**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-Q**








(Mark
      One)





x
              QUARTERLY
                  REPORT UNDER SECTION 13 OR 15 (d)
                OF THE SECURITIES EXCHANGE
                  ACT OF 1934








For
      the
      quarterly period ended March
      31, 2007





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







For
      the
      transition period from __________ to ____________.





Commission
      file number 000-30248





**JACKSONVILLE
      BANCORP, INC.**


(Exact
      name of registrant as specified in its charter)





Florida
            
            59-3472981(State
                or other jurisdiction of
            
            (IRS
                Employerincorporation
                or organization)
            
            Identification
                No.)





100
      North Laura Street, Suite 1000, Jacksonville, Florida 32202


(Address
      of principal executive offices)





(904)
      421-3040


(Registrant’s
      telephone number)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.





Yes
x   No
o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of The
      Exchange Act).





Large
      Accelerated Filer o Accelerated
      Filer o Non-accelerated
      Filer x





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





Yes
o   No
x





As
      of May
      4, 2007, the latest practicable date, 1,743,338 of the Registrant’s common
      shares, $.01 par value, were issued and outstanding.











JACKSONVILLE
        BANCORP, INC.


TABLE
      OF
      CONTENTS




PagePART
                  I—FINANCIAL INFORMATIONItem
                  1.
              Consolidated
                  Financial Statements (Unaudited)Consolidated
                  Balance Sheets
              3Consolidated
                  Statements of Income
              4Consolidated
                  Statements of Changes in Shareholders’ Equity
              5Consolidated
                  Statements of Cash Flows
              6Notes
                  to Consolidated Financial Statements
              7Item
                  2.
              Management’s
                  Discussion and Analysis ofFinancial
                  Condition and Results of Operation
              9Item
                  3.
              Quantitative
                  and Qualitative Disclosures about Market Risk
              18Item
                  4T.
              Disclosure
                  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
              21SIGNATURES
              22CERTIFICATIONS
              23





2.


JACKSONVILLE
        BANCORP, INC.
 CONSOLIDATED
      BALANCE SHEETS


(Dollars
      in thousands, except per share amounts)











March
                31,
            
            December
                31,2007
            
            2006(Unaudited)**ASSETS**Cash
                and due from banks
            
            $
            5,907
            
            $
            4,373Federal
                funds sold
            
            
            105
            
            
            105Total
                cash and cash equivalents
            
            
            6,012
            
            
            4,478Securities
                available for sale
            
            
            26,508
            
            
            26,059Securities
                held to maturity
            
            
            50
            
            
            50Loans,
                net of allowance for loan lossesof
                $2,856****at
                2007 and $2,621 at 2006
            
            
            300,518
            
            
            281,006Premises
                and equipment, net
            
            
            4,544
            
            
            4,616Bank-owned
                life insurance (BOLI)
            
            
            4,880
            
            
            4,837Federal
                Home Loan Bank (FHLB) stock
            
            
            1,389
            
            
            1,071Accrued
                interest receivable
            
            
            1,889
            
            
            2,107Other
                assets
            
            
            1,297
            
            
            1,351Total
                assets
            
            $
            347,087
            
            $
            325,575**LIABILITIES**DepositsNoninterest
                bearing
            
            $
            34,791
            
            $
            32,967Money
                market, NOW and savings deposits
            
            
            158,613
            
            
            150,451Time
                deposits
            
            
            103,220
            
            
            99,208Total
                deposits
            
            
            296,624
            
            
            282,626FHLB
                advances
            
            
            17,850
            
            
            11,650Subordinated
                debt
            
            
            7,000
            
            
            7,000Accrued
                expenses and other liabilities
            
            
            1,841
            
            
            1,161Total
                liabilities
            
            
            323,315
            
            
            302,437**SHAREHOLDERS’
                EQUITY**Common
                stock, $.01 par value, 8,000,000 shares authorized,1,743,338****and
                1,743,338 shares issued
            
            
            17
            
            
            17Additional
                paid-in capital
            
            
            18,271
            
            
            18,230Retained
                earnings
            
            
            5,782
            
            
            5,241Treasury
                stock, 1,137 and 1,650 shares
            
            
            (38
            )
            
            (57
            )Accumulated
                other comprehensive loss
            
            
            (260
            )
            
            (293
            )Total
                shareholders’ equity
            
            
            23,772
            
            
            23,138Total
                liabilities and shareholders’ equity
            
            $
            347,087
            
            $
            325,575




See
        accompanying notes to financial statements.


3.







JACKSONVILLE
        BANCORP, INC.
 CONSOLIDATED
        STATEMENTS OF INCOME
 (Unaudited)
 (Dollars
        in thousands, except per share amounts)


Three
                Months EndedMarch
                31,2007
            
            2006Interest
                and dividend incomeLoans,
                including fees
            
            $
            5,727
            
            $
            4,492Securities
            
            
            300
            
            
            265Other
            
            
            16
            
            
            98Total
                interest income
            
            
            6,043
            
            
            4,855Interest
                expenseDeposits
            
            
            2,704
            
            
            2,213FHLB
                advances
            
            
            268
            
            
            75Subordinated
                debt
            
            
            135
            
            
            74Other
            
            
            4
            
            
            1Total
                interest expense
            
            
            3,111
            
            
            2,363Net
                interest income
            
            
            2,932
            
            
            2,492Provision
                for loan losses
            
            
            247
            
            
            152Net
                interest income after provision for loan losses
            
            
            2,685
            
            
            2,340Noninterest
                incomeService
                charges on deposit accounts
            
            
            151
            
            
            116Other
                income
            
            
            141
            
            
            98Total
                noninterest income
            
            
            292
            
            
            214Noninterest
                expenseSalaries
                and employee benefits
            
            
            1,037
            
            
            883Occupancy
                and equipment
            
            
            446
            
            
            352Other
            
            
            623
            
            
            516Total
                noninterest expense
            
            
            2,106
            
            
            1,751Income
                before income taxes
            
            
            871
            
            
            803Income
                tax expense
            
            
            328
            
            
            295Net
                income
            
            $
            543
            
            $
            508Weighted
                average:Common
                shares
            
            
            1,742,914
            
            
            1,718,435Dilutive
                stock options and warrants
            
            
            79,612
            
            
            86,539Dilutive
                shares
            
            
            1,822,526
            
            
            1,804,974Basic
                earnings per common share
            
            $
            .31
            
            $
            .30Diluted
                earnings per common share
            
            $
            .30
            
            $
            .28


See
        accompanying notes to financial statements.





