UNITED STATES
                            SECURITIES AND EXCHANGE COMMISSION
                                  Washington, D.C.  20549

                                        FORM 10-KSB

[X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934 For the fiscal year ended December 31, 2001 OR

[_]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

       For the transition period from __________ to ___________

       Commission file number  0-31125

                              CBCT BANCSHARES, INC.
        (Exact name of small business issuer as specified in its charter)

                  Maryland                                       74-2957339
(State or other jurisdiction of incorporation                 (I.R.S. Employer
              or organization)                               Identification No.)

       312 Main Street, Smithville, Texas                          78957
    (Address of principal executive offices)                     (Zip Code)

Issuer's telephone number, including(512) 237-2482.

           Securities Registered Pursuant to Section 12(b) of the Act:
                                      None

           Securities Registered Pursuant to Section 12(g) of the Act:
                     Common Stock, par value $.01 per share
                                (Title of class)

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports) and (2) has been subject to such requirements for the past 90 days.
YES X   NO
   ---    ---

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained herein, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

     State issuer's revenues for its most recent fiscal year: $3.012 million.

     The aggregate market value of the voting stock held by non-affiliates of
the registrant, computed by reference to the average of the bid and asked prices
of such stock on the Nasdaq Stock Market as of March 25, 2002, was $4.24
million. (The exclusion from such amount of the market value of the shares owned
by any person shall not be deemed an admission by the registrant that such
person is an affiliate of the registrant.)

     As of March 25, 2002, there were issued and outstanding 291,223 shares of
the Issuer's Common Stock.

     Transitional Small Business Disclosure Format (check one): Yes [_] No [X]


<PAGE>


                                     PART I

Item 1. Business

General

     CBCT Bancshares, Inc. ("CBCT" or the "Company") was formed in 2000 by
Community Bank of Central Texas ("Community Bank" or the "Bank") under the laws
of Maryland for the purpose of becoming the savings and loan holding company of
the Bank. The Company's business consists primarily of the business of the Bank.

     Community Bank is a Texas chartered stock savings bank headquartered in
Smithville, Texas. The Bank was originally chartered in 1934. In 2000, the Bank
converted from a mutual to a stock savings bank. Community Bank currently serves
the financial needs of customers primarily in Bastrop County, Texas, its market
area, through its full service banking office located in Smithville, Texas, and
also originates loans in its primary market area and the greater metropolitan
Austin, Texas area. Its deposits are insured up to applicable limits by the
Federal Deposit Insurance Corporation ("FDIC"). At December 31, 2001, Community
Bank had total assets of $36.3 million, deposits of $27.6 million and equity of
$4.5 million (or 12.4% of total assets).

     Community Bank's principal business consists of attracting retail deposits
from the general public and investing those funds primarily in permanent loans
secured by first mortgages on owner-occupied, one- to four-family residences and
a variety of consumer loans. The Bank also originates commercial real estate
and, to a much lesser extent, construction and commercial business loans. The
Bank's revenues are derived principally from interest on loans and investment
and mortgage-backed securities. It also generates revenue from service charges
and other income. Community Bank offer a variety of deposit accounts having a
wide range of interest rates and terms, which generally include savings
accounts, money market accounts, NOW and non-interest bearing demand deposit
accounts and time deposit accounts with varied terms ranging from 30 days to 60
months. Deposits are solicited in the Bank's primary market area of Bastrop
County, and the Bank has not accepted brokered deposits. At December 31, 2001,
$12.6 million, or 62%, of the Bank's total loan portfolio consisted of one- to
four-family residential mortgage loans. The Bank also invests in mortgage-backed
and other securities and other permissible investments.

Forward-Looking Statements

     The Company has made, and may continue to make, various forward-looking
statements with respect to earnings, credit quality and other financial and
business matters for periods subsequent to December 31, 2001. The Company
cautions that these forward-looking statements are subject to numerous
assumptions, risks and uncertainties, and that statements for subsequent periods
are subject to greater uncertainty because of the increased likelihood of
changes in underlying factors and assumptions. Actual results could differ
materially from forward- looking statements.

     In addition to those factors previously disclosed by the Company and those
factors identified elsewhere herein, the following factors could cause actual
results to differ materially from such forward-looking statements: pricing
pressures on loan and deposit products; actions of competitors; changes in local
and national economic conditions; customer deposit disintermediation; changes in
customers' acceptance of the Company's products and services; the extent and
timing of legislative and regulatory actions and reforms.

     The Company's forward-looking statements speak only as of the date on which
such statements are made. By making any forward-looking statements, the Company
assumes no duty to update them to reflect new, changing or unanticipated events
or circumstances.


                                      1


<PAGE>


Lending Activities

     General. Mortgage loans carry either a fixed or an adjustable rate of
interest. Mortgage loans are generally long-term and amortize on a monthly basis
with principal and interest due each month. Community Bank's fixed rate one- to
four-family residential loans are originated for sale to the secondary market.
At December 31, 2001, the Bank's net loan portfolio totaled $20.01 million,
which constituted 55% of total assets.

     Secured loans up to $10,000 may be approved by the consumer loan officer,
up to $25,000 by the vice president of lending and up to $75,000 by the
President. Any secured loan over the individual approval limits must be approved
by the executive committee. Unsecured loans may be approved by these individuals
up to $1,000, $5,000 and $10,000, respectively.

     At December 31, 2001, the maximum amount which could have been loaned to
any one borrower and the borrower's related entities was approximately $500,000.
The largest lending relationship to a single borrower or group of related
borrowers consisted of one loan for $481,747 secured by eleven duplexes located
in Smithville, Texas. At December 31, 2001, this loan was current and performing
in accordance with its terms.

     The following table presents information concerning the composition of
Community Bank's loan portfolio in dollar amounts and in percentages as of the
dates indicated.

<TABLE>
<CAPTION>
                                                                        December 31,
                                          -----------------------------------------------------------------------
                                                   2001                     2000                    1999
                                          ---------------------     ---------------------    --------------------
                                            Amount      Percent       Amount      Percent      Amount     Percent
                                           -------     --------     --------      -------    --------    --------
                                            (Dollars in Thousands)
<S>                                       <C>          <C>          <C>          <C>         <C>              <C>
Real Estate Loans:
  One- to four-family residential          $12,587           62%    $ 14,748           66%   $ 12,068          55%
  Multi-family residential                      --           --           --           --         137           1
                                          --------     --------     --------     --------    --------    --------

    Total residential loans                 12,587           62       14,748           66      12,205          56
  Commercial real estate                     2,331           11        1,909            9       3,709          16
  Construction loans                           969            5        1,315            5       1,125           5
                                          --------     --------     --------     --------    --------    --------

    Total real estate loans                 15,887           78       17,972           80      17,039          77
                                          --------     --------     --------     --------    --------    --------

Consumer Loans:
  Other personal and installment             4,136           21        4,069           18       4,482          21

    Total consumer loans                     4,136           21        4,069           18       4,482          21
                                          --------     --------     --------     --------    --------    --------

Commercial business loans                      284            1          409            2         413           2
                                          --------     --------     --------     --------    --------    --------

Unearned discount                               --                        --                       --
Unamortized loan fees and costs                (38)                      (42)                     (42)
                                          --------                  --------                 --------

         Total loans                        20,269          100%      22,408          100%     21,892         100%
                                                       ========                  ========                ========

    Allowance for loan losses                 (257)                     (228)                    (199)
                                          --------                  --------                 --------

         Net loans receivable             $ 20,012                  $ 22,180                 $ 21,693
                                          ========                  ========                 ========
</TABLE>


                                       2
<PAGE>


     The following schedule illustrates the contractual maturity of Community
Bank's loan portfolio at December 31, 2001. Mortgages which have adjustable or
renegotiable interest rates are shown as maturing in the period during which the
contract is due. The schedule does not reflect the effects of possible
prepayments or enforcement of due-on-sale clauses.
<TABLE>
<CAPTION>
                                       One Year   Over One Year to  Over Five
                                        or Less      Five Years       Years     Total
                                        -------      --------        -------    ------
                                                     (Dollars in Thousands)
<S>                                     <C>          <C>             <C>       <C>
One- to-four family residential loans   $ 4,599      $ 5,465         $ 2,523   $12,587
All other loans                           3,763        3,790             167     7,720

                                        $ 8,362      $ 9,255         $ 2,690    20,307
                                        =======      =======         =======   =======

Unamortized fees and costs                                                         (38)
Allowance for loan losses                                                         (257)
                                                                               -------

    Net loans                                                                  $20,012
                                                                               =======
</TABLE>

     Of total loans of $20.3 million at December 31, 2001, approximately $7.7
million have fixed rates of interest and approximately $12.6 million have
adjustable rates of interest.

     One- to Four-Family Residential Real Estate Lending. At December 31, 2001,
one- to four-family residential mortgage loans totaled $12.6 million, or 62.07%
of our gross loan portfolio. Community Bank generally underwrites one- to
four-family loans based on the applicant's employment and credit history and the
appraised value of the subject property. Presently, the Bank will lend up to 90%
of the lesser of the appraised value or purchase price for one- to four-family
residential loans. For loans with a loan-to-value ratio in excess of 80%, the
Bank generally requires private mortgage insurance in order to reduce its
exposure below 80%. Properties securing one- to four-family loans are generally
appraised by independent fee appraisers approved by the board of directors.
Borrowers are required to obtain title and hazard insurance, and flood
insurance, if necessary, in an amount not less than the value of the property
improvements.

     Community Bank currently originates one- to four-family mortgage loans on
either a fixed- or adjustable-rate basis, as consumer demand dictates. The
Bank's pricing strategy for mortgage loans includes setting interest rates that
are competitive with Freddie Mac and other local financial institutions, and
consistent with the Bank's internal needs. Adjustable-rate mortgage, or ARM
loans, are offered with either a one-year, three-year or, to a lesser extent,
five-year term to the initial repricing date. After the initial period, the
interest rate for each ARM loan adjusts on an annual basis. The Bank uses the
Wall Street Journal prime rate to reprice ARM loans. During the year ended
December 31, 2001, Community Bank originated $1.6 million of one- to four-family
ARM loans and $2.9 million of one- to four-family fixed rate mortgage loans.

     Fixed-rate loans originated for sale to the secondary market are secured by
one- to four-family residences, have contractual maturities of up to 30 years,
are generally fully amortizing and have payments due monthly. A significant
change in the current level of interest rates could alter the average life of a
residential loan in the Bank's portfolio considerably. The Bank's one- to
four-family loans do not contain prepayment penalties and do not permit negative
amortization of principal. Most are written using underwriting guidelines which
make them saleable in the secondary market. The Bank's real estate loans
generally contain a "due on sale" clause allowing it to declare the unpaid
principal balance due and payable upon the sale of the security property.

     Community Bank's one- to four-family residential ARM loans are fully
amortizing loans with contractual maturities of up to 30 years and payments due
monthly. ARM loans generally provide for specified minimum and maximum interest
rates, with a lifetime cap and floor, and a periodic adjustment on the interest
rate over the rate in


                                      3


<PAGE>


effect on the date of origination. As a consequence of using caps, the interest
rates on these loans may not be as rate sensitive as is the cost of funds.

     ARM loans generally pose different credit risks than fixed-rate loans,
primarily because as interest rates rise, the borrower's payment rises,
increasing the potential for default. The Bank has not experienced difficulty
with the payment history for these loans. See "- Asset Quality --Non-Performing
Assets" and "-- Classified Assets." At December 31, 2001, the one- to
four-family ARM loan portfolio totaled $10.3 million, or 50.74% of the Bank's
gross loan portfolio. At that date the fixed-rate one- to four-family mortgage
loan portfolio totaled $2.5 million, or 12.32% of the Bank's gross loan
portfolio.

     Multi-Family Residential and Commercial Real Estate Lending. Community Bank
offers a variety of multi-family residential and commercial real estate loans.
These loans are secured primarily by small retail establishments, rental
properties, small office buildings and storage facilities located in our primary
market area. At December 31, 2001, multi-family residential and commercial real
estate loans totaled $2.3 million or 11.33% of the Bank's gross loan portfolio.

     The Bank's currently originated loans secured by multi-family residential
and commercial real estate are originated with an adjustable interest rate. The
interest rate on these loans is generally tied to the prime rate of interest.
Loan-to-value ratios on our multi-family residential and commercial real estate
loans typically do not exceed 80% of the appraised value of the property
securing the loan. These loans typically require monthly payments, are fully
amortizing and have maximum maturities of 20 years.

     Loans secured by multi-family residential and commercial real estate are
underwritten based on the income producing potential of the property and the
financial strength of the borrower. The net operating income, which is the
income derived from the operation of the property less all operating expenses,
must be sufficient to cover the payments related to the outstanding debt.
Community Bank may require an assignment of rents or leases in order to be
assured that the cash flow from the project will be used to repay the debt.
Appraisals on properties securing multi-family residential and commercial real
estate loans are performed by independent state licensed fee appraisers approved
by the board of directors. See "-- Loan Originations, Purchases, Sales and
Repayments."

     Loans secured by multi-family residential and commercial real estate
properties are generally larger and involve a greater degree of credit risk than
one- to four-family residential mortgage loans. Because payments on loans
secured by multi-family residential and commercial real estate properties are
often dependent on the successful operation or management of the properties,
repayment of such loans may be subject to adverse conditions in the real estate
market or the economy. If the cash flow from the project is reduced, or if
leases are not obtained or renewed, the borrower's ability to repay the loan may
be impaired. See "- Asset Quality -- Non-Performing Loans."

     Construction and Development Lending. Community Bank originates
construction loans to builders and to individuals for the construction of their
residences. Substantially all of these loans are secured by property located
within the Bank's market area or within the greater metropolitan Austin, Texas
area. At December 31, 2001, the Bank had $1.0 million in construction and
development loans outstanding, representing 4.93% of its gross loan portfolio.

     Construction and development loans are obtained through continued business
with builders who have previously borrowed from us, from walk-in customers and
through referrals from existing customers and realtors. The application process
includes submission of accurate plans, specifications and costs of the project
to be constructed. These items are used as a basis to determine the appraised
value of the subject property. Loans are based on the lesser of current
appraised value and the cost of construction, including the land and the
building. Community Bank generally conducts regular inspections of the
construction project being financed.

     Loans to individuals for the construction of their residences may be either
short term construction financing or a construction/permanent loan which
automatically converts to a long term mortgage consistent with our one- to
four-family residential loan products. Loan-to-value ratios on our construction
and development loans


                                      4


<PAGE>


typically do not exceed 85% of the appraised value of the project on an as
completed basis. Single family construction loans with a loan-to-value ratio
over 80% require private mortgage insurance.

     Because of the uncertainties inherent in estimating construction and
development costs and the market for the project upon completion, it is
relatively difficult to evaluate accurately the total loan funds required to
complete a project, the related loan-to-value ratios and the likelihood of
ultimate success of the project. These loans also involve many of the same risks
discussed above regarding commercial real estate loans and tend to be more
sensitive to general economic conditions than many other types of loans. In
addition, payment of interest from loan proceeds can make it difficult to
monitor the progress of a project.

     Consumer and Other Lending. Consumer loans generally have shorter terms to
maturity, which reduces our exposure to changes in interest rates, and carry
higher rates of interest than do one- to four-family residential mortgage loans.
In addition, management believes that offering consumer loan products helps to
expand and create stronger ties to our existing customer base by increasing the
number of customer relationships and providing cross-marketing opportunities. At
December 31, 2001, Community Bank's consumer loan portfolio totaled $4.1
million, or 20.23% of our gross loan portfolio. The Bank offers a variety of
secured consumer loans, including home equity loans, auto loans, boat and
recreational vehicle loans and loans secured by savings deposits. The Bank also
offers a limited amount of unsecured loans. Consumer and commercial business
loans are originated in the Bank's market area.

     Community Bank's home equity loans totaled $1.3 million, and comprised
6.40% of the gross loan portfolio at December 31, 2001. These loans may be
originated in amounts, together with the amount of the existing first mortgage,
of up to 80% of the value of the property securing the loan. The term to
maturity on the Bank's home equity loans may be up to 20 years.

     Community Bank originates auto loans, boat loans and recreational vehicle
loans on a direct basis. These loans totaled $2.4 million at December 31, 2001,
or 11.84% of the Bank's gross loan portfolio. Auto, boat and recreational
vehicle loans may be written for up to five years and usually have fixed rates
of interest. Loan to value ratios for automobile loans are up to 100% of the
sales price for new autos and up to 100% of value on used cars, based on
valuation from official used car guides.

     Consumer loans may entail greater risk than do one- to four-family
residential mortgage loans, particularly in the case of consumer loans which are
secured by rapidly depreciable assets, such as automobiles, boats and
recreational vehicles. In these cases, any repossessed collateral for a
defaulted loan may not provide an adequate source of repayment of the
outstanding loan balance. As a result, consumer loan collections are dependent
on the borrower's continuing financial stability and, thus, are more likely to
be adversely affected by job loss, divorce, illness or personal bankruptcy.

     Community Bank intends to expand its consumer and other lending in the
future to include commercial business lending. Commercial business loans are
loans extended to finance local businesses and include short term loans to
finance machinery and equipment purchases and inventory.

     Unlike residential mortgage loans, commercial business loans are typically
made on the basis of the borrower's ability to make repayment from the cash flow
of the borrower's business. As a result, the availability of funds for the
repayment of commercial business loans may be substantially dependent on the
success of the business itself (which, in turn, is often dependent in part upon
general economic conditions). Commercial business loans are usually, but not
always, secured by business assets. However, the collateral securing the loans
may depreciate over time, may be difficult to appraise and may fluctuate in
value based on the success of the business.

Loan Originations, Purchases, Sales and Repayments

     Community Bank originates loans through referrals from real estate brokers
and builders, our marketing efforts, and our existing and walk-in customers.
While the Bank originates both adjustable-rate and fixed-rate loans, the Bank's
ability to originate loans is dependent upon customer demand for loans in our
market areas. Demand is affected by local competition and the interest rate
environment. During the last several years, due to low


                                      5


<PAGE>


market interest rates, the Bank's dollar volume of fixed-rate, one- to
four-family loans has exceeded the dollar volume of the same type of
adjustable-rate loans. The majority of the time, the Bank sells fixed rate, one-
to four-family residential loans. Furthermore, during the past few years,
Community Bank, like many other financial institutions, has experienced
significant prepayments on loans due to the low interest rate environment
prevailing in the United States.

     In periods of economic uncertainty, the ability of financial institutions,
including Community Bank, to originate or purchase large dollar volumes of real
estate loans may be substantially reduced or restricted, with a resultant
decrease in interest income.

     The following table shows the loan origination and repayment activities of
Community Bank for the periods indicated, and includes loans originated for both
its own portfolio and for sale in the secondary market.

                                                  Years Ended December 31,
                                            ----------------------------------
                                             2001         2000          1999
                                            -------     --------     ---------
                                                 (Dollars in Thousands)

Total loans, beginning of year.........     $22,408      $21,892       $21,071

Loan originations:
   Real estate loans...................       5,908        5,718         9,414
   Consumer loans......................       2,010        1,465         2,405
   Other loans.........................         439        1,145           173
                                            -------      -------       -------

     Total loan originations...........       8,357        8,328        11,992
                                            -------      -------       -------

Loan repayments and sales..............     (10,496)      (7,812)      (11,171)
                                            -------      -------       -------

Total loans, end of period.............     $20,269      $22,408       $21,892
                                            =======      =======       =======

Asset Quality

     When a borrower fails to make a payment on a mortgage loan on or before the
default date, Community Bank mails a delinquency notice to the borrower when the
loan is 10 days past due. When the loan is 15 days past due, the Bank mails a
subsequent delinquent notice to the borrower. All delinquent accounts are
reviewed by loan personnel, who attempt to cure the delinquency by contacting
the borrower once the loan is 30 days past due. If the loan becomes 60 days
delinquent, the collector will generally contact by phone or send a personal
letter to the borrower in order to identify the reason for the delinquency. Once
the loan becomes 90 days delinquent, contact with the borrower is made
requesting payment of the delinquent amount in full, or the establishment of an
acceptable repayment plan to bring the loan current. If an acceptable repayment
plan has not been agreed upon, loan personnel will generally refer the account
to legal counsel, with instructions to prepare a notice of intent to foreclose.
The notice of intent to foreclose allows the borrower up to 30 days to bring the
account current. Once the loan becomes 120 days delinquent, and an acceptable
repayment plan has not been agreed upon, the collection officer will turn over
the account to our legal counsel with instructions to initiate foreclosure.

