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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 September 30, 2009

Or



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

Commission file number 000-51920





INDEPENDENT
BANCSHARES, INC.

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







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

60 SW 17thStreet

Ocala, Florida 34471

(Address of Principal Executive Offices)

352-622-2377

(Issuers Telephone Number, Including Area Code)

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





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

Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files).*    Yes   ̈    No   ̈     *The
registrant has not yet been phased into the interactive data requirements.

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



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

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

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



|                                     |  |                    
|------------------------------------ |  | -------------------
|Common stock, par value $1 per share |  | 1,235,644 shares   
|(class)                              |  | At November 9, 2009

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









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##### Table of Contents

INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

INDEX



|                                                                                                                       |  |                                                                                       |  |      
|---------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------- |  | -----
|                                                                                                                       |  |                                                                                       |  | Page 
|Part I. FINANCIAL INFORMATION                                                                                          |  |                                                                                      
|                                                                                                                       |  |                                                                                      
|Item 1.                                                                                                                |  | Financial Statements                                                                  |  |      
|                                                                                                                       | 
|Condensed Consolidated Balance Sheets - at September 
30, 2009 (Unaudited) and at December 31, 2008                    |  | 2                                                                                    
|                                                                                                                       | 
|Condensed Consolidated Statements of Operations (Unaudited) - Three and Nine months ended September 30,
 2009 and 2008 |  | 3                                                                                    
|                                                                                                                       | 
|Condensed Consolidated Statements of Stockholders Equity (Unaudited) - Nine months ended September 30,
 2009 and 2008 |  | 4                                                                                    
|                                                                                                                       | 
|Condensed Consolidated Statements of Cash Flows (Unaudited) - Nine months ended September 
30, 2009 and 2008           |  | 5-6                                                                                  
|                                                                                                                       | 
|Notes to Condensed Consolidated Financial Statements (Unaudited)                                                       |  | 7-11                                                                                 
|                                                                                                                       |  |                                                                                      
|Item 2.                                                                                                                |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 12-21
|                                                                                                                       |  |                                                                                      
|Item 3.                                                                                                                |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 22   
|                                                                                                                       |  |                                                                                      
|Item 4T.                                                                                                               |  | Controls and Procedures                                                               |  | 22   
|                                                                                                                       | 
|Part II. OTHER INFORMATION                                                                                             |  |                                                                                      
|                                                                                                                       |  |                                                                                      
|Item 1.                                                                                                                |  | Legal Proceedings                                                                     |  | 23   
|                                                                                                                       |  |                                                                                      
|Item 1A.                                                                                                               |  | Risk Factors                                                                          |  | 23   
|                                                                                                                       |  |                                                                                      
|Item 2.                                                                                                                |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 23   
|                                                                                                                       |  |                                                                                      
|Item 3.                                                                                                                |  | Defaults upon Senior Securities                                                       |  | 23   
|                                                                                                                       |  |                                                                                      
|Item 4.                                                                                                                |  | Submission of Matters to a Vote of Security Holders                                   |  | 23   
|                                                                                                                       |  |                                                                                      
|Item 5.                                                                                                                |  | Other Information                                                                     |  | 23   
|                                                                                                                       |  |                                                                                      
|Item 6.                                                                                                                |  | Exhibits                                                                              |  | 23   
|                                                                                                                       | 
|SIGNATURES                                                                                                             |  | 24                                                                                   



1



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##### Table of Contents

INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Part I. FINANCIAL INFORMATION

Item 
1. Financial Statements

Condensed Consolidated Balance Sheets

($ in thousands, except share amounts)



|                                                                                                  |  |                     |         |                    |         |  
|------------------------------------------------------------------------------------------------- |  | ------------------- | ------- | ------------------ | ------- | -
|                                                                                                  |  | AtSeptember 30,2009 |         | AtDecember 31,2008 |        
|                                                                                                  |  | (Unaudited)         |         |                    |        
|Assets                                                                                            |  |                     |         |                    |         |  
|                                                                                                  |  |                    
|Cash and due from banks                                                                           |  | $                   | 9,646   |                    | 6,569   |  
|Interest-earning deposits                                                                         |  |                     | 85      |                    | 32      |  
|Federal funds sold                                                                                |  |                     | 3,368   |                    | 3,152   |  
|                                                                                                  |  |                     |         |                    |         |  
|                                                                                                  |  |                    
|Cash and cash equivalents                                                                         |  |                     | 13,099  |                    | 9,753   |  
|                                                                                                  |  |                    
|Certificate of deposit                                                                            |  |                     | 250     |                    | 750     |  
|Securities available for sale                                                                     |  |                     | 31,383  |                    | 35,370  |  
|Loans, net of allowance for loan losses of $2,099 and $1,915                                      |  |                     | 138,675 |                    | 148,493 |  
|Accrued interest receivable                                                                       |  |                     | 822     |                    | 905     |  
|Federal Home Loan Bank stock                                                                      |  |                     | 871     |                    | 925     |  
|Federal Reserve Bank stock                                                                        |  |                     | 237     |                    | 237     |  
|Premises and equipment, net                                                                       |  |                     | 8,598   |                    | 8,175   |  
|Foreclosed real estate                                                                            |  |                     | 1,590   |                    | 2,021   |  
|Goodwill                                                                                          |  |                     | 1,525   |                    | 1,525   |  
|Customer intangible, net                                                                          |  |                     | 252     |                    | 305     |  
|Other assets                                                                                      |  |                     | 3,854   |                    | 2,169   |  
|                                                                                                  |  |                     |         |                    |         |  
|                                                                                                  |  |                    
|Total assets                                                                                      |  | $                   | 201,156 |                    | 210,628 |  
|                                                                                                  |  |                     |         |                    |         |  
|                                                                                                  |  |                    
|Liabilities and Stockholders Equity                                                              |  |                     |         |                    |         |  
|                                                                                                  |  |                    
|Liabilities:                                                                                      |  |                     |         |                    |         |  
|Noninterest-bearing demand deposits                                                               |  |                     | 14,799  |                    | 16,108  |  
|NOW, money-market and savings deposits                                                            |  |                     | 86,392  |                    | 70,367  |  
|Time deposits                                                                                     |  |                     | 69,301  |                    | 92,232  |  
|                                                                                                  |  |                     |         |                    |         |  
|Total deposits                                                                                    |  |                     | 170,492 |                    | 178,707 |  
|Federal Home Loan Bank advances                                                                   |  |                     | 10,000  |                    | 10,000  |  
|Junior subordinated debenture                                                                     |  |                     | 2,062   |                    | 2,062   |  
|Other borrowings                                                                                  |  |                     | 104     |                    | 1,385   |  
|Accrued interest payable and other liabilities                                                    |  |                     | 3,619   |                    | 2,041   |  
|                                                                                                  |  |                     |         |                    |         |  
|                                                                                                  |  |                    
|Total liabilities                                                                                 |  |                     | 186,277 |                    | 194,195 |  
|                                                                                                  |  |                     |         |                    |         |  
|                                                                                                  |  |                    
|Stockholders equity:                                                                             |  |                     |         |                    |         |  
|Common stock, $1 par value, 10,000,000 shares authorized, 1,235,644 shares issued and outstanding |  |                     | 1,236   |                    | 1,236   |  
|Additional paid-in capital                                                                        |  |                     | 10,066  |                    | 10,066  |  
|Retained earnings                                                                                 |  |                     | 3,271   |                    | 5,218   |  
|Accumulated other comprehensive income (loss)                                                     |  |                     | 306     |                    | (87     | )
|                                                                                                  |  |                     |         |                    |         |  
|                                                                                                  |  |                    
|Total stockholders equity                                                                        |  |                     | 14,879  |                    | 16,433  |  
|                                                                                                  |  |                     |         |                    |         |  
|                                                                                                  |  |                    
|Total liabilities and stockholders equity                                                        |  | $                   | 201,156 |                    | 210,628 |  
|                                                                                                  |  |                     |         |                    |         |  