4.


JACKSONVILLE
        BANCORP, INC.
 CONSOLIDATED
      STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY


(Unaudited)


(Dollars
      in thousands)


Common
                Stock
            
            Additional
            
            
            
            Treasury
            
            Accumulated
                OtherOutstanding
            
            Paid-In
            
            Retained
            
            Stock
            
            ComprehensiveShares
            
            Amount
            
            Capital
            
            Earnings
            
            Amount
            
            Income
                (Loss)
            
            TotalBalance
                at January 1, 2006
            
            
            1,714,716
            
            $
            17
            
            $
            17,526
            
            $
            2,718
            
            $
            (54
            )
            $
            (361
            )
            $
            19,846Comprehensive
                income:Net
                income
            
            
            
            
            
            
            
            
            
            
            
            508
            
            
            
            
            
            
            
            
            508Change
                in unrealized gain (loss)on
                securities available forsale,
                net of tax effects
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (78
            )
            
            (78
            )Total
                comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            430Purchase
                of treasury stock
            
            
            (1,800
            )
            
            
            
            
            
            
            
            
            
            
            (58
            )
            
            
            
            
            (58
            )Issuance
                of treasury stock
            
            
            1,650
            
            
            
            
            
            2
            
            
            
            
            
            54
            
            
            
            
            
            56Compensation
                expense
            
            
            
            
            
            
            
            
            31
            
            
            
            
            
            
            
            
            
            
            
            31Exercise
                of
                common stock options,including
                tax benefits
            
            
            5,286
            
            
            1
            
            
            94
            
            
            
            
            
            
            
            
            
            
            
            95Balance
                at March 31, 2006
            
            
            1,719,852
            
            $
            18
            
            $
            17,653
            
            $
            3,226
            
            $
            (58
            )
            $
            (439
            )
            $
            20,400Balance
                at January 1, 2007
            
            
            1,741,688
            
            $
            17
            
            $
            18,230
            
            $
            5,241
            
            $
            (57
            )
            $
            (293
            )
            $
            23,138Comprehensive
                income:Net
                income
            
            
            
            
            
            
            
            
            
            
            
            543
            
            
            
            
            
            
            
            
            543Change
                in unrealized gain (loss)on
                securities available forsale,
                net of tax effects
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            33
            
            
            33Total
                comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            576Purchase
                of treasury stock
            
            
            (1,137
            )
            
            
            
            
            
            
            
            
            
            
            (38
            )
            
            
            
            
            (38
            )Issuance
                of treasury stock
            
            
            1,650
            
            
            
            
            
            (2
            )
            
            (2
            )
            
            57
            
            
            
            
            
            53Compensation
                expense
            
            
            
            
            
            
            
            
            43
            
            
            
            
            
            
            
            
            
            
            
            43Balance
                at March 31, 2007
            
            
            1,742,201
            
            $
            17
            
            $
            18,271
            
            $
            5,782
            
            $
            (38
            )
            $
            (260
            )
            $
            23,772


See
        accompanying notes to financial statements.





5.


JACKSONVILLE
        BANCORP, INC.
 CONSOLIDATED
      STATEMENTS OF CASH FLOWS


(Unaudited)


(Dollars
      in thousands)











Three
                Months EndedMarch
                31,2007
            
            2006Cash
                flows from operating activitiesNet
                income
            
            $
            543
            
            $
            508Adjustments
                to reconcile net income to net cash from operatingactivities:Depreciation
                and amortization
            
            
            142
            
            
            120Net
                amortization of deferred loan fees
            
            
            (50
            )
            
            (44
            )Provision
                for loan losses
            
            
            247
            
            
            152Premium
                amortization, net of accretion
            
            
            6
            
            
            12Earnings
                on Bank Owned Life Insurance
            
            
            (43
            )
            
            (52
            )Share-based
                compensation
            
            
            96
            
            
            87Net
                change in accrued interest receivable and other assets
            
            
            372
            
            
            11Net
                change in accrued expenses and other liabilities
            
            
            9
            
            
            (615
            )Net
                cash from operating activities
            
            
            1,322
            
            
            179Cash
                flows from investing activitiesPurchases
                of securities available for sale
            
            
            (1,018
            )
            
            (3,949
            )Proceeds
                from maturities of securities available for sale
            
            
            616
            
            
            794Loan
                (originations) payments, net
            
            
            (19,709
            )
            
            (13,771
            )Additions
                to premises and equipment, net
            
            
            (45
            )
            
            (347
            )Net
                change in Federal Home Loan Bank stock
            
            
            (318
            )
            
            381Net
                cash from investing activities
            
            
            (20,474
            )
            
            (16,892
            )Cash
                flows from financing activitiesNet
                change in deposits
            
            
            13,998
            
            
            41,739Net
                change in short-term FHLB advances
            
            
            200
            
            
            (10,650
            )Net
                change in Fed funds purchased
            
            
            526
            
            
            --Proceeds
                from long-term FHLB advances
            
            
            6,000
            
            
            --Proceeds
                from exercise of stock options
            
            
            --
            
            
            54Excess
                tax benefits from stock-based payment arrangements
            
            
            --
            
            
            41Purchase
                of treasury stock
            
            
            (38
            )
            
            (58
            )Net
                cash from financing activities
            
            
            20,686
            
            
            31,126Net
                change in cash and cash equivalents
            
            
            1,534
            
            
            14,413Cash
                and cash equivalents at beginning of period
            
            
            4,478
            
            
            4,767Cash
                and cash equivalents at end of period
            
            $
            6,012
            
            $
            19,180Supplemental
                disclosures of cash flow informationCash
                paid during the period forInterest
            
            $
            3,038
            
            $
            2,374Income
                taxes
            
            
            --
            
            
            655


See
        accompanying notes to financial statements.


