDENT BANCSHARES, INC.

(Exact name of registrant as specified in its charter)







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

60 SW 17thStreet

Ocala, Florida 34474

(Address of Principal Executive Offices)

352-622-2377

(Registrant's Telephone Number, Including Area Code)

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





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

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



|                                                                       |  |                             
|---------------------------------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈                                             |  | Accelerated filer   ̈        
|Non-accelerated filer   ̈ (Do not check if a smaller reporting company) |  | Smaller reporting company  x

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan confirmed by a court.     ̈  Yes     ̈  No

Common stock outstanding as of May 8, 2008:

Common stock, $2.00 par value 1,235,644 shares









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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 March 31, 2008 (Unaudited) and at December 31, 2007                     |  | 2    
|                                                                                                                  | 
|Condensed Consolidated Statements of Operations (Unaudited) -Three months ended March 31, 2008 and 2007           |  | 3    
|                                                                                                                  | 
|Condensed Consolidated Statements of Stockholders' Equity (Unaudited) -Three months ended March 31, 2008 and 2007 |  | 4    
|                                                                                                                  | 
|Condensed Consolidated Statements of Cash Flows (Unaudited) -Three months ended March 31, 2008 and 2007           |  | 5    
|                                                                                                                  | 
|Notes to Condensed Consolidated Financial Statements (Unaudited)                                                  |  | 6-9  
|                                                                                                                  | 
|Review by Independent Registered Public Accounting Firm                                                           |  | 10   
|                                                                                                                  | 
|Report of Independent Registered Public Accounting Firm                                                           |  | 11   
|                                                                                                                  | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                     |  | 12-18
|                                                                                                                  | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                                |  | 19   
|                                                                                                                  | 
|Item 4T. Controls and Procedures                                                                                  |  | 19   
|                                                                                                                  | 
|Part II. OTHER INFORMATION                                                                                        |  |      
|                                                                                                                  | 
|Item 1. Legal Proceedings                                                                                         |  | 20   
|                                                                                                                  | 
|Item 1A. Risk Factors                                                                                             |  | 20   
|                                                                                                                  | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                               |  | 20   
|                                                                                                                  | 
|Item 3. Defaults upon Senior Securities                                                                           |  | 20   
|                                                                                                                  | 
|Item 4. Submission of Matters to a Vote of Security Holders                                                       |  | 20   
|                                                                                                                  | 
|Item 5. Other Information                                                                                         |  | 20   
|                                                                                                                  | 
|Item 6. Exhibits                                                                                                  |  | 21   
|                                                                                                                  | 
|SIGNATURES                                                                                                        |  | 22   



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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)



|                                                                                                 |  |                 |         |   |                    |   |         |  
|------------------------------------------------------------------------------------------------ |  | --------------- | ------- | - | ------------------ | - | ------- | -
|                                                                                                 |  | AtMarch 31,2008 |         |   | AtDecember 31,2007 |  
|                                                                                                 |  | (unaudited)     |         |   |                    |  
|Assets                                                                                           |  |                 |         |   |                    |   |         |  
|Cash and due from banks                                                                          |  | $               | 4,997   |   |                    | $ | 5,287   |  
|Interest-earning deposits                                                                        |  |                 | 76      |   |                    |   | 6       |  
|Federal funds sold                                                                               |  |                 | 6,922   |   |                    |   | 3,436   |  
|                                                                                                 |  |                 |         |   |                    |   |         |  
|Cash and cash equivalents                                                                        |  |                 | 11,995  |   |                    |   | 8,729   |  
|Securities available for sale                                                                    |  |                 | 43,251  |   |                    |   | 41,486  |  
|Loans, net of allowance for loan losses of $1,755 and $1,888                                     |  |                 | 151,538 |   |                    |   | 152,092 |  
|Foreclosed real estate                                                                           |  |                 | 200     |   |                    |   |        |  
|Accrued interest receivable                                                                      |  |                 | 986     |   |                    |   | 1,057   |  
|Premises and equipment, net                                                                      |  |                 | 7,968   |   |                    |   | 7,841   |  
|Federal Home Loan Bank stock                                                                     |  |                 | 925     |   |                    |   | 926     |  
|Federal Reserve Bank stock                                                                       |  |                 | 237     |   |                    |   | 237     |  
|Goodwill                                                                                         |  |                 | 1,525   |   |                    |   | 1,525   |  
|Customer intangible, net                                                                         |  |                 | 357     |   |                    |   | 375     |  
|Other assets                                                                                     |  |                 | 1,481   |   |                    |   | 1,447   |  
|                                                                                                 |  |                 |         |   |                    |   |         |  
|Total assets                                                                                     |  | $               | 220,463 |   |                    | $ | 215,715 |  
|                                                                                                 |  |                 |         |   |                    |   |         |  
|Liabilities and Stockholders Equity                                                             |  |                 |         |   |                    |   |         |  
|Liabilities:                                                                                     |  |                 |         |   |                    |   |         |  
|Noninterest-bearing demand deposits                                                              |  | $               | 19,352  |   |                    | $ | 18,055  |  
|NOW, money-market and savings deposits                                                           |  |                 | 76,187  |   |                    |   | 81,375  |  
|Time deposits                                                                                    |  |                 | 91,742  |   |                    |   | 83,737  |  
|                                                                                                 |  |                 |         |   |                    |   |         |  
|Total deposits                                                                                   |  |                 | 187,281 |   |                    |   | 183,167 |  
|Federal Home Loan Bank advances                                                                  |  |                 | 10,000  |   |                    |   | 10,000  |  
|Junior Subordinated Debenture                                                                    |  |                 | 2,062   |   |                    |   | 2,062   |  
|Other borrowings                                                                                 |  |                 | 2,681   |   |                    |   | 2,341   |  
|Accrued interest payable and other liabilities                                                   |  |                 | 1,348   |   |                    |   | 937     |  
|                                                                                                 |  |                 |         |   |                    |   |         |  
|Total liabilities                                                                                |  |                 | 203,372 |   |                    |   | 198,507 |  
|                                                                                                 |  |                 |         |   |                    |   |         |  
|Stockholders equity:                                                                            |  |                 |         |   |                    |   |         |  
|Common stock, $2 par value, 2,000,000 shares authorized, 1,235,644 shares issued and outstanding |  |                 | 2,471   |   |                    |   | 2,471   |  
|Additional paid-in capital                                                                       |  |                 | 8,831   |   |                    |   | 8,831   |  
|Retained earnings                                                                                |  |                 | 5,801   |   |                    |   | 5,969   |  
|Accumulated other comprehensive loss                                                             |  |                 | (12     | ) |                    |   | (63     | )
|                                                                                                 |  |                 |         |   |                    |   |         |  
|Total stockholders equity                                                                       |  |                 | 17,091  |   |                    |   | 17,208  |  
|                                                                                                 |  |                 |         |   |                    |   |         |  
|Total liabilities and stockholders equity                                                       |  | $               | 220,463 |   |                    | $ | 215,715 |  
|                                                                                                 |  |                 |         |   |                    |   |         |  

