UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549




Form
10-Q




x           Quarterly
report under section 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934




For the
quarterly period ended March 31, 2009




 ̈           TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT




For the
transition period from ______ to ______




Commission
file number 333-71773




Horizon Bancorporation,
Inc.


(Exact
Name of Registrant as Specified in Its Charter)





Florida
                  (State or Other Jurisdiction of
                  Incorporation or Organization)
                65-0840545
                  (IRS Employer
                  Identification No.)




900
53rd
Avenue East


Bradenton, Florida
34203


(Address
of Principal Executive Offices)




941-753-2265


(Registrant's
Telephone Number, Including Area Code)




N/A


(Former
Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)




Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act 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 filing requirements for the past 90
days.




Yes o  No x




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





Large
      Accelerated Filer  ̈
              Accelerated
      Filer  ̈Non-Accelerated
      Filer  ̈
              Smaller
      reporting company  ̈


(Do not
check if a smaller reporting company)




Indicate
by check mark whether the registrant is a shell company  (as defined
in Rule 12b-2 of the Exchange Act)




Yes  ̈  No x




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




Common
Stock Outstanding as of May 1, 2009, Common stock, $0.01 Par value: 1,770,139
Shares








Index


Part
      I. Financial InformationItem
      1. Financial Statements (unaudited)Consolidated
      Balance Sheets as of March 31, 2009 and December 31, 2008
                                  
                                  
                                  3Consolidated
      Statements of Income for the Three Months Ended March 31, 2009 and
      2008
                                  
                                  
                                  4Consolidated
      Statements of Cash Flows for the Three Months Ended March 31, 2009 and
      2008
                                  
                                  
                                  5Consolidated
      Statements of Changes in Shareholders' Equity for the Three Months Ended
      March 31, 2009 and 2008
                                  
                                  
                                  6Notes
      to Consolidated Financial Statements
                                  
                                  
                                  7Item
      2.  Management's Discussion and Analysis of Financial
      Conditions  and Results of  Operations
                                  
                                  
                                  12Item
      3.  Quantitative and Qualitative Disclosure About Market
      Risk
                                  
                                  
                                  19Item
      4T.  Controls and Procedures
                                  
                                  
                                  19Part
      II. Other InformationItem
      1.  Legal Proceedings
                                  
                                  
                                  20Item
      1A. Risk Factors
                                  
                                  
                                  20Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
                                  
                                  
                                  20Item
      3.  Defaults Upon Senior Securities
                                  
                                  
                                  20Item
      4.  Submission of Matters to a Vote of Security
      Holders
                                  
                                  
                                  20Item
      5.  Other Information
                                  
                                  
                                  20Item
      6.  Exhibits
                                  
                                  
                                  20







PART
I - FINANCIAL INFORMATION




Item 1.  Financial
Statements.





HORIZON
BANCORPORATION, INC.


Consolidated
Balance Sheets





March 31,
                            2009
                            (Unaudited)
                          
                          
                          December 31,
                            2008ASSETSCash
      and cash equivalentsCash
      and due from banks
                          
                          $
                          4,835,907
                          
                          
                          $
                          2,236,783Federal
      funds sold
                          
                          
                          4,609,000
                          
                          
                          
                          147,000Total
      cash and cash equivalents
                          
                          
                          9,444,907
                          
                          
                          
                          2,383,783Securities:Held
      to maturity, at amortized cost
                          
                          
                          14,105,786
                          
                          
                          
                          13,086,900Available-for-sale
      at fair value
                          
                          
                          18,130,226
                          
                          
                          
                          17,965,410Loans
      held for sale
                          
                          
                          6,000,000
                          
                          
                          
                          2,000,000Loans
      receivable, net
                          
                          
                          166,453,814
                          
                          
                          
                          166,027,061Property
      and equipment, net
                          
                          
                          2,120,115
                          
                          
                          
                          2,029,877Other
      real estate owned
                          
                          
                          2,649,490
                          
                          
                          
                          2,815,386Other
      assets
                          
                          
                          3,115,364
                          
                          
                          
                          2,989,837$
                          222,019,702
                          
                          
                          $
                          209,298,254LiabilitiesDepositsNoninterest-bearing
                          
                          $
                          9,510,921
                          
                          
                          $
                          8,572,582Interest-bearing
                          
                          
                          172,052,963
                          
                          
                          
                          157,705,963Total
      deposits
                          
                          
                          181,563,884
                          
                          
                          
                          166,278,545Federal
      Home Loan Bank borrowings
                          
                          
                          26,000,000
                          
                          
                          
                          29,000,000Notes
      Payable
                          
                          
                          1,030,764
                          
                          
                          
                          805,764Dividends
      Payable
                          
                          
                          —0—
                          
                          
                          
                          199,090Other
      liabilities
                          
                          
                          200,317
                          
                          
                          
                          220,325Total
      liabilities
                          
                          
                          208,794,965
                          
                          
                          
                          196,503,724Shareholders'
      equityPreferred
      stock,  $.01 par value 1,000,000 shares authorized; none
      outstanding
                          
                          
                          -
                          
                          
                          
                          -Treasury
      stock  outstanding 39,733 shares at March 31, 2009 and December
      31, 2008
                          
                          
                          (479,393
                          )
                          
                          
                          (479,393
                          )Common
      stock, $.01 par value 25,000,000 shares authorized;
    1,809,912Issued
      and  1,770,139 outstanding at March 31, 2009 and 1,808,219
      issued and 1,768,446 outstanding at  December 31,
      2008
                          
                          
                          18,099
                          
                          
                          
                          18,082Additional
      paid in capital
                          
                          
                          10,383,214
                          
                          
                          
                          10,358,919Retained
      earnings
                          
                          
                          4,259,856
                          
                          
                          
                          4,116,602Accumulated
      other comprehensive income (loss), net of tax
                          
                          
                          (957,039
                          )
                          
                          
                          (1,219,680
                          )Total
      shareholders' equity
                          
                          
                          13,224,737
                          
                          
                          
                          12,794,530$
                          222,019,702
                          
                          
                          $
                          209,298,254





See
accompanying notes to the financial statements


3


HORIZON
BANCORPORATION, INC.