6.


JACKSONVILLE
        BANCORP, INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (Dollars
        in thousands, except per share amounts)


**NOTE
      1 - BASIS OF PRESENTATION**


Jacksonville
      Bancorp, Inc. is a bank holding company headquartered in Jacksonville, Florida.
      Jacksonville Bancorp, Inc. owns and operates The Jacksonville Bank, which has
      a
      total of five operating branches in Jacksonville, Florida.




The
      consolidated financial statements include the accounts of Jacksonville Bancorp,
      Inc. and its wholly owned subsidiary, The Jacksonville Bank, and the Bank’s
      wholly owned subsidiary, Fountain Financial, Inc. The consolidated entity is
      referred to as the “Company” and the Bank and its subsidiary is collectively
      referred to as the “Bank.” The Company’s financial condition and operating
      results principally reflect those of the Bank. All intercompany balances and
      amounts have been eliminated. For further information refer to the consolidated
      financial statements and notes thereto included in the Company's Annual Report
      on Form 10-K for the year ended December 31, 2006.





The
      accounting and reporting policies of the Company reflect banking industry
      practice and conform to generally accepted accounting principles in the United
      States of America. In preparing the consolidated financial statements,
      management is required to make estimates and assumptions that affect the
      reported asset and liability balances and revenue and expense amounts and the
      disclosure of contingent assets and liabilities. Actual results could differ
      significantly from those estimates.





The
      consolidated financial information included herein as of and for the periods
      ended March 31, 2007 and 2006 is unaudited; however, such information reflects
      all adjustments which are, in the opinion of management, necessary for a fair
      statement of results for the interim periods. The December 31, 2006 consolidated
      balance sheet was derived from the Company's December 31, 2006 audited
      consolidated financial statements.





**Adoption
      of New Accounting Standards**





The
      Company adopted the provisions of FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes* (“FIN
      48”) *,* on
      January 1, 2007. The adoption of FIN 48 had no affect on the Company’s financial
      statements. The Company has no unrecognized tax benefits and does not anticipate
      any increase in unrecognized benefits during 2007 relative to any tax positions
      taken prior to January 1, 2007. Should the accrual of any interest or penalties
      relative to unrecognized tax benefits be necessary, it is the Company’s policy
      to record such accruals in its income taxes accounts; no such accruals exist
      as
      of January 1, 2007. The Company and its subsidiaries file a consolidated U.S.
      federal income tax return and a combined unitary return in the state of Florida.
      These returns are subject to examination by taxing authorities for all years
      after 2002.





In
      September 2006, the FASB Emerging Issues Task Force finalized Issue No. 06-5,
      Accounting for Purchases of Life Insurance - Determining the Amount That Could
      Be Realized in Accordance with FASB Technical Bulletin No. 85-4 (Accounting
      for
      Purchases of Life Insurance). This issue requires that a policyholder consider
      contractual terms of a life insurance policy in determining the amount that
      could be realized under the insurance contract. It also requires that if the
      contract provides for a greater surrender value if all individual policies
      in a
      group are surrendered at the same time, that the surrender value be determined
      based on the assumption that policies will be surrendered on an individual
      basis. Lastly, the issue discusses whether the cash surrender value should
      be
      discounted when the policyholder is contractually limited in its ability to
      surrender a policy. This issue is effective for fiscal years beginning after
      December 15, 2006. The adoption of this issue on January 1, 2007 did not have
      a
      material impact on the financial statements of the Company.


7.


JACKSONVILLE
        BANCORP, INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (Dollars
        in thousands, except per share amounts)





**NOTE
      2 - CAPITAL ADEQUACY**


Federal
      banking regulators have established certain capital adequacy standards required
      to be maintained by banks and bank holding companies. The minimum requirements
      established in the regulations are set forth in the table below, along with
      the
      actual ratios at March 31, 2007 and December 31, 2006:








AdequatelyCapitalized
            
            March
                31, 2007
            
            December
                31, 2006Requirement
            
            Actual
            
            ActualTier
                1 Capital (to Average Assets)Consolidated
            >4%
            
            9.40%
            
            9.47%Bank
            >4%
            
            8.75%
            
            8.38%Tier
                1 Capital (to Risk Weighted Assets)Consolidated
            >4%
            
            10.13%
            
            10.57%Bank
            >4%
            
            9.38%
            
            9.28%Total
                Capital (to Risk Weighted Assets)Consolidated
            >8%
            
            11.06%
            
            11.47%Bank
            >8%
            
            10.31%
            
            10.18%





In
      addition, under such standards, a well-capitalized bank is one that has a total
      risk-based capital ratio equal to or greater than 10%, a Tier 1 risk-based
      capital ratio equal to or greater than 6%, and a Tier 1 leverage capital ratio
      equal to or greater than 5%. Management believes, as of March 31, 2007, that
      the
      Company and the Bank met all capital requirements to which they are subject.
      The
      Company has included in Tier 1 Capital and Total Capital the trust preferred
      securities that were issued in June 2004 and December 2006.





**NOTE
      3 - FHLB ADVANCES**


FHLB
      advances at March 31, 2007 consisted of a $3,000 and a $6,000 fixed rate advance
      and a $8,850 overnight advance. The interest rate on the overnight advance
      was
      5.66% at March 31, 2007. The interest rate on the $3,000 fixed rate advance,
      which matures April 11, 2008, is 4.36%. The interest rate on the $6,000 advance
      is 5.26% and matures January 11, 2008. The advances are collateralized by a
      blanket lien on the Company’s residential and commercial real estate loan
      portfolio. The Company had $11,650 in advances outstanding at December 31,
      2006,
      which consisted of the $3,000 fixed rate advance discussed above and $8,650
      in
      overnight advances.


8.