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 EndedSeptember 30, |       |   | Nine Months EndedSeptember 30, |      
|                                                    |  | 2009                            |       |   | 2008                           |       |   | 2009 |        |   | 2008 |      
|Interest income:                                    |  |                                 |       |   |                                |       |   |      |        |   |      |       |  
|Loans                                               |  | $                               | 1,996 |   |                                | 2,508 |   |      | 6,321  |   |      | 7,663 |  
|Securities                                          |  |                                 | 331   |   |                                | 407   |   |      | 1,065  |   |      | 1,225 |  
|Other                                               |  |                                 | 8     |   |                                | 75    |   |      | 14     |   |      | 297   |  
|                                                    |  |                                 |       |   |                                |       |   |      |        |   |      |       |  
|Total interest income                               |  |                                 | 2,335 |   |                                | 2,990 |   |      | 7,400  |   |      | 9,185 |  
|                                                    |  |                                 |       |   |                                |       |   |      |        |   |      |       |  
|                                                    |  |                                 |       |  
|Interest expense:                                   |  |                                 |       |   |                                |       |   |      |        |   |      |       |  
|Deposits                                            |  |                                 | 864   |   |                                | 1,218 |   |      | 3,005  |   |      | 4,030 |  
|Borrowings                                          |  |                                 | 120   |   |                                | 137   |   |      | 359    |   |      | 432   |  
|Capitalized interest                                |  |                                 | -     |   |                                | (19   | ) |      | -      |   |      | (181  | )
|                                                    |  |                                 |       |   |                                |       |   |      |        |   |      |       |  
|Total interest expense                              |  |                                 | 984   |   |                                | 1,336 |   |      | 3,364  |   |      | 4,281 |  
|                                                    |  |                                 |       |   |                                |       |   |      |        |   |      |       |  
|                                                    |  |                                 |       |  
|Net interest income                                 |  |                                 | 1,351 |   |                                | 1,654 |   |      | 4,036  |   |      | 4,904 |  
|                                                    |  |                                 |       |  
|Provision for loan losses                           |  |                                 | 471   |   |                                | 366   |   |      | 2,351  |   |      | 925   |  
|                                                    |  |                                 |       |   |                                |       |   |      |        |   |      |       |  
|                                                    |  |                                 |       |  
|Net interest income after provision for loan losses |  |                                 | 880   |   |                                | 1,288 |   |      | 1,685  |   |      | 3,979 |  
|                                                    |  |                                 |       |   |                                |       |   |      |        |   |      |       |  
|                                                    |  |                                 |       |  
|Noninterest income:                                 |  |                                 |       |   |                                |       |   |      |        |   |      |       |  
|Service charges on deposit accounts                 |  |                                 | 101   |   |                                | 114   |   |      | 332    |   |      | 357   |  
|Brokerage fees                                      |  |                                 | 149   |   |                                | 133   |   |      | 336    |   |      | 462   |  
|Gain on sale of securities                          |  |                                 | 54    |   |                                | -     |   |      | 54     |   |      | -     |  
|Other                                               |  |                                 | 145   |   |                                | 125   |   |      | 429    |   |      | 399   |  
|                                                    |  |                                 |       |   |                                |       |   |      |        |   |      |       |  
|Total noninterest income                            |  |                                 | 449   |   |                                | 372   |   |      | 1,151  |   |      | 1,218 |  
|                                                    |  |                                 |       |   |                                |       |   |      |        |   |      |       |  
|                                                    |  |                                 |       |  
|Noninterest expense:                                |  |                                 |       |   |                                |       |   |      |        |   |      |       |  
|Salaries and employee benefits                      |  |                                 | 992   |   |                                | 1,111 |   |      | 2,878  |   |      | 3,201 |  
|Occupancy and equipment                             |  |                                 | 277   |   |                                | 226   |   |      | 770    |   |      | 632   |  
|Data processing                                     |  |                                 | 87    |   |                                | 115   |   |      | 224    |   |      | 426   |  
|Advertising and business development                |  |                                 | 13    |   |                                | 46    |   |      | 64     |   |      | 163   |  
|Directors fees                                      |  |                                 | 33    |   |                                | 40    |   |      | 99     |   |      | 120   |  
|Stationary and supplies                             |  |                                 | 29    |   |                                | 28    |   |      | 69     |   |      | 81    |  
|Other                                               |  |                                 | 567   |   |                                | 549   |   |      | 2,169  |   |      | 1,458 |  
|                                                    |  |                                 |       |   |                                |       |   |      |        |   |      |       |  
|Total noninterest expense                           |  |                                 | 1,998 |   |                                | 2,115 |   |      | 6,273  |   |      | 6,081 |  
|                                                    |  |                                 |       |   |                                |       |   |      |        |   |      |       |  
|                                                    |  |                                 |       |  
|Loss before income taxes                            |  |                                 | (669  | ) |                                | (455  | ) |      | (3,437 | ) |      | (884  | )
|                                                    |  |                                 |       |  
|Income tax benefit                                  |  |                                 | (282  | ) |                                | (137  | ) |      | (1,490 | ) |      | (388  | )
|                                                    |  |                                 |       |   |                                |       |   |      |        |   |      |       |  
|                                                    |  |                                 |       |  
|Net loss                                            |  | $                               | (387  | ) |                                | (318  | ) |      | (1,947 | ) |      | (496  | )
|                                                    |  |                                 |       |   |                                |       |   |      |        |   |      |       |  
|                                                    |  |                                 |       |  
|Loss per share - basic                              |  | $                               | (0.31 | ) |                                | (0.26 | ) |      | (1.58  | ) |      | (0.40 | )
|                                                    |  |                                 |       |   |                                |       |   |      |        |   |      |       |  
|                                                    |  |                                 |       |  
|Dividends per share                                 |  | $                               | -     |   |                                | -     |   |      | -      |   |      | -     |  
|                                                    |  |                                 |       |   |                                |       |   |      |        |   |      |       |  

See accompanying Notes to Condensed Consolidated Financial Statements.



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##### Table of Contents

INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders Equity

Nine Months Ended September 30, 2009 and 2008

($ in thousands)