Consolidated
Statements of Income (Unaudited)





For
      the three months ended March 31,2009
                
                
                2008Interest
      incomeInterest
      and  fees on loans
                
                $
                2,711,003
                
                
                $
                2,866,687Interest
      on investment securities
                
                
                416,742
                
                
                
                453,352Interest
      on federal funds
                
                
                782
                
                
                
                19,900Total
      interest income
                
                
                3,128,527
                
                
                
                3,339,939Interest
      expenseInterest
      on deposits
                
                
                1,329,086
                
                
                
                1,627,463Interest
      on borrowings
                
                
                277,559
                
                
                
                264,790Total
      interest expense
                
                
                1,606,645
                
                
                
                1,892,253Net
      interest income
                
                
                1,521,882
                
                
                
                1,447,686Provision
      for loan losses
                
                
                220,000
                
                
                
                95,000Net
      interest income after provision for loan losses
                
                
                1,301,882
                
                
                
                1,352,686Noninterest
      incomeGain/(loss)
      on sale of foreclosed assts
                
                
                (1,631
                )
                
                
                —0—Gain
      /(loss) on sale of other assets
                
                
                7,500
                
                
                
                167,500Service
      charges on deposit accounts
                
                
                18,896
                
                
                
                24,136Miscellaneous,
      other
                
                
                35,234
                
                
                
                58,516Total
      noninterest income
                
                
                59,999
                
                
                
                250,152Noninterest
      expenseSalaries
      and benefits
                
                
                629,398
                
                
                
                598,613Building
      & equipment expense
                
                
                198,591
                
                
                
                180,925Professional
      fees
                
                
                49,979
                
                
                
                53,529Data
      processing & software expense
                
                
                94,637
                
                
                
                93,794Other
      noninterest expense
                
                
                224,512
                
                
                
                211,250Total
      noninterest expense
                
                
                1,197,117
                
                
                
                1,138,111Income
      before income taxes
                
                
                164,764
                
                
                
                464,727Income
      tax expense
                
                
                21,510
                
                
                
                163,989Net
      Income
                
                $
                143,254
                
                
                $
                300,738Basic
      earnings per share
                
                $
                0.08
                
                
                $
                0.17Diluted
      earnings per share
                
                
                0.08
                
                
                
                0.16




See
accompanying notes to the financial statements




4


HORIZON
BANCORPORATION, INC.


Consolidated
Statements of Cash Flows (Unaudited)





For the three months
                      ended March 31, 2009
                    
                    
                    For the three months
                      ended March 31, 2008Cash
      flows from operating activitiesNet
      cash provided by operating activities
                    
                    $
                    (223,496
                    )
                    
                    $
                    317,531Cash
      flows from investing activitiesProceeds
      from sale of other assets
                    
                    
                    —0—
                    
                    
                    
                    190,000Proceed
      from sale of other real estate owned
                    
                    
                    164,265
                    
                    
                    
                    —0—Purchase
      of securities held to maturity
                    
                    
                    (1,019,875
                    )
                    
                    
                    —0—Purchase
      of securities available for sale
                    
                    
                    —0—
                    
                    
                    
                    (2,165,307
                    )Proceeds
      from maturities and principal repaymentsof
      securities available for sale
                    
                    
                    137,660
                    
                    
                    
                    1,066,896Purchase
      of Federal Home Loan Bank Stock
                    
                    
                    103,250
                    
                    
                    
                    163,500(Increase)/decrease
      in other real estate owned
                    
                    
                    165,896
                    
                    
                    
                    (945,000
                    )Increase
      in loans held for sale
                    
                    
                    (4,000,000
                    )
                    
                    
                    (1,233,867
                    )Loan
      originations, net
                    
                    
                    (646,753
                    )
                    
                    
                    (2,426,660
                    )Property
      and equipment expenditures, net
                    
                    
                    (139,474
                    )
                    
                    
                    (56,228
                    )Net
      cash provided (used) by investing activities
                    
                    
                    (5,235,031
                    )
                    
                    
                    (5,406,666
                    )Cash
      flows from financing activitiesExercise
      of warrants and options
                    
                    
                    9,312
                    
                    
                    
                    —0—Increase
      in deposits
                    
                    
                    15,285,339
                    
                    
                    
                    16,805,588Increase/(decrease)
      in fed funds purchased
                    
                    
                    —0—
                    
                    
                    
                    (5,028,000
                    )Increase/(decrease)
      in borrowings, net
                    
                    
                    (3,000,000
                    )
                    
                    
                    (5,700,000
                    )Increase
      in note payable
                    
                    
                    225,000Purchase
      of treasury stock
                    
                    
                    —0—
                    
                    
                    
                    (247,000
                    )Net
      cash provided by financing activities
                    
                    
                    12,519,651
                    
                    
                    
                    5,830,588Net
      change in cash and cash equivalents
                    
                    
                    7,061,124
                    
                    
                    
                    741,453Cash
      and cash equivalents at beginning of period
                    
                    
                    2,383,783
                    
                    
                    
                    3,009,201Cash
      and cash equivalents at end of period
                    
                    $
                    9,444,907
                    
                    
                    $
                    3,750,654




See
accompanying notes to the financial statements


5


HORIZON BANCORPORATION, INC.


Consolidated
Statements of Changes in Shareholders' Equity (Unaudited)


for the
three-month periods ended March 31, 2009 and 2008





Common Stock
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      AccumulatedTreasury
                                                                      
                                                                      
                                                                      Paid in
                                                                      
                                                                      
                                                                      Retained
                                                                      
                                                                      
                                                                      OtherShares
                                                                      
                                                                      
                                                                      Par Value
                                                                      
                                                                      
                                                                      Stock
                                                                      
                                                                      
                                                                      Capital
                                                                      
                                                                      
                                                                      Earnings
                                                                      
                                                                      
                                                                      Income
                                                                      
                                                                      
                                                                      TotalBalance,
      December 31, 2007
                                                                      
                                                                      
                                                                      1,788,446
                                                                      
                                                                      
                                                                      $
                                                                      18,082
                                                                      
                                                                      
                                                                      $
                                                                      (232,393
                                                                      )
                                                                      
                                                                      $
                                                                      10,288,581
                                                                      
                                                                      
                                                                      $
                                                                      3,727,722
                                                                      
                                                                      
                                                                      $
                                                                      (648,467
                                                                      )
                                                                      
                                                                      $
                                                                      13,153,525Comprehensive
      Income:Net
      income, three-month period ended March 31, 2008
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      300,738
                                                                      
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      300,738Net
      unrealized gains on securities, three-month period ended March 31,
      2008
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      (573,698
                                                                      )
                                                                      
                                                                      
                                                                      (573,698
                                                                      )Total
      comprehensive income/(loss),net of tax
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      (272,960
                                                                      )Repurchase
      of common stock
                                                                      
                                                                      
                                                                      (20,000
                                                                      )
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      (247,000
                                                                      )
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      (247,000
                                                                      )Stock
      based Compensation
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      24,001
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      24,001Balance,
      March 31, 2008
                                                                      
                                                                      
                                                                      1,768,446
                                                                      
                                                                      
                                                                      $
                                                                      18,082
                                                                      
                                                                      
                                                                      $
                                                                      (479,393
                                                                      )
                                                                      
                                                                      $
                                                                      10,312,582
                                                                      
                                                                      
                                                                      $
                                                                      4,028,460
                                                                      
                                                                      
                                                                      $
                                                                      (1,222,165
                                                                      )
                                                                      