**Item
      2. Management’s Discussion and Analysis of Financial Condition and Results of
      Operation**




**General**





Jacksonville
      Bancorp, Inc. (“Bancorp”) was incorporated on October 24, 1997 and was organized
      to conduct the operations of The Jacksonville Bank (the “Bank”), collectively
      (the “Company”). The Bank is a Florida state-chartered commercial bank that
      opened for business on May 28, 1999, and its deposits are insured by the Federal
      Deposit Insurance Corporation. The Bank provides a variety of community banking
      services to businesses and individuals in the greater Jacksonville area of
      Northeast Florida. During 2000, the Bank formed Fountain Financial, Inc., a
      wholly owned subsidiary. The primary business activities of Fountain Financial,
      Inc. consist of referral of our customers to third parties for the sale of
      insurance products.





**Forward
      Looking Statements**





“Management's
      Discussion and Analysis of Financial Condition and Results of Operations” and
“Quantitative and Qualitative Disclosures About Market Risk” contain various
      forward-looking statements with respect to financial performance and business
      matters. Such statements are generally contained in sentences including the
      words or phrases “will likely result,” “are expected to,” “is anticipated,” or
“estimate,” “project” or “believe.” The Company cautions that these
      forward-looking statements are subject to numerous assumptions, risks and
      uncertainties, including changes in local economic conditions, changes in
      regulatory requirements, fluctuations in interest rates, demand for products,
      and competition, and, therefore, actual results could differ materially from
      those contemplated by the forward-looking statements. In addition, the Company
      assumes no duty to update forward-looking statements to reflect events or
      circumstances after the date of such statements.





**Business
      Strategy**





Our
      primary business segment is community banking and consists of attracting
      deposits from the general public and using such deposits and other sources
      of
      funds to originate commercial business loans, commercial real estate loans,
      residential mortgage loans and a variety of consumer loans. We also invest
      in
      securities backed by the United States Government, and agencies thereof, as
      well
      as municipal tax-exempt bonds. Our profitability depends primarily on our net
      interest income, which is the difference between the income we receive from
      our
      loan and securities investment portfolios and our costs incurred on our
      deposits, FHLB advances, and other sources of funding. Net interest income
      is
      also affected by the relative amounts of interest-earning assets and
      interest-bearing liabilities. Net interest income is generated as the relative
      amounts of interest-earning assets grow in relation to the relative amounts
      of
      interest-bearing liabilities. In addition, the level of noninterest income
      earned and noninterest expenses incurred also affects profitability. Included
      in
      noninterest income are service charges earned on deposit accounts, increases
      in
      cash surrender value of Bank Owned Life Insurance (“BOLI”) and mortgage
      origination fees. Included in noninterest expense are costs incurred for
      salaries and employee benefits, occupancy and equipment expenses, marketing
      and
      advertising expenses, federal deposit insurance premiums and legal and
      professional fees.





Our
      goal
      is to sustain profitable, controlled growth by focusing on increasing our loan
      and deposit market share in the Northeast Florida market by developing new
      financial products, services and delivery channels; closely managing yields
      on
      interest-earning assets and rates on interest-bearing liabilities; focusing
      on
      noninterest income opportunities; controlling the growth of noninterest expenses
      and maintaining strong asset quality. We have initiated programs to expand
      our
      scope of services and achieve these goals. The Bank has adopted a philosophy
      of
      seeking out and retaining the best available personnel for positions of
      responsibility which we believe will provide us with a competitive edge in
      the
      local banking industry. The Bank opened its fourth and fifth locations in 2006
      in key areas of Jacksonville, which provide additional visibility and access
      to
      businesses and individuals and will likely result in additional loan and deposit
      growth.


9.








Our
      operations are influenced by the local economic conditions and by policies
      of
      financial institution regulatory authorities. Fluctuations in interest rates,
      due to factors such as competing financial institutions as well as the Federal
      Reserve, impact interest-earnings assets and our cost of funds and, thus, our
      net interest margin. In addition, the local economy and real estate market
      of
      Northeast Florida and the demand for our products and loans impacts our margin.
      The local economy and viability of local businesses can also impact the ability
      of our customers to make payments on loans, thus impacting our loan portfolio.
      The Company evaluates these factors when valuing its allowance for loan losses
      and believes that the local economy and real estate market are stable. In
      addition, the Company believes its underwriting procedures are relatively
      conservative and, as a result, the Company should not be any more affected
      than
      the overall market in the event of economic downturn.





As
      stated
      above, fluctuations in interest rates impact our yield on interest-earning
      assets and our cost of funds, and thus our net interest margin. After 17
      interest rate increases beginning in June 2004 and ending in June 2006, the
      Federal Reserve has left the fed funds rate unchanged at 5.25%. The recent
      flattening of rates has resulted in a stabilization in our yield on earning
      assets while increasing our cost of funds due to increasing interest rates
      paid
      on deposits, as well as rates charged on FHLB advances and other borrowings.





**Introduction**





In
      the
      following pages, management presents an analysis of the financial condition
      of
      Jacksonville Bancorp, Inc. as of March 31, 2007 compared to December 31, 2006,
      and the results of operations for the three months ended March 31, 2007 compared
      with the same period in 2006. This discussion is designed to provide a more
      comprehensive review of the operating results and financial position than could
      be obtained from an examination of the financial statements alone. This analysis
      should be read in conjunction with the interim financial statements and related
      footnotes included herein.





**Comparison
      of Financial Condition at March 31, 2007 and December 31,
      2006**





Total
      assets increased $21.5 million, or 7%, from $325.6 million at December 31,
      2006
      to $347.1 million at March 31, 2007. During the three months ended March 31,
      2007, the Company experienced net loan growth of $19.5 million, or 7%. The
      increase in net loans was driven by increases in commercial real estate loans
      of
      $17.5 million, or 9%, and residential real estate loans of $3.7 million, or
      6%.
      The Company funded the increase in earning assets through an increase in
      deposits of $14.0 million and an increase in Federal Home Loan Bank advances
      of
      $6.2 million.




Total
      deposits increased $14.0 million, or 5%, from $282.6 million at December 31,
      2006 to $296.6 million at March 31, 2007. During the three months ended March
      31, 2007, noninterest bearing deposits increased $1.8 million to $34.8
      million. Money market, NOW and savings deposits increased $8.2 million to
      $158.6 million.