     For consumer loans a similar process is followed, with the initial written
contact being made once the loan is 7 days past due. Follow-up contacts are
generally on an accelerated basis compared to the mortgage loan procedure.


                                      6


<PAGE>


     Delinquent Loans. The following table sets forth our loans delinquent 60
days or more by type, number, amount and percentage of type at December 31,
2001.


<TABLE>
<CAPTION>
                    60 to 89 days past due       90 days and over past due   Total over 60 days past due
                  --------------------------    --------------------------   ---------------------------
                                    Percent                       Percent                        Percent
                                    of Loan                       of Loan                        of Loan
                  Number   Amount   Category    Number   Amount   Category   Number    Amount   Category
                  ------   ------   --------    ------   ------   --------   ------    ------   --------
                                                  (Dollars in Thousands)
<S>                   <C>    <C>       <C>          <C>    <C>        <C>        <C>     <C>        <C>
Real estate:
   Residential         2     $ 72      0.57%        --     $ --                   2      $ 72       0.57%
   Commercial         --       --                   --       --                  --        --
   Construction       --       --                   --       --                  --        --

Other:
   Consumer            4       13      0.31%        13       86       2.08%                99       2.39%
   Commercial         --       --                   --       --                  17        --
                                                           ----                ----     -----

Total                  6     $ 85                   13     $ 86                  19     $ 171
                     ===     ====                  ===     ====                ====     =====
</TABLE>

     Non-Performing Assets. The table below sets forth the amounts and
categories of non-performing assets in Community Bank's loan portfolio.
Non-performing assets consist of non-accrual loans, accruing loans past due 90
days and more, and foreclosed assets. Loans to a customer whose financial
condition has deteriorated are considered for non-accrual status whether or not
the loan is 90 days and over past due. All loans past due 90 days and over are
classified as non-accrual. On non-accrual loans, interest income is not
recognized until actually collected. At the time the loan is placed on
non-accrual status, interest previously accrued but not collected is reversed
and charged against current income.

     Foreclosed assets consist of real estate and other assets which have been
acquired through foreclosure on loans. At the time of foreclosure, assets are
recorded at the lower of their estimated fair value less selling costs or the
loan balance, with any write-down charged against the allowance for loan losses.
At all dates presented, Community Bank had no troubled debt restructurings which
involve forgiving a portion of interest or principal on any loans or making
loans at a rate materially less than that of market rates.


                                      7

<PAGE>


                                                                December 31,
                                                                ------------
                                                           2001    2000    1999
                                                           ----    ----    ----
                                                          (Dollars in Thousands)
Non-accruing loans:
  One-to-four family residential                           $ --    $ --    $ 60
  Multi-family residential                                   --      --      --
  Commercial real estate                                     --      --      --
  Commercial non-real estate                                 --      --      --
  Consumer                                                    7      --       1
                                                           ----    ----    ----

     Total                                                    7      --      61
                                                           ----    ----    ----

Accruing loans past due 90 days and over:
  One-to-four family residential                             --      --      --
  Multi-family residential                                   --      --      --
  Commercial real estate                                     --      --      --
  Commercial non-real estate                                 --      --      --
  Consumer                                                   86      12       7
                                                           ----    ----    ----

     Total                                                   86      12       7
                                                           ----    ----    ----

Total non-performing loans                                   93      12      68

Foreclosed assets                                            --       3      --
                                                           ----    ----    ----

Total non-performing assets                                $ 93    $ 15    $ 68
                                                           ====    ====    ====

Allowance for loan losses                                  $257    $228    $199
                                                           ====    ====    ====

Coverage of non-performing loans                            276%   1900%    293%
                                                           ====    ====    ====

Non-performing assets as a percentage of total assets      0.25%   0.03%   0.16%
                                                           ====    ====    ====

     Other Loans of Concern. In addition to the non-performing assets set forth
in the table above, as of December 31, 2001, there was also an aggregate of
$132,000 in net book value of loans with respect to which known information
about the possible credit problems of the borrowers have caused management to
have doubts as to the ability of the borrowers to comply with present loan
repayment terms and which may result in the future inclusion of such items in
the non-performing asset categories. These loans have been considered in
management's determination of the adequacy of our allowance for loan losses.

     Classified Assets. Regulations provide for the classification of loans and
other assets, such as debt and equity securities considered by regulators to be
of lesser quality, as "substandard," "doubtful" or "loss." An asset is
considered "substandard" if it is inadequately protected by the current net
worth and paying capacity of the obligor or of the collateral pledged, if any.
"Substandard" assets include those characterized by the "distinct possibility"
that the insured institution will sustain "some loss" if the deficiencies are
not corrected. Assets classified as "doubtful" have all of the weaknesses
inherent in those classified "substandard," with the added characteristic that
the weaknesses present make "collection or liquidation in full," on the basis of
currently existing facts, conditions, and values, "highly questionable and
improbable." Assets classified as "loss" are those considered "uncollectible"
and of such little value that their continuance as assets without the
establishment of a specific loss reserve is not warranted.


                                      8

<PAGE>

     When an insured institution classifies problem assets as either substandard
or doubtful, it may establish general allowances for loan losses in an amount
deemed prudent by management and approved by the board of directors. General
allowances represent loss allowances which have been established to recognize
the inherent risk associated with lending activities, but which, unlike specific
allowances, have not been allocated to particular problem assets. When an
insured institution classifies problem assets as "loss," it is required either
to establish a specific allowance for losses equal to 100% of that portion of
the asset so classified or to charge off such amount. An institution's
determination as to the classification of its assets and the amount of its
valuation allowances is subject to review by the FDIC, which may order the
establishment of additional general or specific loss allowances.

     In connection with Community Bank's filing of periodic reports with the
FDIC and in accordance with the Bank's classification of assets policy, the Bank
regularly reviews the problem assets in its portfolio to determine whether any
assets require classification in accordance with applicable regulations. On the
basis of management's review of assets, at December 31, 2001, $225,000 of assets
were classified as substandard, $0 as doubtful and $2,800 as loss. The total
amount classified represented 3.94% of the Bank's equity capital and 0.60% of
the Bank's assets at December 31, 2001.

     Provision for Loan Losses. The provision for loan losses is charged to
income to bring our allowance for loan losses to a level deemed appropriate by
management based on the factors discussed below under "-- Allowance for Loan
Losses." The provision for loan losses during the year ended December 31, 2001
was based on management's review of such factors which indicated that the
allowance for loan losses was adequate to cover losses inherent in the loan
portfolio as of December 31, 2001.

     Allowance for Loan Losses. Community Bank maintains an allowance for loan
losses to absorb losses inherent in the loan portfolio. The allowance is based
on ongoing, quarterly assessments of the estimated losses inherent in the loan
portfolio. The methodology for assessing the appropriateness of the allowance
consists of several key elements, which include the formula allowance, specific
allowances for identified problem loans and portfolio segments and the
unallocated allowance. In addition, the allowance incorporates the results of
measuring impaired loans as provided in SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan" and SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures." These accounting
standards prescribe the measurement methods, income recognition and disclosures
related to impaired loans.

     The formula allowance is calculated by applying loss factors to outstanding
loans based on the internal risk evaluation of the loans or pools of loans.
Changes in risk evaluations of both performing and nonperforming loans affect
the amount of the formula allowance. Loss factors are based both on our
historical loss experience as well as on significant factors that, in
management's judgment, affect the collectibility of the portfolio as of the
evaluation date.

     The appropriateness of the allowance is reviewed by management based upon
its evaluation of then-existing economic and business conditions affecting the
Bank's key lending areas and other conditions, such as credit quality trends
(including trends in nonperforming loans expected to result from existing
conditions), collateral values, loan volumes and concentrations, specific
industry conditions within portfolio segments and recent loss experience in
particular segments of the portfolio that existed as of the balance sheet date
and the impact that such conditions were believed to have had on the
collectibility of the loan. Senior management reviews these conditions quarterly
in discussions with the Bank's senior credit officers. To the extent that any of
these conditions is evidenced by a specifically identifiable problem credit or
portfolio segment as of the evaluation date, management's estimate of the effect
of such condition may be reflected as a specific allowance applicable to such
credit or portfolio segment. Where any of these conditions is not evidenced by a
specifically identifiable problem credit or portfolio segment as of the
evaluation date, management's evaluation of the loss related to this condition
is reflected in the unallocated allowance. The evaluation of the inherent loss
with respect to these conditions is subject to a higher degree of uncertainty
because they are not identified with specific problem credits or portfolio
segments.

     The allowance for loan losses is based on estimates of losses inherent in
the loan portfolio. Actual losses can vary significantly from the estimated
amounts. Community Bank's methodology as described permits adjustments to any
loss factor used in the computation of the formula allowance in the event that,
in management's judgment, significant factors which affect the collectibility of
the portfolio as of the evaluation date are not reflected


                                      9


<PAGE>


in the loss factors. By assessing the estimated losses inherent in the loan
portfolio on a quarterly basis, the Bank is able to adjust specific and inherent
loss estimates based upon any more recent information that has become available.

     At December 31, 2001, Community Bank's allowance for loan losses was
$256,710 or 1.27% of the total loan portfolio and approximately 276% of total
non-performing loans. Assessing the adequacy of the allowance for loan losses is
inherently subjective as it requires making material estimates, including the
amount and timing of future cash flows expected to be received on impaired
loans, that may be susceptible to significant change. In the opinion of
management, the allowance, when taken as a whole, is adequate to absorb
reasonable estimated loan losses inherent in our loan portfolios.

     The following table sets forth an analysis of our allowance for loan
losses.

<TABLE>
<CAPTION>
                                                          Years Ended December 31,
                                                  ----------------------------------
                                                     2001         2000         1999
                                                  --------     --------     --------
                                                         (Dollars in Thousands)

<S>                                               <C>          <C>          <C>
Total loans outstanding (at end of period)        $ 20,306     $ 22,408     $ 21,892
                                                  ========     ========     ========

Average loans outstanding (period to date)        $ 20,942     $ 23,854     $ 21,485
                                                  ========     ========     ========

Allowance for loan losses, beginning of period    $    228     $    199     $    181

Loan charge-offs:
   One- to four-family residential                      --           --           --
   Multi-family residential                             --           --           --
   Commercial real estate                               --           --           --
   Construction                                         --           --           --
   Consumer loans                                       (9)          (5)         (12)
   Commercial loans                                     --           --           --
                                                  --------     --------     --------
      Total loan charge-offs                            (9)          (5)         (12)
                                                  --------     --------     --------

Loan recoveries:
   One- to four-family residential                      --           --           30
   Multi-family residential                             --           --           --
   Commercial real estate                               --           --           --
   Construction                                         --           --           --
   Consumer loans                                        2           --           --
   Commercial loans                                     --           --           --
                                                  --------     --------     --------
      Total loan recoveries                              2           --           30
                                                  --------     --------     --------

Net loan (charge-offs) recoveries                       (7)          (5)          18
Provision charged to operations                         36           34           --

Allowance for loan losses, end of period          $    257     $    228     $    199
                                                  ========     ========     ========

Ratio of net loan charge-offs during the period
   to average loans outstanding                       0.03%        0.02%       (0.08)%
                                                  ========     ========     ========

Provision as a percentage of average loans            0.17%        0.14%      0.00 %
                                                  ========     ========     ========

Allowance as a percentage of total loans              1.26%        1.02%      0.91 %
                                                  ========     ========     ========
</TABLE>


                                      10

<PAGE>

     The allowance for loan losses is established through charges to operations
in the form of a provision for loan losses. Loans, or portions thereof, which
are considered to be uncollectible are charged against the allowance and
subsequent recoveries, if any, are credited to the allowance. The allowance
represents the amount, which in the judgment of the Bank's management, will be
adequate to absorb possible losses. The adequacy of the allowance is determined
by management's continuous evaluation of the loan portfolio and the Asset
Committee of the Board of Directors. Industry concentrations, specific credit
risks, past loan loss experience, delinquency ratios, current loan portfolio
quality and projected economic conditions in the Bank's market areas are
pertinent factors in determining the adequacy of the allowance for loan losses.
Loans identified as losses by management are charged off.

     At December 31, 2001, the Bank had specific loan loss reserves of $0 and
general, unallocated loan loss reserves of $256,710.

     The distribution of the allowance for losses on loans at the dates
indicated is summarized as follows.

<TABLE>
<CAPTION>
                                       December 31, 2001      December 31, 2000      December 31, 1999
                                     ---------------------   ---------------------- -------------------
                                               Percent of             Percent of             Percent of
                                                 Loans                  Loans                  Loans
                                                in Each                in Each                in Each
                                               Category               Category               Category
                                                   to                     to                     to
                                     Amount   Total Loans   Amount   Total Loans   Amount   Total Loans
                                     ------   -----------   ------   -----------   ------   -----------
                                                           (Dollars in Thousands)

<S>                                    <C>        <C>         <C>        <C>         <C>         <C>
One- to four-family residential ...    $ 68        62%        $ 60        64%        $ 53        53%
Multi-family residential ..........       1        --            1        --            1         1
Commercial real estate ............      23        12           21        10           18        18
Construction loans ................       7         5            6         6            5         5
Home equity .......................      11         1           10         3            8         3
Automobile loans ..................      58        12           21        11           45        14
Other personal and investment loans      25         8           22         6           20         6
Unallocated .......................      64        --           57        --           50        --
                                       ----       ---         ----       ---         ----       ---
                                       $257       100%        $228       100%        $199       100%
                                       ====       ===         ====       ===         ====       ===
</TABLE>

Investment Activities

     Community Bank is authorized to invest in various types of liquid assets,
including United States Treasury obligations, securities of various federal
agencies, including callable agency securities, certificates of deposit of
insured banks and savings institutions, bankers' acceptances, repurchase
agreements and federal funds. Subject to various restrictions, savings
institutions may also invest their assets in investment grade commercial paper
and corporate debt securities and mutual funds whose assets conform to the
investments that a federally chartered savings institution is otherwise
authorized to make directly. See "How We Are Regulated - Community Bank" for a
discussion of additional restrictions on our investment activities.

     The president has the basic responsibility for the management of our
investment portfolio, subject to the direction and guidance of the
Investment/Asset and Liability Management Committee. The president considers
various factors when making decisions, including the marketability, maturity and
tax consequences of the proposed investment. The maturity structure of
investments will be affected by various market conditions, including the current
and anticipated slope of the yield curve, the level of interest rates, the trend
of new deposit inflows, and the anticipated demand for funds via deposit
withdrawals and loan originations and purchases.

     The current objectives of the investment portfolio are to provide liquidity
when loan demand is high, to assist in maintaining earnings when loan demand is
low and to maximize earnings while satisfactorily managing risk, including
credit risk, reinvestment risk, liquidity risk and interest rate risk.

     Community Bank's investment securities currently consist of state and
political subdivision securities, mortgage-backed securities, and U.S. Agency
obligations. See Note 2 of the Notes to Consolidated Financial


                                      11


<PAGE>


Statements. The Bank's mortgage-backed securities portfolio currently consists
of securities issued under government-sponsored agency programs.

     While mortgage-backed securities, carry a reduced credit risk as compared
to whole loans, these securities remain subject to the risk that a fluctuating
interest rate environment, along with other factors like the geographic
distribution of the underlying mortgage loans, may alter the prepayment rate of
the mortgage loans and so affect both the prepayment speed, and value, of the
securities.

     Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," requires that investments be
categorized as "held to maturity," "trading securities" or "available for sale,"
based on management's intent as to the ultimate disposition of each security.
Statement of Financial Accounting Standards No. 115 allows debt securities to be
classified as "held to maturity" and reported in financial statements at
amortized cost only if the reporting entity has the positive intent and ability
to hold those securities to maturity. Securities that might be sold in response
to changes in market interest rates, changes in the security's prepayment risk,
increases in loan demand, or other similar factors cannot be classified as "held
to maturity." Debt and equity securities held for current resale are classified
as "trading securities." These securities are reported at fair value, and
unrealized gains and losses on the securities would be included in earnings.
Community Bank does not currently use or maintain a trading account. Debt and
equity securities not classified as either "held to maturity" or "trading
securities" are classified as "available for sale." These securities are
reported at fair value, and unrealized gains and losses on the securities are
excluded from earnings and reported, net of deferred taxes, as a separate
component of equity.

     The following table sets forth the composition of Community Bank's
investment and mortgage-related securities portfolio and other investments at
the dates indicated. The investment securities portfolio at December 31, 2001,
did not contain securities of any issuer with an aggregate book value in excess
of 10% of our equity capital, excluding those issued by the United States
Government or its agencies.

<TABLE>
<CAPTION>
                                                                 December 31,
                                       ------------------------------------------------------------
                                               2001                2000                 1999
                                       -----------------   ------------------    ------------------
                                       Carrying    % of    Carrying      % of    Carrying     % of
                                         Value     Total     Value      Total      Value      Total
                                         -----     -----     -----      -----      -----      -----
                                                          (Dollars in Thousands)
<S>                                    <C>           <C>    <C>          <C>     <C>           <C>
Securities available for sale,
   at fair value:
   State and political subdivision     $    78         1%   $   114         2%   $   148         1%
   Mortgage-backed securities            9,542        91      2,279        37     15,898        98
   U.S. Agency securities                  519         5      3,356        55         --        --
   Marketable equity securities            332         3        338         6        231         1
                                       -------       ---    -------       ---    -------       ---

     Total                             $10,461       100%   $ 6,087       100%   $ 16,27       100%
                                       =======       ===    =======       ===    =======       ===


Securities to be held to maturity,
   at amortized cost:
   State and political subdivision$         --        --%   $    --        --%   $    --        --%
   Mortgage-backed securities            1,009        34      2,656        47         --        --
   Other                                 1,996        66      2,991        53         --        --
                                       -------       ---    -------       ---    -------       ---

     Total                             $ 3,005       100%   $ 5,647       100%   $    --       --%
                                       =======       ===    =======       ===    =======       ===

Securities to be held to maturity,
         a value                       $ 3,063              $ 5,687              $    --
                                       =======              =======              =======
</TABLE>


                                      12


<PAGE>


     The composition and maturities of the investment securities and
mortgage-backed securities portfolio, excluding Federal Home Loan Bank stock and
our trading portfolio as of December 31, 2001 are indicated in the following
table.

<TABLE>
<CAPTION>
                                      Less than 1 Year    1 to 5 Years      5 to 10 Years     Over 10 Years    Total Securities
                                      ----------------   ---------------   ---------------   ---------------   ----------------
                                               Average           Average           Average           Average           Average
                                       Amount   Yield     Amount  Yield     Amount  Yield     Amount  Yield     Amount  Yield
                                      ----------------   ---------------   ---------------   ---------------   ---------------
                                                                        (Dollars in Thousands)
<S>                                   <C>         <C>    <C>        <C>     <C>       <C>    <C>        <C>    <C>        <C>
Securities available for sale, at
   fair value:
   State and political subdivisions   $    36     5.75%  $    42    5.75%   $    --     --%  $    --      --%  $    78    5.75%
   Mortgage_backed securities              --                682    6.64      4,705   5.27     4,155    5.79     9,542    5.59
   U.S. Agency securities                  --                519    4.15         --     --        --      --       519    4.65
   Marketable equity securities            --       --        --      --         --     --        --      --       322      --
                                      -------     ----   -------    ----    -------   ----   -------    ----   -------    ----

       Total                          $    36     5.75%  $ 1,243    5.78%   $ 4,705   5.27%  $ 4,155    5.79%  $10,461    5.37%
                                      =======     ====   =======    ====    =======   ====   =======    ====   =======    ====

Securities to be held to maturity,
    at cost:
    Mortgage_backed securities        $    --       --%  $   806    6.30%   $    --     --%  $   203    8.52%  $1,009     6.74%
    U.S. Agency securities              1,996     6.67        --      --         --     --       --      --     1,996     6.67
                                      -------     ----   -------    ----    -------   ----   -------    ----   -------    ----

       Total                          $ 1,996     6.67%  $   806    6.30%   $    --     --%  $   203    8.52%  $ 3,005    6.70%
                                      =======     ====   =======    ====    =======   ====   =======    ====   =======    ====
</TABLE>

Marketable equity securities are shown in the over 10 years column.