See accompanying Notes to Condensed Consolidated Financial Statements.



2



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##### Table of Contents

INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share amounts)



|                                                    |  |                             |       |   |      |   |      
|--------------------------------------------------- |  | --------------------------- | ----- | - | ---- | - | -----
|                                                    |  | Three Months EndedMarch 31,
|                                                    |  | 2008                        |       |   | 2007
|                                                    |  | (unaudited)                 |       |   |     
|Interest income:                                    |  |                             |       |   |      |   |      
|Loans                                               |  | $                           | 2,642 |   |      | $ | 2,870
|Securities                                          |  |                             | 466   |   |      |   | 449  
|Other                                               |  |                             | 45    |   |      |   | 48   
|                                                    |  |                             |       |   |      |   |      
|Total interest income                               |  |                             | 3,153 |   |      |   | 3,367
|                                                    |  |                             |       |   |      |   |      
|Interest expense:                                   |  |                             |       |   |      |   |      
|Deposits                                            |  |                             | 1,489 |   |      |   | 1,523
|Borrowings                                          |  |                             | 149   |   |      |   | 187  
|                                                    |  |                             |       |   |      |   |      
|Total interest expense                              |  |                             | 1,638 |   |      |   | 1,710
|                                                    |  |                             |       |   |      |   |      
|Net interest income                                 |  |                             | 1,515 |   |      |   | 1,657
|Provision for loan losses                           |  |                             | 322   |   |      |   |     
|                                                    |  |                             |       |   |      |   |      
|Net interest income after provision for loan losses |  |                             | 1,193 |   |      |   | 1,657
|                                                    |  |                             |       |   |      |   |      
|Noninterest income:                                 |  |                             |       |   |      |   |      
|Service charges on deposit accounts                 |  |                             | 123   |   |      |   | 117  
|Brokerage fees                                      |  |                             | 128   |   |      |   | 121  
|Other                                               |  |                             | 147   |   |      |   | 116  
|                                                    |  |                             |       |   |      |   |      
|Total noninterest income                            |  |                             | 398   |   |      |   | 354  
|                                                    |  |                             |       |   |      |   |      
|Noninterest expense:                                |  |                             |       |   |      |   |      
|Salaries and employee benefits                      |  |                             | 1,073 |   |      |   | 1,003
|Occupancy and equipment                             |  |                             | 204   |   |      |   | 175  
|Data processing                                     |  |                             | 168   |   |      |   | 119  
|Advertising and business development                |  |                             | 60    |   |      |   | 45   
|Directors fees                                      |  |                             | 40    |   |      |   | 40   
|Stationery and supplies                             |  |                             | 27    |   |      |   | 35   
|Other                                               |  |                             | 362   |   |      |   | 295  
|                                                    |  |                             |       |   |      |   |      
|Total noninterest expense                           |  |                             | 1,934 |   |      |   | 1,712
|                                                    |  |                             |       |   |      |   |      
|(Loss) earnings before income taxes                 |  |                             | (343  | ) |      |   | 299  
|Income taxes (benefit)                              |  |                             | (175  | ) |      |   | 44   
|                                                    |  |                             |       |   |      |   |      
|Net (loss) earnings                                 |  | $                           | (168  | ) |      | $ | 255  
|                                                    |  |                             |       |   |      |   |      
|(Loss) earnings per share  basic                   |  | $                           | (0.14 | ) |      | $ | 0.21 
|                                                    |  |                             |       |   |      |   |      
|Cash dividends per share                            |  | $                           |      |   |      | $ |     
|                                                    |  |                             |       |   |      |   |      