|                                                                                     |  |              |  |                          |       |                  |        |  |                                            |   |  |                          |   |  |        |  
|------------------------------------------------------------------------------------ |  | ------------ |  | ------------------------ | ----- | ---------------- | ------ |  | ------------------------------------------ | - |  | ------------------------ | - |  | ------ | -
|                                                                                     |  | Common Stock |  | AdditionalPaid-InCapital |       | RetainedEarnings |        |  | AccumulatedOtherComprehensiveIncome (Loss) |   |  | TotalStockholdersEquity |  
|                                                                                     |  | Shares       |  | ParAmount                |       |                  |        | 
|Balance at December 31, 2007                                                         |  | 1,235,644    |  | $                        | 1,236 |                  | 10,066 |  | 5,969                                      |   |  | (63                      | ) |  | 17,208 |  
|                                                                                     |  |              |  |                          |       |                  |        |  |                                            |   |  |                          |   |  |        |  
|                                                                                     |  |              |  |                          |       |                 
|Comprehensive loss:                                                                  |  |              |  |                          |       |                  |        |  |                                            |   |  |                          |   |  |        |  
|Net loss (unaudited)                                                                 |  | -            |  |                          | -     |                  | -      |  | (496                                       | ) |  | -                        |   |  | (496   | )
|                                                                                     |  |              |  |                          |       |                 
|Change in unrealized loss on securities available for sale, net of taxes (unaudited) |  | -            |  |                          | -     |                  | -      |  | -                                          |   |  | (366                     | ) |  | (366   | )
|                                                                                     |  |              |  |                          |       |                  |        |  |                                            |   |  |                          |   |  |        |  
|                                                                                     |  |              |  |                          |       |                 
|Comprehensive loss (unaudited)                                                       |  |              |  |                          |       |                  |        |  |                                            |   |  |                          |   |  | (862   | )
|                                                                                     |  |              |  |                          |       |                  |        |  |                                            |   |  |                          |   |  |        |  
|                                                                                     |  |              |  |                          |       |                 
|Balance at September 30, 2008 (unaudited)                                            |  | 1,235,644    |  | $                        | 1,236 |                  | 10,066 |  | 5,473                                      |   |  | (429                     | ) |  | 16,346 |  
|                                                                                     |  |              |  |                          |       |                  |        |  |                                            |   |  |                          |   |  |        |  
|                                                                                     |  |              |  |                          |       |                 
|Balance at December 31, 2008                                                         |  | 1,235,644    |  | $                        | 1,236 |                  | 10,066 |  | 5,218                                      |   |  | (87                      | ) |  | 16,433 |  
|                                                                                     |  |              |  |                          |       |                  |        |  |                                            |   |  |                          |   |  |        |  
|                                                                                     |  |              |  |                          |       |                 
|Comprehensive loss:                                                                  |  |              |  |                          |       |                  |        |  |                                            |   |  |                          |   |  |        |  
|Net loss (unaudited)                                                                 |  | -            |  |                          | -     |                  | -      |  | (1,947                                     | ) |  | -                        |   |  | (1,947 | )
|                                                                                     |  |              |  |                          |       |                 
|Change in unrealized loss on securities available for sale, net of taxes (unaudited) |  | -            |  |                          | -     |                  | -      |  | -                                          |   |  | 393                      |   |  | 393    |  
|                                                                                     |  |              |  |                          |       |                  |        |  |                                            |   |  |                          |   |  |        |  
|                                                                                     |  |              |  |                          |       |                 
|Comprehensive loss (unaudited)                                                       |  |              |  |                          |       |                  |        |  |                                            |   |  |                          |   |  | (1,554 | )
|                                                                                     |  |              |  |                          |       |                  |        |  |                                            |   |  |                          |   |  |        |  
|                                                                                     |  |              |  |                          |       |                 
|Balance at September 30, 2009 (unaudited)                                            |  | 1,235,644    |  | $                        | 1,236 |                  | 10,066 |  | 3,271                                      |   |  | 306                      |   |  | 14,879 |  
|                                                                                     |  |              |  |                          |       |                  |        |  |                                            |   |  |                          |   |  |        |  

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)



|                                                                                |  |                                |        |   |      |        |  
|------------------------------------------------------------------------------- |  | ------------------------------ | ------ | - | ---- | ------ | -
|                                                                                |  | Nine Months EndedSeptember 30, |       
|                                                                                |  | 2009                           |        |   | 2008 |       
|Cash flows from operating activities:                                           |  |                                |        |   |      |        |  
|Net loss                                                                        |  | $                              | (1,947 | ) |      | (496   | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                                |        |   |      |        |  
|Depreciation and amortization                                                   |  |                                | 341    |   |      | 279    |  
|Provision for loan losses                                                       |  |                                | 2,351  |   |      | 925    |  
|Gain on sale of securities available for sale                                   |  |                                | (54    | ) |      | -      |  
|Net amortization of premiums and discounts on securities                        |  |                                | (75    | ) |      | 105    |  
|Amortization of customer intangible                                             |  |                                | 53     |   |      | 52     |  
|Net decrease in accrued interest receivable                                     |  |                                | 83     |   |      | 106    |  
|Net increase in other assets                                                    |  |                                | (1,886 | ) |      | (374   | )
|Net increase in accrued interest payable and other liabilities                  |  |                                | 1,578  |   |      | 77     |  
|Loss on sale of foreclosed real estate                                          |  |                                | 76     |   |      | -      |  
|Writedown on foreclosed real estate                                             |  |                                | 561    |   |      | -      |  
|                                                                                |  |                                |        |   |      |        |  
|                                                                                |  |                               
|Net cash provided by operating activities                                       |  |                                | 1,081  |   |      | 674    |  
|                                                                                |  |                                |        |   |      |        |  
|                                                                                |  |                               
|Cash flows from investing activities:                                           |  |                                |        |   |      |        |  
|Purchase of securities available for sale                                       |  |                                | (2,500 | ) |      | (7,844 | )
|Maturities and principal repayments of securities available for sale            |  |                                | 5,225  |   |      | 9,412  |  
|Sales of securities available for sale                                          |  |                                | 1,985  |   |      | -      |  
|Net decrease (increase) in loans, net of principal repayments                   |  |                                | 5,378  |   |      | (118   | )
|Purchase of premises and equipment                                              |  |                                | (764   | ) |      | (638   | )
|Redemption of Federal Home Loan Bank stock                                      |  |                                | 54     |   |      | 1      |  
|Maturities of certificates of deposit                                           |  |                                | 500    |   |      | -      |  
|Proceeds from sale of foreclosed real estate                                    |  |                                | 1,883  |   |      | -      |  
|                                                                                |  |                                |        |   |      |        |  
|                                                                                |  |                               
|Net cash provided by investing activities                                       |  |                                | 11,761 |   |      | 813    |  
|                                                                                |  |                                |        |   |      |        |  
|                                                                                |  |                               
|Cash flows from financing activities:                                           |  |                                |        |   |      |        |  
|Net decrease in deposits                                                        |  |                                | (8,215 | ) |      | (2,379 | )
|Net (decrease) increase in other borrowings                                     |  |                                | (1,281 | ) |      | 217    |  
|                                                                                |  |                                |        |   |      |        |  
|                                                                                |  |                               
|Net cash used in financing activities                                           |  |                                | (9,496 | ) |      | (2,162 | )
|                                                                                |  |                                |        |   |      |        |  
|                                                                                |  |                               
|Net increase (decrease) in cash and cash equivalents                            |  |                                | 3,346  |   |      | (675   | )
|                                                                                |  |                               
|Cash and cash equivalents at beginning of period                                |  |                                | 9,753  |   |      | 8,729  |  
|                                                                                |  |                                |        |   |      |        |  
|                                                                                |  |                               
|Cash and cash equivalents at end of period                                      |  | $                              | 13,099 |   |      | 8,054  |  
|                                                                                |  |                                |        |   |      |        |  



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited), Continued

(In thousands)



|                                                                                                                          |  |                                |       |      |       |  
|------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ----- | ---- | ----- | -
|                                                                                                                          |  | Nine Months EndedSeptember 30, |      
|                                                                                                                          |  | 2009                           |       | 2008 |      
|Cash paid during the period for:                                                                                          |  |                                |       |      |       |  
|Interest                                                                                                                  |  | $                              | 3,280 |      | 3,126 |  
|                                                                                                                          |  |                                |       |      |       |  
|Taxes                                                                                                                     |  | $                              | -     |      | -     |  
|                                                                                                                          |  |                                |       |      |       |  
|                                                                                                                          |  |                               
|Noncash transactions:                                                                                                     |  |                                |       |      |       |  
|Accumulated other comprehensive income (loss), net change in unrealized loss on securities available for sale, net of
tax |  | $                              | 393   |      | (366  | )
|                                                                                                                          |  |                                |       |      |       |  
|                                                                                                                          |  |                               
|Transfer of loan to foreclosed real estate                                                                                |  | $                              | 2,089 |      | 1,776 |  
|                                                                                                                          |  |                                |       |      |       |  

See accompanying Notes to Condensed Consolidated Financial Statements.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.Basis of Presentation.In the opinion of the management of Independent BancShares, Inc. (the Holding Company), the accompanying condensed consolidated financial
statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position at September 30, 2009, the results of operations for the three- and nine-month periods ended September 30, 2009
and 2008 and the cash flows for the nine-month periods ended September 30, 2009 and 2008. The results of operations for the three- and nine-month periods ended September 30, 2009, are not necessarily indicative of results that may be
expected for the year ending December 31, 2009.