Interest earned on tax-exempt securities has not been computed on a
tax-equivalent basis because of the insignificant amount of these securities
owned.


                                      13


<PAGE>


Sources of Funds

     General. Community Bank's sources of funds are deposits, borrowings,
payment of principal and interest on loans, interest earned on or maturation of
other investment securities and funds provided from operations.

     Deposits. The Bank offers a variety of deposit accounts to both consumer
and businesses having a wide range of interest rates and terms. Deposits consist
of NOW accounts, time deposit accounts, savings and money market and demand
accounts and certificates of deposit. The Bank solicit deposits in its market
areas and has not accepted brokered deposits. The Bank primarily relies on
competitive pricing policies, marketing and customer service to attract and
retain these deposits.

     The flow of deposits is influenced significantly by general economic
conditions, changes in money market and prevailing interest rates and
competition. The variety of deposit accounts we offer has allowed us to be
competitive in obtaining funds and to respond with flexibility to changes in
consumer demand. Community Bank has become more susceptible to short-term
fluctuations in deposit flows, as customers have become more interest rate
conscious. The Bank tries to manage the pricing of its deposits in keeping with
its asset/liability management, liquidity and profitability objectives, subject
to competitive factors. Based on experience, the Bank believes that its deposits
are relatively stable sources of funds. Despite this stability, the ability to
attract and maintain these deposits and the rates paid on them has been and will
continue to be significantly affected by market conditions.

     The following table sets forth the dollar amount of savings deposits in the
various types of deposit programs we offered at the dates indicated.

<TABLE>
<CAPTION>
                                                         December 31,
                                  -----------------------------------------------------------
                                        2001                 2000                1999
                                  -----------------  -------------------   ------------------
                                   Amount   Percent     Amount   Percent     Amount   Percent
                                  -------  --------  ---------  --------   --------   -------
                                                    (Dollars in Thousands)
<S>                               <C>           <C>    <C>           <C>    <C>           <C>
Noninterest-bearing accounts ..   $ 1,640         6%   $   707         3%   $   377         1%
Savings accounts ..............     1,763         6      1,537         6      1,770         5
NOW and money market accounts .     4,831        18      4,923        18      4,852        15
                                  -------   -------    -------   -------    -------   -------
    Total non-certificates ....     8,234        30      7,167        27      6,999        21
                                  -------   -------    -------   -------    -------   -------
Certificates of deposit:
    2.00% to 2.99% ............     5,315        19
    3.00% to 3.99% ............     4,660        17
    4.00% to 4.99% ............     2,469         9      3,054        11     15,230        47
    5.00% to 5.99% ............     3,302        12     11,990        43      7,120        22
    6.00% to 6.99% ............     3,575        13      5,374        19      3,005        10
                                  -------   -------    -------   -------    -------   -------
    Total certificates ........    19,321        70     20,418        73     25,355        79
                                  -------   -------    -------   -------    -------   -------
       Total deposits .........   $27,555       100%   $27,585       100%   $32,354       100%
                                  =======   =======    =======   =======    =======   =======
</TABLE>


                                      14


<PAGE>


     The following table shows rate and maturity information for Community
Bank's certificates of deposit as of December 31, 2001.

                                                               Weighted Average
                                                      Amount        Rate
                                                      ------        ----
                                                    (Dollars in Thousands)
Certificate accounts maturing within:
One month                                            $ 1,168        5.11%
One to three months                                    3,739        4.21
Three to six months                                    5,686        3.79
Nine to twelve months                                  4,764        4.07
One to three years                                     3,587        4.40
Over three years                                         377        4.59
                                                     -------        ----
     Total                                           $19,321        4.14%
                                                     =======        ====

     The following table indicates the amount of Community Bank's certificates
of deposit and other deposits by time remaining until maturity as of December31,
2001.

<TABLE>
<CAPTION>
                                                       Maturity
                                              ----------------------------
                                                         Over
                                             3 Months   3 to 12     Over
                                              or Less   Months   12 months   Total
                                              -------   ------   ---------   -----
                                                           (In Thousands)

<S>                                           <C>       <C>        <C>      <C>
Certificates of $100,000 and over .........   $   547   $ 1,434    $   547  $ 2,528

Certificates of deposit of $100,000 or more     4,360     9,420      3,013   16,793
                                              -------   -------    -------  -------

Total certificates of deposit .............   $ 4,907   $10,854    $ 3,560  $19,321
                                              =======   =======    =======  =======
</TABLE>


                                      15

     <PAGE>

     Borrowings. Although deposits are Community Bank's primary source of funds,
the Bank may utilize borrowings when they are a less costly source of funds, and
can be invested at a positive interest rate spread, when additional capacity to
fund loan demand is desired or when such borrowings meet our asset/liability
management goals. Borrowings historically have consisted of advances from the
Federal Home Loan Bank of Dallas. See Note 8 of the Notes to Consolidated
Financial Statements.

     We may obtain advances from the Federal Home Loan Bank of Dallas upon the
security of our mortgage loans and mortgage-backed securities. These advances
may be made pursuant to several different credit programs, each of which has its
own interest rate, range of maturities and call features. At December 31, 2001,
we had $3.7 million in Federal Home Loan Bank advances outstanding.

     The following table sets forth information as to our Federal Home Loan Bank
advances for the periods indicated.

                                                      Years Ended December 31,
                                                      ------------------------
                                                     2001       2000       1999
                                                     ----       ----       ----
                                                       (Dollars in Thousands)
   Federal Home Loan Bank advances:
     Maximum balance                               $5,438     $7,736     $8,000
                                                   ======     ======     ======

   Average monthly balance                         $3,959     $6,314     $6,716
                                                   ======     ======     ======

   Amount outstanding at end of period             $3,731     $5,438     $7,392
                                                   ======     ======     ======

   Weighted average interest rate of advances        4.14%      5.21%      5.36%
                                                   ======     ======     ======

Subsidiary and Other Activities

     As of December 31, 2001, Community Bank has an inactive subsidiary. The
subsidiary was engaged in securities brokerage activities through a third party
from 1993 through 1998. Effective January 1, 1999, its operations were combined
into Community Bank and the subsidiary became inactive.

Regulation

     Set forth below is a brief description of all material aspects of the laws
and regulations which are applicable to CBCT Bancshares, Inc. and Community
Bank.

     Legislation is introduced from time to time in the United States Congress
that may affect the operations of CBCT Bancshares, Inc. and Community Bank. In
addition, the regulations governing CBCT Bancshares, Inc. and Community Bank may
be amended from time to time by the Texas Savings and Loan Department and the
FDIC. Any such legislation or regulatory changes in the future could adversely
affect CBCT Bancshares, Inc. or Community Bank. No assurance can be given as to
whether or in what form any such changes may occur.

General

     Community Bank, as a Texas chartered savings bank, is subject to both state
and federal regulation and oversight by the Texas Savings and Loan Department
and the FDIC extending to all aspects of its operations. Community Bank also is
subject to requirements established by the Federal Reserve Board. Community Bank
is required to file periodic reports with the Texas Savings and Loan Department
and the FDIC and is subject to periodic examinations by the Texas Savings and
Loan Department and the FDIC. The investment and lending authority of Community
Bank is prescribed by state laws and regulations, and Community Bank is
prohibited from engaging in any activities not permitted by such laws and
regulations. Such regulation and supervision primarily is


                                      16


<PAGE>


intended for the protection of depositors and not for the purpose of protecting
shareholders. This regulatory oversight will continue to apply to Community Bank
following the reorganization.

     The Texas Savings and Loan Department regularly examines Community Bank and
prepares reports for the consideration of Community Bank's board of directors on
any deficiencies that it may find in Community Bank's operations. The FDIC also
has the authority to examine Community Bank in its role as the administrator of
the Savings Association Insurance Fund. Community Bank's relationship with its
depositors and borrowers also is regulated to a great extent by both Federal and
state laws, especially in such matters as the ownership of savings accounts and
the form and content of Community Bank's mortgage requirements. In addition, the
Federal Reserve Board also has the authority to make or amend regulations which
govern CBCT Bancshares and Community Bank. Any change in such regulations,
whether by the FDIC, the Texas Savings and Loan Department or Congress, could
have a material adverse impact on CBCT Bancshares, Inc. and Community Bank and
their operations.

CBCT Bancshares, Inc.

     CBCT Bancshares, Inc. is a bank holding company. A bank holding company
must obtain Federal Reserve Board approval before: (i) acquiring, directly or
indirectly, ownership or control of any voting shares of another bank or bank
holding company if, after such acquisition, it would own or control more than 5%
of such shares (unless it already owns or controls the majority of such shares);
(ii) acquiring all or substantially all of the assets of another bank or bank
holding company; or (iii) merging or consolidating with another bank holding
company.

     Additionally, a bank holding company may not, with certain exceptions,
acquire direct or indirect ownership or control of more than 5% of the voting
shares of any company which is not a bank or bank holding company, or engage
directly or indirectly in activities other than those of banking, managing or
controlling banks, or providing services for its subsidiaries. The principal
exceptions to these prohibitions involve certain non-bank activities which, by
statute or by Federal Reserve Board regulation, have been identified as
activities closely related to the business of banking or managing or controlling
banks. The list of activities permitted by the Federal Reserve Board includes,
among other things, operating a savings institution, mortgage company, finance
company, credit card company or factoring company; performing certain data
processing operations; providing certain investment and financial advice;
underwriting and acting as an insurance agent for certain types of
credit-related insurance; leasing property on a full-payout, non-operating
basis; selling money orders, travelers' checks and United States Savings Bonds;
real estate and personal property appraising; providing tax planning and
preparation services; and, subject to certain limitations, providing securities
brokerage services for customers.

     Further, under Federal Reserve Board policy, a bank holding company must
serve as a source of strength for its subsidiary banks. Under this policy, the
Federal Reserve Board may require, and has required in the past, a bank holding
company to contribute additional capital to an undercapitalized subsidiary bank.

     Capital Requirements. The FRB has established capital requirements for bank
holding companies that generally parallel the capital requirements for national
banks. For bank holding companies with consolidated assets of less than $150
million, such as CBCT Bancshares, compliance is measured on a bank-only basis.
Community Bank's primary federal banking regulator is the FDIC. The FDIC
regulations establish two capital standards for state chartered banks: a
leverage requirement and a risk-based capital requirement.

     The leverage ratio adopted by the FDIC requires a minimum ratio of "Tier 1
capital" to adjusted total assets of 3% for state chartered banks rated
composite 1 under the CAMEL rating system for banks. State chartered banks not
rated composite 1 under the CAMEL rating system for banks are required to
maintain a minimum ratio of Tier 1 capital to adjusted total assets of 4% to 5%,
depending upon the level and nature of risks of their operations. For purposes
of the FDIC's leverage requirement, Tier 1 capital generally consists of common
stockholders' equity and retained income and certain non-cumulative perpetual
preferred stock and related income, except that no intangibles and certain
purchased mortgage servicing rights and purchased credit card relationships may
be included in capital.

     The risk-based capital requirements established by the FDIC's regulations
require state chartered banks to maintain "total capital" equal to at least 8%
of total risk-weighted assets. For purposes of the risk-based capital
requirement, "total capital" means Tier 1 capital (as described above) plus
"Tier 2 capital," provided that the amount


                                      17


<PAGE>


of Tier 2 capital may not exceed the amount of Tier 1 capital, less certain
assets. The components of Tier 2 capital include certain permanent and maturing
capital instruments as well as unreduced gains that do not qualify as core
capital and general valuation loan and lease loss allowances up to a maximum of
1.25% of risk-weighted assets.

Community Bank

     General. As a state chartered savings bank, the Bank derives its authority
from, and is governed by, the provisions of the Texas Savings Bank Act (the
"Texas Act") and rules and regulations of the Texas Department. The Texas Act
and regulations of the Texas Department are administered by the Texas Savings
and Loan Commissioner (the "Commissioner").

     Investments and Deposit Accounts. The Texas Act imposes restrictions on the
amounts and types of loans that may be made by a state savings bank, generally
bringing these restrictions into parity with the regulation of federally
chartered institutions. The manner of establishing deposit accounts and
evidencing the same is prescribed, as are the obligations of the Bank with
respect to withdrawals from deposit accounts and redemptions of deposit
accounts.

     Branch Offices. Pursuant to the Texas Act and the regulations issued
thereunder, the Commissioner may permit the Bank to establish branch offices
after giving consideration to the promotion of public need, market conditions
and financial and managerial capability of the Bank to establish and maintain
each branch office sought. Interested parties, which include any savings and
loan association or branch thereof, together with any others deemed to be
interested parties by the Commissioner, are permitted to protest the
establishment of such branches and may request a hearing before the Commissioner
regarding this matter.

     Consolidation or Merger. The Texas Act provides that savings banks may
consolidate or merge, subject to approval of the Commissioner, when the
Commissioner finds that such merger or consolidation is not in restraint of
trade, would not significantly curtail competition or impair other financial
institutions.

     Examination. The Texas Department conducts and supervises the examination
of state chartered savings banks. An insured association such as the Bank will
also be examined periodically by the FDIC.

     Supervision. The Commissioner has general supervisory authority over
savings banks and their holding companies. Upon his finding that a savings bank
is in violation of any provision of the Act or regulations, or is engaging in
unsafe or unsound practices, or is failing to maintain adequate documentary or
accounting records, he may order the savings bank or its holding company to
discontinue the violation or practice, or to establish necessary records. Upon
failure of any savings bank, its holding company or any participating person to
comply with his order, the Commissioner may issue upon the violating party (i)
an order to cease and desist from continuing such a particular action, (ii) a
removal or prohibition order suspending or prohibiting the person participating
in such violation from the affairs of the savings bank, (iii) an order requiring
divestiture of control of the savings bank, (iv) an order requiring the payment
of a civil penalty in an amount of not more than $25,000, or (v) an order
placing the affairs of the savings bank under the control of a conservator who
will manage the savings bank under the direction of the Commissioner.
Furthermore, if it appears doubtful to the Commissioner that a savings bank
subject to such a conservatorship order can be successfully rehabilitated, the
Commissioner may close the savings bank and liquidate it.

     Change of Control. A change of control of a savings bank (and therefore the
holding company) may not occur unless an application is made and approved by the
Commissioner. For the purposes of Texas law, control shall be deemed to exist if
any person owns or controls 25% or more of the voting securities of a savings
bank. Similar to federal law, there is a presumption of control if any person
owns or controls 10% or more of the voting securities of the savings bank

     Holding Companies. The Commissioner also has the authority to regulate and
examine the holding companies of Texas chartered savings banks. Each holding
company is required by Texas law to register with the Commissioner within 90
days after becoming a holding company. Such holding companies, like that of the
Bank,


                                      18


<PAGE>


must file with the Commissioner reports concerning its operations. The
Commissioner also has enforcement powers over such holding companies similar to
those applicable to savings banks.

     Applicable Corporate Law. In addition to the laws of Texas specifically
governing savings banks and their holding companies, the Bank and CBCT
Bancshares, Inc. are also subject to Texas corporate law, to the extent such law
does not conflict with the laws specifically governing savings banks and their
holding companies.

Insurance of Accounts and Regulation by the FDIC

     Community Bank is a member of the Savings Association Insurance Fund, which
is administered by the FDIC. Deposits are insured up to the applicable limits by
the FDIC and such insurance is backed by the full faith and credit of the United
States Government. As insurer, the FDIC imposes deposit insurance premiums and
is authorized to conduct examinations of and to require reporting by
FDIC-insured institutions. It also may prohibit any FDIC-insured institution
from engaging in any activity the FDIC determines by regulation or order to pose
a serious risk to the Bank Insurance Fund or the Bank Insurance Fund. The FDIC
also has the authority to initiate enforcement actions against savings
institutions and may terminate the deposit insurance if it determines that the
institution has engaged in unsafe or unsound practices or is in an unsafe or
unsound condition.

     The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums based upon their level of
capital and supervisory evaluation. Under the system, institutions classified as
well capitalized (i.e., a core capital ratio of at least 5%, a ratio of Tier 1
or core capital to risk-weighted assets ("Tier 1 risk-based capital") of at
least 6% and a risk-based capital ratio of at least 10%) and considered healthy
pay the lowest premium while institutions that are less than adequately
capitalized (i.e., core or Tier 1 risk-based capital ratios of less than 4% or a
risk-based capital ratio of less than 8%) and considered of substantial
supervisory concern pay the highest premium. Risk classification of all insured
institutions is made by the FDIC for each semi-annual assessment period.

     The FDIC is authorized to increase assessment rates, on a semi-annual
basis, if it determines that the reserve ratio of the Bank Insurance Fund will
be less than the designated reserve ratio of 1.25% of Bank Insurance Fund
insured deposits. In setting these increased assessments, the FDIC must seek to
restore the reserve ratio to that designated reserve level, or such higher
reserve ratio as established by the FDIC.

Community Reinvestment Act

     Under the Community Reinvestment Act, every FDIC-insured institution has a
continuing and affirmative obligation consistent with safe and sound banking
practices to help meet the credit needs of its entire community, including low
and moderate income neighborhoods. The Community Reinvestment Act does not
establish specific lending requirements or programs for financial institutions
nor does it limit an institution's discretion to develop the types of products
and services that it believes are best suited to its particular community,
consistent with the Community Reinvestment Act. Due to the heightened attention
being given to the Community Reinvestment Act in the past few years, Community
Bank may be required to devote additional funds for investment and lending in
its local community. Community Bank was examined for Community Reinvestment Act
compliance as of May 11, 1999, and received a rating of satisfactory.

Limitations on Dividends and Other Capital Distributions

     The Company is a legal entity separate and distinct from the Bank. CBCT
Bancshares, Inc.'s principal source of revenue consists of dividends from
Community Bank. The payment of dividends by the Bank is subject to various
regulatory requirements.

     Under Texas State Banking Law, a Texas-chartered stock savings bank may
declare and pay dividends out of its net profits, unless there is an impairment
of capital, but approval of the Texas Savings and Loan Department is required if
the total of all dividends declared in a calendar year would exceed the total of
its net profits for that year combined with its retained net profits of the
preceding two years, subject to certain adjustments.


                                      19


<PAGE>


Transactions with Affiliates

     Generally, transactions between a savings institution or its subsidiaries
and its affiliates are required to be on terms as favorable to the institution
as transactions with non-affiliates. In addition, certain of these transactions,
such as loans to an affiliate, are restricted to a percentage of the
institution's capital. Affiliates of Community Bank include CBCT Bancshares,
Inc. and any company which is under common control with Community Bank. In
addition, a savings institution may not lend to any affiliate engaged in
activities not permissible for a bank holding company or acquire the securities
of most affiliates.

     Certain transactions with directors, officers or controlling persons are
also subject to conflict of interest regulations enforced by the regulators.
These conflict of interest regulations and other statutes also impose
restrictions on loans to these persons and their related interests. Among other
things, these loans must generally be made on terms substantially the same as
loans to unaffiliated individuals.

Federal Reserve System

     The Federal Reserve Board requires all depository institutions to maintain
non-interest bearing reserves at specified levels against their transaction
accounts, primarily checking, NOW and Super NOW checking accounts. At December
31, 2001, Community Bank was in compliance with these reserve requirements.

     Savings institutions are authorized to borrow from the Federal Reserve Bank
"discount window," but Federal Reserve Board regulations require institutions to
exhaust other reasonable alternative sources of funds, including Federal Home
Loan Bank borrowings, before borrowing from the Federal Reserve Bank.

Federal Home Loan Bank System

     Community Bank is a member of the Federal Home Loan Bank of Dallas, which
is one of 12 regional Federal Home Loan Banks, that administers the home
financing credit function of savings institutions. Each Federal Home Loan Bank
serves as a reserve or central bank for its members within its assigned region.
It is funded primarily from proceeds derived from the sale of consolidated
obligations of the Federal Home Loan Bank System. It makes loans or advances to
members in accordance with policies and procedures, established by the board of
directors of the Federal Home Loan Bank, which are subject to the oversight of
the Federal Housing Finance Board. All advances from the Federal Home Loan Bank
are required to be fully secured by sufficient collateral as determined by the
Federal Home Loan Bank. In addition, all long-term advances are required to
provide funds for residential home financing.