See accompanying Notes to Condensed Consolidated Financial Statements.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in
Stockholders Equity

Three Months Ended March 31, 2008 and 2007

($ in thousands)



|                                                                                   |        |              |           |                          |       |                  |   |       |                                   |   |        |                          |  |   |      |   |  |   |        |  
|---------------------------------------------------------------------------------- | ------ | ------------ | --------- | ------------------------ | ----- | ---------------- | - | ----- | --------------------------------- | - | ------ | ------------------------ |  | - | ---- | - |  | - | ------ | -
|                                                                                   |        | Common Stock |           | AdditionalPaid-InCapital |       | RetainedEarnings |   |       | AccumulatedOtherComprehensiveLoss |   |        | TotalStockholders'Equity | 
|                                                                                   | Shares |              | ParAmount |                          |       |                  |  
|Balance at December 31, 2006                                                       |        | 1,176,975    |           | $                        | 2,354 |                  | $ | 7,517 |                                   | $ | 6,649  |                          |  | $ | (359 | ) |  | $ | 16,161 |  
|                                                                                   |        |              |           |                          |       |                  |   |       |                                   |   |        |                          |  |   |      |   |  |   |        |  
|                                                                                   |        |              |           |                          |       |                 
|Comprehensive income:                                                              |        |              |           |                          |       |                  |   |       |                                   |   |        |                          |  |   |      |   |  |   |        |  
|Net earnings (unaudited)                                                           |        |             |           |                          |      |                  |   |      |                                   |   | 255    |                          |  |   |     |   |  |   | 255    |  
|                                                                                   |        |              |           |                          |       |                 
|Change in unrealized loss on securities available for sale, net of tax (unaudited) |        |             |           |                          |      |                  |   |      |                                   |   |       |                          |  |   | 105  |   |  |   | 105    |  
|                                                                                   |        |              |           |                          |       |                  |   |       |                                   |   |        |                          |  |   |      |   |  |   |        |  
|Comprehensive income (unaudited)                                                   |        |              |           |                          |       |                  |   |       |                                   |   |        |                          |  |   |      |   |  |   | 360    |  
|                                                                                   |        |              |           |                          |       |                 
|5% stock dividend (unaudited)                                                      |        | 58,669       |           |                          | 117   |                  |   | 1,314 |                                   |   | (1,431 | )                        |  |   |     |   |  |   |       |  
|                                                                                   |        |              |           |                          |       |                 
|Cash in lieu of shares (unaudited)                                                 |        |             |           |                          |      |                  |   |      |                                   |   | (5     | )                        |  |   |     |   |  |   | (5     | )
|                                                                                   |        |              |           |                          |       |                  |   |       |                                   |   |        |                          |  |   |      |   |  |   |        |  
|Balance at March 31, 2007 (unaudited)                                              |        | 1,235,644    |           | $                        | 2,471 |                  | $ | 8,831 |                                   | $ | 5,468  |                          |  | $ | (254 | ) |  | $ | 16,516 |  
|                                                                                   |        |              |           |                          |       |                  |   |       |                                   |   |        |                          |  |   |      |   |  |   |        |  
|Balance at December 31, 2007                                                       |        | 1,235,644    |           | $                        | 2,471 |                  | $ | 8,831 |                                   | $ | 5,969  |                          |  | $ | (63  | ) |  | $ | 17,208 |  
|                                                                                   |        |              |           |                          |       |                  |   |       |                                   |   |        |                          |  |   |      |   |  |   |        |  
|                                                                                   |        |              |           |                          |       |                 
|Comprehensive loss:                                                                |        |              |           |                          |       |                  |   |       |                                   |   |        |                          |  |   |      |   |  |   |        |  
|Net loss (unaudited)                                                               |        |             |           |                          |      |                  |   |      |                                   |   | (168   | )                        |  |   |     |   |  |   | (168   | )
|                                                                                   |        |              |           |                          |       |                 
|Change in unrealized loss on securities available for sale, net of tax (unaudited) |        |             |           |                          |      |                  |   |      |                                   |   |       |                          |  |   | 51   |   |  |   | 51     |  
|                                                                                   |        |              |           |                          |       |                  |   |       |                                   |   |        |                          |  |   |      |   |  |   |        |  
|Comprehensive loss (unaudited)                                                     |        |              |           |                          |       |                  |   |       |                                   |   |        |                          |  |   |      |   |  |   | (117   | )
|                                                                                   |        |              |           |                          |       |                  |   |       |                                   |   |        |                          |  |   |      |   |  |   |        |  
|Balance at March 31, 2008 (unaudited)                                              |        | 1,235,644    |           | $                        | 2,471 |                  | $ | 8,831 |                                   | $ | 5,801  |                          |  | $ | (12  | ) |  | $ | 17,091 |  
|                                                                                   |        |              |           |                          |       |                  |   |       |                                   |   |        |                          |  |   |      |   |  |   |        |  