The Holding Company owns 100% of the outstanding common stock of Independent National
Bank (the Bank) and HKH Financial Center, Inc. (HKH) doing business as Independent Financial Partners (IFP) (collectively, the Company). On July 7, 2009 the Holding Companys directors
approved a plan of corporate reorganization where the par value of the Holding Company was reduced to $1 from $2. 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.

The Banks operating and capital requirements, the losses due to recent increases in nonperforming loans and
declining net interest margin are factors Management considered when evaluating the Banks ability to continue as a going concern.

Management is evaluating all potential sources of capital to meet the Banks capital requirements, including debt financing, issuing equity securities, entering into other financing arrangements and/or strategic alliances, and seeking
recapitalization opportunities. There can be no assurance, however, that additional financing or recapitalization plans will be available or forthcoming and, if available, can be obtained or undertaken on terms favorable to the Holding Company or
its existing shareholders. Further there is no assurance that any acceptable financing alternative or recapitalization plan would be successfully implemented, or receive regulatory approval. However, even if no additional capital is obtained,
Management expects the Bank to be adequately capitalized at September 30, 2010, based on detailed financial projections.

Management has
evaluated events occurring subsequent to the balance sheet date through November 13, 2009 (the financial statement issuance date), determining no events require additional disclosure in these consolidated condensed financial statements.



(continued)



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



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



|                                        |  |                     |         |   |                    |         |  
|--------------------------------------- |  | ------------------- | ------- | - | ------------------ | ------- | -
|                                        |  | AtSeptember 30,2009 |         |   | AtDecember 31,2008 |        
|Commercial real estate                  |  | $                   | 65,493  |   |                    | 68,036  |  
|Residential real estate and home equity |  |                     | 55,154  |   |                    | 54,092  |  
|Construction and land development       |  |                     | 12,298  |   |                    | 17,520  |  
|Commercial                              |  |                     | 5,416   |   |                    | 8,004   |  
|Consumer                                |  |                     | 2,435   |   |                    | 2,842   |  
|                                        |  |                     |         |   |                    |         |  
|                                        |  |                    
|Total loans                             |  |                     | 140,796 |   |                    | 150,494 |  
|                                        |  |                    
|Deduct:                                 |  |                     |         |   |                    |         |  
|Allowance for loan losses               |  |                     | (2,099  | ) |                    | (1,915  | )
|Deferred loan costs, net                |  |                     | (22     | ) |                    | (86     | )
|                                        |  |                     |         |   |                    |         |  
|                                        |  |                    
|Loans, net                              |  | $                   | 138,675 |   |                    | 148,493 |  
|                                        |  |                     |         |   |                    |         |  

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



|                          |  |                                 |       |   |                                |       |   |      |        |   |      |       |  
|------------------------- |  | ------------------------------- | ----- | - | ------------------------------ | ----- | - | ---- | ------ | - | ---- | ----- | -
|                          |  | Three Months EndedSeptember 30, |       |   | Nine Months EndedSeptember 30, |      
|                          |  | 2009                            |       |   | 2008                           |       |   | 2009 |        |   | 2008 |      
|Beginning balance         |  | $                               | 2,160 |   |                                | 1,938 |   |      | 1,915  |   |      | 1,887 |  
|Provision for loan losses |  |                                 | 471   |   |                                | 366   |   |      | 2,351  |   |      | 925   |  
|Net charge-offs           |  |                                 | (532  | ) |                                | (378  | ) |      | (2,167 | ) |      | (886  | )
|                          |  |                                 |       |   |                                |       |   |      |        |   |      |       |  
|                          |  |                                 |       |  
|Ending balance            |  | $                               | 2,099 |   |                                | 1,926 |   |      | 2,099  |   |      | 1,926 |  
|                          |  |                                 |       |   |                                |       |   |      |        |   |      |       |  

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



|                                             |  |                      |        |                     |      
|-------------------------------------------- |  | -------------------- | ------ | ------------------- | -----
|                                             |  | At September 30,2009 |        | At December 31,2008
|Nonaccrual loans                             |  | $                    | 10,428 |                     | 3,213
|Past due ninety days or more, still accruing |  |                      | -      |                     | -    
|                                             |  |                      |        |                     |      
|                                             |  |                     
|                                             |  | $                    | 10,428 |                     | 3,213
|                                             |  |                      |        |                     |      



(continued)



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



3.Loan Impairment and Loan Losses, Continued.Collateral dependent impaired
loans are as follows (in thousands):



|                                                                  |  |                      |        |                     |      
|----------------------------------------------------------------- |  | -------------------- | ------ | ------------------- | -----
|                                                                  |  | At September 30,2009 |        | At December 31,2008
|Gross loans with a related allowance for loan loss recorded       |  | $                    | -      |                     | -    
|Less: Allowance on these loans                                    |  |                      | -      |                     | -    
|Gross loans for which there is no related allowance for loan loss |  |                      | 10,477 |                     | 3,095
|                                                                  |  |                      |        |                     |      
|                                                                  |  |                     
|Net investment in impaired loans                                  |  | $                    | 10,477 |                     | 3,095
|                                                                  |  |                      |        |                     |      

There was no interest collected or recognized on impaired loans during the three- or nine-months
ended September 30, 2009 or 2008.

4.Loss Per Share. Basic loss per share has been computed on the basis of the
weighted-average number of shares of common stock outstanding during the periods, which was 1,235,644 during the three-and nine-month periods ended September 30, 2009 and 2008. There is no dilution to basic loss per share because the Company
does not have any common stock equivalents.

5.Regulatory Capital.The Bank is required to maintain certain
minimum regulatory capital requirements. At September 30, 2009 and December 31, 2008, the Banks capital exceeded regulatory capital requirements.

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



|                              |  |                                                 |        |                                                           |   |                                           |        |                                        |  
|----------------------------- |  | ----------------------------------------------- | ------ | --------------------------------------------------------- | - | ----------------------------------------- | ------ | -------------------------------------- | -
|                              |  | Fair Value Measurements at Reporting Date Using
|                              |  | FairValue                                       |        | Quoted PricesIn ActiveMarkets forIdenticalAssets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |        | SignificantUnobservableInputs(Level 3)
|As of September 30, 2009:     |  |                                                 |        |                                                           |   |                                           |        |                                        |  
|Available for sale securities |  | $                                               | 31,383 |                                                           | - |                                           | 31,383 |                                        | -
|                              |  |                                                 |        |                                                           |   |                                           |        |                                        |  



(continued)



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



6.Fair Value Measurements, Continued.The table below presents a reconciliation
for all available-for-sale securities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine-months ended September 30, 2009. These instruments were valued using pricing models and discounted
cash flow methodologies incorporating assumptions that, in managements judgment, reflect the assumptions a marketplace participant would use at September 30, 2009 (in thousands).



|                                             |  |   |      |  
|-------------------------------------------- |  | - | ---- | -
|Balance, January 1, 2009                     |  | $ | 564  |  
|Total gains or losses (realized/unrealized): |  |   |      |  
|Included in operations                       |  |   | -    |  
|Included in other comprehensive income       |  |   | (46  | )
|Purchases, net of repayments                 |  |   | -    |  
|Transfers out of Level 3                     |  |   | (517 | )
|Non trading activity                         |  |   | (1   | )
|                                             |  |   |      |  
|                                             | 
|Balance, September 30, 2009                  |  | $ | -    |  
|                                             |  |   |      |  