                                                                      $
                                                                      12,657,566Balance,
      December 31, 2008
                                                                      
                                                                      
                                                                      1,768,446
                                                                      
                                                                      
                                                                      $
                                                                      18,082
                                                                      
                                                                      
                                                                      $
                                                                      (479,393
                                                                      )
                                                                      
                                                                      $
                                                                      10,358,919
                                                                      
                                                                      
                                                                      $
                                                                      4,116,602
                                                                      
                                                                      
                                                                      $
                                                                      (1,219,680
                                                                      )
                                                                      
                                                                      $
                                                                      12,794,530Comprehensive
      Income:Net
      income, three-month period ended March 31, 2009
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      143,254
                                                                      
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      143,254Net
      unrealized gains on securities, three-month period ended March 31,
      2009
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      262,641
                                                                      
                                                                      
                                                                      
                                                                      262,641Total
      comprehensive income/(loss),net of tax
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      405,895Exercise
      of warrants to purchase common stock
                                                                      
                                                                      
                                                                      1,693
                                                                      
                                                                      
                                                                      
                                                                      17
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      9,295
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      9,312Stock
      based Compensation
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      15,000
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      15,000Balance,
      March 31, 2009
                                                                      
                                                                      
                                                                      1,770,139
                                                                      
                                                                      
                                                                      $
                                                                      18,099
                                                                      
                                                                      
                                                                      $
                                                                      (479,393
                                                                      )
                                                                      
                                                                      $
                                                                      10,383,214
                                                                      
                                                                      
                                                                      $
                                                                      4,259,856
                                                                      
                                                                      
                                                                      $
                                                                      (957,039
                                                                      )
                                                                      
                                                                      $
                                                                      13,224,737


6





HORIZON
BANCORPORATION, INC.


Notes to
the Consolidated Financial Statements (Unaudited)





NOTE
1 – BASIS OF PRESENTATION





The
accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and, therefore, do not include
information or footnotes necessary for a complete presentation of consolidated
financial condition, results of operations, and cash flows in conformity with
U.S. generally accepted accounting principles.  However, all
adjustments, consisting of normal recurring accruals, which, in the opinion of
management, are necessary for fair presentation of the consolidated financial
statements have been included.  The results of operations for the
period ended March 31, 2009, are not necessarily indicative of the results which
may be expected for the entire fiscal year or for any other
period.  For further information, refer to the consolidated financial
statements and footnotes thereto for the year ended December 31, 2008 included
in Horizon Bancorporation's Form 10-K.





Certain
prior year amounts have been reclassified to conform to the 2009
presentation.





NOTE
2 – SUMMARY OF ORGANIZATION





Horizon
Bancorporation, Inc., Bradenton, Florida (the "Company"), is a one-bank holding
company with respect to Horizon Bank, Bradenton, Florida (the "Bank"). The
Company commenced banking operations on October 25, 1999 when the Bank commenced
operations. The Bank is primarily engaged in the business of obtaining deposits
and providing commercial, consumer and real estate loans to the general public.
The Bank's depositors are each insured up to $250,000 by the Federal Deposit
Insurance Corporation (the "FDIC") subject to certain limitations imposed by the
FDIC.





The
Company is authorized to issue up to 25.0 million shares of its $.01 par value
per share common stock. Each share is entitled to one vote and shareholders have
no preemptive or conversion rights. As of March 31, 2009 and December 31, 2008,
there were 1,809,912 and 1,808,219 shares issued. As of March 31, 2009 and
December 31, 2008 there were 1,770,139 and 1,768,446 shares outstanding.
Additionally, the Company has authorized the issuance of up to 1.0 million
shares of its $.01 par value per share preferred stock. The Company's Board of
Directors may, without further action by the shareholders, direct the issuance
of preferred stock for any proper corporate purpose with preferences, voting
powers, conversion rights, qualifications, special or relative rights and
privileges which could adversely affect the voting power or other rights of
shareholders of common stock. As of March 31, 2009, and December 31, 2008, there
were no shares of the Company's preferred stock issued or
outstanding.





NOTE
3 – LOANS RECEIVABLE





Loans
receivable consist of the following:





March 31,
                    2009
                  
                  
                  December 31,
                    2008Real
      estate – commercial
                  
                  $
                  100,083,068
                  
                  
                  $
                  95,871,496Real
      estate – construction
                  
                  
                  4,202,876
                  
                  
                  
                  4,378,504Real
      estate – residential
                  
                  
                  35,112,957
                  
                  
                  
                  34,662,690Commercial
                  
                  
                  26,105,152
                  
                  
                  
                  30,036,270Consumer
                  
                  
                  2,602,062
                  
                  
                  
                  2,580,924Loans,
      gross
                  
                  
                  168,106,115
                  
                  
                  
                  167,529,884Deduct
      allowance for loan losses
                  
                  
                  (1,652,301
                  )
                  
                  
                  (1,502,823
                  )Loans,
      net
                  
                  $
                  166,453,814
                  
                  
                  $
                  166,027,061


7


HORIZON
BANCORPORATION, INC.


Notes to
the Consolidated Financial Statements (Unaudited)





NOTE
3 – LOANS RECEIVABLE (Continued)





Activity
in the allowance for loan losses for the three months ended March 31, are as
follows:




2009
                  
                  
                  2008Balance
      at beginning of period
                  
                  $
                  1,502,823
                  
                  
                  $
                  1,402,843Provision
      for loan losses
                  
                  
                  220,000
                  
                  
                  
                  95,000Loans
      charged-off
                  
                  
                  (70,522
                  )
                  
                  
                  (147,950
                  )Recoveries
                  
                  
                  —0—
                  
                  
                  
                  —0—Balance
      at end of period
                  
                  $
                  1,652,301
                  
                  
                  $
                  1,349,893




NOTE
4 – SECURITIES HELD-TO-MATURITY




Information
pertaining to securities with gross unrealized losses at March 31, 2009,
aggregated by investment category and further segregated by length of time (less
than or over twelve months) that the securities have been in a continuous loss
position follows:




Less Than
                
                
                OverTwelve Months
                
                
                Twelve Months
                
                
                TotalFair
                  Value
                
                
                Unrealized
                  Loss
                
                
                Fair
                  Value
                
                
                Unrealized
                  Loss
                
                
                Fair
                  Value
                
                
                Unrealized
                  LossState,
      County and Municipal
                
                $
                7,022,963
                
                
                $
                (726,274
                )
                
                $
                2,738,093
                
                
                $
                (751,948
                )
                
                $
                9,761,056
                
                
                $
                (1,478,222
                )Corporate
      Securities
                
                
                —0—
                
                
                
                (—0—
                )
                
                
                97,600
                
                
                
                (902,400
                )
                
                
                97,600
                
                
                
                (902,400
                )Total
                
                $
                7,022,963
                
                
                $
                (726,274
                )
                
                $
                2,835,693
                
                
                $
                (1,654,348
                )
                
                $
                9,858,656
                
                
                $
                (2,380,622
                )




At
March 31, 2009 unrealized losses on held-to-maturity securities amounted to
$2,380,622 representing 16.9% of the total held to maturity
portfolio.  Management evaluates securities for other-than-temporary
impairment on a quarterly basis, or more frequently when economic or market
concerns warrant such evaluation.  In analyzing an issuer's financial
condition, management considers whether the securities are issued by the federal
government or its agencies, whether downgrades by bond rating entities have
occurred, the severity and duration of the impairment and the volatility of the
security's fair value.  As management has the intent and ability to
hold the securities until maturity, or for the foreseeable future and due to the
fact that the unrealized losses relate primarily to the lack of liquidity in the
market rather than the expected cash flows of the underlying collateral or
issuer, no declines are deemed to be other than temporary.