     As a member, Community Bank is required to purchase and maintain stock in
the Federal Home Loan Bank of Dallas. At December 31, 2001, Community Bank had
$508,000 in Federal Home Loan Bank stock, which was in compliance with this
requirement. In past years, Community Bank has received substantial dividends on
its Federal Home Loan Bank stock. Over the past five fiscal years such dividends
have averaged 6.08% and were 4.12% for 2001.

     Under federal law the Federal Home Loan Banks are required to provide funds
for the resolution of troubled savings institutions and to contribute to low-
and moderately priced housing programs through direct loans or interest
subsidies on advances targeted for community investment and low- and
moderate-income housing projects. These contributions have affected adversely
the level of Federal Home Loan Bank dividends paid and could continue to do so
in the future. These contributions could also have an adverse effect on the
value of Federal Home Loan Bank stock in the future. A reduction in value of
Community Bank's Federal Home Loan Bank stock may result in a corresponding
reduction in Community Bank's capital.

     For the year ended December 31, 2001, dividends paid by the Federal Home
Loan Bank of Dallas to Community Bank totaled $20,900, as compared to $39,800
for 2000.


                                      20


<PAGE>


Federal Taxation

     General. CBCT Bancshares, Inc. and Community Bank will be subject to
federal income taxation in the same general manner as other corporations, with
some exceptions discussed below. The following discussion of federal taxation is
intended only to summarize pertinent federal income tax matters and is not a
comprehensive description of the tax rules applicable to CBCT Bancshares, Inc.
or Community Bank. Community Bank's federal income tax returns have been closed
without audit by the IRS through its year ended December 31, 1998.

     Following the conversion, CBCT Bancshares, Inc. anticipates that it will
file a consolidated federal income tax return with Community Bank commencing
with the first taxable year after completion of the conversion. Accordingly, it
is anticipated that any cash distributions made by CBCT Bancshares, Inc. to its
stockholders would be considered to be taxable dividends and not as a
non-taxable return of capital to stockholders for federal and state tax
purposes.

     Method of Accounting. For federal income tax purposes, Community Bank
currently reports its income and expenses on the cash method of accounting and
uses a fiscal year ending on December 31, for filing its federal income tax
return.

     Bad Debt Reserves. Prior to the Small Business Job Protection Act,
Community Bank was permitted to establish a reserve for bad debts under the
percentage of taxable income method and to make annual additions to the reserve
utilizing that method. These additions could, within specified formula limits,
be deducted in arriving at taxable income. As a result of the Small Business Job
Protection Act, savings associations of Community Bank's size may now use the
experience method in computing bad debt deductions beginning with their 1996
Federal tax return. In addition, federal legislation requires Community Bank to
recapture, over a six year period, the excess of tax bad debt reserves at
December 31, 1997 over those established as of the base year reserve balance as
of December 31, 1987. Community Bank has fully recaptured the reserve as of
December 31, 2001.

     Taxable Distributions and Recapture. Prior to the Small Business Job
Protection Act, bad debt reserves created prior to the year ended December 31,
1997, were subject to recapture into taxable income should Community Bank fail
to meet thrift asset and definitional tests. New federal legislation eliminated
these thrift related recapture rules. However, under current law, pre-1988
reserves remain subject to recapture should Community Bank make certain
non-dividend distributions or cease to maintain a thrift/bank charter.

     Minimum Tax. The Internal Revenue Code imposes an alternative minimum tax
at a rate of 20% on a base of regular taxable income plus certain tax
preferences, called alternative minimum taxable income. The alternative minimum
tax is payable to the extent such alternative minimum taxable income is in
excess of an exemption amount. Net operating losses can offset no more than 90%
of alternative minimum taxable income. Certain payments of alternative minimum
tax may be used as credits against regular tax liabilities in future years.
Community Bank has not been subject to the alternative minimum tax, nor do we
have any such amounts available as credits for carryover.

     Net Operating Loss Carryovers. A financial institution may carryback net
operating losses to the preceding two taxable years and forward to the
succeeding 20 taxable years. This provision applies to losses incurred in
taxable years beginning after August 6, 1997. For losses incurred in the taxable
years prior to August 6, 1997, the carryback period was three years and the
carryforward period was 15 years.

     Corporate Dividends-Received Deduction. CBCT Bancshares, Inc. may eliminate
from its income dividends received from Community Bank as a wholly owned
subsidiary of CBCT Bancshares, Inc. if it elects to file a consolidated return
with Community Bank. The corporate dividends-received deduction is 100% or 80%,
in the case of dividends received from corporations with which a corporate
recipient does not file a consolidated tax return, depending on the level of
stock ownership of the payor of the dividend. Corporations which own less than
20% of the stock of a corporation distributing a dividend may deduct 70% of
dividends received or accrued on their behalf.


                                      21


<PAGE>


State Taxation

     The State of Texas does not have a corporate income tax, but it does have a
corporate franchise tax. Prior to January 1, 1992, savings banks had been exempt
from the corporate franchise tax. The tax for the year 2001 is the higher of
0.25% of taxable capital, usually the amount of paid in capital plus retained
earnings, or 4.5% of "net taxable earned surplus." "Net taxable earned surplus"
is net income for federal income tax purposes increased by the compensation of
directors and executive officers and decreased by interest on obligations
guaranteed by the U.S. government. Net income cannot be reduced by net operating
loss carryforwards from years prior to 1991, and operating loss carryovers are
limited to five years.

Competition

     Community Bank faces strong competition in originating real estate and
other loans and in attracting deposits. Competition in originating real estate
loans comes primarily from other savings institutions, commercial banks, credit
unions and mortgage bankers. Other savings institutions, commercial banks,
credit unions and finance companies provide vigorous competition in consumer
lending.

     Community Bank attracts all of its deposits through its branch office
system. Competition for those deposits is principally from other savings
institutions, commercial banks and credit unions located in the same community,
as well as mutual funds and other alternative investments. The Bank competes for
these deposits by offering superior service and a variety of deposit accounts at
competitive rates. As of December 31, 2001, the Bank believes that it holds less
than 10% of the deposits in its primary market area.

Employees

     At December 31, 2001, Community Bank had a total of 16 employees, including
3 part-time employees. Employees are not represented by any collective
bargaining group. Management considers its employee relations to be good.


                                      22


<PAGE>


Item 2.  Properties

     The following table sets forth information concerning the main office and
each branch office of the Bank at December 31, 2001. At December 31, 2001, the
Bank's premises had an aggregate net book value of approximately $1.2 million.

                                         Year      Owned or   Net Book Value at
Location                               Acquired     Leased    December 31, 2001
--------                               --------     ------    -----------------
                                                               (In Thousands)
Main Office:

312 Main Street                          1994       Owned           $899
Smithville, Texas

Land Held for Development:

Gregg Manor Road                         1998       Owned            270
Manor, Texas

     The Bank believes that its current facilities are adequate to meet the
present and foreseeable future needs of the Bank and the Company.

     The Bank's depositor and borrower customer files are maintained by an
independent data processing company. The net book value of the data processing
and computer equipment utilized by the Bank at December 31, 2001 was
approximately $46,000.

Item 3.  Legal Proceedings

     From time to time the Bank is involved as plaintiff or defendant in various
legal actions arising in the normal course of business. Neither the Bank nor the
Company anticipates incurring any material liability as a result of such
litigation.

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

     No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
2001.


                                      23


<PAGE>


                                    PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

Stock Listing

     CBCT Bancshares, Inc. common stock is traded on the National Association of
Securities Dealers, Inc. over-the-counter market system under the symbol "CBCB."

Price Range of Common Stock

     The following table sets forth, for the periods shown, the high and low
prices of the common stock. The prices reflect inter-dealer quotations without
retail markup, markdown or commissions, and do not necessarily represent actual
transactions.

     No dividends have been paid to date by CBCT Bancshares, Inc. Dividend
restrictions are described in the notes to consolidated financial statements
included in this report.

                               HIGH             LOW
                               ----             ---

March 31, 2001...........     $10.50          $10.00
June 30, 2001............     $16.745         $10.625
September 30, 2001.......     $16.05          $12.10
December 31, 2001........     $13.59          $13.59

September 30, 2000.......     $10.88          $10.31
December 31, 2000........     $10.56          $10.00

The stock price information set forth in the table above was provided by the
National Association of Securities Dealers, Inc. Automated Quotation System. The
average of the bid and asked prices of CBCT Bancshares, Inc.'s common stock on
March 25, 2002 was $14.58.

At March 25, 2002, there were 291,223 shares of CBCT Bancorp, Inc. common stock
issued and outstanding and there were approximately 110 holders of record.


                                      24


<PAGE>


Item 6.  Selected Financial Data

Selected Consolidated Financial Information

     The summary information presented below under "Selected Financial Condition
Data" and "Selected Operations Data" for, and as of the end of, each of the
years ended December 31 is derived from our audited consolidated financial
statements. The following information is only a summary and you should read it
in conjunction with our financial statements and notes in Item 7, below.

                                                            At December 31,
                                                      --------------------------
                                                      2001       2000      1999
                                                      ----       ----      ----
                                                        (Dollars in Thousands)
Selected Financial Condition Data:
  Total assets                                       $37,387   $38,798   $42,833
  Loans receivable, net                               20,012    22,180    21,693
  Securities available for sale, at fair value:
    Mortgage-backed securities                         9,542     2,279    15,898
    Other securities                                     919     3,808       379
  Securities to be held to maturity, at cost:
    Mortgage-backed securities                         1,009     2,656        --
    Other securities                                   1,996     2,991        --
  Deposits                                            27,555    27,585    32,354
  Federal Home Loan Bank borrowings                    3,731     5,438     7,392
  Total equity                                         5,713     5,359     2,999


                                                    Years Ended December 31,
                                                  -----------------------------
                                                    2001       2000        1999
                                                    ----       ----        ----
                                                       (Dollars in Thousands)
Selected Operations Data:
  Interest and dividend income                    $ 2,689    $ 2,975    $ 3,050
  Interest expense                                 (1,340)    (1,626)    (1,902)
                                                  -------    -------    -------
    Net interest income                             1,349      1,349      1,148
  Provision for loan losses                           (36)       (34)        --
                                                  -------    -------    -------
    Net interest income after loan losses           1,313      1,315      1,148
                                                  -------    -------    -------

  Other operating income:
    Service charges and fees                          218        177        113
    Net securities gains (losses)                     105       (864)        76
    Net gains on sales of loans                        --         18         51
    Gain on sale of other real estate owned            --         --         --
                                                  -------    -------    -------
      Total other operating income (loss)             323       (669)       240
                                                  -------    -------    -------

  Other operating expenses:
    Compensation and benefits                        (606)      (553)      (454)
    Occupancy and equipment expense                  (136)      (149)      (183)
    Other operating expenses                         (434)      (536)      (512)
                                                  -------    -------    -------
      Total other operating expenses               (1,176)    (1,238)    (1,149)
                                                  -------    -------    -------

      Income (loss) before income taxes               460       (592)       239

  Income tax (expense) benefit                       (146)       246        (71)
                                                  -------    -------    -------

      Net income (loss)                           $   314    $  (346)   $   168
                                                  =======    =======    =======


                                      25


<PAGE>


                                                      Years Ended December 31,
                                                    ---------------------------
                                                    2001       2000       1999
                                                    ----       ----       ----
Key Operating Ratios and Other Data:
Performance ratios:
  Return on assets (1)                              0.85%     (0.87)%     0.39%
  Return on equity (2)                              5.70%     (9.00)%     5.29%
  Net interest margin (3)                           3.79%      3.55%      2.79%
  Operating expense divided by average assets       3.18%      3.10%      2.65%

  Average interest-earning assets divided by
    average interest-bearing liabilities             118%       108%       104%

Quality ratios:
  Non-performing assets divided by total assets     0.25%      0.03%      0.16%
  Allowance for loan losses to
    non-performing loans                             276%      1900%       293%
  Allowance for loan losses to gross loans          1.26%      1.02%      0.91%

Capital ratios:
  Equity to total assets at end of period          15.27%     13.81%      7.00%
  Average equity to average assets                 14.94%      9.62%      7.33%
  Tier 1 risk-based capital ratio                  29.06%     26.30%     15.00%
  Total risk-based capital ratio                   31.05%     28.30%     15.90%

Other data:
  Number of full service offices                       1          1          1

----------

(1)  Ratio of net income (loss) to average total assets

(2)  Ratio of net income (loss) to average equity

(3)  Net interest income divided by average earning assets

Item 7    Management's Discussion and Analysis of Financial Condition and
          Results of Operation

General

     The following discussion is intended to assist in understanding the
financial condition and results of operations of CBCT Bancshares, Inc. The
information contained in this section should be read in conjunction with the
consolidated financial statements and the accompanying notes to consolidated
financial statements and the other sections contained in the prospectus.

     CBCT Bancshares' results of operations depend primarily on its net interest
income, which is the difference between interest income on interest-earning
assets, which principally consist of loans and mortgage-backed and investment
securities, and interest expense on interest-bearing liabilities, which
principally consist of deposits and borrowings. Community Bank's results of
operations also are affected by the level of its noninterest income and expenses
and income tax expense.

     On September 29, 2000 Community Bank of Central Texas completed its
conversion from the mutual to the stock form of organization. In connection with
the conversion, CBCT Bancshares issued 281,031 shares to the public for total
gross proceeds of $2.81 million and became the holding company for Community
Bank.


                                      26


<PAGE>


Changes in Financial Condition from December 31, 2000 to December 31, 20001

General. Our total assets decreased by $1.4 million or 3.61% to $37.4 million at
December 31, 2001 as compared to $38.8 million at December 31, 2000. The
decrease was primarily due to a $2.1 million or 9.61% decrease in loans. Our
total liabilities decreased by $1.7 million, or 5.2%, to $31.7 million at
December 31, 2001 compared to $33.4 million at December 31, 2000. This decrease
was primarily due to a $1.7 million or 5.09% decrease in Federal Home Loan Bank
borrowings. This decrease was partially offset by a $354,000 increase in equity,
due to net income for 2001.

Loans. Our net loan portfolio decreased from $22.2 million at December 31, 2000
to $20.0 million at December 31, 2001. The decrease in the loan portfolio over
this time period was due to a decrease in new loan demand in our market area and
the refinancing of existing adjustable-rate mortgages with other lenders in the
secondary market to obtain the benefit of lower rate, fixed rate loans, as a
result of a decrease in market rates of interest.

Securities. Our total securities portfolio increased from $11.7 million at
December 31, 2000 to $13.5 million at December 31, 2001. The increase was
primarily due to the purchase of additional securities utilizing the proceeds
from the pay down of our loan portfolio.

Liabilities. Our total liabilities decreased $1.7 million or 5.09% to $31.7
million at December 31, 2001 compared to $33.4 million at December 31, 2000.
This decrease was primarily due to a $1.7 million decrease in Federal Home Loan
Bank advances, which we were able to do as a result of the decrease in assets.

Equity. Total equity increased $354,000 or 6.72% from $5.4 million at December
31, 2000 to $5.7 million at December 31, 2001. The increase was due to the net
income for 2001 and an increase in our unrealized gain on our investment
portfolio.


                                      27


<PAGE>


Average Balances, Net Interest Income, Yields Earned and Rates Paid

     The following table presents for the periods indicated the total dollar
amount of interest income from average interest-earning assets and the resultant
yields, as well as the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates. No tax equivalent adjustments were made.
All average balances are monthly average balances. Non-accruing loans have been
included in the table as loans carrying a zero yield.

<TABLE>
<CAPTION>
                                                                            Years Ended December 31,
                                                                            ------------------------
                                                        2001                        2000                       1999
                                                        ----                        ----                       ----

                                                      Interest                    Interest                    Interest
                                             Average   Earned/  Yield/   Average   Earned/  Yield/   Average   Earned/  Yield/
                                             Balance    Paid     Rate    Balance    Paid     Rate    Balance    Paid     Rate
                                             -------    ----     ----    -------    ----     ----    -------    ----     ----
                                                                           (Dollars in Thousands)
<S>                                          <C>       <C>       <C>     <C>       <C>       <C>     <C>       <C>       <C>
Interest-Earning Assets:
     Deposits in banks                       $ 2,564   $    70   2.73%   $ 3,224   $   205   6.36%   $ 2,633   $   131   4.98%
     Investment securities                    11,780       748   6.35     10,401       722   6.94     16,505     1,011   6.13
     Loans                                    20,753     1,851   8.92     23,854     2,008   8.42     21,500     1,878   8.73
     Other interest-earning assets               505        20   3.96        510        40   7.84        544        30   5.51
                                             -------   -------   ----    -------   -------   ----    -------   -------   ----

        Total interest-earning assets         35,602     2,689   7.55     37,989     2,975   7.83     41,182     3,050   7.41
                                                       -------   ----              -------   ----              -------   ----

Noninterest-earning assets                     1,567                       1,964                       2,130
                                             -------                     -------                     -------

        Total assets                         $37,169                     $39,953                     $43,312
                                             =======                     =======                     =======

Interest-Bearing Liabilities:
     Passbook savings accounts               $ 1,678        37   2.21    $ 1,648   $    45   2.73    $ 1,520   $    41   2.70
     NOW and money market accounts             4,707        97   2.06      4,745       124   2.61      5,015       133   2.65
     Time deposit accounts                    19,770       990   4.01     22,394     1,128   5.04     26,305     1,368   5.20
     Federal Home Loan Bank advances           3,959       216   5.46      6,314       329   5.21      6,716       360   5.36
                                             -------   -------   ----    -------   -------   ----    -------   -------   ----

        Total interest-bearing liabilities    30,114     1,340   4.45     35,101     1,626   4.63     39,556     1,902   4.81
                                                       -------   ----              -------   ----    -------   -------   ----

Noninterest-bearing liabilities and equity     7,055                       4,852                       3,756
                                             -------                     -------                     -------

        Total liabilities and equity         $37,169                     $39,953                     $43,312
                                             =======                     =======                     =======

Net interest income                                    $ 1,349                     $ 1,349                     $ 1,148
                                                       =======                     =======                     =======

Net interest spread(1)                                           3.10%                       3.20%                       2.60%
                                                                 ====                        ====                        ====

Net interest margin(2)                                           3.79%                       3.55%                       2.79%
                                                                 ====                        ====                        ====
</TABLE>

----------
(1)  The net interest spread is the difference between the average rate on
     interest-earning assets and interest-bearing liabilities.

(2)  The net interest margin is net interest income divided by average earning
     assets.


                                            28


<PAGE>


Rate/Volume Analysis

     The following table presents the dollar amount of changes in interest
income and interest expense for major components of interest-earning assets and
interest-bearing liabilities. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable to
(1) changes in volume, which are changes in volume multiplied by the old rate,
and (2) changes in rate, which are changes in rate multiplied by the old volume.
Changes attributable to both rate and volume which cannot be segregated have
been allocated proportionately to the change due to volume and the change due to
rate.

<TABLE>
<CAPTION>
                                   Year Ended December 31,   Year Ended December 31,
                                        2001 vs. 2000             2000 vs. 1999
                                  -----------------------    -----------------------
                                 Increase (decrease)        Increase (decrease)
                                      due to        Total        due to        Total
                                      ------      Increase       ------       Increase
                                 Volume    Rate  (Decrease) Volume     Rate  (Decrease)
                                 ------    ----  ---------- ------     ----  ----------
                                                (Dollars in Thousands)
<S>                               <C>      <C>      <C>      <C>      <C>      <C>
Interest income:
Deposits in banks                 $ (42)   $ (93)   $(135)   $  29    $  45    $  74
Investment securities                96      (70)      26     (374)      85     (289)
Loans                              (261)     104     (157)     205      (75)     130
Other earning assets                 --      (20)     (20)      (2)      12       10
                                  -----    -----    -----    -----    -----    -----

     Total interest income         (207)     (79)    (286)    (142)      67      (75)
                                  -----    -----    -----    -----    -----    -----

Interest expense:
Savings accounts                      1       (9)      (8)       3        1        4
NOW and money market accounts        (1)     (26)     (27)      (7)      (2)      (9)
Time deposit accounts              (132)      (6)    (138)    (203)     (37)    (240)
Federal Home Loan Bank advances    (123)      10     (113)     (22)      (9)     (31)
                                  -----    -----    -----    -----    -----    -----

     Total interest expense        (255)     (31)    (286)    (229)     (47)    (276)
                                  -----    -----    -----    -----    -----    -----

Net interest income               $  48    $ (48)   $  --    $  87    $ 114    $ 201
                                  =====    =====    =====    =====    =====    =====
</TABLE>


                                      29


<PAGE>


      The following table presents the weighted average yields earned on loans,
investments and other interest-earning assets, and the weighted average rates
paid on savings and borrowings and the resultant interest rate spreads at
December 31, 2001.