See accompanying Notes to Condensed Consolidated Financial Statements.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)



|                                                                                                                 |  |                             |        |   |      |   |        |  
|---------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                                                 |  | Three Months EndedMarch 31, |       
|                                                                                                                 |  | 2008                        |        |   | 2007 |  
|                                                                                                                 |  | (unaudited)                 |        |   |      |  
|Cash flows from operating activities:                                                                            |  |                             |        |   |      |   |        |  
|Net (loss) earnings                                                                                              |  | $                           | (168   | ) |      | $ | 255    |  
|Adjustments to reconcile net (loss) earnings to net cash provided by (used in) operating activities:             |  |                             |        |   |      |   |        |  
|Depreciation and amortization                                                                                    |  |                             | 89     |   |      |   | 80     |  
|Provision for loan losses                                                                                        |  |                             | 322    |   |      |   |       |  
|Net amortization of premiums and discounts on securities                                                         |  |                             | (43    | ) |      |   | 68     |  
|Amortization of customer intangible                                                                              |  |                             | 18     |   |      |   | 18     |  
|Net decrease (increase) in accrued interest receivable                                                           |  |                             | 71     |   |      |   | (141   | )
|Net increase in other assets                                                                                     |  |                             | (65    | ) |      |   | (88    | )
|Net increase (decrease) in accrued interest payable and other liabilities                                        |  |                             | 411    |   |      |   | (2,454 | )
|                                                                                                                 |  |                             |        |   |      |   |        |  
|Net cash provided by (used in) operating activities                                                              |  |                             | 635    |   |      |   | (2,262 | )
|                                                                                                                 |  |                             |        |   |      |   |        |  
|                                                                                                                 |  |                            
|Cash flows from investing activities:                                                                            |  |                             |        |   |      |   |        |  
|Purchase of securities available for sale                                                                        |  |                             | (3,970 | ) |      |   | (3,817 | )
|Maturities, sales, and principal repayments of securities available for sale                                     |  |                             | 2,330  |   |      |   | 2,572  |  
|Loan principal repayments, net of originations                                                                   |  |                             | 32     |   |      |   | (5,362 | )
|Purchase of premises and equipment                                                                               |  |                             | (216   | ) |      |   | (83    | )
|Redemption of Federal Home Loan Bank stock                                                                       |  |                             | 1      |   |      |   | 9      |  
|Purchase of assets of HKH                                                                                        |  |                             |       |   |      |   | (2,019 | )
|                                                                                                                 |  |                             |        |   |      |   |        |  
|Net cash used in investing activities                                                                            |  |                             | (1,823 | ) |      |   | (8,700 | )
|                                                                                                                 |  |                             |        |   |      |   |        |  
|                                                                                                                 |  |                            
|Cash flows from financing activities:                                                                            |  |                             |        |   |      |   |        |  
|Net increase in deposits                                                                                         |  |                             | 4,114  |   |      |   | 615    |  
|Net increase in other borrowings                                                                                 |  |                             | 340    |   |      |   | 3,070  |  
|Cash in lieu of fractional shares                                                                                |  |                             |       |   |      |   | (5     | )
|                                                                                                                 |  |                             |        |   |      |   |        |  
|Net cash provided by financing activities                                                                        |  |                             | 4,454  |   |      |   | 3,680  |  
|Net increase (decrease) in cash and cash equivalents                                                             |  |                             | 3,266  |   |      |   | (7,282 | )
|Cash and cash equivalents at beginning of period                                                                 |  |                             | 8,729  |   |      |   | 12,277 |  
|                                                                                                                 |  |                             |        |   |      |   |        |  
|Cash and cash equivalents at end of period                                                                       |  | $                           | 11,995 |   |      | $ | 4,995  |  
|                                                                                                                 |  |                             |        |   |      |   |        |  
|Supplemental disclosures of cash flow information:                                                               |  |                             |        |   |      |   |        |  
|Cash paid during the period for:                                                                                 |  |                             |        |   |      |   |        |  
|Interest                                                                                                         |  | $                           | 1,600  |   |      | $ | 1,739  |  
|                                                                                                                 |  |                             |        |   |      |   |        |  
|Taxes                                                                                                            |  | $                           |       |   |      | $ |       |  
|                                                                                                                 |  |                             |        |   |      |   |        |  
|                                                                                                                 |  |                            
|Noncash transactions:                                                                                            |  |                             |        |   |      |   |        |  
|Accumulated other comprehensive loss, net change in unrealized loss on securities available for sale, net of tax |  | $                           | 51     |   |      | $ | 105    |  
|                                                                                                                 |  |                             |        |   |      |   |        |  
|Transfer of loan to foreclosed real estate                                                                       |  | $                           | 200    |   |      | $ |       |  
|                                                                                                                 |  |                             |        |   |      |   |        |  

See accompanying Notes to Condensed Consolidated Financial Statements.



5



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##### Table of Contents

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 March 31,
2008 and the results of operations and cash flows for the three-month periods ended March 31, 2008 and 2007. The results of operations for the three-month period ended March 31, 2008, are not necessarily indicative of results that may be
expected for the year ending December 31, 2008.