8





HORIZON
BANCORPORATION, INC.


Notes to
the Consolidated Financial Statements (Unaudited)





NOTE
5 – SECURITIES AVAILABLE FOR SALE




Information
pertaining to securities with gross unrealized losses at March 31, 2009,
aggregated by investment category and further segregated by the length of time
(less than or over twelve months) that the securities have been in a continuous
loss position follows:




Less than
                    Twelve Months
                  
                  
                  Greater than
                    Twelve Months
                  
                  
                  TotalFair
                    Value
                  
                  
                  Unrealized
                    Loss
                  
                  
                  Fair
                    Value
                  
                  
                  Unrealized
                    Loss
                  
                  
                  Fair
                    Value
                  
                  
                  Unrealized
                    LossU.S.
      Agency
                  
                  $
                  979,040
                  
                  
                  $
                  (13,771
                  )
                  
                  $
                  —0—
                  
                  
                  $
                  —0—
                  
                  
                  $
                  979,040
                  
                  
                  $
                  (13,771
                  )Mortgage
      backed securities
                  
                  
                  —0—
                  
                  
                  
                  —0—
                  
                  
                  
                  730,859
                  
                  
                  
                  (1,319,048
                  )
                  
                  
                  730,859
                  
                  
                  
                  (1,319,048
                  )Trust
      preferred securities & other corporate notes
                  
                  
                  —0—
                  
                  
                  
                  —0—
                  
                  
                  
                  3,222,606
                  
                  
                  
                  (422,728
                  )
                  
                  
                  3,222,606
                  
                  
                  
                  (422,728
                  )Total
                  
                  $
                  979,040
                  
                  
                  $
                  (13,771
                  )
                  
                  $
                  3,953,465
                  
                  
                  $
                  (1,741,776
                  )
                  
                  $
                  4,932,505
                  
                  
                  $
                  (1,755,547
                  )




At
March 31, 2009, unrealized losses in the securities portfolio amounted to
$1,755,574 representing 9.0 % of the total available for sale
portfolio.  Management evaluates securities for other-than-temporary
impairment on a quarterly basis, or more frequently when economic or market
concerns warrant such evaluation.  In analyzing an issuer's financial
condition, management considers whether the securities are issued by the federal
government or its agencies, whether downgrades by bond rating entities have
occurred, the severity and duration of the impairment and the volatility of the
security's fair value.  As management has the intent and ability to
hold the securities until maturity, or for the foreseeable future and due to the
fact that the unrealized losses relate primarily to the lack of liquidity in the
market rather than the expected cash flows of the underlying collateral or
issuer, no declines are deemed to be other than temporary.





NOTE
6 - EARNINGS PER SHARE





The
following summarizes the computation of basic and diluted earnings per
share.





Three Months Ended March 31, 2009
                  
                  
                  Three Months Ended March 31, 2008Basic
      earnings per shareNet
      income applicable to common stock
                  
                  $
                  143,254
                  
                  
                  $
                  300,738Weighted
      average shares outstanding
                  
                  
                  1,770,045
                  
                  
                  
                  1,772,182Basic
      earnings per share
                  
                  $
                  0.08
                  
                  
                  $
                  0.17Diluted
      earnings per shareNet
      income applicable to common stock
                  
                  $
                  143,254
                  
                  
                  $
                  300,738Weighted
      average shares outstanding
                  
                  
                  1,770,045
                  
                  
                  
                  1,772,182Dilutive
      effect of assumed exercise of stock options/warrants
                  
                  
                  31,432
                  
                  
                  
                  86,423Diluted
      average shares outstanding
                  
                  
                  1,801,477
                  
                  
                  
                  1,858,605Diluted
      earnings per share
                  
                  $
                  0.08
                  
                  
                  $
                  0.16


9




HORIZON
BANCORPORATION, INC.


Notes to
the Consolidated Financial Statements (Unaudited)




NOTE
7 - FAIR VALUE OF FINANCIAL INSTRUMENTS




Assets
and liabilities are grouped for fair value in three level based on the markets
in which the assets and liabilities are traded and the reliability of the
assumptions used to determine fair value.  These levels
are:





Level 1 -
Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted
assets or liabilities;





Level 2
-  Quoted prices in markets that are not active, or inputs that are
observable, either directly or indirectly, for substantially
the full term of the asset or liability;





Level 3 -
Prices or valuation techniques that require inputs that are both significant to
the fair value measurement and unobservable (i.e., supported by little or no
market activity).




The
following table summarizes fair value measurements as of March 31, 2009: (in
thousands)





Fair Value Measurements UsingQuoted Prices in
                              Active Markets
                              for Identical
                              Assets
                            
                            
                            Significant Other
                              Observable Input
                            
                            
                            Significant
                              Unobservable
                              InputsDescriptions
                            
                            3/31/2009
                            
                            
                            (Level
      1)
                            
                            
                            (Level
      2)
                            
                            
                            (Level
      3)Held
      to maturity securities
                            
                            $
                            14,106
                            
                            
                            
                            
                            
                            $
                            14,106Available-for-sale
      securities
                            
                            $
                            18,130
                            
                            
                            $
                            979
                            
                            
                            $
                            17,151Impaired
      Loans
                            
                            $
                            3,127
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            $
                            3,127Total
                            
                            $
                            35,363
                            
                            
                            $
                            979
                            
                            
                            $
                            31,257
                            
                            
                            $
                            3,127





The types
of instruments valued based on quoted market prices in active markets include
most U.S. Government debt and agency debt securities. Such instruments are
generally classified within level 1 or level 2 of the fair value hierarchy.
As required by SFAS No. 157, the Company does not adjust the quoted price
for such instruments.





The types
of instruments valued based on quoted prices in markets that are not active,
broker or dealer quotations, or alternative
pricing sources with reasonable levels of price transparency include state and
municipal obligations, mortgage backed securities and collateralized
mortgage obligations. Such instruments are generally classified within level 2
of the fair value hierarchy.