                                                        At December 31,
                                                             2001
                                                           (Dollars
                                                         in Thousands)

               Weighted average yield on:
                  Deposits in banks ....................      1.99%
                  Investment securities ................      5.67
                  Loans ................................      8.17
                  FHLB stock ...........................      3.02
                                                              ----

                  Combined weighted average yield on
                    interest-earning assets ............      6.88
                                                              ----

               Weighted average rate paid on:
                  Savings accounts .....................      1.05
                  NOW and money market accounts ........      0.80
                  Time deposit accounts ................      4.15
                  Federal Home Loan Bank advances ......      4.14
                                                              ----

                  Combined weighted average rate paid on
                    interest-bearing liabilities .......      3.42
                                                              ----

               Spread ..................................      3.46%
                                                              ====


Comparison of Results of Operations for the Years Ended December 31, 2000 and
2001

General. We reported net income of $314,000 for the year ended December 31, 2001
compared to a net loss of $346,000 for the year ended December 31, 2000.

Net Interest Income. Net interest income was $1.3 million at December 31, 2001
compared to $1.3 million at December 31, 2000. Total interest income and total
interest expense were both down $286,000 in 2001 from 2000. The decrease was
primarily due to lower rates of interest offered on assets and liabilities. Our
interest rate spread decreased to 3.10% for 2001 compared to 3.20% for 2000.
This was offset, however, by the ratio of average interest-earning assets to
average interest-bearing liabilities increasing to 121% for 2001 compared to
108% for 2000.

Interest income. The decrease in interest income was primarily due to the
decrease in the average balance of loans during the year and the rates earned on
interest-earning assets due to the drastic decline in the rate environment
during 2001. Interest income on loans decreased by $157,000 from $2.01 million
for 2000 to $1.85 million in 2001. Interest income on deposits in banks
decreased $135,000 from $205,000 in 2000 to $70,000 in 2001. The average yield
earned on our interest-earning assets decreased from 7.83% in 2000 to 7.55% in
2001. Increased refinancing activity during 2001 resulted in a portion of our
one- to four-family residential loans being paid off. The remainder of our loan
portfolio includes commercial real estate loans, consumer loans and three and
five year residential loans with higher rates of interest that did not refinance
or reprice during the year. This combination caused the average rate earned on
our loan portfolio to increase from 8.42% in 2000 to 8.92% in 2001.


                                      30


<PAGE>


Interest Expense. The $286,000 decrease in interest expense during the year
ended December 31, 2001 was primarily due to the decrease in average
interest-bearing liabilities by $5.0 million, from $35.1 million during 2000 to
$30.1 million during 2001. The average rate paid on interest-bearing liabilities
decreased from 4.63% in 2000 to 4.45% in 2001.

Provision for loan losses. The provision for loan losses for the year 2001 was
$36,000 compared to $34,000 in 2000. At December 31, 2001, the ratio of our
allowance for loan losses to total loans was 1.26% compared to 1.02% in 2000,
and the ratio of our allowance for loan losses to non-performing loans was 276%
in 2001 compared to 1900% in 2000. The amount of provision is influenced by
current economic conditions, actual loss experience, industry trends and other
factors.

Noninterest Income. Noninterest income, net of securities gains and losses,
increased from $195,000 in 2000 to $218,000 in 2001. The increase was primarily
attributed to an increase in fees and service charges on deposit accounts
resulting from an increase in the number of demand deposit accounts from 903
accounts in 2000 to 993 accounts in 2001. A loss on sale of securities of
$864,000 was reported for 2000 while a gain on the sale/call of securities of
$105,000 was reported for 2001. The loss for 2000 was attributed to the
liquidation of the entire securities portfolio in March of 2000.

Noninterest Expense. Noninterest expenses decreased $62,000 or 5.0% to $1.18
million for the year ended December 31, 2001compared to $1.24 million for the
year ended December 31, 2000. This decrease was primarily attributed to a
$102,000 or 19.0% decrease in other operating expenses. This decrease is
attributed to a one-time write down of fixed assets, including obsolete computer
equipment and other assets during 2000, a one-time deconversion fee associated
with a data processing conversion during 2000, along with corporate expenses
associated with our conversion to a stock-based company in 2000. In addition,
the data processing expenses decreased from 2000 to 2001 as a result of the data
processing conversion. There was also a decrease in occupancy and equipment
expense of $13,000 or 8.7% and an increase in compensation and benefits of
$53,000 or 9.6% of which $52,000 is attributed to the implementation of the RRP.

Comparison of Results of Operations for the Years Ended December 31, 1999 and
2000

General. We reported a net loss of $346,000 for the year ended December 31, 2000
and $168,000 for the year ended December 31, 1999.

Net Interest Income. Net interest income increased $201,000 or 17.5% to $1.3
million at December 31, 2000 compared to $1.1 million at December 31, 1999. The
net increase was primarily due to a large decrease in interest expense which
more than offset a slight decrease in interest income from 1999 to 2000. Our
interest rate spread increased to 3.20% for 2000 compared to 2.60% for 1999. In
addition, the ratio of average interest-earning assets to average
interest-bearing liabilities increased to 108% for 2000 compared to 104% for
1999.

Interest Income. The slight decrease in interest income was primarily due to a
decrease in average interest-earning assets. The sale of our securities, and the
use of proceeds from these sales to fund the planned reduction in certificates
of deposit and to pay down Federal Home Loan Bank advances was the primary
reason for the decrease. Interest income on securities decreased by $292,000
from $1.0 million for 1999 to $719,000 for 2000. The average yield earned on our
interest-earning assets increased from 7.41% in 1999 to 7.83% in 2000.

Interest Expense. The decrease in interest expense during the year ended
December 31, 2000 was primarily due to the decrease of $4.9 million or 19% in
certificates of deposit and the decrease of $2.0 million or 26.4% in Federal
Home Loan Bank borrowings. In addition, the average rate paid on
interest-bearing liabilities decreased from 4.81% in 1999 to 4.62% in 2000 due
to a decrease in market rates of interest and as part of management's strategy
to reduce higher paying certificates of deposit.

Provision for loan losses. The provision for loan losses for the year 2000 was
$34,000. There was no provision for loan losses in the year 1999. At December
31, 2000, the ratio of our allowance for loan losses to total loans was 1.02%
and the ratio of our allowance for loan losses to non-performing loans was
1900%. The amount of the provision is influenced by current economic conditions,
actual loss experience, industry trends and other factors.


                                      31


<PAGE>


Noninterest Income. Noninterest income, net of securities gains and losses,
increased from $164,000 in 1999 to $195,000 in 2000. The increase was primarily
attributed to an increase in fees and service charges on deposit accounts
resulting from an increase in the number of demand deposit accounts from 711
accounts in 1999 to 903 accounts in 2000 and an increase in fees charged on such
accounts. A loss on sale of securities of $864,000 was reported for 2000 while a
gain on sale of securities of $76,000 was reported for 1999. The loss for 2000
was attributed to the liquidation of the entire securities portfolio in March of
2000.

Noninterest Expenses. Noninterest expenses increased $89,000 or 7.8% to $1.2
million for the year ended December 31, 2000 compared to $1.1 million for the
year ended December 31, 1999. This increase was primarily attributed to a
$99,000 or 21.8% increase in compensation and benefits and a $24,000 or 4.70%
increase in other expenses. This was partially offset by a decrease in occupancy
and equipment expense of $34,000 or 18.6%.

Liquidity and Commitments

      We are required to maintain minimum levels of investments that qualify as
liquid assets under government regulations. Liquidity may increase or decrease
depending upon the availability of funds and comparative yields on investments
in relation to the return on loans. Historically, we have maintained liquid
assets at levels above the minimum requirements and above levels believed to be
adequate to meet the requirements of normal operations, including potential
deposit outflows. Cash flow projections are regularly reviewed and updated to
assure that adequate liquidity is maintained. At December 31, 2001, our
regulatory liquidity ratio, which is our liquid assets as a percentage of
deposits and current borrowings, was 51.65%.

      CBCT Bancshares' liquidity, represented by cash and cash equivalents and
investment securities, is a product of its operating, investing and financing
activities. Our primary sources of funds are deposits, amortization, prepayments
and maturities of outstanding loans and mortgage-backed securities, maturities
and sales of investment securities and other short-term investments and funds
provided from operations. While scheduled payments from the amortization of
loans and mortgage-backed securities and maturing investment securities and
short-term investments are relatively predictable sources of funds, deposit
flows and loan prepayments are greatly influenced by general interest rates,
economic conditions and competition. In addition, we invest excess funds in
short-term interest-earning assets, which provide liquidity to meet lending
requirements. We also generate cash through borrowings. We utilize Federal Home
Loan Bank advances to leverage our capital base and provide funds for our
lending and investment activities, and to enhance our interest rate risk
management.

     Liquidity management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term investments
such as overnight deposits or U.S. Agency securities. On a longer term basis, we
maintain a strategy of investing in our various lending products. We use our
sources of funds primarily to meet ongoing commitments, to pay maturing time
deposits and savings withdrawals, to fund loan commitments and to maintain our
portfolio of mortgage-backed securities and investment securities. At December
31, 2001, the total approved loan origination commitments outstanding amounted
to $1.1 million. At the same date, the unadvanced portion of construction loans
was $1.1 million. There were no outstanding letters of credit at December 31,
2001. Time deposits scheduled to mature in one year or less at December 31,
2001, totaled $15.4 million. Investment and mortgage-backed securities scheduled
to mature in less than one year at December 31, 2001 totaled $2.0 million. Based
on historical experience, management believes that a significant portion of
maturing deposits will remain with Community Bank. Community Bank anticipates
that we will continue to have sufficient funds, through deposits and borrowings,
to meet its current commitments.

Capital

     Consistent with our goal to operate a sound and profitable financial
organization, we actively seek to maintain a "well capitalized" institution in
accordance with regulatory standards. Total equity was $5.7 million at December
31, 2001, or 15.27% of total assets on that date. As of December 31, 2001, we
exceeded all capital requirements of the FDIC and the Texas Savings and Loan
Department. Our regulatory capital ratios at December 31, 2001 were as follows:
core capital 14.34%; Tier I risk-based capital, 28.28%; and total risk-based
capital, 30.53%. The regulatory capital requirements to be considered well
capitalized are 5.0%, 6.0% and 10.0%, respectively.


                                      32


<PAGE>


Impact of Inflation

     The consolidated financial statements presented herein have been prepared
in accordance with generally accepted accounting principles. These principles
require the measurement of financial position and operating results in terms of
historical dollars, without considering changes in the relative purchasing power
of money over time due to inflation.

     Our primary assets and liabilities are monetary in nature. As a result,
interest rates have a more significant impact on our performance than the
effects of general levels of inflation. Interest rates, however, do not
necessarily move in the same direction or with the same magnitude as the price
of goods and services, since such prices are affected by inflation. In a period
of rapidly rising interest rates, the liquidity and maturities structures of our
assets and liabilities are critical to the maintenance of acceptable performance
levels.

     The principal effect of inflation, as distinct from levels of interest
rates, on earnings is in the area of noninterest expense. Such expense items as
employee compensation, employee benefits and occupancy and equipment costs may
be subject to increases as a result of inflation. An additional effect of
inflation is the possible increase in the dollar value of the collateral
securing loans that we have made. We are unable to determine the extent, if any,
to which properties securing our loans have appreciated in dollar value due to
inflation.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

Asset and Liability Management and Market Risk

     Our Risk When Interest Rates Change. The rates of interest we earn on
assets and pay on liabilities generally are established contractually for a
period of time. Market interest rates change over time. Our loans generally have
longer maturities than our deposits. Accordingly, our results of operations,
like those of other financial institutions, are impacted by changes in interest
rates and the interest rate sensitivity of our assets and liabilities. The risk
associated with changes in interest rates and our ability to adapt to these
changes is known as interest rate risk and is our most significant market risk.
As of December 31, 2001, our one-year cumulative interest rate sensitivity gap
as a percentage of total assets was a negative 35.3%, which generally means if
interest rates rise, our net interest income could be reduced because interest
paid on interest-bearing liabilities, including deposits and borrowings, could
increase more quickly than interest received on interest-earning assets,
including loans and mortgage-backed and investment securities. In addition,
rising interest rates may hurt our income because they may reduce the demand for
loans and the value of our mortgage-related and investment securities. In the
alternative, if interest rates decrease, our net interest income would increase.

     How We Measure Our Risk of Interest Rate Changes. As part of our attempt to
manage our exposure to changes in interest rates and comply with applicable
regulations, we monitor our interest rate risk. In monitoring this risk we
continually analyze and manage assets and liabilities based on their payment
streams and interest rates, the timing of their maturities, and their
sensitivity to actual or potential changes in market interest rates.

     In order to minimize the potential for adverse effects of material and
prolonged increases in interest rates on our results of operations, we have
adopted investment/asset and liability management policies to better match the
maturities and repricing terms of our interest-earning assets and
interest-bearing liabilities. The board of directors sets and recommends the
asset and liability policies of CBCT Bancshares which are implemented by the
investment/asset and liability management committee. The investment/asset and
liability management committee is chaired by Mike Maney and is comprised of
members of our board of directors and senior management.

     The purpose of the investment/asset and liability management committee is
to communicate, coordinate and control asset/liability management consistent
with our business plan and board approved policies. The investment/asset and
liability management committee establishes and monitors the volume and mix of
assets and funding sources taking into account relative costs and spreads,
interest rate sensitivity and liquidity needs. The objectives are to manage
assets and funding sources to produce results that are consistent with
liquidity, capital adequacy, growth, risk and profitability goals.


                                      33


<PAGE>


     The investment/asset and liability management committee generally meets on
a monthly basis to review, among other things, economic conditions and interest
rate outlook, current and projected liquidity needs and capital position,
anticipated changes in the volume and mix of assets and liabilities and interest
rate risk exposure limits versus current projections pursuant to net present
value of portfolio equity analysis and income simulations. The investment/asset
and liability management committee recommends appropriate strategy changes based
on this review. The President or his designee is responsible for reviewing and
reporting on the effects of the policy implementations and strategies to the
board of directors, at least quarterly.

     In order to manage our assets and liabilities and achieve the desired
liquidity, credit quality, interest rate risk, profitability and capital
targets, we have focused our strategies on:

     o    originating adjustable rate mortgage loans and commercial business
          loans,

     o    originating shorter-term consumer loans,

     o    managing our deposits to establish stable deposit relationships,

     o    acquiring longer-term borrowings at fixed interest rates, when
          appropriate, to offset the negative impact of longer-term fixed rate
          loans in our loan portfolio, and

     o    selling to the secondary market fixed-rate residential loans
          originated by us.

     At times, depending on the level of general interest rates, the
relationship between long- and short-term interest rates, market conditions and
competitive factors, the investment/asset and liability management committee may
determine to increase our interest rate risk position in order to maintain our
net interest margin. In the future, we intend to increase our emphasis on the
origination of relatively short-term and/or adjustable rate loans.

     The investment/asset and liability management committee regularly reviews
interest rate risk by forecasting the impact of alternative interest rate
environments on net interest income and market value of portfolio equity, which
is defined as the net present value of an institution's existing assets,
liabilities and off-balance sheet instruments, and evaluating such impacts
against the maximum potential changes in net interest income and market value of
portfolio equity that are authorized by the board of directors of Community
Bank.


                                      34


<PAGE>


     The following table presents the contractual maturities and repricing data
of CBCT Bancshares' interest-earning assets and interest-bearing liabilities,
commonly called a "gap" report, as of December 31, 2001. It gives an indication
of our interest rate sensitivity position and it is used by management in
conjunction with other reports to determine plans and strategies for managing
our interest rate risk. The gap report does have limitations. For example, all
savings, NOW, and money market deposit accounts are shown as maturing within the
90 day to one year time frame. In reality, these deposits are relatively stable
and do not turn over or reprice as frequently as the static gap report suggests.
In addition, no prepayment assumptions have been made with regard to
interest-earning assets.

<TABLE>
<CAPTION>

                                                     Rate Sensitive                Not Rate
                                        ----------------------------------------   Sensitive
                                          Within        90 days        1 to 3        Over
                                         90 days       to 1 Year        Years       3 Years       Total
                                        ----------     ----------     ----------   ----------   ----------
                                                                 (Dollars in Thousands)

<S>                                     <C>                     <C>                <C>          <C>
Interest-Earning Assets:
  Deposits in banks                     $    1,609              $     $       --   $       --   $    1,609
  Investment securities                        997          1,035            408       11,026       13,466
  Loans                                      1,402          6,960          6,215        5,730       20,307
  Other interest-earning assets                508             --             --           --          508
                                        ----------     ----------     ----------   ----------   ----------

    Total interest-earning assets            4,519          7,995          6,623       16,756       35,890
                                        ----------     ----------     ----------   ----------   ----------

Interest-Bearing Liabilities:
  Passbook savings accounts                     --          1,763             --           --        1,763
  NOW and money market accounts                 --          4,831             --           --        4,831
  Time deposit accounts                      4,907         10,854          3,183          377       19,321
  Federal Home Loan Bank advances              259          3,104            368           --        3,731
                                        ----------     ----------     ----------   ----------   ----------

   Total interest-bearing liabilities        5,166         20,552          3,551          377   $   29,646
                                        ----------     ----------     ----------   ==========   ==========

Interest sensitivity gap                $     (650)    $  (12,557)    $    3,072
                                        ==========     ==========     ==========

Cumulative gap                          $     (650)    $  (13,207)      $(10,135)
                                        ==========     ==========     ==========

Cumulative gap as a percentage
  of total assets                            (1.73)%       (35.30)%       (27.09)%
                                        ==========     ==========     ==========
</TABLE>

     As with any method of measuring interest rate risk, shortcomings are
inherent in the method of analysis presented in the foregoing table. For
example, although assets and liabilities may have similar maturities or periods
to repricing, they may react in different degrees to changes in market interest
rates. Also, the interest rates on certain types of assets and liabilities may
fluctuate in advance of changes in market interest rates, while interest rates
on other types may lag behind changes in market rates. Additionally, certain
assets, such as adjustable rate mortgage loans, have features which restrict
changes in interest rates on a short-term basis and over the life of the asset.
Further, if interest rates change, expected rates of prepayments on loans and
early withdrawals from certificates could deviate significantly from those
assumed in calculating the table.


                                      35


<PAGE>


Item 8.  Financial Statements and Supplementary Data


                        Padgett, Stratemann & Co., L.L.P.

                          Independent Auditors' Report


To the Board of Directors
CBCT Bancshares, Inc.
Smithville, Texas

We have audited the accompanying consolidated balance sheets of CBCT Bancshares,
Inc. as of December 31, 2001 and 2000, and the consolidated statements of
income, changes in stockholders' equity, and cash flows for the three years
ended December 31, 2001, 2000, and 1999. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CBCT Bancshares,
Inc. as of December 31, 2001 and 2000, and the results of their operations and
their cash flows for the three years ended December 31, 2001, 2000, and 1999, in
conformity with accounting principles generally accepted in the United States of
America.