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

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



|                                  |  |                             |       |   |      |   |       |  
|--------------------------------- |  | --------------------------- | ----- | - | ---- | - | ----- | -
|                                  |  | Three Months EndedMarch 31, |      
|                                  |  | 2008                        |       |   | 2007 |  
|Beginning balance                 |  | $                           | 1,888 |   |      | $ | 1,899 |  
|Provision for loan losses         |  |                             | 322   |   |      |   |      |  
|Net, (charge-offs) and recoveries |  |                             | (455  | ) |      |   | (3    | )
|                                  |  |                             |       |   |      |   |       |  
|Ending balance                    |  | $                           | 1,755 |   |      | $ | 1,896 |  
|                                  |  |                             |       |   |      |   |       |  

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



|                                             |  |                  |       |                     |   |    
|-------------------------------------------- |  | ---------------- | ----- | ------------------- | - | ---
|                                             |  | At March 31,2008 |       | At December 31,2007
|Nonaccrual loans                             |  | $                | 1,522 |                     | $ | 751
|Past due ninety days or more, still accruing |  |                  |      |                     |   |   
|                                             |  |                  |       |                     |   |    
|                                             |  | $                | 1,522 |                     | $ | 751
|                                             |  |                  |       |                     |   |    



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



2.Loan Impairment and Loan Losses (continued).



The following summarizes the amount of impaired loans (in thousands):



|                                                            |  |                  |       |   |                     |   |       |  
|----------------------------------------------------------- |  | ---------------- | ----- | - | ------------------- | - | ----- | -
|                                                            |  | At March 31,2008 |       |   | At December 31,2007 |  
|Gross loans with a related allowance for loan loss recorded |  | $                | 1,671 |   |                     | $ | 2,328 |  
|Less: Allowance on these loans                              |  |                  | (20   | ) |                     |   | (164  | )
|                                                            |  |                  |       |   |                     |   |       |  
|Net investment in impaired loans                            |  | $                | 1,651 |   |                     | $ | 2,164 |  
|                                                            |  |                  |       |   |                     |   |       |  

The average net investment in impaired loans and interest income recognized and received on
impaired loans are as follows (in thousands):



|                                             |  |                  |       |                     |   |      
|-------------------------------------------- |  | ---------------- | ----- | ------------------- | - | -----
|                                             |  | At March 31,2008 |       | At December 31,2007
|Average investment in impaired loans         |  | $                | 2,031 |                     | $ | 1,040
|                                             |  |                  |       |                     |   |      
|Interest income recognized on impaired loans |  | $                | 5     |                     | $ | 95   
|                                             |  |                  |       |                     |   |      
|Interest income received on impaired loans   |  | $                | 6     |                     | $ | 1    
|                                             |  |                  |       |                     |   |      

3.(Loss) Earnings Per Share. Basic (loss) earnings per
share has been computed on the basis of the weighted-average number of shares of common stock outstanding during the periods, which was 1,235,644 shares during the three-month periods ended March 31, 2008 and 2007, respectively. 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 dividends paid in March, 2007.

4.Regulatory Capital.The Bank is required to maintain certain minimum regulatory capital requirements. The
following is a summary at March 31, 2008, of the Banks actual capital and related capital ratios ($ in thousands).



|                                             |  |        |        |       |                                                  |   |        |   |        |  |      |  
|-------------------------------------------- |  | ------ | ------ | ----- | ------------------------------------------------ | - | ------ | - | ------ |  | ---- | -
|                                             |  | Actual |        |       | Minimum Amountand Ratio toRemain WellCapitalized |  
|                                             |  | Amount |        | Ratio |                                                  |   | Amount |   | Ratio  | 
|As of March 31, 2008:                        |  |        |        |       |                                                  |   |        |   |        |  |      |  
|Total Capital (to Risk-Weighted Assets)Bank  |  | $      | 18,854 |       | 11.2                                             | % |        | $ | 16,850 |  | 10.0 | %
|                                             |  |        |        |       |                                                  |   |        |   |        |  |      |  
|Tier 1 Capital (to Risk-Weighted Assets)Bank |  | $      | 17,100 |       | 10.1                                             | % |        | $ | 10,110 |  | 6.0  | %
|                                             |  |        |        |       |                                                  |   |        |   |        |  |      |  
|Tier 1 Capital (to Average Assets)Bank       |  | $      | 17,100 |       | 7.9                                              | % |        | $ | 10,830 |  | 5.0  | %
|                                             |  |        |        |       |                                                  |   |        |   |        |  |      |  



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES



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

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

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

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

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

Our listing of financial assets subject to fair value measurements on a recurring basis are as follows (in thousands):



|                              |  |                                                 |        |                                                           |   |                                           |  |                                        |        |  |   |  
|----------------------------- |  | ----------------------------------------------- | ------ | --------------------------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | ------ |  | - | -
|                              |  | Fair Value Measurements at Reporting Date Using
|                              |  | Fair ValueAs ofMarch 31,2008                    |        | Quoted PricesIn ActiveMarkets forIdenticalAssets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level
3)
|Available for sale securities |  | $                                               | 43,251 |                                                           | $ |                                          |  | $                                      | 43,251 |  | $ | 
|                              |  |                                                 |        |                                                           |   |                                           |  |                                        |        |  |   |  



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

5.Fair Value Measurements (continued).