Investment
      securities available for sale increased $449,000 to $26.5 million at March
      31,
      2007. During the three months ended March 31, 2007, we purchased $1.0 million
      of
      securities and received $616,000 in proceeds from maturities and principal
      repayments. The $1.0 million bond purchased during the period was a FNMA
      mortgage-backed security which qualified for CRA (Community Reinvestment Act)
      credit.


10.








Total
      shareholders' equity increased by $634,000, or 3%, from $23.1 million at
      December 31, 2006 to $23.8 million at March 31, 2007. The increase is mainly
      attributable to net income of $543,000. At March 31, 2007, the Company had
      8,000,000 authorized shares of $.01 par value common stock, of which 1,743,338
      shares were issued and 1,742,201 shares were outstanding. In addition, the
      Company had 2,000,000 authorized shares of $.01 par value preferred stock,
      none
      of which were issued or outstanding at March 31, 2007.




**Comparison
      of Operating Results for the Three Months Ended March 31, 2007 and
      2006**





**Net
      Income**





Net
      income increased $35,000, or 6.9%, from $508,000 for the three months ended
      March 31, 2006 to $543,000 for the three months ended March 31, 2007. Diluted
      earnings per share increased $.02 from $.28 for the three months ended March
      31,
      2006 to $.30 for the three months ended March 31, 2007. This increase in net
      income and diluted earnings per share was due to an increase in net interest
      income and noninterest income, offset by an increase in noninterest expenses
      and
      income tax expense. Net interest income increased as a result of an increase
      in
      interest-earning assets. The increase in noninterest income was primarily due
      to
      an increase in deposit service charges and mortgage fees. Mortgage fees
      increased as a result of the implementation of a mortgage initiative during
      2006. Salaries and employee benefits, which accounted for the largest portion
      of
      the increase in noninterest expenses, increased primarily due to the costs
      associated with the opening of two additional branches during 2006. The increase
      in income tax expense was directly related to the increase in net income.





**Net
      Interest Income**





Net
      interest income, the difference between interest earned on interest-earning
      assets and interest paid on interest-bearing liabilities, increased $440,000,
      or
      18% from $2.5 million for the three months ended March 31, 2006 to $2.9
      million for the three months ended March 31, 2007. This increase resulted from
      an increase in interest income of $1.2 million, offset by an increase in
      interest expense of $748,000. The average net interest margin increased seven
      basis points from 3.69% for the three months ended March 31, 2006 to 3.76%
      for the three months ended March 31, 2007. Refer to the table and discussion
      on
      the following pages for a detailed analysis of the increase in net interest
      income.





***Average
      Balance Sheet; Interest Rates and Interest
      Differential.*** **** The
      following table sets forth the average daily balances for each major category
      of
      assets, liabilities and shareholders’ equity as well as the amounts and average
      rates earned or paid on each major category of interest-earning assets and
      interest-bearing liabilities.


11.





Three
                Months Ended March 31,2007
            
            2006Average
            
            
            
            Average
            
            Average
            
            
            
            AverageBalance
            
            Interest
            
            Rate
            
            Balance
            
            Interest
            
            Rate(Dollars
                in thousands)Interest-earning
                assets:Loans(1)
            
            $
            287,103
            
            $
            5,727
            
            
            8.09
            %
            $
            239,565
            
            $
            4,492
            
            
            7.60
            %Securities(2)
            
            
            26,671
            
            
            300
            
            
            4.56
            
            
            25,063
            
            
            265
            
            
            4.29Other
                interest-earning assets(3)
            
            
            2,187
            
            
            16
            
            
            2.97
            
            
            9,399
            
            
            98
            
            
            4.23Total
                interest-earning assets
            
            
            315,961
            
            
            6,043
            
            
            7.76
            
            
            274,027
            
            
            4,855
            
            
            7.19Noninterest-earning
                assets(4)
            
            
            14,053
            
            
            
            
            
            
            
            
            13,182Total
                assets
            
            $
            330,014
            
            
            
            
            
            
            
            $
            287,209Interest-bearing
                liabilities:Savings
                and NOW deposits
            
            $
            17,177
            
            $
            82
            
            
            1.94
            
            $
            18,082
            
            $
            82
            
            
            1.84Money
                market deposits
            
            
            133,911
            
            
            1,434
            
            
            4.34
            
            
            131,497
            
            
            1,434
            
            
            4.42Time
                deposits
            
            
            93,234
            
            
            1,188
            
            
            5.17
            
            
            68,304
            
            
            697
            
            
            4.14FHLB
                advances
            
            
            20,343
            
            
            268
            
            
            5.34
            
            
            6,778
            
            
            75
            
            
            4.49Subordinated
                debt
            
            
            7,000
            
            
            135
            
            
            7.82
            
            
            4,000
            
            
            74
            
            
            7.50Other
                interest-bearing liabilities(5)
            
            
            317
            
            
            4
            
            
            5.10
            
            
            91
            
            
            1
            
            
            4.46Total
                interest-bearing liabilities
            
            
            271,982
            
            
            3,111
            
            
            4.64
            
            
            228,752
            
            
            2,363
            
            
            4.19Noninterest-bearing
                liabilities
            
            
            34,667
            
            
            
            
            
            
            
            
            38,368Shareholders'
                equity
            
            
            23,365
            
            
            
            
            
            
            
            
            20,089Total
                liabilities andshareholders'
                equity
            
            $
            330,014
            
            
            
            
            
            
            
            $
            287,209Net
                interest income
            
            
            
            
            $
            2,932
            
            
            
            
            
            
            
            $
            2,492Interest
                rate spread(6)
            
            
            
            
            
            
            
            
            3.12
            %
            
            
            
            
            
            
            
            3.00
            %Net
                interest margin(7)
            
            
            
            
            
            
            
            
            3.76
            %
            
            
            
            
            
            
            
            3.69
            %






(1)
            Includes
                nonaccrual loans.


(2)
            Due
                to immateriality, the interest income and yields related to certain
                tax
                exempt assets have not been adjusted to reflect a fully taxable equivalent
                yield.


(3)
            Includes
                federal funds sold.


(4)
            For
                presentation purposes, the BOLI acquired by the Bank has been included
                in
                noninterest-earning assets.


(5)
            Includes
                federal funds purchased.