Certified Public Accountants
February 22, 2002
San Antonio, Texas


                                      36


<PAGE>


                              CBCT Bancshares, Inc.
                           Consolidated Balance Sheets
                           December 31, 2001 and 2000
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                        Assets
                                                                                  2001           2000
                                                                                 --------    -----------
<S>                                                                           <C>            <C>
Cash and cash equivalents:
  Cash and noninterest-bearing due from banks                                    $    224       $    213
  Interest-bearing due from banks                                                   1,609          2,146
                                                                                 --------       --------

        Total cash and cash equivalents                                             1,833          2,359

Securities available for sale                                                      10,461          6,087
Securities to be held to maturity (fair value of $3,063
  and $5,687 in 2001 and 2000, respectively)                                        3,005          5,647
Federal Home Loan Bank stock - at cost                                                508            513
Loans held for sale                                                                    --            121
Loans - net of allowance for loan losses of $257 ($228 in 2000)                    20,012         22,180
Bank premises and equipment - net                                                   1,288          1,271
Accrued interest receivable                                                           247            291
Prepaid expenses and other assets                                                      33            329
                                                                                 --------       --------

                                                                                 $ 37,387       $ 38,798
                                                                                 ========       ========

                         Liabilities and Stockholders' Equity

Liabilities
Deposits:
  Noninterest-bearing                                                            $  1,640       $    707
  Interest-bearing                                                                 25,915         26,878
                                                                                 --------       --------

        Total deposits                                                             27,555         27,585

Advances from Federal Home Loan Bank                                                3,731          5,438
Accrued interest payable and other liabilities                                        388            416
                                                                                 --------       --------

        Total liabilities                                                          31,674         33,439
                                                                                 --------       --------

Stockholders' Equity
Preferred stock - $.01 par value; 1,000,000 shares authorized;
  none issued or outstanding in 2001 or 2000                                           --             --
Common stock - $.01 par value; 4,000,000 shares authorized;
  291,223 issued and outstanding in 2001; 281,031 shares
  issued and outstanding in 2000                                                        3              3
Surplus                                                                             2,525          2,383
Retained earnings                                                                   3,182          2,868
Unallocated ESOP shares                                                              (182)          (199)
Unallocated RRP shares                                                                (95)            --
Accumulated other comprehensive income                                                280            304
                                                                                 --------       --------

        Total stockholders' equity                                                  5,713          5,359
                                                                                 --------       --------

                                                                                 $ 37,387       $ 38,798
                                                                                 ========       ========
</TABLE>


                                      37


<PAGE>


                              CBCT Bancshares, Inc.

                        Consolidated Statements of Income
                  Years Ended December 31, 2001, 2000, and 1999
                  (Dollars in Thousands, Except Per Share Data)


<TABLE>
<CAPTION>
                                                                               2001            2000           1999
                                                                            ----------      ----------     ----------
<S>                                                                         <C>            <C>             <C>
Interest and dividend income:
  Interest and fees on loans                                                $    1,851     $    2,008      $    1,878
  Debt securities:
    Taxable                                                                        745            712           1,002
    Tax-exempt                                                                       1              7               9
  Interest on deposits in banks                                                     70            205             131
  Dividends                                                                         22             43              30
                                                                            ----------      ----------     ----------

        Total interest and dividend income                                       2,689          2,975           3,050
                                                                            ----------      ----------     ----------

Interest expense:
  Deposits                                                                       1,124          1,297           1,542
  Federal Home Loan Bank advances                                                  216            329             360
                                                                            ----------      ----------     ----------

        Total interest expense                                                   1,340          1,626           1,902
                                                                            ----------      ----------     ----------

        Net interest income                                                      1,349          1,349           1,148

Provision for loan losses                                                           36             34              --
                                                                            ----------      ----------     ----------

        Net interest income after provision for loan losses                      1,313          1,315           1,148
                                                                            ----------      ----------     ----------

Noninterest income (loss):
  Service charges and other income                                                 218            177             113
  Net gains on sales of loans                                                       --             18              51
  Net gains (losses) on sales of securities                                        105           (864)             76
                                                                            ----------      ----------     ----------

        Total noninterest income (loss)                                            323           (669)            240
                                                                            ----------      ----------     ----------

Noninterest expenses:
  Salaries and employee benefits                                                   606            553             454
  Occupancy and equipment expenses                                                 136            149             183
  Other operating expenses                                                         434            536             512
                                                                            ----------      ----------     ----------

        Total noninterest expenses                                               1,176          1,238           1,149
                                                                            ----------      ----------     ----------

        Income (loss) before income taxes                                          460           (592)            239

Income tax expense (benefit)                                                       146           (246)             71
                                                                            ----------      ----------     ----------

        Net income (loss)                                                   $      314     $     (346)     $      168
                                                                            ==========      ==========     ==========

Basic and diluted earnings (loss) per share                                 $     1.20     $    (1.34)     $      N/A
                                                                            ==========      ==========     ==========
</TABLE>


                                          38


<PAGE>


                              CBCT Bancshares, Inc.

           Consolidated Statements of Changes in Stockholders' Equity
                  Years Ended December 31, 2001, 2000, and 1999
                                 (In Thousands)


<TABLE>
<CAPTION>
                                                                                                            Accumulated
                                                                                  Unallocated  Unallocated     Other
                                                   Common               Retained      ESOP        RRP       Comprehensive
                                                    Stock     Surplus   Earnings     Shares      Shares     Income (Loss)   Total
                                                   -------    -------   -------      -------     -------    -------------  -------
<S>                                                <C>        <C>       <C>          <C>         <C>           <C>         <C>
Balance at December 31, 1998                       $    --      $  --   $ 3,046      $    --       $  --       $   297     $ 3,343

Comprehensive income (loss):
Net income - year ended December 31, 1999               --         --       168           --          --            --         168
Change in net unrealized loss on securities
  available for sale, net of reclassification
  adjustment and tax effect                             --         --        --           --          --          (512)       (512)
                                                                                                                           -------

Total comprehensive loss                                                                                                     (344)
                                                   -------    -------   -------      -------     -------       -------     -------

Balance at December 31, 1999                            --         --     3,214           --          --          (215)      2,999

Sale of stock - net of expenses                          3      2,383        --         (225)         --            --       2,161

ESOP shares released                                    --         --        --           26          --            --          26

Comprehensive income:
Net loss - year ended December 31, 2000                 --         --      (346)          --          --            --        (346)
Change in net unrealized loss on securities
  available for sale, net of reclassification
    adjustment and tax effect                           --         --        --           --          --           519         519
                                                                                                                           -------

Total comprehensive income                                                                                                     173
                                                   -------    -------   -------      -------     -------       -------     -------

Balance at December 31, 2000                             3      2,383     2,868         (199)         --           304       5,359

RRP shares awarded                                      --        142        --           --         (95)           --          47

ESOP shares released                                    --         --        --           17          --            --          17

Comprehensive income:
Net income - year ended December 31, 2001               --         --       314           --          --            --         314
Change in net unrealized loss on securities
  available for sale, net of reclassification
  adjustment and tax effect                             --         --        --           --          --           (24)        (24)
                                                                                                                           -------

Total comprehensive income                                                                                                     290
                                                   -------    -------   -------      -------     -------       -------     -------

Balance at December 31, 2001                       $     3    $ 2,525   $ 3,182      $  (182)    $   (95)      $   280     $ 5,713
                                                   =======    =======   =======      =======     =======       =======     =======
</TABLE>




                                      39


<PAGE>


<TABLE>
<CAPTION>
                                                                     2001         2000        1999
                                                                  ---------    ---------    ---------
<S>                                                               <C>          <C>          <C>
Cash Flows From Operating Activities
Net income (loss)                                                 $     314    $    (346)   $     168
Adjustments to reconcile net income (loss) to
   net cash provided by operating activities:
     Depreciation and amortization                                      122           26          107
     Net (gains) losses on sales of securities                         (105)         864          (76)
     Provision for loan losses                                           36           34           --
     Deferred income taxes                                               53          (87)          12
     Federal Home Loan Bank stock dividends                             (20)         (40)         (26)
     Net change in:
       Loans held for sale                                              121          242          (14)
       Accrued interest receivable, prepaid expenses,
         and other assets                                               357         (137)         (80)
       Accrued interest payable and other liabilities                   (72)          51          (35)
       Other - net                                                       --           38            2
                                                                  ---------    ---------    ---------

            Net cash provided by operating activities                   806          645           58
                                                                  ---------    ---------    ---------

Cash Flows From Investing Activities
Activities in securities available for sale:
   Sales                                                              3,451       15,224        1,868
   Maturities and prepayments                                         1,565          482        2,218
   Purchases                                                         (9,311)      (5,553)      (4,227)
Activities in securities to be held to maturity:
   Maturities and prepayments                                         2,657          507        1,465
   Purchases                                                             --       (6,140)      (4,854)
Loan originations and collections - net                               2,132         (521)        (785)
Capital expenditures                                                    (91)         (30)         (48)
Proceeds from sale of assets                                              2           29           --
                                                                  ---------    ---------    ---------

            Net cash provided by (used in) investing activities         405        3,998       (4,363)
                                                                  ---------    ---------    ---------
</TABLE>


                                          40


<PAGE>


                            CBCT Bancshares, Inc.

                  Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                     2001         2000        1999
                                                                  ---------    ---------    ---------
<S>                                                               <C>          <C>          <C>
Cash Flows From Financing Activities
Net change in deposits                                            $     (30)   $  (4,769)   $     216
Proceeds of Federal Home Loan Bank advances                           1,800          500        4,000
Repayment of Federal Home Loan Bank advances                         (3,507)      (2,454)        (608)
Sale of stock                                                            --        2,611           --
Costs of stock issuance                                                  --         (425)          --
                                                                  ---------    ---------    ---------

            Net cash provided by (used in) financing activities      (1,737)      (4,537)       3,608
                                                                  ---------    ---------    ---------

            Net increase (decrease) in cash
              and cash equivalents                                     (526)         106         (697)



Cash and cash equivalents at beginning of year                        2,359        2,253        2,950
                                                                  ---------    ---------    ---------

Cash and cash equivalents at end of year                          $   1,833    $   2,359    $   2,253
                                                                  =========    =========    =========


                    Schedules of Other Cash Flow Information

Interest paid on deposits and borrowed funds                      $   1,293    $   1,616    $   1,882
                                                                  =========    =========    =========

Income taxes paid (refunded)                                      $      85    $     (69)   $     119
                                                                  =========    =========    =========
</TABLE>


                                      41

<PAGE>


                              CBCT Bancshares, Inc.

                   Notes to Consolidated Financial Statements

1.   Summary of Significant Accounting Policies

Change in Reporting Entity

In December 1999, the Board of Directors of Community Bank of Central Texas (the
"Bank") adopted a Plan of Conversion to convert from a mutual state savings bank
to a capital stock state savings bank. The conversion was accomplished through
the formation of CBCT Bancshares, Inc. (the "Company") and the sale of the
Company's common stock to the public on September 25, 2000. The conversion was
accounted for similar to a pooling of interests, whereby the assets,
liabilities, and equity of the Bank were transferred to the new entity at book
value.

The offering of the Company's common stock was conducted whereby the shares were
offered to eligible accountholders of the Bank, the CBCT Bancshares, Inc.
Employee Stock Ownership Plan ("ESOP"), supplemental eligible accountholders,
and other members of the Bank.

The Company issued 281,031 shares on September 25, 2000 at the offering price of
$10 per share of gross proceeds of approximately $2.8 million. The Company
received approximately $2.5 million in cash proceeds and a $224,820 note
receivable from the ESOP for the purchase of the shares. Expenses of the stock
offering were deducted from the gross proceeds.

General

The accounting and reporting policies of the Company conform to accounting
principles generally accepted in the United States of America and to general
practices within the banking industry. The preparation of financial statements
in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. Material estimates that are particularly
susceptible to significant change in the near term relate to the determination
of the allowance for loan losses and the valuation of other real estate owned
and deferred tax assets.


                                      42


<PAGE>


                              CBCT Bancshares, Inc.

                   Notes to Consolidated Financial Statements


1.   Summary of Significant Accounting Policies (continued)

Following is a summary of the Company's more significant accounting and
reporting policies:

Consolidation

The consolidated financial statements include the accounts of the Company and
Bank and its wholly-owned subsidiary, Central State Service Corporation. Central
State Service Corporation was formed to engage in securities brokerage
activities through a third party. Effective in December 1998, these activities
were transferred to the Bank's accounts and the subsidiary became inactive. All
significant intercompany balances and transactions have been eliminated in
consolidation.

Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141, Business Combinations ("SFAS 141")
and Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets ("SFAS 142"). SFAS 141 requires all business combinations to
be accounted for using the purchase method of accounting and is effective for
all business combinations initiated after June 30, 2001. SFAS 142 requires
goodwill to be tested for impairment under certain circumstances, and be written
off when impaired, rather than being amortized as previous standards required.
SFAS 142 is effective for fiscal years beginning after December 31, 2001. The
adoption of SFAS 141 did not have a material effect on the Company's financial
condition or results of operations. It is anticipated that the adoption of SFAS
142 will not have a material effect on the Company's financial condition or
results of operations.

Business

The Company, through the Bank, provides a variety of financial services to
individuals and small businesses through its office in Smithville, Texas. Its
primary deposit products are savings and term certificate accounts, and its
primary lending products are residential mortgage loans, commercial real estate
loans, and consumer installment loans.


                                      43


<PAGE>


                              CBCT Bancshares, Inc.

                   Notes to Consolidated Financial Statements



1.   Summary of Significant Accounting Policies (continued)

Significant Group Concentrations of Credit Risk

Most of the Bank's activities are with customers located in Bastrop County,
Texas and surrounding counties. Note 2 discusses the types of securities in
which the Bank invests. Note 3 discusses the types of lending in which the Bank
engages. The Bank does not have any significant concentrations to any one
industry or customer.

Securities

The Bank's investments in securities are classified in three categories and
accounted for as follows:

Trading Securities. Government bonds held principally for resale in the near
term and mortgage-backed securities held for sale in conjunction with the Bank's
mortgage banking activities are classified as trading securities and recorded at
their fair values. Unrealized gains and losses on trading securities are
included in other income. The Bank did not have any securities classified as
trading during 2001 or 2000.

Securities to Be Held to Maturity. Bonds, notes, and debentures for which the
Bank has the positive intent and ability to hold to maturity are reported at
cost adjusted for amortization of premiums and accretion of discounts, which are
recognized in interest income using the interest method over the period to
maturity.

Securities Available for Sale. Securities available for sale are recorded at
fair value and consist of bonds, notes, and debentures not classified as trading
securities nor as securities to be held to maturity. Unrealized holding gains
and losses on securities available for sale are excluded from earnings and
reported in accumulated other comprehensive income, net of tax effect. Gains and
losses on the sale of securities available for sale are determined using the
specific-identification method and are included in earnings. Premiums and
discounts are recognized in interest income using the interest method over the
period to maturity.

Declines in the fair value of individual securities to be held to maturity and
available for sale below their cost that are other than temporary result in
write-downs of the individual securities to their fair value. The related write-
downs are included in earnings as realized losses.


                                      44

<PAGE>


                              CBCT Bancshares, Inc.

                   Notes to Consolidated Financial Statements


1.   Summary of Significant Accounting Policies (continued)

Loans Held for Sale

Loans originated and intended for sale in the secondary market are carried at
the lower of cost or estimated fair value in the aggregate. Net unrealized
losses, if any, are recognized through a valuation allowance by charges to
income.

Loans

Loans that management has the intent and ability to hold for the foreseeable
future, or until maturity or payoff, are reported at their outstanding principal
adjusted for any charge-offs, the allowance for loan losses, and any deferred
fees or costs on originated loans.

Loan origination fees, net of certain direct origination costs, are deferred and
recognized as an adjustment of the related loan yield using the interest method.

The accrual of interest on mortgage and commercial loans is discontinued at the
time the loan is 90 days delinquent unless the credit is well secured and in
process of collection. Consumer loans are typically charged off no later than
120 days past due. In all cases, loans are placed on nonaccrual or charged off
at an earlier date if collection of principal or interest is considered
doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual
or charged off is reversed against interest income. The interest on these loans
is accounted for on the cash basis or cost recovery method, until qualifying for
return to accrual. Loans are returned to accrual status when all the principal
and interest amounts contractually due are brought current and future payments
are reasonably assured.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have
occurred through a provision for loan losses charged to earnings. Loan losses
are charged against the allowance when management believes the uncollectibility
of a loan balance is confirmed. Subsequent recoveries, if any, are credited to
the allowance.


                                       45


<PAGE>


                              CBCT Bancshares, Inc.

                   Notes to Consolidated Financial Statements


1.   Summary of Significant Accounting Policies (continued)

Allowance for Loan Losses (continued)

The allowance for loan losses is evaluated on a regular basis by management and
is based upon management's periodic review of the collectibility of the loans in
light of historical experience, the nature and volume of the loan portfolio,
adverse situations that may affect the borrower's ability to repay, estimated
value of any underlying collateral, and prevailing economic conditions. This
evaluation is inherently subjective as it requires estimates that are
susceptible to significant revision as more information becomes available.

A loan is considered impaired when, based on current information and events, it
is probable that the Bank will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. Factors considered by management in determining impairment include
payment status, collateral value, and the probability of collecting scheduled
principal and interest payments when due. Loans that experience insignificant
payment delays and payment shortfalls generally are not classified as impaired.
Management determines the significance of payment delays and payment shortfalls
on a case-by-case basis, taking into consideration all of the circumstances
surrounding the loan and the borrower, including the length of the delay, the
reasons for the delay, the borrower's prior payment record, and the amount of
the shortfall in relation to the principal and interest owed. Impairment is
measured on a loan-by-loan basis for commercial and construction loans by either
the present value of expected future cash flows discounted at the loan's
effective interest rate, the loan's obtainable market price, or the fair value
of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for
impairment. Accordingly, the Bank does not separately identify individual
consumer and residential loans for impairment disclosures.

Servicing

Servicing assets are recognized as separate assets when rights are acquired
through purchase or through sale of financial assets. Capitalized servicing
rights are reported in other assets and are amortized into noninterest income in
proportion to, and over the period of, the estimated future net servicing income
of the underlying financial assets. Servicing assets are evaluated for
impairment based upon the fair value of the rights as compared to amortized
cost. Impairment is determined by stratifying rights by predominant
characteristics, such as interest rates and terms. Fair value is determined
using prices for similar assets with similar characteristics, when available, or
based upon discounted cash flows using market-based


                                      46


<PAGE>


                              CBCT Bancshares, Inc.

                   Notes to Consolidated Financial Statements


1.   Summary of Significant Accounting Policies (continued)

Servicing (continued)

assumptions. Impairment is recognized through a valuation allowance for an
individual stratum, to the extent that fair value is less than the capitalized
amount for the stratum.

Bank Premises and Equipment

Land is carried at cost. Bank premises and equipment are stated at cost, net of
accumulated depreciation. Depreciation is recognized on straight-line and
accelerated methods over the estimated useful lives of the assets. The estimated
useful lives range from 3 to 30 years.

Pension Costs and Postretirement Benefits

Pension costs under the Bank's 401(k) plan are charged to salaries and employee
benefits expense and are funded as accrued.

The Bank does not have any postretirement benefit obligations.

Foreclosed Assets

Assets acquired through, or in lieu of, loan foreclosure are held for sale and
are initially recorded at fair value at the date of foreclosure, establishing a
new cost basis. Subsequent to foreclosure, valuations are periodically performed
by management and the assets are carried at the lower of carrying amount or fair
value less cost to sell. Revenue and expenses from operations and changes in the
valuation allowance are included in net expenses from foreclosed assets.

Income Taxes

Deferred income tax assets and liabilities are determined using the liability
(or balance sheet) method. Under this method, the net deferred tax asset or
liability is determined based on the tax effects of the temporary differences
between the book and tax bases of the various balance sheet assets and
liabilities and gives current recognition to changes in tax rates and laws.

Cash and Cash Equivalents

For purposes of presentation in the consolidated statements of cash flows, cash
and cash equivalents include cash and noninterest- and interest-bearing due from
banks.


                                      47

<PAGE>


                              CBCT Bancshares, Inc.

                   Notes to Consolidated Financial Statements


1.   Summary of Significant Accounting Policies (continued)

Off-Balance Sheet Financial Instruments

In the ordinary course of business, the Bank has entered into off-balance sheet
financial instruments consisting of commitments to extend credit under mortgage,
construction, and consumer line of credit loans. Such financial instruments are
recorded in the consolidated financial statements when they are funded or
related fees are incurred or received.

Derivative Financial Instruments

The Company nor the Bank does not utilize derivative financial instruments as
part of its asset/liability management.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the
assets has been surrendered. Control over transferred assets is deemed to be
surrendered when (1) the assets have been isolated from the Bank, (2) the
transferee obtains the right (free of conditions that constrain it from taking
advantage of that right) to pledge or exchange the transferred assets, and (3)
the Bank does not maintain effective control over the transferred assets through
an agreement to repurchase them before their maturity.

Upon completion of a transfer of financial assets, the Bank continues to carry
on its balance sheet any retained interests in the transferred asset, including
servicing assets. Allocation of carrying amount between the assets sold and
retained is based on their fair values at the date of transfer.