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

Our listing of financial assets and liabilities subject to fair value measurements on a non-recurring basis are as follows (in
thousands):



|               |  |                              |       |                                                           |   |                                           |  |                                        |   |                    |   |       |                                |   |      |   |  |   |      |  
|-------------- |  | ---------------------------- | ----- | --------------------------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | - | ------------------ | - | ----- | ------------------------------ | - | ---- | - |  | - | ---- | -
|               |  |                              |       | Fair Value Measurementsat Reporting Date Using            |   |                                           |  |                                        |   |                   
|               |  | Fair ValueAs ofMarch 31,2008 |       | Quoted PricesIn ActiveMarkets forIdenticalAssets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level 3) |   | TotalGains(Losses) |   |       | TotalGains(Losses)InOperations |  
|Impaired Loans |  | $                            | 1,170 |                                                           | $ |                                          |  | $                                      |  |                    | $ | 1,170 |                                | $ | (268 | ) |  | $ | (268 | )
|               |  |                              |       |                                                           |   |                                           |  |                                        |   |                    |   |       |                                |   |      |   |  |   |      |  

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



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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 March 31, 2008, and for the three-month periods ended March 31, 2008 and 2007 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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##### Table of Contents

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 March 31, 2008, the related condensed consolidated statements of operations, cash flows and stockholders equity for the
three-month periods ended March 31, 2008 and 2007. 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 (United States),
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 (United States),
the consolidated balance sheet as of December 31, 2007, 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 28, 2008,
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, 2007, 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                
|May 14, 2008                  



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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-Q 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., doing business as Independent Financial Partners (IFP) (collectively, the Company). In 2000, the Holding Company
elected financial holding company status. Its primary business activity has been the operation of the Bank and IFP. The Bank is a nationally-chartered commercial bank and its deposits are insured up to the applicable limits by the Federal Deposit
Insurance Corporation (FDIC). The Bank offers a variety of financial services to individual and corporate customers through its five banking offices located in Marion and Sumter Counties, Florida. IFP is a financial services company
registered with the National Association of Securities Dealers (NASD). IFP has an established product and brokering agreement with Raymond James Financial Services, Inc. As a fully reporting company, our common stock tracks on the
Over-the-Counter Bulletin Board under the symbol IBFL.

The Bank provides a variety of consumer and commercial banking services
to individuals, businesses and industries. The basic services offered by the Bank include: demand interest-bearing and noninterest-bearing accounts, money market deposit accounts, NOW accounts, time deposits, credit cards, cash management, direct
deposits, notary services, money orders, night depository, travelers checks, cashiers checks, domestic collections, savings bonds, bank drafts, automated teller services, drive-in tellers, on-line banking, electronic statements and
banking by mail. In addition, the Bank makes secured and unsecured commercial, consumer, and real estate loans and issues stand-by letters of credit. The Bank provides automated teller machine (ATM) cards and is a member of the Pulse, Presto and
Plus ATM networks, thereby permitting customers to utilize the convenience of larger ATM networks.

In addition to the foregoing services,
the offices of the Company provide customers with extended banking hours. The Company does not have trust powers and, accordingly, no trust services are provided.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES



The revenues of the Bank are primarily derived from interest on, and fees
received in connection with loans, and from interest and dividends from investment securities. The principal sources of funds for the Banks lending activities are its deposits and borrowings, repayment of loans, and the sale and maturity of
investment securities. The principal expenses of the Bank are the interest paid on deposits, and operating and general administrative expenses.

As is the case with banking institutions generally, the Companys operations are materially and significantly influenced by general economic conditions and by related monetary and fiscal policies of financial institution regulatory
agencies, including the Board of Governors of the Federal Reserve System (the Federal Reserve) and the FDIC. Deposit flows and costs of funds are influenced by interest rates on competing investments and general market rates of interest.
Lending activities are affected by the demand for financing of real estate and other types of loans, which in turn is affected by the interest rates at which such financing may be offered and other factors affecting local demand and availability of
funds. The Company faces strong competition in the attraction of deposits (its primary source of lendable funds) and in the origination of loans.

Liquidity and Capital Resources

The Companys primary source of cash during the three months ended March 31, 2008
was from a net increase in deposits of $4.1 million and principal repayments of $2.3 million on securities available for sale. Cash was used primarily to purchase investments of $4.0 million. At March 31, 2008, the Bank exceeded its regulatory
liquidity requirements.

Off-Balance Sheet Arrangements

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

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



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES



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
March 31, 2008 follows (in thousands):



|                                                   |  |                |       
|-------------------------------------------------- |  | -------------- | ------
|                                                   |  | ContractAmount
|Undisbursed lines of credit and construction loans |  | $              | 8,153 
|                                                   |  |                |       
|Commitments to extend credit                       |  | $              | 15,233
|                                                   |  |                |       
|Standby letters of credit                          |  | $              | 319   
|                                                   |  |                |       