(6)
            Interest
                rate spread represents the difference between the average yield on
                interest-earning assets and the average cost of interest-bearing
                liabilities.


(7)
            Net
                interest margin is net interest income divided by average interest-earning
                assets.





12.


***Rate/Volume
      Analysis.*** **** The
      following table sets forth the effect of changes in volumes, changes in rates,
      and changes in rate/volume on tax-equivalent interest income, interest expense
      and net interest income.





Three
                Months Ended March 31,2007
                Versus 2006(1)Increase
                (decrease) due to changes in:NetVolume
            
            Rate
            
            Change(Dollars
                in thousands)Interest
                income:Loans
            
            $
            934
            
            $
            301
            
            $
            1,235Securities
            
            
            18
            
            
            17
            
            
            35Other
                interest-earning assets
            
            
            (59
            )
            
            (23
            )
            
            (82
            )Total
                interest income
            
            
            893
            
            
            295
            
            
            1,188Interest
                expense:Savings
                and NOW deposits
            
            
            (10
            )
            
            10
            
            
            --Money
                market deposits
            
            
            26
            
            
            (27
            )
            
            (1
            )Time
                deposits
            
            
            293
            
            
            199
            
            
            492FHLB
                advances
            
            
            176
            
            
            17
            
            
            193Subordinated
                debt
            
            
            58
            
            
            3
            
            
            61Other
                interest-bearing liabilities
            
            
            3
            
            
            --
            
            
            3Total
                interest expense
            
            
            546
            
            
            202
            
            
            748Increase
                in net interest income
            
            $
            347
            
            $
            93
            
            $
            440





_______________________________


(1)
            The
                change in interest due to both rate and volume has been allocated
                to the
                volume and rate components in proportion to the relationship of the
                dollar
                amounts of the absolute change in
                each.








***Volume
      Variance.*** When
      comparing the first three months of 2007 to the same period last year, the
      Company experienced substantial growth in its loan portfolio, with the most
      significant impact occurring in commercial real estate. The Company also
      experienced growth in deposit products, with the largest increase occurring
      in
      time deposit accounts.





Although
      deposit growth contributed to the positive volume variance shown in the table
      above, recent increases in short-term interest rates, coupled with local market
      competition, has put pressure on the Bank’s ability to continue to grow these
      balances at rates historically experienced. Additionally, the Company utilized
      overnight Federal Home Loan Bank advances, which further supported the funding
      of interest-earning assets. The aggregate positive impact of the loan and core
      deposit growth largely comprised the positive volume variance of $347,000.





***Rate
      Variance.*** The
      increase in short-term interest rates, which drove an increase in the Bank’s
      prime lending rate, contributed to the positive rate variance. In addition,
      the
      Bank’s earnings also increased to the extent that it was able to reinvest cash
      flows from short-term securities in higher yielding securities of similar
      duration.


13.


The
      increase in short-term interest rates also drove the increase in the Bank’s cost
      of deposits and borrowings. The variance shown in the preceding table was
      primarily caused by the amount of deposits and borrowings that were impacted
      by
      the change in short-term interest rates being less than the amount of interest
      earning assets impacted. The average rate earned by the Company on
      interest-earning assets increased by 57 basis points to 7.76% for the three
      months ended March 31, 2007, whereas, the average rate paid by the Company
      on
      interest-bearing liabilities increased 45 basis points to 4.64% for the same
      period, driving the $93,000 positive rate variance.




***Net
      Interest Margin.*** Net
      interest margin increased by seven basis points from 3.69% to 3.76% when
      comparing the first three months of 2007 to the same period last year. This
      increase is mainly the result of an increase in interest-earning assets, and
      the
      positive impact from the increase in short-term interest rates. The Company
      closely monitors its cost of funds and has taken action to reduce such costs.
      Furthermore, variable rates adjust to increasing rates, and proceeds from
      maturity, amortization and prepayment of loans and securities continue to be
      invested at higher rates, mitigating the rising costs of core funding.
      Additionally, management is currently implementing various strategies to impact
      the rising cost of funding.





**Critical
      Accounting Policies**





A
      critical accounting policy is one that is both very important to the portrayal
      of the Company’s financial condition and requires management’s most difficult,
      subjective or complex judgments. The circumstances that make these judgments
      difficult, subjective or complex have to do with the need to make estimates
      about the effect of matters that are inherently uncertain. Based on this
      definition, the Company’s primary critical accounting policy is the
      establishment and maintenance of an allowance for loan losses.





The
      allowance for loan loss is established through a provision for loan loss charged
      to expense. Loans are charged against the allowance for loan loss when
      management believes that the collectibility of the principal is unlikely. The
      allowance is an amount that management believes will be adequate to absorb
      inherent losses on existing loans that may become uncollectible based on
      evaluations of the collectibility of the loans. The evaluations take into
      consideration such objective factors as changes in the nature and volume of
      the
      loan portfolio and historical loss experience. The evaluation also considers
      certain subjective factors such as overall portfolio quality, review of specific
      problem loans and current economic conditions that may affect the borrowers’
ability to pay. The level of allowance for loan loss is also impacted by
      increases and decreases in loans outstanding because either more or less
      allowance is required as the amount of the Company’s credit exposure changes. To
      the extent actual loan losses differ materially from management’s estimate of
      these subjective factors, loan growth/run-off accelerates, or the mix of loan
      types changes, the level of provision for loan loss, and related allowance
      can,
      and will, fluctuate.





Additional
      information with regard to the Company’s methodology and reporting of the
      allowance for loan losses is included in the 2006 Annual Report on Form
      10-K.





**Asset
      Quality**





The
      Company has identified certain assets as nonperforming. These assets include
      nonaccruing loans, loans that are contractually past due 90 days or more as
      to
      principal or interest payments and still accruing, and foreclosed real estate.
      Loans are placed on nonaccrual status when management has concerns regarding
      its
      ability to collect the outstanding loan principal and interest amounts and
      typically when such loans are more than 90 days past due. These loans present
      more than the normal risk that the Company will be unable to eventually collect
      or realize their full carrying value. Loans are impaired when it is considered
      probable that management will not collect the outstanding loan principal and
      interest amounts or realize the full carrying value of the loan. The Company’s
      nonperforming assets at March 31, 2007 and December 31, 2006 are as
      follows:


14.