Transfers recorded as sales result in the asset being derecognized from the
balance sheet. Gain or loss on the sale is recognized in current earnings based
on the proceeds of the sale, which can include cash and other assets measured at
their fair values at the date of receipt.

Reclassifications

Certain amounts have been reclassified from prior presentations at December 31,
2000 and 1999 to conform to classifications at December 31, 2001. There is no
effect on previously-reported net income (loss) or equity.


                                      48


<PAGE>


                              CBCT Bancshares, Inc.

                   Notes to Consolidated Financial Statements



2.   Investment Securities

The amortized cost and fair value of securities, with gross unrealized gains and
losses, follow (dollars in thousands):

<TABLE>
<CAPTION>
                                                December 31, 2001
                                  ----------------------------------------------
                                                Gross       Gross    Approximate
                                  Amortized   Unrealized  Unrealized    Fair
                                     Cost       Gains       Losses      Value
                                  ---------   ---------   ---------   ---------
<S>                               <C>         <C>         <C>         <C>
Securities Available for Sale

Debt securities:
  U.S. Agency                     $     510   $       9   $      --   $     519
  State and municipal                    78          --          --          78
  Mortgage-backed                     9,443         118          19       9,542
                                  ---------   ---------   ---------   ---------

    Total debt securities            10,031         127          19      10,139

Marketable equity securities              5         317          --         322
                                  ---------   ---------   ---------   ---------

                                  $  10,036   $     444   $      19   $  10,461
                                  =========   =========   =========   =========
</TABLE>


<TABLE>
<CAPTION>
                                                December 31, 2000
                                  ----------------------------------------------
                                                Gross       Gross    Approximate
                                  Amortized   Unrealized  Unrealized    Fair
                                     Cost       Gains       Losses      Value
                                  ---------   ---------   ---------   ---------
<S>                               <C>         <C>         <C>         <C>
Securities Available for Sale

Debt securities:
  U.S. Agency                     $   3,277   $      79   $      --   $   3,356
  State and municipal                   110           4          --         114
  Mortgage-backed                     2,235          44          --       2,279
                                  ---------   ---------   ---------   ---------

    Total debt securities             5,622         127          --       5,749

Marketable equity securities              4         334          --         338
                                  ---------   ---------   ---------   ---------

                                  $   5,626   $     461   $      --   $   6,087
                                  =========   =========   =========   =========
</TABLE>


                                      49

<PAGE>


                              CBCT Bancshares, Inc.

                   Notes to Consolidated Financial Statements

2.   Investment Securities (continued)


<TABLE>
<CAPTION>
                                                December 31, 2001
                                  ----------------------------------------------
                                                Gross       Gross    Approximate
                                  Amortized   Unrealized  Unrealized    Fair
                                     Cost       Gains       Losses      Value
                                  ---------   ---------   ---------   ---------
<S>                               <C>         <C>         <C>         <C>
Securities to Be Held to Maturity

Debt securities:
  U.S. Agency                     $   1,996   $      48   $      --   $   2,044
  Mortgage-backed                     1,009          10          --       1,019
                                  ---------   ---------   ---------   ---------

                                  $   3,005   $      58   $      --   $   3,063
                                  =========   =========   =========   =========
</TABLE>


<TABLE>
<CAPTION>
                                                December 31, 2000
                                  ----------------------------------------------
                                                Gross       Gross    Approximate
                                  Amortized   Unrealized  Unrealized    Fair
                                     Cost       Gains       Losses      Value
                                  ---------   ---------   ---------   ---------
<S>                               <C>         <C>         <C>         <C>
Securities to Be Held to Maturity

Debt securities:
  U.S. Agency                     $   2,991   $      26   $      --   $   3,017
  Mortgage-backed                     2,656          14          --       2,670
                                  ---------   ---------   ---------   ---------

                                  $   5,647   $      40   $      --   $   5,687
                                  =========   =========   =========   =========
</TABLE>


                                      50


<PAGE>


                            CBCT Bancshares, Inc.

                  Notes to Consolidated Financial Statements

 2.   Investment Securities (continued)

The amortized cost and fair value of debt securities by contractual maturity at
December 31, 2001 follow (dollars in thousands):

<TABLE>
<CAPTION>
                                       Available for Sale       Held to Maturity
                                     ---------------------   ---------------------

                                     Amortized      Fair     Amortized     Fair
                                        Cost       Value        Cost       Value
                                     ---------   ---------   ---------   ---------
<S>                                  <C>         <C>         <C>         <C>
Within one year                      $      35   $      36   $   1,996   $   2,044
Over one year through five years           553         561          --          --
After five years through ten years          --          --          --          --
                                     ---------   ---------   ---------   ---------

                                           588         597       1,996       2,044
Mortgage-backed securities               9,443       9,542       1,009       1,019
                                     ---------   ---------   ---------   ---------

                                     $  10,031   $  10,139   $   3,005   $   3,063
                                     =========   =========   =========   =========
</TABLE>

None of the Bank's investment securities were pledged at December 31, 2001 or
2000.

For the years ended December 31, 2001, 2000, and 1999, proceeds from sales of
securities available for sale amounted to $3,451,000, $15,224,000, and
$1,868,000, respectively. Gross realized gains amounted to $105,000, $0, and
$126,000, respectively. Gross realized losses amounted to $0, $864,000, and
$50,000, respectively. The tax provision (benefit) applicable to these net
realized gains and losses amounted to $0, $(294,000), and $26,000, respectively.


                                      51

<PAGE>


                            CBCT Bancshares, Inc.

                  Notes to Consolidated Financial Statements

 3.   Loans and Allowance for Loan Losses

A summary of the balances of loans follows (dollars in thousands):

                                     December 31,
                                    2001     2000
                                 --------- ---------
Mortgage loans on real estate:
  Residential 1-4 family         $  12,756 $  14,785
  Commercial                         2,331     1,909
  Construction                       2,135     1,761
                                 --------- ---------

                                    17,222    18,455
Commercial loans                       280       409
Consumer loans                       3,970     4,032
                                 --------- ---------

                                    21,472    22,896
Less:
  Allowance for loan losses            257       228
  Unadvanced loan funds              1,165       446
  Net deferred loan fees                38        42
                                 --------- ---------

                                 $  20,012 $  22,180
                                 ========= =========

At December 31, 2001 and 2000, the Bank's loans secured by 1-4 family residences
were pledged as collateral for advances received from the Federal Home Loan Bank
(see note 8).


                                      52


<PAGE>


                              CBCT Bancshares, Inc.

                   Notes to Consolidated Financial Statements

3.   Loans and Allowance for Loan Losses (continued)

An analysis of the allowance for loan losses follows (dollars in thousands):

                                                 Years Ended December 31,
                                                2001       2000       1999
                                             --------------------------------

Balance at beginning of year                 $    228    $    199    $    181
Provision for loan losses                          36          34          --
Loans charged off                                  (9)         (5)        (12)
Recoveries of loans previously charged off          2          --          30
                                             --------    --------    --------

Balance at end of year                       $    257    $    228    $    199
                                             ========    ========    ========


Impairment of loans having an aggregate recorded investment of $7,350 at
December 31, 2001 and $0 at December 31, 2000 has been recognized in conformity
with FASB Statement No. 114, as amended by FASB Statement No. 118. The average
recorded investment in impaired loans during 2001 and 2000 was $3,675 and $0,
respectively. The total allowance for loan losses related to those loans was $0
at December 31, 2001 and 2000, respectively. No interest income on impaired
loans was recognized during the years ended December 31, 2001 and 2000,
respectively.

No additional funds are committed to be advanced in connection with impaired
loans.


4.   Servicing

During the year ended December 31, 2000, the Bank sold its portfolio of
servicing assets to an unrelated financial institution.

There were no capitalized servicing rights for the year ended December 31, 2000.


                                      53


<PAGE>


                            CBCT Bancshares, Inc.

                  Notes to Consolidated Financial Statements


 5.   Bank Premises and Equipment

Components of bank premises and equipment included in the consolidated balance
sheets were as follows (dollars in thousands):

                                     December 31,
                                   2001       2000
                                ---------------------

Land                            $     307   $     307
Buildings                           1,079       1,079
Equipment and furniture               368         279
                                ---------   ---------

                                    1,754       1,665
Less accumulated depreciation         466         394
                                ---------   ---------

                                $   1,288   $   1,271
                                =========   =========


Depreciation expense for the years ended December 31, 2001, 2000, and 1999
amounted to $72,000, $58,000, and $65,000, respectively.

The Bank did not have any significant long-term lease obligations at December
31, 2001 or 2000.


6.   Foreclosed Assets

The Bank had no other real estate or other foreclosed assets at December 31,
2001. The Bank had no other real estate and $3,000 of other foreclosed assets at
December 31, 2000.


                                      54


<PAGE>


                              CBCT Bancshares, Inc.

                   Notes to Consolidated Financial Statements


7.   Deposits

The aggregate amount of certificates of deposit ("CDs"), each with a minimum
denomination of $100,000, was $2,528,000 at December 31, 2001 ($2,088,000 in
2000).

At December 31, 2001, the scheduled maturities of CDs are as follows (dollars in
thousands):

Year ending December 31,
     2002                       $   15,357
     2003-2004                       3,587
     2005-2006                         377
                                ----------

                                $   19,321
                                ==========


 8.   Advances From Federal Home Loan Bank

Advances received from the Federal Home Loan Bank are at fixed interest rates
that range from 5.03% to 5.05%. Advances are received pursuant to a collateral
pledge and security agreements giving the Federal Home Loan Bank a security
interest in the Bank's loans secured by 1-4 family residences.

At December 31, 2001, the scheduled repayments of principal due on outstanding
advances are as follows (dollars in thousands):

Year ending December 31,
        2002                     $    3,363
        2003                            368
                                 ----------

                                 $    3,731
                                 ==========


                                      55


<PAGE>


                              CBCT Bancshares, Inc.

                   Notes to Consolidated Financial Statements

9.   Federal Income Tax

The provision for federal income tax expense (benefit) consisted of the
following (dollars in thousands):

                                         Years Ended December 31,
                                          2001     2000     1999
                                         ------------------------

Currently paid or payable (receivable)   $  93    $(159)   $  59
Deferred tax expense (benefit)              53      (87)      12
                                         -----    -----    -----

                                         $ 146    $(246)   $  71
                                         =====    =====    =====

The provision for federal income tax expense (benefit) is less than that
computed by applying the federal statutory rate of 34% as indicated in the
following analysis (dollars in thousands):

                                                Years Ended December 31,
                                                 2001     2000     1999
                                                ------------------------

Tax expense (benefit) based on statutory rate   $ 156    $(201)   $  81
Effect of tax-exempt income                       (11)     (12)     (13)
Interest and other nondeductible expenses           2        1        2
Other - net                                        (1)     (34)       1
                                                -----    -----    -----

                                                $ 146    $(246)   $  71
                                                =====    =====    =====


                                      56

<PAGE>

                              CBCT Bancshares, Inc.

                   Notes to Consolidated Financial Statements


9.   Federal Income Tax (continued)

The components of the deferred income tax liability included in other
liabilities were as follows (dollars in thousands):


                                                      December 31,
                                                  2001          2000
                                                  -------------------

Deferred tax assets related to:
  Allowance for loan losses                       $ 114         $ 102
  Loan origination fees and costs                    13            14
                                                  -----         -----

                                                    127           116
Less valuation allowance                             89            89
                                                  -----         -----

     Total deferred tax assets                       38            27
                                                  -----         -----

Deferred tax liabilities related to:
  Depreciation                                      (16)          (27)
  Cash method of accounting for tax purposes        (54)          (95)
  Net unrealized appreciation on securities
  available for sale                               (141)         (157)
  Other                                             (41)          (31)
                                                  -----         -----

     Total deferred tax liabilities                (252)         (310)
                                                  -----         -----

        Net deferred tax liability                $(214)        $(283)
                                                  =====         =====


The deferred tax asset related to the allowance for loan losses has been reduced
by a valuation allowance as it has been determined it is more likely than not
that a significant portion of this deferred tax asset will not be realized. This
determination was made based on an analysis of the temporary differences
relating to the allowance for loan losses and their expected reversal in future
years.

For the year ended December 31, 2000, the Company generated a net operating loss
carryover for tax purposes, which was completely absorbed during the year ended
December 31, 2001.


                                      57

<PAGE>


                              CBCT Bancshares, Inc.

                   Notes to Consolidated Financial Statements


10.  Off-Balance Sheet Activities

The Bank is a party to credit-related 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 commitments to extend credit
under mortgage and construction loan agreements and consumer lines of credit.
Such commitments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the consolidated balance sheets.

The Bank's exposure to credit loss is represented by the contractual amount of
these commitments. The Bank follows the same credit policies in making
commitments as it does for on-balance sheet instruments.

The following commitments to extend credit were outstanding (dollars in
thousands):

                                                      December 31,
                                                  2001          2000
                                                  -------------------

Real estate                                      $2,034        $1,222
Consumer                                             89            31
                                                 ------        ------


                                                 $2,123        $1,253
                                                 ======        ======

Amounts expected to be sold in the
  secondary mortgage market                      $1,084        $  713
                                                 ======        ======



Commitments to extend credit 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. The Bank evaluates each customer's creditworthiness on
a case-by-case basis. The amount of collateral obtained, if it is deemed
necessary by the Bank upon extension of credit, is based on management's credit
evaluation of the counterparty. Collateral held is usually first-lien
residential mortgage property.

The Bank did not have any letters of credit outstanding at December 31, 2001 and
2000.


                                       58

<PAGE>

                              CBCT Bancshares, Inc.

                   Notes to Consolidated Financial Statements


11.  Related Party Transactions

In the ordinary course of business, the Bank has granted loans to principal
officers and directors and their affiliates (related parties) amounting to
$791,000 at December 31, 2001 and $327,000 at December 31, 2000. During the year
ended December 31, 2001, new loans were $556,000 ($12,000 in 2000) and net
principal payments were $92,000 ($6,000 in 2000).

Deposits from related parties held by the Bank at December 31, 2001 amounted to
$309,000 ($357,000 at December 31, 2000).

Amounts paid to related parties for products and services were $9,000, $8,000,
and $19,000 for the years ended December 31, 2001, 2000, and 1999, respectively.


12.  Employee Benefits

The Bank has a 401(k) plan for the benefit of substantially all employees. The
Bank's contribution is determined annually by the Board of Directors. The Bank
contributed $8,000, $13,000, and $5,000 to the plan for the years ended December
31, 2001, 2000, and 1999, respectively.

The ESOP is a noncontributory retirement plan adopted by the Company effective
September 25, 2000 which includes all employees who meet minimum eligibility
requirements. The ESOP acquired 22,482 shares of the Company's common stock in
the conversion at a price of $10 per share with proceeds of a loan from the
Company in the amount of $224,820. The Bank intends to make annual cash
contributions to the ESOP in an amount sufficient for the ESOP to make the
scheduled payments under the note payable to the Company.

The note payable has a term of ten years, bears interest at 6%, and requires a
level annual payment of principal and interest of approximately $35,000. The
note is secured by the shares of common stock held by the ESOP.

As the note is repaid, shares are released from collateral based on the
proportion of the payment in relation to total payments required to be made on
the loan. The shares released from collateral are then allocated to participants
based upon compensation. The Bank recognized $29,000 in compensation expense for
the years ended December 31, 2001 and 2000 related to the ESOP.


                                      59

<PAGE>

                            CBCT Bancshares, Inc.

                  Notes to Consolidated Financial Statements


12.   Employee Benefits (continued)

Since the ESOP borrowed directly from the Company, the note is not shown as an
asset, but rather the cost of the unallocated shares is shown as a reduction in
equity. Unallocated shares are considered neither outstanding shares for
computation of basic earnings per share nor potentially-dilutive securities for
computation of diluted earnings per share. Any dividends that will be paid on
unallocated ESOP shares will be reflected as a reduction of the note payable.

Shares released during the years ended December 31, 2001 and 2000 totaled 2,248
in each year. Unallocated shares at December 31, 2001 totaled 17,986, with a
market value of approximately $250,000.

Stock Option and Incentive Plan

The Company adopted the 2001 Stock Option and Incentive Plan ("Stock Option
Plan"), which was approved by stockholders in November 2001, for officers, key
employees, and directors. The Stock Option Plan is authorized to grant options
to purchase up to 28,103 shares. As of December 31, 2001, 25,293 options have
been granted with an exercise price of $14.03, representing the fair market
value on the date the options were granted. Stock options are generally
exercisable by the individual within ten years of the grant date.

Recognition and Retention Plan

The Company adopted the 2001 Recognition and Retention Plan ("RRP"), which was
approved by stockholders in November 2001, for officers, key employees, and
directors. The RRP is authorized to issue up to 11,241 shares of stock subject
to certain vesting requirements. As of December 31, 2001, 10,192 shares have
been awarded, of which one-third of the shares is fully vested, and the
remaining two-thirds vests over the next two years. For the year ended December
31, 2001, the Company recognized compensation expense of $48,000, representing
the fair market value of the vested shares.


                                       60

<PAGE>


                              CBCT Bancshares, Inc.

                   Notes to Consolidated Financial Statements


13.  Earnings Per Shares

Basic earnings per share is computed by dividing net income by the average
number of shares of common stock outstanding during the period presented.
Diluted earnings per share is computed in a manner similar to that of basic
earnings per share except that the weighted-average common shares outstanding is
increased to include the number of common shares that would have been
outstanding if contracts to issue stock for stock options and stock awards were
exercised during the period using the treasury stock method. ESOP shares
committed to be released are considered outstanding while unallocated common
shares held by the ESOP are not included in the weighted- average number of
common shares outstanding for either the basic or diluted earnings per share
calculations.

For the year ended December 31, 2001, the Company has 261,194 weighted-average
shares outstanding for the basic earnings per share calculation and 261,976
weighted-average shares outstanding for the diluted earnings per share
calculation. For the year ended December 31, 2000, 258,562 weighted-average
shares were outstanding for both the basic and diluted earnings per share
calculations. For the 2000 earnings per share calculation, shares issued in
connection with the conversion and stock offering have been assumed to be
outstanding at January 1, 2000. For the year ended December 31, 1999, earnings
per share is not presented, as no shares were outstanding during this period
prior to the Company's conversion to a stock company.


14.  Minimum Regulatory Capital Requirements

The Company (on a consolidated basis) and the Bank are subject to various
regulatory capital requirements administered by federal and state banking
agencies. Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Company's and Bank's
consolidated financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company and Bank must
meet specific capital guidelines that involve quantitative measures of their
assets, liabilities, and certain off-balance sheet items as calculated under
regulatory accounting practices. The capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.


                                       61

<PAGE>


                              CBCT Bancshares, Inc.

                   Notes to Consolidated Financial Statements


14.  Minimum Regulatory Capital Requirements (continued)

Quantitative measures established by regulation to ensure capital adequacy
require the Company and Bank to maintain minimum amounts and ratios (set forth
in the following tables) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as
defined) to average assets (as defined). Management believes, as of December 31,
2001 and 2000, that the Company and Bank met all capital adequacy requirements
to which they are subject.

As of December 31, 2001, the most recent notification from the regulators
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized, an institution
must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage
ratios as set forth in the following tables. There are no conditions or events
since the notification that management believes have changed the Bank's
category. The Company's and Bank's actual capital amounts and ratios as of
December 31, 2001 and 2000 are also presented in the tables (dollars in
thousands).

<TABLE>
<CAPTION>
                                                                             Minimum
                                                                            to Be Well
                                                         Minimum         Capitalized Under
                                                         Capital         Prompt Corrective
                                      Actual           Requirement       Action Provisions
                                 ---------------     --------------      -----------------
                                 Amount    Ratio     Amount    Ratio     Amount     Ratio
                                 ------    -----     ------    -----     ------     -----
<S>                              <C>       <C>       <C>        <C>      <C>        <C>
December 31, 2001
Total Capital to Risk-
  Weighted Assets:
    Consolidated                 $6,086    32.7%     $1,491     8.0%     $1,863     10.0%
    Bank                         $4,636    25.1%     $1,477     8.0%     $1,847     10.0%

Tier 1 Capital to Risk-
  Weighted Assets:
    Consolidated                 $5,710    30.6%     $  745     4.0%     $1,118      6.0%
    Bank                         $4,263    23.1%     $  739     4.0%     $1,108      6.0%

Tier 1 Capital to Average
  Assets:
    Consolidated                 $5,710    15.0%     $1,523     4.0%     $1,904      5.0%
    Bank                         $4,263    11.9%     $1,431     4.0%     $1,788      5.0%
</TABLE>


                                      62

<PAGE>


                            CBCT Bancshares, Inc.