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



|                          |  |               |           |                                                                      |                                                |   |             |   |  |       |  |       |  |      
|------------------------- |  | ------------- | --------- | -------------------------------------------------------------------- | ---------------------------------------------- | - | ----------- | - |  | ----- |  | ----- |  | -----
|                          |  |               |           | TotalLosses
inOperationsDuring the NineMonths EndedSeptember 30,2009
|                          |  | CarryingValue |           |                                                                      | Fair Value Measurementsat
Reporting Date Using |   | TotalLosses |  
|                          |  |               | (Level 1) |                                                                      | (Level 2)                                      |   | (Level 3)   |   | 
|As of September 30, 2009: |  |               |           |                                                                      |                                                |   |             |   |  |       |  |       |  |      
|Impaired loans            |  | $             | 3,479     | (1)                                                                  |                                                | - |             | - |  | 3,479 |  | 3,015 |  | 1,732
|                          |  |               |           |                                                                      |                                                |   |             |   |  |       |  |       |  |      
|                          |  |               |           |                                                                      |                                                |  
|Foreclosed real estate    |  | $             | 1,590     |                                                                      |                                                | - |             | - |  | 1,590 |  | 1,077 |  | 561  
|                          |  |               |           |                                                                      |                                                |   |             |   |  |       |  |       |  |      



|(1) | Loans with a carrying value of $6,998 at September 30, 2009 were measured for impairment using Level 3 inputs and had a fair value in excess of
carrying value.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



(continued)



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



7. Fair Value of Financial Instruments.The estimated fair values of the
Companys financial instruments are as follows (in thousands):



|                                |  |                  |         |                 |         |                |         |           |        
|------------------------------- |  | ---------------- | ------- | --------------- | ------- | -------------- | ------- | --------- | -------
|                                |  | At September 30, |         | At December 31,
|                                |  | 2009             |         | 2008           
|                                |  | CarryingAmount   |         | FairValue       |         | CarryingAmount |         | FairValue
|Financial assets:               |  |                  |         |                 |         |                |         |           |        
|Cash and cash equivalents       |  | $                | 13,099  |                 | 13,099  |                | 9,753   |           | 9,753  
|Certificates of deposit         |  |                  | 250     |                 | 250     |                | 750     |           | 750    
|Securities available for sale   |  |                  | 31,383  |                 | 31,383  |                | 35,370  |           | 35,370 
|Loans                           |  |                  | 138,675 |                 | 136,867 |                | 148,493 |           | 145,225
|Accrued interest receivable     |  |                  | 822     |                 | 822     |                | 905     |           | 905    
|Federal Home Loan Bank stock    |  |                  | 871     |                 | 871     |                | 925     |           | 925    
|Federal Reserve Bank stock      |  |                  | 237     |                 | 237     |                | 237     |           | 237    
|                                |  |                  |         |                
|Financial liabilities:          |  |                  |         |                 |         |                |         |           |        
|Deposits                        |  |                  | 170,492 |                 | 171,859 |                | 178,707 |           | 178,887
|Federal Home Loan Bank advances |  |                  | 10,000  |                 | 10,287  |                | 10,000  |           | 10,370 
|Junior subordinated debentures  |  |                  | 2,062   |                 | 2,062   |                | 2,062   |           | 2,062  
|Other borrowings                |  |                  | 104     |                 | 104     |                | 1,385   |           | 1,385  
|                                |  |                  |         |                
|Off-balance-sheet instruments   |  |                  | -       |                 | -       |                | -       |           | -      

8. Subsequent Events.On November 3, 2009, the Bank entered into a consent order
(the Order) with the OCC. The Bank has agreed to take certain steps to enhance the operations of the Bank.

On October 9,
2009, the Company filed a proxy statement on Schedule 14A, and a Schedule 13E-3 Transaction Statement on Schedule 13E-3 also has been filed, with the Securities and Exchange Commission in connection with a proposal by the Company that its
shareholders adopt an amendment to its Articles of Incorporation that will result in the reclassification of certain shares of common stock into newly authorized shares of preferred stock. The effect of the transaction will be to reduce the number
of shareholders of record of Company common stock to less than 300, which will allow the Company to terminate its reporting obligations under the Securities Exchange Act of 1934, as amended.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

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

and Results of Operations

Forward Looking Statements

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

General

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



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES



Liquidity and Capital Resources

The Companys primary source of cash during the nine months ended September 30, 2009 was from maturities, sales, and principal repayments of securities available for sale of $6.7 million, and a
net increase in loan principal repayments (net of originations) of $5.4 million. Cash was used primarily to purchase securities available for sale of $2.5 million, and to fund a decrease in deposits of $8.2 million. At September 30, 2009 the
Bank exceeded its regulatory liquidity requirements.

Off-Balance Sheet Arrangements

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

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

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

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



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES



A summary of the amounts of the Companys financial instruments, with off-balance-sheet risk at
September 30, 2009 follows (in thousands):



|                                                   |  |                |      
|-------------------------------------------------- |  | -------------- | -----
|                                                   |  | ContractAmount
|Undisbursed lines of credit and construction loans |  | $              | 2,028
|                                                   |  |                |      
|                                                   | 
|Commitments to extend credit                       |  | $              | 6,602
|                                                   |  |                |      
|                                                   | 
|Standby letters of credit                          |  | $              | 68   
|                                                   |  |                |      

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 twelve months and, if so desired, that the Company can adjust the rates and terms on time deposits and other deposit accounts to retain or obtain new deposits in a changing interest
rate environment.

Selected Ratios

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



|                                                        |  |                                   |    |  |                            |    |  |                                   |   
|------------------------------------------------------- |  | --------------------------------- | -- |  | -------------------------- | -- |  | --------------------------------- | --
|                                                        |  | Nine MonthsEndedSeptember 30,2009 |    |  | Year EndedDecember 31,2008 |    |  | Nine MonthsEndedSeptember 30,2008 |   
|Average equity as a percentage of average assets        |  | 7.34                              | %  |  | 9.12                       | %  |  | 7.84                              | % 
|                                                        |  |                                   |   
|Total equity to total assets at end of period           |  | 7.40                              | %  |  | 7.81                       | %  |  | 7.68                              | % 
|                                                        |  |                                   |   
|Return on average assets (1)                            |  | (1.23                             | )% |  | (0.36                      | )% |  | (0.31                             | )%
|                                                        |  |                                   |   
|Return on average equity (1)                            |  | (16.77                            | )% |  | (4.57                      | )% |  | (3.89                             | )%
|                                                        |  |                                   |   
|Noninterest expense to average assets (1)               |  | 3.97                              | %  |  | 3.82                       | %  |  | 3.79                              | % 
|                                                        |  |                                   |   
|Nonperforming loans to total loans at end of period (2) |  | 7.41                              | %  |  | 2.13                       | %  |  | 0.98                              | % 



| | (1) | Annualized for the nine-months ended September 30, 2009 and 2008.
| | --- | -----------------------------------------------------------------