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:



|                                                                               |  |                                |    |  |                            |   |  |                                |  
|------------------------------------------------------------------------------ |  | ------------------------------ | -- |  | -------------------------- | - |  | ------------------------------ | -
|                                                                               |  | Three MonthsEndedMarch 31,2008 |    |  | Year EndedDecember 31,2007 |   |  | Three MonthsEndedMarch 31,2007 |  
|Average equity as a percentage of average assets                               |  | 7.91                           | %  |  | 7.65                       | % |  | 7.58                           | %
|Total equity to total assets at end of period                                  |  | 7.75                           | %  |  | 7.98                       | % |  | 7.64                           | %
|Return on average assets (1)                                                   |  | (.31                           | )% |  | .35                        | % |  | .47                            | %
|Return on average equity (1)                                                   |  | (3.90                          | )% |  | 4.54                       | % |  | 6.24                           | %
|Noninterest expense to average assets (1)                                      |  | 3.55                           | %  |  | 3.39                       | % |  | 3.18                           | %
|Nonperforming loans and foreclosed real estate as a percentage of total assets |  | .76                            | %  |  | .35                        | % |  | .20                            | %



|(1) | Annualized for the three months ended March 31, 2008 and 2007.
|--- | --------------------------------------------------------------

|(2) | Nonperforming loans consist of nonaccrual loans and accruing loans contractually past due ninety days or more.
|--- | --------------------------------------------------------------------------------------------------------------



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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.



|                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|---------------------------------------------------------------- |  | ---------------------------- | ------- | -------------------- | ---- | ----------------- |  | ---- | -------------- |  | -------------------- | ------- | ----------------- | - | ----- |  | ---- | -
|                                                                 |  | Three Months Ended March 31, |        
|                                                                 |  | 2008                         |         |                      | 2007 |                  
|                                                                 |  | AverageBalance               |         | InterestandDividends |      | AverageYield/Rate |  |      | AverageBalance |  | InterestandDividends |         | AverageYield/Rate |  
|Interest-earning assets:                                         |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Loans                                                            |  | $                            | 150,934 |                      | $    | 2,642             |  | 7.00 | %              |  | $                    | 152,592 |                   | $ | 2,870 |  | 7.52 | %
|Securities                                                       |  |                              | 41,740  |                      |      | 466               |  | 4.47 |                |  |                      | 42,432  |                   |   | 449   |  | 4.23 |  
|Other interest-earning assets (1)                                |  |                              | 6,033   |                      |      | 45                |  | 2.98 |                |  |                      | 3,239   |                   |   | 48    |  | 5.93 |  
|                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-earning assets                                    |  |                              | 198,707 |                      |      | 3,153             |  | 6.35 |                |  |                      | 198,263 |                   |   | 3,367 |  | 6.79 |  
|                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Noninterest-earning assets                                       |  |                              | 19,043  |                      |      |                   |  |      |                |  |                      | 17,249  |                   |   |       |  |      |  
|                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total assets                                                     |  | $                            | 217,750 |                      |      |                   |  |      |                |  | $                    | 215,512 |                   |   |       |  |      |  
|                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-bearing liabilities:                                    |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Savings, NOW and money-market deposits                           |  | $                            | 78,168  |                      | $    | 416               |  | 2.13 |                |  | $                    | 83,394  |                   | $ | 560   |  | 2.69 |  
|Time deposits                                                    |  |                              | 88,344  |                      |      | 1,073             |  | 4.86 |                |  |                      | 77,735  |                   |   | 963   |  | 4.96 |  
|                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-bearing deposits                                  |  |                              | 166,512 |                      |      | 1,489             |  | 3.58 |                |  |                      | 161,129 |                   |   | 1,523 |  | 3.78 |  
|Borrowed funds                                                   |  |                              | 14,224  |                      |      | 149               |  | 4.19 |                |  |                      | 15,665  |                   |   | 187   |  | 4.77 |  
|                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-bearing liabilities                               |  |                              | 180,736 |                      |      | 1,638             |  | 3.63 |                |  |                      | 176,794 |                   |   | 1,710 |  | 3.87 |  
|                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Noninterest-bearing demand deposits                              |  |                              | 18,792  |                      |      |                   |  |      |                |  |                      | 21,220  |                   |   |       |  |      |  
|Noninterest-bearing liabilities                                  |  |                              | 1,006   |                      |      |                   |  |      |                |  |                      | 1,164   |                   |   |       |  |      |  
|Stockholders equity                                             |  |                              | 17,216  |                      |      |                   |  |      |                |  |                      | 16,334  |                   |   |       |  |      |  
|                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total liabilities and stockholders equity                       |  | $                            | 217,750 |                      |      |                   |  |      |                |  | $                    | 215,512 |                   |   |       |  |      |  
|                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest income                                              |  |                              |         |                      | $    | 1,515             |  |      |                |  |                      |         |                   | $ | 1,657 |  |      |  
|                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-rate spread                                             |  |                              |         |                      |      |                   |  | 2.72 | %              |  |                      |         |                   |   |       |  | 2.92 | %
|                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest margin (2)                                          |  |                              |         |                      |      |                   |  | 3.05 | %              |  |                      |         |                   |   |       |  | 3.34 | %
|                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Ratio of interest-earning assets to interest-bearing liabilities |  |                              | 1.10    |                      |      |                   |  |      |                |  |                      | 1.12    |                   |   |       |  |      |  
|                                                                 |  |                              |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  



|(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 March 31, 2008 and 2007

General Operating Results.Net loss for the quarter ended March 31, 2008 was ($168,000) or ($0.14) per basic share
compared to net earnings of $255,000, or $0.21 per basic share for the quarter ended March 31, 2007. The first quarter 2008 loss was caused by credit  related expenses including a $322,000 provision for loan losses prompted by partial
charge offs on two land loans and $75,000 of interest charged off for loans that moved to non  accrual status.