                  Notes to Consolidated Financial Statements


14.   Minimum Regulatory Capital Requirements (continued)


<TABLE>
<CAPTION>
                                                                             Minimum
                                                                             to Be Well
                                                       Minimum           Capitalized Under
                                                       Capital           Prompt Corrective
                                      Actual           Requirement       Action Provisions
                                 ---------------     --------------      -----------------
                                 Amount    Ratio     Amount    Ratio     Amount     Ratio
                                 ------    -----     ------    -----     ------     -----
<S>                              <C>       <C>       <C>        <C>      <C>        <C>
December 31, 2000
Total Capital to Risk-
  Weighted Assets:
    Consolidated                 $5,433    28.3%     $1,537     8.0%     $1,922     10.0%
    Bank                         $4,326    22.8%     $1,520     8.0%     $1,900     10.0%

Tier 1 Capital to Risk-
  Weighted Assets:
    Consolidated                 $5,055    26.3%     $  769     4.0%     $1,153      6.0%
    Bank                         $3,948    20.8%     $  760     4.0%     $1,140      6.0%

Tier 1 Capital to Average
  Assets:
    Consolidated                 $5,055    12.5%     $1,617     4.0%     $2,021      5.0%
    Bank                         $3,948    10.0%     $1,573     4.0%     $1,966      5.0%
</TABLE>


                                      63

<PAGE>


                            CBCT Bancshares, Inc.

                  Notes to Consolidated Financial Statements


15.   Parent Company Only Condensed Financial Statements

Condensed balance sheet information of CBCT Bancshares, Inc. as of December 31,
2001 and 2000 and the related statements of income and cash flows for the
periods then ended are as follows. CBCT Bancshares, Inc. did not have operations
prior to its initial stock offering on September 25, 2000 (dollars in
thousands):

                              CBCT Bancshares, Inc.
                                 Balance Sheets
                           December 31, 2001 and 2000

                                     Assets

                                                  2001          2000
                                                 ------        ------
Cash                                             $  385        $1,107
Investment in subsidiary bank                     1,423         1,108
Securities available for sale                       791            --
Accrued interest receivable                           4            --
                                                 ------        ------

                                                 $2,603        $2,215
                                                 ======        ======


                      Liabilities and Stockholders' Equity

Liabilities                                      $    4        $   --
                                                 ------        ------

Stockholders' Equity
Preferred stock                                      --            --
Common stock                                          3             3
Surplus                                           2,525         2,383
Retained earnings                                   342            28
Unallocated ESOP shares                            (182)         (199)
Unallocated RRP shares                              (95)           --
Accumulated other comprehensive income                6            --
                                                 ------        ------

        Total stockholders' equity                2,599         2,215
                                                 ------        ------

                                                 $2,603        $2,215
                                                 ======        ======


                                       64


<PAGE>


                              CBCT Bancshares, Inc.

                   Notes to Consolidated Financial Statements


15.  Parent Company Only Condensed Financial Statements (continued)


                              CBCT Bancshares, Inc.
                              Statements of Income
                For the Periods Ended December 31, 2001 and 2000


                                                   2001          2000
                                                  -----         -----

Income:
  Equity in undistributed earnings of subsidiary  $ 315         $   8
  Interest and other income                          67            36
                                                  -----         -----

                                                    382            44

Expenses                                             68            16
                                                  -----         -----

  Net income                                      $ 314         $  28
                                                  =====         =====


                                       65


<PAGE>


                              CBCT Bancshares, Inc.

                   Notes to Consolidated Financial Statements

15.  Parent Company Only Condensed Financial Statements (continued)


                            CBCT Bancshares, Inc.
                           Statements of Cash Flows
               For the Periods Ended December 31, 2001 and 2000

                         Increase (Decrease) in Cash

                                                       2001           2000
                                                      ------         ------

Cash Flows From Operating Activities
Net income                                            $ 314          $  28
Adjustments to reconcile net income to net cash
  provided by (used in) operating activities:
    Equity in undistributed earnings of subsidiary     (315)            (8)
    Net accretion of securities                          (3)            --
    Net change in accrued interest receivable            (4)            --
    Net change in other liabilities                       4             --
                                                      ------         ------

        Net cash provided by (used in)
          operating activities                           (4)            20
                                                      ------         ------

Cash Flows From Investing Activities
Purchases of securities available for sale             (933)            --
Prepayments of securities available for sale            145             --
Capital contribution to subsidiary                       --          (1,100)
                                                      ------         ------

        Net cash used in investing activities          (788)         (1,100)
                                                      ------         ------

Cash Flows From Financing Activities
Sale of stock                                            70             --
Issuance of common stock                                 --          2,612
Expenses of stock offering                               --           (425)
                                                      ------         ------

        Net cash provided by financing activities        70          2,187
                                                      ------         ------

        Net increase (decrease) in cash                (722)         1,107



Cash at beginning of year                             1,107             --
                                                      ------         ------

Cash at end of year                                   $ 385          $1,107
                                                      ======         ======


                                      66


<PAGE>


Item 9    Changes In and Disagreements With Accountants on Accounting and
          Financial Disclosure

     No disclosure under this item is required.


                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

Directors

     Georgina Chronis. Ms. Chronis is the President of Clara Inc., which
operates La Cabana Restaurant Chevron Store in Smithville, Texas. Ms. Chronis
has held this position since 1985.

     Rodney E. Langer. Mr. Langer retired as a Captain with Delta Airlines in
July 1997.

     Gordon N. Fowler, Jr. Mr. Fowler is the owner/operator of Diamond F Ranch,
a cattle operation located in Rosanky, Texas. Prior to 1997, Mr. Fowler was the
ranch manager of Double D Ranch, located in Rosanky, Texas.

     Barry W. Hannath. Mr. Hannath is a self-employed rancher. From 1975 until
1993, Mr. Hannath was the President and Chief Executive Officer of Hannath Inc.,
a grocery store.

     Brad M. Hurta. Mr. Hurta is the President of Community Bank, a position he
has held since May 1999. Prior to this, he was the Senior Vice President of
First State Bank, Smithville, Texas.

     James A. Cowan. Mr. Cowan is a self-employed consultant in the
telecommunications field.

     Mike C. Maney. Mr. Maney has been the owner of Maney Tax Service, a tax
preparation service since 1999. Previously, he was the Foreman-Gas Measurement
for Western Gas Resources, a natural gas pipeline, a position he retired from in
October 1998, after 17 years.

Executive Officers

     Lynn D. Frerich. Age 31 years. Mr. Frerich serves as Executive Vice
President and Chief Operating Officer. He has been employed by Community Bank
since 1999. Prior to joining Community Bank, he was the Branch Manager of First
State Bank of Bastrop, Texas.

Section 16(a) Beneficial Ownership Reporting Compliance

     No disclosure under this item is required.

Item 11. Executive Compensation

     The Company has not paid any compensation to its executive officers since
its formation. The Company does not anticipate paying any compensation to its
officers until it becomes actively involved in the operation or acquisition of a
business other than the Bank. The following table summarizes for the years
indicated the compensation paid by the Bank to the Chief Executive Officer of
the Bank. No Executive Officer received a salary and bonus in excess of
$100,000.

                                      67


<PAGE>


<TABLE>
<CAPTION>
                                                                                                Long Term
                                                          Annual Compensation             Compensation Awards
                                                ----------------------------------------  ---------------------
                                                                              Other       Restricted
                                                                              Annual        Stock                All Other
                                       Fiscal                              Compensation     Award      Options   Compen-
Name and Principal Position             Year       Salary       Bonus         ($)(1)         ($)         (#)     sation
-----------------------------------   --------  -----------  -----------  --------------  ----------  ---------  ---------

<S>                                     <C>     <C>             <C>                         <C>         <C>        <C>
Brad M. Hurta, President and Chief      2001    $77,625(2)      9,750           --          14,030      7,000      $--
Executive Officer                       2000     75,850            --           --              --       --         --
----------------                        1999     44,692(3)         --           --              --       --         --
</TABLE>

(1)  This amount does not include personal benefits or perquisites which did not
     exceed the lesser of $50,000 or 10% of the named individuals' salary and
     bonus.

(1)  Includes fees paid as a director of $2,625.

(3)  Employment began May 27, 1999.


Employment Agreement

     In connection with the conversion, Community Bank entered into a three-year
employment agreement with Mr. Hurta. Under the employment agreement, the initial
salary level is $75,000, and the agreement also provides for equitable
participation by Mr. Hurta in Community Bank's employee benefit plans. The
salary may be increased at the discretion of the board of directors. The
agreement may be terminated by Community Bank at any time or by the executive if
he is assigned duties inconsistent with his initial position, duties,
responsibilities and status. In the event that Mr. Hurta's employment is
terminated without cause or upon his voluntary termination following the
occurrence of an event described in the preceding sentence, Community Bank would
be required to honor the terms of the agreement through the expiration of the
contract, including payment of then current cash compensation and continuation
of employee benefits.

     The employment agreement also provides for a severance payment and other
benefits if Mr. Hurta is involuntarily terminated because of a change in control
of the Company or the Bank. The agreement authorizes severance payments on a
similar basis if Mr. Hurta involuntarily terminates his employment following a
change in control because he is assigned duties inconsistent with his position,
duties, responsibilities and status immediately prior to the change in control.

     The maximum value of the severance benefits under the employment agreements
is 2.99 times the executive's average annual W-2 compensation during the five
calendar year period prior to the effective date of the change in control (base
amount). Assuming that a change in control had occurred at December 31, 2001 Mr.
Hurta would be entitled to a payment of approximately $224,250. Section 280G of
the Internal Revenue Code provides that severance payments that equal or exceed
three times the individual's base amount are deemed to be "excess parachute
payments" if they are conditioned upon a change in control. Individuals
receiving parachute payments in excess of three times of their base amount are
subject to a 20% excise tax on the amount of the excess payments. If excess
parachute payments are made, CBCT Bancshares, Inc. and Community Bank would not
be entitled to deduct the amount of the excess payments. The employment
agreement provides that severance and other payments that are subject to a
change in control will be reduced as much as necessary to ensure that no amounts
payable to the executive will be considered excess parachute payments.


                                      68


<PAGE>


Awards Under The Stock Option Plan

     The following table sets forth information regarding grants of stock
options made under the Company's 2001 Stock Option and Incentive Plan during
fiscal year 2001 to Brad Hurta, the President and Chief Executive Officer.



                      OPTION/SAR GRANTS IN LAST FISCAL YEAR
--------------------------------------------------------------------------------
                                Individual Grants
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                 Number of
                                 Securities       % of Total
                                 Underlying      Options/SARs    Exercise
                                  Options/        Granted to     or Base
                                    SARs          Employees       Price      Expiration
          Name                   Granted (#)    in Fiscal Year    ($/Sh)        Date
----------------------------     -----------    -------------    --------    ----------
<S>                              <C>             <C>             <C>         <C>
Brad M. Hurta, President and        7,000           27.68%        $14.03     11/20/2011
Chief Executive Officer
</TABLE>

     The following table sets forth the number and value of unexercised stock
options held by Mr. Hurta. The value of an unexercised, in-the-money option at
fiscal year-end is the difference between its exercise or base price and the
fair market value of the underlying stock on December 31, 2001, the last trading
day in fiscal 2001. On that date, the price was $12.41 per share, based on the
closing price of the Company's common stock as reported on the over-the-counter
Electronic Bulletin Board. Since the exercise price of the options held by the
named executive officers was higher than the market value of the Company's
Common Stock, they had no value at that date. No stock options were exercised by
Mr. Hurta during the fiscal year ended December 31, 2001.



<TABLE>
<CAPTION>
                Aggregated Option/SAR Exercises in Last Fiscal Year and Year-end Option/SAR Values
-------------------------------------------------------------------------------------------------------------------
                                                                                             Value of
                                                       Number of Securities                Unexercised
                                                      Underlying Unexercised               In-the-Money
                                                         Options/SARs at                 Options/SARs at
                                                            FY-End (#)                      FY-End ($)
                                                   ------------------------------  --------------------------------
                              Shares
                              Acquired
                              on        Value
                              Exercise  Realized
Name                          (#)       ($)        Exercisable   Unexercisable(1)  Exercisable   Unexercisable
--------------------------    --------  --------   -----------   ----------------  -----------   ------------------
<S>                           <C>       <C>        <C>           <C>               <C>           <C>
Brad M. Hurta
   President and
   Chief Executive Officer      ---       $---        2,334           4,666            ---           ---
</TABLE>
------------

(1)   Represents options to purchase Common Stock awarded to the above-named
      officers of the Company. The options vest in three equal annual
      installments. The first installment vested on November 20, 2001 with the
      remaining installments to vest on November 20, 2002and 2003.


                                      69


<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management

      The address of each of the beneficial owners, except where otherwise
indicated, is the same address as the Company's. As of March 25, 2002, there
were 291,223 shares of Company common stock issued and outstanding.


<TABLE>
<CAPTION>
                                                                       Percent of
                                                       Beneficial    Common Stock
          Name of Beneficial Owner                      Ownership     Outstanding
---------------------------------------------     ---------------   -------------
<S>                                                     <C>             <C>
Significant Stockholder

Community Bank of Central Texas                         22,482          7.72%
Employee Stock Ownership Plan(1)
312 Main Street
Smithville, Texas 78957-2035

The Baupost Group, L.L.C.(2)                            26,100          8.96
Sak Corporation
Seth A. Klarman
44 Brattle Street, 5th Floor
Cambridge, Massachusetts 02138

BVP, LLC(3)                                             28,000          9.61
530 S. Whittaker
PMB 301
New Buffalo, Michigan 49117

Directors and Executive Officers(4)

Mike C. Maney, Director                                 10,120          3.48
Gordon N. Fowler, Director                               8,470          2.91
James A. Cowan, Director                                14,120          4.85
Rodney E. Langer, Director                               2,620          0.90
Brad M. Hurta, President and Director                    5,800          1.99
Georgina Chronis, Director                                 270          0.09
Barry W. Hannath, Director                              10,120          3.48

All executive officers and
  directors as a group (8 persons)                      52,726         18.11%
</TABLE>

(1)  Represents shares held by the Community Bank of Central Texas Employee
     Stock Ownership Plan ("ESOP"), none of which have been allocated to
     accounts of the ESOP participants. First Bankers Trust Company, N.A., the
     trustee of the ESOP, may be deemed to beneficially own the shares held by
     the ESOP which have not been allocated to participant accounts.
     Participants are entitled to instruct the trustee as to the voting of
     shares allocated to their accounts. For each issue voted upon by the
     Company's stockholders, the unallocated shares held by the ESOP are voted
     by the ESOP trustee in the same proportion as the trustee is instructed by
     participants to vote the allocated shares. Allocated shares as to which the
     ESOP trustee receives no voting instructions are voted by the trustee in
     its discretion.

(2)  The information is presented as reported by The Baupost Group, L.L.C.
     ("Baupost"),SAK Corporation ("SAK") and Seth A. Klarman ("Klarman") in a
     Schedule 13G filed with the Securities and Exchange Commission ("SEC") on
     February 14, 2001. Baupost reported sole voting and sole investment power
     over all 26,100 shares and no shared voting or investment power. SAK and
     Klarman reported no sole or shared voting or investment powers over the
     shares reported.

(3)  The information is presented as reported in a Schedule 13G by BVP, LLC on
     October 19, 2000. BVP LLC reported sole voting and investment power over
     28,000 shares and no shared voting or investment power over the shares
     reported.

(4)  Includes shares held directly, as well as shares held jointly with family
     members, shares held in retirement accounts, held in a fiduciary capacity,
     held by members of the individual's or group member's family, or held by
     trusts of which the individual or group member is a trustee or substantial
     beneficiary, with respect to which shares the individual or group member
     may be deemed to have sole or shared voting and/or investment powers.

                                      70


<PAGE>

Item 13.  Certain Relationships and Related Transactions

     The Bank has followed a policy of granting loans to officers and directors,
which fully complies with all applicable federal regulations. Loans to directors
and executive officers are made in the ordinary course of business and on
substantially the same terms and conditions, including interest rates and
collateral, as those of comparable transactions with non-insiders prevailing at
the time, in accordance with the Bank's underwriting guidelines, and do not
involve more than the normal risk of collectibility or present other unfavorable
features. Loans to all directors and executive officers and their associates
totaled approximately $682,627 at December 31, 2001, which was approximately
11.95% of the Company's consolidated stockholders' equity at that date. All
loans to directors and executive officers were performing in accordance with
their terms at December 31, 2001.


                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

         (a)(1) Financial Statements

          The consolidated financial statements and independent accountant's
     report are included in Item 8.

         (a)(2) Financial Statement Schedules:

     All financial statement schedules have been omitted as the information is
not required under the related instructions or is not applicable.


                                       71


<PAGE>

         (a)(3)  Exhibits


                                                                    Reference to
Regulation                                                          Prior Filing
SK Exhibit                                                     or Exhibit Number

  Number                           Document                      Attached Hereto
----------    -----------------------------------------------  -----------------

     2        Plan of acquisition, reorganization,
              arrangement, liquidation or succession                   None

   3(i)       Articles of Incorporation                                  *

   3(ii)      ByLaws                                                     *

     4        Instruments defining the rights of security
              holders, including debentures                              *

     9        Voting Trust Agreement                                   None

    10        Material contracts

    (1)       Employment Agreement with Mr. Hurta                        *

    11        Statement re: computation of per share earnings      Inapplicable

    13        Annual Report                                        Inapplicable

    16        Letter re: change in certifying accountants              None

    18        Letter re: change in accounting principles               None

    21        Subsidiaries of Registrant                                21

    22        Published report regarding matters submitted to
              vote of security holders                                 None

    23        Consent of Experts and Counsel                            23

    24        Power of attorney                                        None

    28        Information from reports furnished to state
              insurance regulatory authorities                         None

    99        Additional Exhibits                                      None


----------------

*    Filed as exhibit to the Company's Form SB-2 registration statement filed on
     March 23, 2000 (File No. 333-33102) pursuant to Section 5 of the Securities
     Act of 1933. All of such previously filed documents are hereby incorporated
     herein by reference in accordance with Item 601 of Regulation S-K.

     The Company did not file any reports on Form 8-K during the quarter ended
December 31, 2001.

                                      72


<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of Section 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                        CBCT BANCSHARES, INC.

Date:   March 29, 2002                  By:  /s/ Brad M. Hurta
                                           ---------------------------------
                                           Brad M. Hurta, President and
                                           Chief Executive Officer
                                           (Duly Authorized Representative)

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.


<TABLE>
<CAPTION>
<S>                                         <C>
  /s/ Brad M. Hurta                           /s/ James A. Cowan
-------------------------------------       ------------------------------------
Brad M. Hurta, President, Chief Executive   James A. Cowan, Director
  Officer and Director

Date:   March 29, 2002                      Date:   March 29, 2002


  /s/ Mike C. Maney                           /s/ Georgina Chronis
-------------------------------------       ------------------------------------
Mike C. Maney, Director                     Georgina Chronis, Director

Date:   March 29, 2002                      Date:   March 29, 2002


  /s/ Rodney E. Langer                        /s/ Gordon N. Fowler
-------------------------------------       ------------------------------------
Rodney E. Langer, Director                  Gordon N. Fowler, Director

Date:   March 29, 2002                      Date:   March 29, 2002

  /s/ Barry W. Hannath                        /s/ Lynn Frerich
-------------------------------------       ------------------------------------
Barry W. Hannath, Director                  Lynn Frerich, Executive Vice President and Chief
                                            Operating Officer
                                            (Principal Financial and Accounting Officer)
</TABLE>

Date:   March 29, 2002                      Date:   March 29, 2002


                                      73


<PAGE>


                                  Exhibit Index


Exhibit
  No.                            Document
-------       --------------------------------------------
  21          Subsidiaries of Registrant

  23          Consent of Padgett, Stratemann & Co., L.L.P.