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



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Results of Operations

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



|                                                                 |  |                                  |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|---------------------------------------------------------------- |  | -------------------------------- | ------- | -------------------- | ---- | ----------------- |  | ---- | -------------- |  | -------------------- | ------- |  | ----------------- | ----- | - |  | ---- | -
|                                                                 |  | Three Months Ended September 30, |        
|                                                                 |  | 2009                             |         |                      | 2008 |                  
|                                                                 |  | AverageBalance                   |         | InterestandDividends |      | AverageYield/Rate |  |      | AverageBalance |  | InterestandDividends |         |  | AverageYield/Rate |      
|Interest-earning assets:                                         |  |                                  |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Loans                                                            |  | $                                | 139,682 |                      |      | 1,996             |  | 5.59 | %              |  | $                    | 149,764 |  |                   | 2,508 |   |  | 6.70 | %
|Securities                                                       |  |                                  | 35,283  |                      |      | 331               |  | 3.67 |                |  |                      | 37,719  |  |                   | 407   |   |  | 4.32 |  
|Other interest-earning assets (1)                                |  |                                  | 6,075   |                      |      | 8                 |  | 0.51 |                |  |                      | 7,639   |  |                   | 75    |   |  | 3.93 |  
|                                                                 |  |                                  |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                  |         |                      |      |                  
|Total interest-earning assets                                    |  |                                  | 181,040 |                      |      | 2,335             |  | 5.05 |                |  |                      | 195,122 |  |                   | 2,990 |   |  | 6.13 |  
|                                                                 |  |                                  |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                  |         |                      |      |                  
|Noninterest-earning assets                                       |  |                                  | 25,590  |                      |      |                   |  |      |                |  |                      | 18,829  |  |                   |       |   |  |      |  
|                                                                 |  |                                  |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                  |         |                      |      |                  
|Total assets                                                     |  | $                                | 206,630 |                      |      |                   |  |      |                |  | $                    | 213,951 |  |                   |       |   |  |      |  
|                                                                 |  |                                  |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                  |         |                      |      |                  
|Interest-bearing liabilities:                                    |  |                                  |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|NOW, money-market and savings deposits                           |  |                                  | 86,423  |                      |      | 213               |  | 0.98 |                |  |                      | 70,354  |  |                   | 248   |   |  | 1.41 |  
|Time deposits                                                    |  |                                  | 73,881  |                      |      | 651               |  | 3.50 |                |  |                      | 94,009  |  |                   | 970   |   |  | 4.13 |  
|                                                                 |  |                                  |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                  |         |                      |      |                  
|Total interest-bearing deposits                                  |  |                                  | 160,304 |                      |      | 864               |  | 2.14 |                |  |                      | 164,363 |  |                   | 1,218 |   |  | 2.96 |  
|                                                                 |  |                                  |         |                      |      |                  
|Borrowed funds (2)                                               |  |                                  | 12,434  |                      |      | 120               |  | 3.83 |                |  |                      | 14,745  |  |                   | 137   |   |  | 3.72 |  
|                                                                 |  |                                  |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Capitalized interest                                             |  |                                  |         |                      |      | -                 |  |      |                |  |                      |         |  |                   | (19   | ) |  |      |  
|                                                                 |  |                                  |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                  |         |                      |      |                  
|Total interest-bearing liabilities                               |  |                                  | 172,738 |                      |      | 984               |  | 2.23 |                |  |                      | 179,108 |  |                   | 1,336 |   |  | 2.98 |  
|                                                                 |  |                                  |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                  |         |                      |      |                  
|Noninterest-bearing demand deposits                              |  |                                  | 17,423  |                      |      |                   |  |      |                |  |                      | 16,820  |  |                   |       |   |  |      |  
|Noninterest-bearing liabilities                                  |  |                                  | 1,632   |                      |      |                   |  |      |                |  |                      | 1,269   |  |                   |       |   |  |      |  
|Stockholders equity                                             |  |                                  | 14,837  |                      |      |                   |  |      |                |  |                      | 16,754  |  |                   |       |   |  |      |  
|                                                                 |  |                                  |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                  |         |                      |      |                  
|Total liabilities and stockholders equity                       |  | $                                | 206,630 |                      |      |                   |  |      |                |  | $                    | 213,951 |  |                   |       |   |  |      |  
|                                                                 |  |                                  |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                  |         |                      |      |                  
|Net interest income                                              |  |                                  |         |                      | $    | 1,351             |  |      |                |  |                      |         |  | $                 | 1,654 |   |  |      |  
|                                                                 |  |                                  |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                  |         |                      |      |                  
|Interest-rate spread                                             |  |                                  |         |                      |      |                   |  | 2.82 | %              |  |                      |         |  |                   |       |   |  | 3.15 | %
|                                                                 |  |                                  |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                  |         |                      |      |                  
|Net interest margin (3)                                          |  |                                  |         |                      |      |                   |  | 2.92 | %              |  |                      |         |  |                   |       |   |  | 3.39 | %
|                                                                 |  |                                  |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                  |         |                      |      |                  
|Ratio of interest-earning assets to interest-bearing liabilities |  |                                  | 1.05    |                      |      |                   |  |      |                |  |                      | 1.09    |  |                   |       |   |  |      |  
|                                                                 |  |                                  |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  



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

|(2) | Includes Federal Home Loan Bank advances, junior subordinated debentures and other borrowings.
|--- | ----------------------------------------------------------------------------------------------

|(3) | Net interest margin is annualized net interest income divided by average interest-earning assets.
|--- | -------------------------------------------------------------------------------------------------



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

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



|                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|---------------------------------------------------------------- |  | ------------------------------- | ------- | -------------------- | ---- | ----------------- |  | ---- | -------------- |  | -------------------- | ------- |  | ----------------- | ----- | - |  | ---- | -
|                                                                 |  | Nine Months Ended September 30, |        
|                                                                 |  | 2009                            |         |                      | 2008 |                  
|                                                                 |  | AverageBalance                  |         | InterestandDividends |      | AverageYield/Rate |  |      | AverageBalance |  | InterestandDividends |         |  | AverageYield/Rate |      
|Interest-earning assets:                                         |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Loans                                                            |  | $                               | 144,230 |                      |      | 6,321             |  | 5.84 | %              |  | $                    | 151,194 |  |                   | 7,663 |   |  | 6.76 | %
|Securities                                                       |  |                                 | 36,437  |                      |      | 1,065             |  | 3.90 |                |  |                      | 38,885  |  |                   | 1,225 |   |  | 4.28 |  
|Other interest-earning assets (1)                                |  |                                 | 7,047   |                      |      | 14                |  | 0.26 |                |  |                      | 8,517   |  |                   | 297   |   |  | 3.39 |  
|                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                 |         |                      |      |                  
|Total interest-earning assets                                    |  |                                 | 187,714 |                      |      | 7,400             |  | 5.26 |                |  |                      | 198,596 |  |                   | 9,185 |   |  | 6.16 |  
|                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                 |         |                      |      |                  
|Noninterest-earning assets                                       |  |                                 | 23,041  |                      |      |                   |  |      |                |  |                      | 18,075  |  |                   |       |   |  |      |  
|                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                 |         |                      |      |                  
|Total assets                                                     |  | $                               | 210,755 |                      |      |                   |  |      |                |  | $                    | 216,671 |  |                   |       |   |  |      |  
|                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                 |         |                      |      |                  
|Interest-bearing liabilities:                                    |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|NOW, money-market and savings deposits                           |  |                                 | 81,802  |                      |      | 721               |  | 1.18 |                |  |                      | 74,510  |  |                   | 952   |   |  | 1.70 |  
|Time deposits                                                    |  |                                 | 82,123  |                      |      | 2,284             |  | 3.72 |                |  |                      | 91,484  |  |                   | 3,078 |   |  | 4.49 |  
|                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                 |         |                      |      |                  
|Total interest-bearing deposits                                  |  |                                 | 163,925 |                      |      | 3,005             |  | 2.48 |                |  |                      | 165,994 |  |                   | 4,030 |   |  | 3.24 |  
|                                                                 |  |                                 |         |                      |      |                  
|Borrowed funds (2)                                               |  |                                 | 12,520  |                      |      | 359               |  | 3.88 |                |  |                      | 14,521  |  |                   | 432   |   |  | 3.97 |  
|                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|Capitalized interest                                             |  |                                 |         |                      |      | -                 |  |      |                |  |                      |         |  |                   | (181  | ) |  |      |  
|                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                 |         |                      |      |                  
|Total interest-bearing liabilities                               |  |                                 | 176,445 |                      |      | 3,364             |  | 2.58 |                |  |                      | 180,515 |  |                   | 4,281 |   |  | 3.16 |  
|                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                 |         |                      |      |                  
|Noninterest-bearing demand deposits                              |  |                                 | 17,729  |                      |      |                   |  |      |                |  |                      | 18,013  |  |                   |       |   |  |      |  
|Noninterest-bearing liabilities                                  |  |                                 | 1,099   |                      |      |                   |  |      |                |  |                      | 1,156   |  |                   |       |   |  |      |  
|Stockholders equity                                             |  |                                 | 15,482  |                      |      |                   |  |      |                |  |                      | 16,987  |  |                   |       |   |  |      |  
|                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                 |         |                      |      |                  
|Total liabilities and stockholders equity                       |  | $                               | 210,755 |                      |      |                   |  |      |                |  | $                    | 216,671 |  |                   |       |   |  |      |  
|                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                 |         |                      |      |                  
|Net interest income                                              |  |                                 |         |                      | $    | 4,036             |  |      |                |  |                      |         |  | $                 | 4,904 |   |  |      |  
|                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                 |         |                      |      |                  
|Interest-rate spread                                             |  |                                 |         |                      |      |                   |  | 2.68 | %              |  |                      |         |  |                   |       |   |  | 3.00 | %
|                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                 |         |                      |      |                  
|Net interest margin (3)                                          |  |                                 |         |                      |      |                   |  | 2.87 | %              |  |                      |         |  |                   |       |   |  | 3.29 | %
|                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  
|                                                                 |  |                                 |         |                      |      |                  
|Ratio of interest-earning assets to interest-bearing liabilities |  |                                 | 1.06    |                      |      |                   |  |      |                |  |                      | 1.10    |  |                   |       |   |  |      |  
|                                                                 |  |                                 |         |                      |      |                   |  |      |                |  |                      |         |  |                   |       |   |  |      |  