First quarter earnings
were adversely impacted by the interest charge off noted above and lower loan balances that generated less interest income. The Bank has increased its short term interest bearing deposits and Fed Funds sold. While this adversely impacts interest
income, it bolsters liquidity. The Bank does not have any sub-prime securities in its investment portfolio. The increased level of liquidity and conservative nature of investments help offset the increased level of risk in the loan portfolio. The
Bank does not use brokered deposits and its loan to deposit ratio is 82%. Fed Funds sold increased to $6.9 million at March 31, 2008 compared to $250,000 at March 31, 2007. Interest expense was also impacted by a shift of nearly $2.5
million of non  interest bearing deposits to time deposits and an increase in time deposits.

In order to offset the reduced spread
and the increased credit costs, the Bank has increased its focus on strategic initiatives involving personal wealth management, merchant service products and electronic business banking designed to add long-term value to our franchise and enhance
customer loyalty, particularly among small business owners. We are encouraged by the loyalty our customers have demonstrated as our deposits and assets grew during the first quarter by 2.25% and 2.20%, respectively. Our non  interest income
grew 12.4% compared to the quarter ended March 31, 2007.

Interest Income.Interest income declined
$214,000 to $3.2 million for the three-month period ended March 31, 2008, compared to $3.4 million for the three-month period ended March 31, 2007. As noted above, $75,000 was attributed to the charge off of previously accrued interest and
a reduction in loans outstanding. The decline in the average yield earned on interest-earning assets (6.35%, for the three months ended March 31, 2008 compared to 6.79%, for the three months ended March 31, 2007) was caused by reduced
interest rates and the migration of earning assets from higher yielding loans to lower yielding short term deposits and Fed Funds.

Interest Expense.Interest expense decreased $72,000, from $1.7 million for the three-month period ended March 31, 2007, to $1.6 million for the three-month period ended March 31, 2008. The lower expense was due
primarily to a decrease in the average cost of interest-bearing liabilities from 3.87% for the three months ended March 31, 2007 to 3.63% for the comparable 2008 period. The decline in cost offset an increase of $10.6 million in average time
deposit balances. Total average interest bearing deposits grew $5.4 million, to $166.5 million for the three months ended March 31, 2008, up from $161.1 million for the three month period ending March 31, 2007.



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Comparison of the Three-Month Periods Ended March 31, 2008 and 2007, Continued

Provision for Loan Losses.The provision for loan loss is a current period expense charged to operations to bring the
total loan loss allowance to a level deemed appropriate by management. The provision is based upon the volume and type of lending conducted by the Company, general economic conditions, particularly as they relate to the Companys market area,
and other factors related to the collectibility of the Companys loan portfolio. The Company recorded provisions of $322,000 and $0, for the three-month periods ended March 31, 2008 and 2007, respectively. During the three month period
ending March 31, 2008, the Company posted net charge-offs of $455,000 to the allowance for loan loss reserve, due primarily to loans that were determined to be uncollectible. One property was accepted in lieu of foreclosure and is shown on the
balance sheet at the fair market value of $200,000. At the end of the quarter, the allowance for loan losses was $1,755,000 or 1.14% of gross loans. Management is aggressively working on its collection effort and is increasing the level of
monitoring for commercial real estate and investment real estate. The company has also redeployed staff from loan sales to loan monitoring. Management believes the balance in the allowance for loan losses, of $1,755,000 at March 31, 2008, is
adequate.

Approximately one third of the loan portfolio is single family consumer mortgages. Since the bank never participated in any type
of subprime lending, the Bank has not foreclosed a consumer mortgage in four years. The five year loss history for consumer mortgages is 0.00%.

Noninterest Income.Noninterest income increased $44,000 during the first quarter of 2008, compared to 2007. The increase is primarily attributable to an increase in the collection rate on non-sufficient
fund charges and fee income from the sale of residential mortgage loans originated in 2008.

Noninterest Expense.Noninterest expense increased $222,000, from $1.7 million for the three month period ending March 31, 2007, to $1.9 million for the three-month period ended March 31, 2008. The increase was attributable to an increase of $97,000 in
salaries and employee benefits, $29,000 in occupancy costs, $49,000 in data processing, $15,000 in advertising and business development, and an increase in FDIC assessments.

Income Taxes.The Company benefited from an income tax credit of $175,000 for the first quarter of 2008, on a pre-tax loss
of $343,000, compared to income tax expense of $44,000 for the three-month period ended March 31, 2007, on pre-tax income of $299,000. The effective tax benefit for first quarter of 2008 was 51%, and the tax rate for the first quarter of 2007
was 14.7%.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES



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

Not applicable.



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

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

Changes in Internal Controls Over Financial Reporting.

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

Limitations on the Effectiveness of
Controls.

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

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



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Part II  OTHER INFORMATION



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

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



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

Not applicable.



|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
|------- | ---------------------------------------------------

Not applicable.



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

Not applicable.



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|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 SUBSIDIARY

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 thereunto
duly authorized.

Date: May 14, 2008



INDEPENDENT BANCSHARES, INC.(Registrant)By:

/s/ Mark A. ImesName:

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

/s/ Dennis M. ClarkeName:

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




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