Impaired
loans are evaluated and valued at the time the loan is identified as impaired,
at the lower of cost or market value, and classified at level 3 in the fair
value hierarchy. Market value is measured based on the value of the collateral
securing these loans or techniques that are not supported by market activity for
loans that are not collateral dependent
and require management’s judgment. Collateral may be real estate and/or
business assets including equipment, inventory and/or accounts receivable. The value of real estate
collateral is determined based on appraisals by qualified licensed appraisers
hired bythe
Company. The value of business equipment may be based on an appraisal by
qualified licensed appraisers hired by the Company if significant, or may be
valued based on the equipment’s net book value on the business’ financial
statements. Inventory and accounts receivable collateral may be
valued based on independent field examiner review or aging reports, if
significant.Field examiner reviews may be conducted based on the loan
exposure and reliance on this type of collateral. Appraised and reported
values may be discounted based on management’s historical knowledge, changes in
market conditions from the time of valuation, and/or management’s expertise
and knowledge of the client and client’s business. Impaired loans are reviewed
and evaluated on at least a
quarterly basis for additional impairment and adjusted accordingly, based on the
same factorsidentified above.


10




HORIZON
BANCORPORATION, INC.


Notes to
the Consolidated Financial Statements (Unaudited)




NOTE
8 - RECENT ACCOUNTING PRONOUNCEMENTS




On April
9, 2009, the Financial Accounting Standard Board (“FASB”) issued three FASB
Staff Positions (“FSP”) intended to provide additional application guidance and
enhance disclosures regarding fair value measurements and impairments of
securities:




1.
            FSP
      FAS 107-1 and APB 28-1, Interim Disclosures about Fair
      Value of Financial Instruments, amends FASB Statement No. 107,
      Disclosures about Fair
      Value of Financial Instruments, to require an entity to provide
      quantitative and qualitative disclosures about fair value of any financial
      instruments for interim reporting periods as well as in annual financial
      statements.  Prior to issuing this FSP, fair values for these
      assets and liabilities were only disclosed annually. This FSP also amends
      APB Opinion No. 28, Interim Financial
      Reporting, to require those disclosures in summarized financial
      information at interim reporting periods.  We will adopt FSP
      107-1 and APB 28-1 for the quarter ending June 30,
  2009.




2.
            FSP
      FAS 115-2 and FAS 124-2, Recognition and Presentation
      of Other-Than-Temporary Impairments, is intended to bring greater
      consistency to the timing of impairment recognition, and provide greater
      clarity to investors about the credit and non-credit components of
      impaired debt securities that are not expected to be
      sold.  Further, it replaces the existing requirement that the
      entity’s management assert it has both the intent and ability to hold an
      impaired security until recovery with a requirement that management
      assert: (a) it does not have the intent to sell the security; and (b) it
      is more likely than not it will not have to sell the security before
      recovery of its cost basis.  The FSP also requires increased and
      more timely disclosures sought by investors regarding expected cash flows,
      credit losses, and an aging of securities with unrealized losses. When
      adopting FSP FAS 115-2 and FAS 124-2, an entity is required to record a
      cumulative-effect adjustment as of the beginning of the period of adoption
      to reclassify the non-credit component of a previously recognized
      other-than-temporary impairment from retained earnings to accumulated
      other comprehensive income if the entity does not intend to sell the
      security and it is more likely than not that the entity will not be
      required to sell the security before recovery.  FSP FAS 115-2
      and FSP 124-2 FSP will be effective for us for the quarter ending June 30,
      2009.  We do not expect that the adoption of this FSP will have
      a significant impact on our financial condition or results of
      operations.




3.
            FSP
      FAS 157-4,Determining
      Fair Value When the Volume and Level of Activity for the Asset or
      Liability Have Significantly Decreased and Identifying Transactions That
      Are Not Orderly,reaffirms the objective of fair value measurement
      stated in FASB Statement No. 157, Fair Value Measurements
      (“SFAS No. 157”) to reflect how much an asset would be sold for in an
      orderly transaction (as opposed to a distressed or forced transaction) at
      the date of the financial statements under current market
      conditions.  Specifically, it reaffirms the need to use judgment
      to ascertain if a formerly active market has become inactive and in
      determining fair values when markets have become inactive.  It
      also requires an entity to base its conclusion as to whether a transaction
      was not orderly on the weight of the evidence.  FSP FAS 157-4
      will be effective for us for the quarter ending June 30,
      2009.  We do not expect that the adoption of this FSP will have
      a significant impact on our financial condition or results of
      operations.




On
October 10, 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset is Not
Active.  The FSP clarifies the application of SFAS No. 157 in a
market that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial asset when the
market for that financial asset is not active.  FSP FAS 157-3 is
effective upon issuance, including prior periods for which financial statements
have not been issued. Revisions resulting form a change in the valuation
technique or its applications should be accounted for as a change in accounting
estimate following the guidance in SFAS No. 154, Accounting Changes and Error
Corrections.  However, the disclosure provisions in SFAS No.
154 for a change in accounting estimate are not required for revisions resulting
from a change in valuation techniques or its application.  Adoption of
FSP FAS 157-3 did not have a significant Impact on our financial condition or
results of operations.


11




Item
2: Management's Discussion and Analysis of Financial Condition and
Operations


Forward
Looking Statements




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





Overview





The
Company serves as the holding company for the Bank.  The Bank’s
business activities involve attracting deposits from the general public and
using these funds to originate consumer, commercial, and real estate loans, from
its four offices, two in Bradenton, Florida, one in Brandon, Florida and one in
Palmetto, Florida.





The
Company's earnings are primarily dependent upon three sources: net interest
income, which is the difference between interest earned on interest-earning
assets and interest paid on interest-bearing liabilities; fee income from
customers; and gains realized on sales of loans.  These revenues are
in turn significantly affected by factors such as changes in prevailing interest
rates and in the yield curve (that is, the difference between prevailing
short-term and long-term interest rates).




Results
of Operations





Overall Net
Income





The
Company reported net income of $143,000 for the three months ended March 31,
2009 compared to $301,000 for the three months ended March 31,
2008.  Basic and diluted earnings per share were $0.08 for the three
months end March 31, 2009 and $0.17 and $0.16 per share, respectively for the
three months ended March 31, 2008.





Net Interest
Income.





Net
interest income was $1.522 million and $1.448 million for the three months ended
March 31, 2009 and 2008, respectively.  Declining rates offset by
increased volumes led to this $74,000 increase between these two
periods.