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

|(2) | Includes Federal Home Loan Bank advances, junior subordinated debentures and other borrowings.
|--- | ----------------------------------------------------------------------------------------------

|(3) | Net interest margin is annualized net interest income divided by average interest-earning assets.
|--- | -------------------------------------------------------------------------------------------------



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Comparison of the Three-Month Periods Ended September 30, 2009 and 2008

General Operating Results.Net loss for the quarter ended September 30, 2009 was $387,000 or $0.31 per
basic share compared to net loss of $318,000 or $0.26 per basic share for the quarter ended September 30, 2008. The increase in the net loss for the third quarter 2009 was caused by credit-related expenses of $39,000 for foreclosed property
write downs, $59,000 for OREO expenses and loss on sale of OREO property included in other expenses, and a $471,000 provision for loan losses.

The Company does not have any sub-prime securities in its investment portfolio. The sustained level of liquidity and conservative nature of investments helps offset the increased level of risk in the loan
portfolio. The Company does not use brokered deposits and its loan to deposit ratio is 82.57%.

Interest Income.Interest income declined $655,000 to $2.3 million for the three-month period ended September 30, 2009, compared to $3.0 million for the three-month period ended September 30, 2008. The decline was
due to a decrease in average yield of earning assets from 6.13% to 5.05%, a decrease in average loans outstanding of $10.1 million, and the reversal of interest on non accrual loans of $47,000.

Interest Expense.Interest expense decreased $352,000 from $1.3 million for the three-month period ended
September 30, 2008, to $984 thousand for the three-month period ended September 30, 2009. The decrease was due to repricing of deposits, which lowered the average rate paid to 2.14% from 2.96%, and the reduction in average interest bearing
deposits from $164.4 million to $160.3 million.

Provision for Loan Losses.The provision for
loan loss is a current period expense charged to operations to bring 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 collectability of the Companys loan portfolio. The Company recorded provisions of $471,000 and $366,000, for the three-month periods
ended September 30, 2009 and 2008, respectively. During the three-month period ending September 30, 2009, the Company posted net charge offs of $532,000 to the allowance for loan losses, due primarily to impaired loans that were written
down to the market value of the collateral. At September 30, 2009, the allowance for loan losses was $2,099,000 or 1.50% of gross loans. In response to market conditions, the Companys allowance for loan losses has increased from 1.27% of
loans at September 30, 2008, to 1.50% of loans at September 30, 2009. Management continues aggressively working on its collection efforts and continues to increase the level of monitoring for the loan portfolio. The Company has never
participated in any type of sub-prime lending. Management believes the allowance for loan losses of $2.1 million at September 30, 2009, is adequate. However, if market conditions continue to deteriorate, additional provisions for loan losses
may be necessary.

Noninterest Income.Noninterest income increased $77,000 to $449,000 for the
three month period ended September 30, 2009, compared to $372,000 for the three-month period ended September 30, 2008. The increase was due primarily to a $54,000 gain on sale of securities.

Noninterest Expense.Noninterest expense decreased $117,000, from $2.1 million for the three month period
ended September 30, 2008, to $2.0 million for the three-month period ended September 30, 2009. The decrease was attributable to a reduction in salaries expense of $119,000.

Income Taxes. The Company benefited from an income tax credit of $282,000 for the three-month period ended
September 30, 2009, compared to a benefit of $137,000 for the three-month period ended September 30, 2008.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

Comparison of the Nine-Month Periods Ended September 30, 2009 and 2008

General Operating Results.Net losses for the nine-month period ended September 30, 2009 was $1.9
million or $1.58 per basic share, compared to net losses of $496,000 or $0.40 per basic share for the comparable period in 2008. The net loss was a result of a provision for loan loss of $2.4 million, and the expense to carry foreclosed real estate
of $630,000 included in other non interest expense.

The Company does not have any sub-prime securities in its investment
portfolio. The sustained level of liquidity and conservative nature of investments helps offset the increased level of risk in the loan portfolio. The Company does not use brokered deposits. The loan to deposit ratio at September 30, 2009 is
82.57%.

Interest Income.Interest income decreased $1.8 million to $7.4 million for the
nine-month period ended September 30, 2009, compared to $9.2 million for the nine-month period ended September 30, 2008. The decrease was due to a drop in the average yield of earning assets from 6.16% to 5.26%, a decrease in average loans
outstanding of $7.0 million, and the reversal of interest on nonaccrual loans of $162,000.

Interest
Expense.Interest expense decreased $917,000 to $3.4 million for the nine-month period ended September 30, 2009, compared to $4.3 million for the nine-month period ended September 30, 2008. The decrease was due to repricing of
deposits, which lowered the average rate paid to 2.48% from 3.24%, and a reduction in average interest bearing deposits from $166.0 million to $163.9 million.

Provision for Loan Losses.The provision for loan losses is charged to operations to bring the total loan
loss allowance to a level deemed appropriate by management. The provision is based upon the volume and type of lending conducted by the Company, industry standards, general economic conditions, particularly as they relate to the Companys
market area, and other factors related to the Companys loan portfolio. The Company recorded provisions for loan losses for the nine-month periods ended September 30, 2009 and 2008 of $2,351,000 and $925,000, respectively. During the
nine-month period ending September 30, 2009, the Company posted net charge offs of $2.2 million to the allowance for loan losses, due primarily to charge-offs on impaired loans. At September 30, 2009, the allowance for loan losses was
$2,099,000 or 1.50% of gross loans. In response to market conditions the Companys allowance for loan losses has increased from 1.27% of loans at September 30, 2008 to 1.50% at September 30, 2009. Management is aggressively working on
its collection effort and continues to increase the level of monitoring of the loan portfolio. The Company has never participated in any type of sub-prime lending. Management believes that the allowance for loan losses of $2.1 million at
September 30, 2009 is adequate. However, if market conditions continue to deteriorate, additional provisions for loan losses may be necessary.

Noninterest Income.Noninterest income decreased $67,000 during the nine-month period ended September 30, 2009. The decrease was due to a decline in brokerage fees of $126,000.

Noninterest Expense.Noninterest expense increased $192,000 to $6.3 million for the nine-month
period ended September 30, 2009, as compared to $6.1 million for the same period in 2008. The increase in expenses can be attributed to foreclosed real estate expenses of $630,000, and FDIC special assessment of $98,000. Expenses of core
operations decreased $404,000 for the period ended September 30, 2009 compared to the same period in 2008.

Income Taxes.The Company benefited from an income tax credit of $1.5 million for the nine-month period ended September 30, 2009, compared to an income tax credit of $388,000 for the nine-month period ended
September 30, 2008.



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Regulatory Order

On
November 3, 2009, the Bank entered into a consent order (the Order) with the OCC. The Bank has agreed to take the following steps to enhance the operations of the Bank (with the time periods below corresponding with the
effectiveness of the Order):

1. Compliance Committee. The Board of Directors (the Board) will appoint a compliance
committee to monitor and coordinate the Banks adherence to the Order, which will meet at least monthly, and submit monthly written progress reports to the Board. The Board also will insure that the Bank has sufficient processes, personnel, and
control systems to effectively implement the Order.