March
                31,
            
            December
                31,2007
            
            2006(Dollars
                in thousands)Nonaccruing
                loans
            
            $
            459
            
            $
            420Loans
                past due over 90 days still on accrual
            
            
            --
            
            
            809Total
                nonperforming loans
            
            
            459
            
            
            1,229Foreclosed
                assets, net
            
            
            --
            
            
            --Total
                nonperforming assets
            
            $
            459
            
            $
            1,229Allowance
                for loan losses
            
            $
            2,856
            
            $
            2,621Nonperforming
                loans and foreclosed assets as a percent of total assets
            
            
            .13
            %
            
            .38
            %Nonperforming
                loans as a percent of gross loans
            
            
            .15
            %
            
            .43
            %Allowance
                for loan losses as a percent of nonperforming loans
            
            
            622.22
            %
            
            213.26
            %




**Allowance
      and Provision for Loan Losses**





The
      allowance for loan losses grew by $235,000 during the first three months of
      2007, amounting to $2.8 million at March 31, 2007, as compared to $2.6
      million at December 31, 2006. The allowance represented approximately .94%
      and
      .92% of total loans at both dates, respectively. During the first three months
      of 2007, the Company had no charge-offs or recoveries and recorded a $247,000
      provision for loan losses compared to charge-offs of $4,700, no recoveries
      and a
      provision for loan losses of $152,000 for the first three months of 2006. The
      larger provision for loan losses in 2007 resulted primarily from continued
      loan
      growth and management’s assessment of local and national economic
      conditions.




The
      allowance for loan losses is a valuation allowance for credit losses in the
      loan
      portfolio. Management has adopted a methodology to properly analyze and
      determine an adequate loan loss allowance. The analysis is based on sound,
      reliable and well documented information and is designed to support an allowance
      that is adequate to absorb all estimated incurred losses in the Company’s loan
      and lease portfolio. Due to their similarities, the Company has grouped the
      loan
      portfolio into three components. The components are residential real estate,
      consumer loans and commercial loans. The Company has created a loan
      classification system to properly calculate the allowance for loan losses.
      Commercial and commercial real estate loans are individually evaluated for
      impairment. If a loan is impaired, a portion of the allowance is allocated
      so
      that the loan is reported, net, at the present value of estimated future cash
      flows using the loan’s existing rate or at the fair value of collateral if
      repayment is expected solely from the sale of the collateral. Large groups
      of
      smaller balance homogeneous loans, such as consumer and residential real estate
      loans, are collectively evaluated for impairment and, accordingly, they are
      not
      separately identified for impairment disclosures.





In
      estimating the overall exposure to loss on impaired loans, the Company has
      considered a number of factors, including the borrower’s character, overall
      financial condition, resources and payment record, the prospects for support
      from any financially responsible guarantors, and the realizable value of any
      collateral. The Company also considers other internal and external factors
      when
      determining the allowance for loan losses. These factors include, but are not
      limited to, changes in national and local economic conditions, commercial
      lending staff limitations, impact from lengthy commercial loan workout and
      charge-off period, loan portfolio concentrations and trends in the loan
      portfolio.


15.





Based
      on
      the results of the analysis performed by management at March 31, 2007, the
      allowance for loan loss is considered to be adequate to absorb estimated loan
      losses in the portfolio as of that date. As more fully discussed in the
“Application of Critical Accounting Policies” section of this discussion and
      analysis of financial condition and results of operations, the process for
      estimating credit losses and determining the allowance for loan losses as of
      any
      balance sheet date is subjective in nature and requires material estimates.
      Actual results could differ significantly from these estimates.





The
      amount of future charge-offs and provisions for loan losses could be affected
      by, among other things, economic conditions in Jacksonville, Florida, and the
      surrounding communities. Such conditions could affect the financial strength
      of
      the Company’s borrowers and do affect the value of real estate collateral
      securing the Company’s mortgage loans. Loans secured by real estate represent
      approximately 93% of the Company’s total loans outstanding at March 31, 2007. In
      recent years, economic conditions in Jacksonville and the surrounding
      communities have been strong and real estate values have appreciated in a
      healthy manner. Presently, economic conditions remain healthy in this market
      and
      real estate values appear to have stabilized. Conditions and values could
      deteriorate in the future, and such deterioration could be substantial. If
      this
      were to occur, some of the Company’s borrowers may be unable to make the
      required contractual payments on their loans, and the Company may be unable
      to
      realize the full carrying value of such loans through foreclosure. However,
      management believes that the Company’s underwriting policies are relatively
      conservative and, as a result, the Company should not be any more affected
      than
      the overall market.





Future
      provisions and charge-offs could also be affected by environmental impairment
      of
      properties securing the Company’s mortgage loans. Under the Company’s current
      policy, an environmental audit is required on practically all commercial-type
      properties that are considered for a mortgage loan. At the present time, the
      Company is not aware of any existing loans in the portfolio where there is
      environmental pollution existing on the mortgaged properties that would
      materially affect the value of the portfolio.





**Noninterest
      Income, Noninterest Expense and Income Taxes**





Noninterest
      income was $292,000 for the three months ended March 31, 2007, compared to
      $214,000 for the 2006 period. The increase in total noninterest income was
      primarily due to the increase in mortgage origination fees and service charges
      on deposit accounts.




Noninterest
      expense increased to $2.1 million for the three months ended March 31, 2007,
      from $1.8 million for the three months ended March 31, 2006. Salaries and
      employee benefits and occupancy and equipment accounted for the majority of
      noninterest expense, increasing $248,000 over the same period of 2006. This
      increase is a result of the absorption of additional staffing, rent and
      equipment expense related to the Company’s two newest locations. The Company
      opened its fourth location in February 2006 and its fifth location in June
      2006.





Income
      taxes for the three months ended March 31, 2007 were $328,000 (an effective
      rate
      of 37.66%) compared to income taxes of $295,000 for the three months ended
      March
      31, 2006 (an effective tax rate of 36.74%). Income tax expense increased due
      to
      the increase in net income.