The
effect on interest income, interest expense and net interest income during the
periods indicated from changes in average balances and rates from the
corresponding prior period, is shown below.  The effect of a change in
average balance has been determined by applying the average rate in the earlier
period to the change in the average balance in the later
period.  Changes resulting from average balance/rate variances are
included in changes resulting from rate.  The balance of the change in
interest income or expense and net interest income has been attributed to a
change in average rate:


12




Three months ended March 31, 2009Compared withThree months ended March 31, 2008(in thousands)Increase (decrease) due to:Volume
                                                      
                                                      
                                                      Rate
                                                      
                                                      
                                                      TotalInterest
      earned on:Taxable/Nontaxable
      securities
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      (36
                                                      )
                                                      
                                                      
                                                      (36
                                                      )Federal
      funds sold
                                                      
                                                      
                                                      (1
                                                      )
                                                      
                                                      
                                                      (18
                                                      )
                                                      
                                                      
                                                      (19
                                                      )Net
      loans
                                                      
                                                      
                                                      337
                                                      
                                                      
                                                      
                                                      (493
                                                      )
                                                      
                                                      
                                                      (156
                                                      )Total
      Interest Income
                                                      
                                                      
                                                      336
                                                      
                                                      
                                                      
                                                      (547
                                                      )
                                                      
                                                      
                                                      (211
                                                      )Interest
      paid on:NOW
      deposits and money market deposits
                                                      
                                                      
                                                      3
                                                      
                                                      
                                                      
                                                      (59
                                                      )
                                                      
                                                      
                                                      (56
                                                      )Savings
      deposits
                                                      
                                                      
                                                      (5
                                                      )
                                                      
                                                      
                                                      (54
                                                      )
                                                      
                                                      
                                                      (59
                                                      )Time
      deposits
                                                      
                                                      
                                                      356
                                                      
                                                      
                                                      
                                                      (538
                                                      )
                                                      
                                                      
                                                      (182
                                                      )Other
      borrowings
                                                      
                                                      
                                                      24
                                                      
                                                      
                                                      
                                                      (12
                                                      )
                                                      
                                                      
                                                      12Total
      Interest Expense
                                                      
                                                      
                                                      378
                                                      
                                                      
                                                      
                                                      (663
                                                      )
                                                      
                                                      
                                                      (285
                                                      )Change
      in net interest income
                                                      
                                                      $
                                                      (42
                                                      )
                                                      
                                                      $
                                                      116
                                                      
                                                      
                                                      $
                                                      74





Average Balance
Sheet





The
following tables summarize the average yields earned on interest-earning assets
and the average rates paid on interest-bearing liabilities for the Bank and
helps to further explain the slight increase in net interest
income.





Three
      months ended March 31,2009
                              
                              
                              2008Average
                                Volume
                              
                              
                              Interest
                              
                              
                              Yield/Cost
                              
                              
                              AverageVolume
                              
                              
                              Interest
                              
                              
                              Yield/CostASSETSInterest-earning
      assets:Federal
      funds sold
                              
                              $
                              2,228
                              
                              
                              $
                              1
                              
                              
                              
                              0.18
                              %
                              
                              $
                              2,365
                              
                              
                              $
                              20
                              
                              
                              
                              3.38
                              %Securities
                              
                              
                              33,083
                              
                              
                              
                              417
                              
                              
                              
                              5.04
                              
                              
                              
                              33,081
                              
                              
                              
                              453
                              
                              
                              
                              5.48Loans
      receivable
                              
                              
                              170,968
                              
                              
                              
                              2,711
                              
                              
                              
                              6.34
                              
                              
                              
                              156,680
                              
                              
                              
                              2,867
                              
                              
                              
                              7.32Total
      interest-earning assets
                              
                              $
                              206,279
                              
                              
                              
                              3,129
                              
                              
                              
                              6.07
                              
                              
                              $
                              192,126
                              
                              
                              
                              3,340
                              
                              
                              
                              6.95LIABILITIESInterest-bearing
      liabilities:Transactional
      accounts
                              
                              $
                              24,461
                              
                              
                              
                              80
                              
                              
                              
                              1.31
                              
                              
                              $
                              24,015
                              
                              
                              
                              136
                              
                              
                              
                              2.27Savings
      deposits
                              
                              
                              13,490
                              
                              
                              
                              61
                              
                              
                              
                              1.81
                              
                              
                              
                              14,160
                              
                              
                              
                              120
                              
                              
                              
                              3.39Time
      deposits
                              
                              
                              130,849
                              
                              
                              
                              1,189
                              
                              
                              
                              3.63
                              
                              
                              
                              111,629
                              
                              
                              
                              1,371
                              
                              
                              
                              4.91Other
      borrowings
                              
                              
                              27,752
                              
                              
                              
                              277
                              
                              
                              
                              3.99
                              
                              
                              
                              25,265
                              
                              
                              
                              265
                              
                              
                              
                              4.20Total
      interest-bearing liabilities
                              
                              $
                              196,552
                              
                              
                              
                              1,607
                              
                              
                              
                              3.27
                              
                              
                              $
                              175,069
                              
                              
                              
                              1,892
                              
                              
                              
                              4.32Interest
      rate spread
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              2.80
                              %
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              2.63
                              %Net
      interest income and net interest Margin
                              
                              
                              
                              
                              
                              $
                              1,522
                              
                              
                              
                              2.95
                              %
                              
                              
                              
                              
                              
                              $
                              1,488
                              
                              
                              
                              3.01
                              %




13


Net
interest income represents the excess of income on interest-earning assets over
interest expense on interest bearing liabilities.  The principal
interest-earning assets are federal funds sold, investment securities and loans
receivable.  Interest-bearing liabilities primarily consist of FHLB
borrowings, time deposits, interest-bearing checking accounts (NOW accounts),
savings deposits and money market accounts.  Funds attracted by these
interest-bearing liabilities are invested in interest-earning
assets.  Accordingly, net interest income depends upon the volume of
average interest-earning assets and average interest bearing liabilities and the
interest rates earned or paid on them.





Noninterest
Income.





Noninterest
income for the three months ended March 31, 2009 was $60,000 compared to
$250,000 for the same period in 2008, a decrease of $190,000, or
76%.  In the fall of 2005 the Bank purchased an interest rate swap to
protect it from falling interest rates for a period of three years. The Bank
amortized the $90,000 cost of this contract over its three year
life.  In the first quarter of 2008 the seller of this contract
offered to buy it back for $190,000.  This offer was accepted by the
Bank and it realized a $168,000 gain on the sale of this asset that was recorded
in 2008 as noninterest income.  No such gain was realized in
2009.  The remainder of this decrease relates primarily to a $21,000
decrease in commissions realized by the Bank as a result of a decrease in
brokerage activities by the Investment Centers of America financial planner
affiliated with the Bank.





Noninterest
Expense.





Total
noninterest expense for the three months ended March 31, 2009, was $1,197,000,
compared to $1,138,000 for the same period in 2008, an increase of approximately
$59,000, or 5.2%. The increase was primarily due to a $30,000 increase in
employee compensation and benefits expense which was primarily attributable to
the addition of staff for the new Brandon branch (which opened at the end of the
quarter), and an $18,000 increase in building and equipment expense which was
also attributable to the Brandon branch.  The remainder of this
increase was due to increases in insurance expense of $9,000; supplies expense
of $7,000; other real estate expense of $4,000 and increased costs associated
with Investment Centers of America of $3,000.  These increases were
offset by an approximate decrease of $12,000 in promotion related
expenses.