2. Strategic Plan. Within 60 days, the Bank will send to the OCC a three-year
strategic plan to include a mission statement, targeted markets, strategic goals, actions to improve earnings, risk assessment of product lines, description of control systems, evaluation of Banks operations, and management employment and
succession program, and systems to monitor the Banks progress in meeting goals. At least monthly, the Board will review financial reports and analyses that evaluate the Banks performance against the goals and objectives of the strategic
plan. At least quarterly, the Bank will prepare a written evaluation of the Banks performance against the strategic plan and describe actions the Board will require to address any shortcomings. The Board will give the OCC advance, written
notice of its intent to deviate significantly from the strategic plan.

3. Capital Plan and Higher Minimums. Within 90 days, the Bank
will maintain a total risk-weighted capital ratio of at least 12%, and a leverage capital ratio of at least 9%. Within 60 days, the Bank will forward to the OCC a written capital plan to include plans for achieving adequate capital, projections for
growth and capital requirements, sources and timing of additional capital, and contingency plans. The Bank may only pay a dividend if in compliance with the approved capital plan, in compliance with applicable law, and provided no objection is
received from the OCC. If the Bank fails to submit an acceptable capital plan or to achieve or maintain the minimum capital ratios required by the Order, then in the OCCs direction it can request that the Bank submit to the OCC a disposition
plan that details the Boards proposal to sell or merge the Bank, or liquidate the Bank. If a disposition plan is submitted by the Board that outlines the sale or merger of the Bank, it must describe actions that will be taken to insure that a
definitive agreement for such sale or merger is signed within 90 days after the receipt of OCC non-objection to the plan. If the disposition plan outlines the liquidation of the Bank, the plan must detail actions and steps necessary to accomplish
the liquidation in accordance with applicable law. Failure to submit a timely acceptable disposition plan, or to implement and adhere to the disposition plan may be deemed a violation of the Order.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES



4. Loan Policy and Credit Administration. Within 60 days, the Bank will implement a revised
written loan policy to improve the Banks credit administration and loan portfolio management, including improving credit underwriting, describing the types of credit information required from borrowers, requiring that any extension of credit
is made only after obtaining and validating current credit information, requiring that any extension of credit is made only after obtaining and documenting the current valuation of any supporting collateral, requiring that borrowers and/or
guarantors maintain any collateral margins established in the credit approval process, prohibit the capitalization of accrued interest, insure that all exceptions to credit policy are clearly documented, implement a process for early problem loan
identification, requiring that loans be placed on non-accrual pursuant to applicable regulatory guidelines, assigning accountability for risk rating credits, and establishing prudent lending and approval limits. Where the Bank deviates from the
revised loan policy and procedures, exceptions will be clearly documented and approved by the Board. The Bank may grant, extend, renew, alter or restructure any loan or other extension of credit only after documenting the specific purpose for the
extension, identifying expected sources of repayments, structuring repayment terms to coincide with sources of repayment, documenting the value of collateral, and obtaining complete credit information.

5. Concentrations of Credit. Within 60 days, the Bank will adopt and insure adherence to a revised written CRE concentration management program to
include a written description of risk tolerance for CRE concentrations, prudent underwriting and credit administration guidelines, concentration limits, procedures for monitoring compliance with Board review of risk limits, policies to manage
concentration risks, strategies to reduce or mitigate concentrations, management information systems that stratify the loan portfolio into various segments, portfolio stress testing and sensitivity, periodic analysis of market conditions, and an
action plan to control future CRE growth.

6. Criticized Assets. Within 30 days, the Bank will implement a written program designed to
protect the Banks interest in assets criticized in its most recent examination report, and develop a program for all relationships and assets aggregating $250,000 or more. The Bank will not extend any credit to a borrower whose loans are
criticized in the recent examination report unless certain conditions set forth in the Order are met. On a monthly basis, management will provide the Board with written reports identifying problem and delinquent loans, credit exceptions, credit
related violations of law, responsible loan officer, and loans not in conformance with the Banks policies.

7. Credit and Collateral
Exceptions. The Bank will obtain current and complete credit information on all loans lacking such information. The Bank will insure proper collateral documentation is maintained on all loans and correct each collateral exception.

8. Independent Loan Review. Within 30 days, the Board will establish an effective independent and ongoing loan review program to provide for a
written report to be filed with the Board promptly after each review, and to include conclusions on the overall quality of the loan portfolio, identification of problem and delinquent loans, credit documentation exceptions, non-accrual loan status,
loan officer responsibility, credit-related violations of law, concentrations of credit, loans to insiders, and loans not in conformance with the Banks policies.

9. Allowance for Loan and Lease Losses. The Bank will implement and adhere to a program for the maintenance of an adequate allowance for loan and lease losses, to include compliance with applicable
regulatory guidelines.



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INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES



10. Appraisals of Real Property. The Bank will obtain a current independent appraisal or update
its appraisal on any loan that is secured by real property which was criticized in its most recent examination report or where the borrower has failed to comply with the terms of the loan agreement, and also on each parcel of other real estate owned
(OREO) or needed to bring an existing appraisal in conformity with applicable laws. Within 30 days, the Bank will develop and implement an independent review and analysis process to insure appraisals conform to appraisal standards and
regulations.

11. Other Real Estate Owned  Action Plans. Within 60 days, the Bank will adhere to action plans for each parcel of
OREO to assure that the assets are managed in accordance with applicable law and to include identification of responsible Bank officers, analysis of each OREO property, marketing strategies, time frames for disposition, targeted write-downs at
periodic intervals, procedures to require periodic market valuations, and periodic reports to the Board.

12. Within 60 days, the Board will
revise and maintain a comprehensive liquidity risk management program which will assess the Banks funding needs and insure access to funds to meet those needs. The program will include strategies to maintain sufficient liquidity at reasonable
costs, the preparation of liquidity reports to be reviewed monthly by the Board, and a contingency funding plan.

13. Administrative
Appeals and Extensions of Time. If the Bank requires an extension of any time frame within the Order, the Board will submit a written request to the OCC asking for relief, accompanied by relevant supporting documentation.

Going Private Transaction

The Company has filed a proxy statement on Schedule 14A, and a Schedule 13E-3 Transaction Statement on Schedule 13E-3 also has been filed, with the Securities and Exchange Commission in connection with a proposal by the Company that its
shareholders adopt an amendment to its Articles of Incorporation that will result in the reclassification of certain shares of common stock into newly authorized shares of preferred stock. If the transaction is completed, shareholders of record who
hold less than 400 shares of common stock will receive shares of preferred stock on the basis of one share of preferred stock for each share of common stock, by such shareholders. As a result, shareholders of record who hold 400 or more shares of
common stock prior to the transaction will continue to hold the same number of shares following the reclassification transaction. The effect of the transaction will be to reduce the number of shareholders of record of Company common stock to less
than 300, which will allow the Company to terminate its reporting obligations under the Securities Exchange Act of 1934, as amended.



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

None applicable



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

Evaluation of
Disclosure Controls and Procedures

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

Changes in Internal Controls Over Financial Reporting

There have been no changes in the Companys internal control over financial reporting during the first nine months of 2009 that have materially affected or are reasonably likely to materially affect
the Companys internal control over financial reporting.

Limitations on the Effectiveness of Controls

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

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



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##### Table of Contents

INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES



Part II - OTHER INFORMATION



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

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



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

None
applicable



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

None applicable



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

None applicable



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

None applicable



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

None
applicable



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



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



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##### Table of Contents

INDEPENDENT BANCSHARES, INC. AND SUBSIDIARIES

SIGNATURES

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

Date: November 13, 2009



INDEPENDENT BANCSHARES, INC.(Registrant)By:

/S/    MARK A.
IMESName:

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

/S/    NICHOLAS J.
PANICAROName:

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




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