Balance
Sheet Analysis





The
following is a discussion of the consolidated balance sheet of the
Company.





Total
Assets





As of
March 31, 2009, total assets of the Company were $222,019,702 compared to
$209,298,254 at December 31, 2008, an increase of $12.7million.  The
increase is primarily due to increased deposits of $15.3million offset by
decreased other borrowings of $2.6million.  This net increase was used
to fund loan growth of $4.4million and purchase an additional $1million of
securities to be held to maturity.





Investment
Securities




As
of March 31, 2009 the available-for-sale and held-to-maturity securities
comprised approximately 14.6% of the Company's assets. The Bank invests
primarily in obligations of the United States or obligations guaranteed as to
principal and interest by the United States and other taxable
securities.  In addition, the Bank enters into Federal Funds
transactions with its principal correspondent banks, and acts as a net seller of
such funds.  The sale of Federal Funds amounts to a short-term loan
from the Bank to another bank.


14




The
following table presents, for the periods ended March 31, 2009 and December 31,
2008, the approximate market value of the Company's investments, classified by
category and by whether they are considered available-for-sale or
held-to-maturity (in thousands):




Investment
Category




March 31, 2009
                          
                          
                          December 31, 2008Available-for-Sale:U.S.
      agency bonds
                          
                          $
                          979
                          
                          
                          $
                          1,014Collateralized
      mortgage obligations
                          
                          
                          5,030
                          
                          
                          
                          4,708Mortgage-backed
      securities
                          
                          
                          2,206
                          
                          
                          
                          2,668Trust
      preferred & other corporate securities
                          
                          
                          7,910
                          
                          
                          
                          7,467Equity
      securities
                          
                          
                          2,005
                          
                          
                          
                          2,108Total
      Available-for-Sale Securities
                          
                          $
                          18,130
                          
                          
                          $
                          17,965Held-to-Maturity
Securities:Corporate
      Securities
                          
                          $
                          98
                          
                          
                          $
                          550General
      obligation bonds of municipalities
                          
                          
                          7,101
                          
                          
                          
                          6,450Revenue
      bonds of municipalities
                          
                          
                          4,532
                          
                          
                          
                          4,451Total
      Held-to-Maturity Securities
                          
                          $
                          11,731
                          
                          
                          $
                          11,451Total Portfolio
                          
                          $
                          29,861
                          
                          
                          $
                          29,416





Loans
Receivable


The Bank
engages in a full complement of lending activities, including commercial,
consumer installment and real estate loans.




Commercial
lending is directed principally towards businesses whose demands for funds fall
within the Company's legal lending limits and which are potential deposit
customers of the Bank.  These loans include loans obtained for a
variety of business purposes, and are made to individual, partnership or
corporate borrowers.  The Bank places particular emphasis on loans to
small and medium-sized businesses.




The
Bank's consumer loans consist primarily of installment loans to individuals for
personal, family and household purposes, including automobile loans and
pre-approved lines of credit to individuals.  This category of loans
includes lines of credit and term loans secured by second mortgages on
residences for a variety of purposes, including home improvements, education and
other personal expenditures.




The
Bank's real estate loans consist of residential and commercial first and second
mortgages.




The
following table presents various categories of loans contained in the Bank's
loan portfolio as of March 31, 2009 and December 31, 2008 and the total amount
of all loans for such periods (in thousands):




Type
      of Loan
                  
                  March 31, 2009
                  
                  
                  December 31, 2008Commercial
      real estate
                  
                  $
                  94,083
                  
                  
                  $
                  95,871Residential
      real estate
                  
                  
                  35,113
                  
                  
                  
                  34,663Construction
      loans
                  
                  
                  4,203
                  
                  
                  
                  4,379Commercial
      loans
                  
                  
                  32,105
                  
                  
                  
                  30,036Consumer
      loans
                  
                  
                  2,602
                  
                  
                  
                  2,581Subtotal
                  
                  
                  168,106
                  
                  
                  
                  167,530Allowance
      for loan losses
                  
                  
                  (1,652
                  )
                  
                  
                  (1,503
                  )Total
      (net of allowance)
                  
                  $
                  166,454
                  
                  
                  $
                  166,027




15


Asset
Quality





The Bank
has developed policies and procedures for evaluating the overall quality of our
credit portfolio and the timely identification of potential problem
loans.  The Bank's judgment as to the adequacy of the allowance is
based upon a number of assumptions about future events that it believes to be
reasonable, but which may or may not be valid.  Thus, there can be no
assurance that charge-offs in future periods will not exceed the allowance for
loan losses or that additional increases in the loan loss allowance will not be
required.





Asset
Classification.





Commercial
banks are required to review and, when appropriate, classify their assets on a
regular basis.  The State of Florida and the Federal Reserve have the
authority to identify problem assets and, if appropriate, require them to be
classified.  There are three classifications for problem assets:
substandard, doubtful, and loss. Substandard assets have one or more defined
weaknesses and are characterized by the distinct possibility that the insured
institution will sustain some loss if the deficiencies are not
corrected.  Doubtful assets have the weaknesses of substandard assets
with the additional characteristic that the weaknesses make collection or
liquidation in full on the basis of currently existing facts, conditions, and
values questionable, and there is a high possibility of loss.  An
asset classified as loss is considered uncollectible and of such little value
that continuance as an asset of the institution is not warranted.  If
an asset or portion thereof is classified as loss, the insured institution must
establish a specific reserve for the full amount of the portion of the asset
classified as loss.  All or a portion of general loss allowances
established to cover possible losses related to assets classified as substandard
or doubtful may be included in determining an institution's regulatory capital,
while specific valuation allowances for loan losses generally do not qualify as
regulatory capital.  Assets that do not warrant classification in the
aforementioned categories, but possess weaknesses, must be classified as special
mention and monitored.


16




The
following table presents information regarding non-accrual, past due and
restructured loans as of March 31, 2009 and December 31, 2008 (dollars in
thousands):




March 31, 2009
                
                
                December 31, 2008Loans
      accounted for on a non-accrual basis:Number:
                
                Forty
                
                
                Twenty-fourAmount:
                
                $
                9,208
                
                
                $
                7,289Accruing
      loans which are contractually past due 90 days or more as to principal and
      interest payments:Number:
                
                Seven
                
                
                TwoAmount:
                
                $
                2,294
                
                
                $
                84Loans
      which were renegotiated to provide a reduction or deferral of interest or
      principal because of deterioration in the financial position of the
      borrower:Number:
                
                One
                
                
                OneAmount:
                
                $
                479
                
                
                $
                479Loans
      for which there are serious doubts as to the borrower's ability to comply
      with existing terms:Number:
                
                Sixteen
                
                
                TenAmount:
                
                $
                6,166
                
                
                $
                5,308





At March
31, 2009, there were no loans classified for regulatory purposes as doubtful,
substandard or special mention that have not been disclosed in the above table,
which (i) represent or result from trends or uncertainties which management
reasonably expects will materially impact future operating results, liquidity,
or capital resources, or (ii) represent material credits about which management
is aware of any information which causes management to have serious doubts as to
the ability of such borrowers to comply with the loan repayment
terms.





Allowance for Loan
Losses.





The
allowance for loan losses is established through a provision for loan losses
charged against income.  Loans are charged against the allowance when
the Bank believes that the collectibility of principal is
unlikely.  The provision is an estimated amount that the Bank believes
will be adequate to absorb probable losses inherent in the loan portfolio based
on evaluations of its collectibility.  The evaluations take into
consideration such factors as changes in the nature and volume of the portfolio,
overall portfolio quality, specific problem loans and commitments, and current
anticipated economic conditions that may affect the borrower's ability to
pay.  While the Bank uses the best information available to recognize
losses on loans, future additions to the provision may be necessary based on
changes in economic conditions.


17


A summary
of balances in the allowance for loan losses, nonperforming assets and key
ratios follows (dollars in thousands):





For the Three
                  
                  
                  For the TwelveMonths Ended
                  
                  
                  Months EndedMarch 31,
                  
                  
                  December, 312009
                  
                  
                  2008
                  
                  
                  2008End
      of period loans (net of deferred fees)
                  
                  $
                  168,106
                  
                  
                  $
                  157,196
                  
                  
                  $
                  167,530End
      of period allowance for loan losses
                  
                  $
                  1,652
                  
                  
                  $
                  1,350
                  
                  
                  $
                  1,503%age
      of allowance for loan losses to total loans
                  
                  
                  0.98
                  %
                  
                  
                  0.86
                  %
                  
                  
                  .90
                  %Average
      loans for the period
                  
                  $
                  170,968
                  
                  
                  $
                  156,680
                  
                  
                  $
                  162,671Net
      charge-offs as a percentage of average loans for the
      period
                  
                  
                  .04
                  %
                  
                  
                  .09
                  %
                  
                  
                  .21
                  %Nonperforming
      assetsNonaccrual
      loans
                  
                  $
                  9,208
                  
                  
                  $
                  1,282
                  
                  
                  $
                  7,289Loans
      past due 90 days or more and still accruing
                  
                  $
                  2,294
                  
                  
                  $
                  12
                  
                  
                  $
                  84Other
      real estate
                  
                  $
                  2,649
                  
                  
                  $
                  2,064
                  
                  
                  $
                  2,815$
                  14,151
                  
                  
                  $
                  3,358
                  
                  
                  $
                  10,188Nonperforming
      assets to period end loans
                  
                  
                  8.42
                  %
                  
                  
                  2.12
                  %
                  
                  
                  6.08
                  %Nonperforming
      assets to period end total assets
                  
                  
                  6.43
                  %
                  
                  
                  1.68
                  %
                  
                  
                  4.87
                  %





Liquidity
and Capital Resources





Liquidity
is the Company's ability to meet all deposit withdrawals immediately, while also
providing for the credit needs of customers. The March 31, 2009 financial
statements evidence a satisfactory liquidity position as total cash and cash
equivalents amounted to $9.4million, representing 4.3% of total assets.
Investment securities, which amounted to $32.2 million or 14.5% of total assets,
provide a secondary source of liquidity because they can be converted into cash
in a timely manner. The Bank is a member of the Federal Reserve System and
maintains relationships with several correspondent banks and, thus, could obtain
funds from those banks on short notice. The Company's management closely
monitors and maintains appropriate levels of interest earning assets and
interest bearing liabilities, so that maturities of assets can provide adequate
funds to meet customer withdrawals and loan demand. The Company knows of no
trends, demands, commitments, events or uncertainties that will result in or are
reasonably likely to result in its liquidity increasing or decreasing in any
material way.


The Bank
maintains an adequate level of capitalization as measured by the following
capital ratios and the respective minimum capital:





Bank's
                  
                  
                  Minimum RegulatoryMarch 31, 2009
                  
                  
                  RequirementLeverage
      Ratio
                  
                  
                  6.9
                  %
                  
                  
                  4.0
                  %Total
      Risk Weighted ratio
                  
                  
                  10.2
                  %
                  
                  
                  8.0
                  %





With
respect to the leverage ratio, the regulators expect a minimum of 5.0% to 6.0%
ratio for banks that are not rated CAMELS 1. The Bank's leverage ratio of 6.9%
and risk weighted ratio of 10.2% are above the required minimum.


The
Company is not aware of any current recommendation by the regulatory authorities
which, if implemented, would have a material effect on the Company's liquidity,
capital resources, or results of operations.




18


In the
normal course of business, the Bank has various commitments outstanding to
extend credit in the form of unused loan commitments and standby letters of
credit that are not reflected in the Company’s consolidated financial
statements.  Since these commitments may expire without being
exercised, they do not necessarily represent future funding
requirements.  The Bank uses the same credit and collateral policies
in making commitments as those it uses in making loans.





As of
March 31, 2009, the Bank had outstanding loan commitments of approximately $6.5
million and outstanding letters of credit of approximately $133
thousand.  Various assets collateralize the majority of these
commitments.  The Bank does not anticipate that it will suffer any
material losses as a result of these transactions.





Item
3:  Quantitative and Qualitative Disclosure About Market
Risk





Not
applicable.





Item
4T.  Controls and Procedures





Evaluation of
Disclosure Controls and Procedures.





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




Changes in Internal Controls
Over Financial Reporting.




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





Limitations on the
Effectiveness of Controls.




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




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


19


PART
II. OTHER INFORMATION





Item
1.   Legal Proceedings





There
have been no material changes to the pending legal proceedings to which the
Company or the Bank is a party since the filing of the Registrant’s Form 10-K
for the year ended December 31, 2008.





Item 1A.  Risk
Factors





Not
applicable.





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




Not
Applicable.




Item
3.   Defaults Upon Senior Securities




Not
Applicable.




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




None




Item
5.   Other Information




None




Item
6.   Exhibits





31.1
              
              Certification
      of Chief Executive Officer31.2
              
              Certification
      of Chief Financial Officer32.1
              
              Certification
      Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 200232.2
              
              Certification
      of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002




20


SIGNATURES





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





/s/ Charles S. ConoleyCharles
      S. ConoleyPresident
      and Chief Executive Officer(Principal
      Executive Officer)/s/ Kathleen M. JepsonKathleen
      M. JepsonSenior
      Vice President and Chief Financial Officer(Principal
      Financial and Accounting
Officer)


Date: May
12, 2009


21