16.


**Capital**





The
      Company’s capital management policy is designed to build and maintain capital
      levels that meet regulatory standards. Under current regulatory capital
      standards, banks are classified as well capitalized, adequately capitalized
      or
      undercapitalized. Under such standards, a well-capitalized bank is one that
      has
      a total risk-based capital ratio equal to or greater than 10%, a Tier 1
      risk-based capital ratio equal to or greater than 6%, and a Tier 1 leverage
      capital ratio equal to or greater than 5%. The Company’s total risk-based
      capital, Tier 1 risk-based capital and Tier 1 leverage capital ratios were
      11.06%, 10.13% and 9.40%, respectively, at March 31, 2007.





**Cash
      Flows and Liquidity**





*Cash
      Flows.*  The
      Company’s primary sources of cash are deposit growth, maturities and
      amortization of investment securities, FHLB advances and federal funds
      purchased. The Company uses cash from these and other sources to fund loan
      growth. Any remaining cash is used primarily to reduce borrowings and to
      purchase investment securities. During the first three months of 2007, the
      Company’s cash and cash equivalent position increased by $1.5 million. The
      increase in cash mainly resulted from an increase in deposit accounts of
      approximately $14.0 million from $282.6 million at December 31, 2006 to $296.6
      million at March 31, 2007, as well as FHLB advances of $6.2 million, offset
      by
      net loan originations of $19.7 million.





***Liquidity.*** The
      Company has both internal and external sources of near-term liquidity that
      can
      be used to fund loan growth and accommodate deposit outflows. The primary
      internal sources of liquidity are principal and interest payments on loans;
      proceeds from maturities and monthly payments on the balance of the investment
      securities portfolio; and its overnight position with federal funds sold. At
      March 31, 2007 the Company had $26.6 million in federal funds sold and
      available-for-sale securities not subject to pledge agreements.





The
      Company’s primary external sources of liquidity are customer deposits and
      borrowings from other commercial banks. The Company’s deposit base consists of
      both core deposits from businesses and consumers in its local and national
      market. The Company can also borrow overnight federal funds and fixed-rate
      term
      products under credit facilities established with the Federal Home Loan Bank
      and
      other commercial banks. These lines in the aggregate amount of approximately
      $81.5 million do not represent legal commitments to extend credit on the part
      of
      the other banks.





**Recent
      Accounting Pronouncements**





In
      September 2006, FASB issued Statement No. 157, *Fair
      Value Measurements* .
      This
      new standard provides guidance for using fair value to measure assets and
      liabilities. Under Statement 157, fair value refers to the price that would
      be
      received to sell an asset or paid to transfer a liability in an orderly
      transaction between market participants in the market in which the reporting
      entity transacts. In this standard, the FASB clarifies the principle that fair
      value should be based on the assumptions market participants would use when
      pricing the asset or liability. In support of this principle, Statement 157
      establishes a fair value hierarchy that prioritizes the information used to
      develop those assumptions. The fair value hierarchy gives the highest priority
      to quoted prices in active markets and the lowest priority to unobservable
      data.
      Under the standard, fair value measurements would be separately disclosed by
      level within the fair value hierarchy. The provisions of Statement 157 are
      effective for financial statements issued for fiscal years beginning after
      November 15, 2007, and interim periods within those fiscal years, with earlier
      application encouraged. The Company has not yet determined the effect of
      adopting this Statement.


17.





On
      February 15, 2007, FASB issued Statement No. 159, *The
      Fair Value Option for Financial Assets and Financial
      Liabilities* .
      This
      new standard permits entities to measure many financial instruments at fair
      value. The provisions of Statement 159 provide entities with the opportunity
      to
      mitigate volatility in reported earnings caused by measuring related assets
      and
      liabilities differently without having to apply complex hedge accounting
      provisions. Statement 159 is effective as of the beginning of an entity’s first
      fiscal year that begins after November 15, 2007. Early adoption is permitted
      as
      of the beginning of a fiscal year that begins on or before November 15, 2007;
      however, the early adoption must occur within 120 days of the start of the
      fiscal year and before any quarterly financial statements are issued. An entity
      electing to adopt Statement 159 early must also elect to apply the provisions
      of
      Statement 157 (discussed above). The Company has not elected to early adopt
      this
      statement and has not yet determined the effect of adopting this
      statement.





In
      September 2006, the FASB Emerging Issues Task Force finalized Issue No. 06-4,
      Accounting for Deferred Compensation and Postretirement Benefit Aspects of
      Endorsement Split-Dollar Life Insurance Arrangements. This issue requires that
      a
      liability be recorded during the service period when a split-dollar life
      insurance agreement continues after participants’ employment or retirement. The
      required accrued liability will be based on either the post-employment benefit
      cost for the continuing life insurance or based on the future death benefit
      depending on the contractual terms of the underlying agreement. This issue
      is
      effective for fiscal years beginning after December 15, 2007. Management does
      not expect the adoption of EITF 06-4 to have a material impact on the financial
      statements.





***Contractual
      Obligations, Commitments, Contingent Liabilities, and Off-Balance Sheet
      Arrangements*** **.** The
      Corporation has various financial obligations, including contractual obligations
      and commitments that may require future cash payments. Management believes
      that
      there have been no material changes in the Corporation’s overall level of these
      financial obligations since December 31, 2006 and that any changes in the
      Corporation’s obligations which have occurred are routine for the industry.
      Further discussion of the nature of each type of obligation is included in
      Management’s Discussion and Analysis in the Corporation’s Annual Report on Form
      10-K and is incorporated herein by reference.





**Item
      3. Quantitative and Qualitative Disclosures about Market
      Risk**





Market
      risk is the risk that a financial institution will be adversely impacted by
      unfavorable changes in market prices. These unfavorable changes could result
      in
      a reduction in net interest income, which is the difference between interest
      earned on interest-earning assets and interest paid on interest-bearing
      liabilities.





Interest
      rate risk is the sensitivity of income to variations in interest rates over
      both
      short-term and long-term horizons. The primary goal of interest rate risk
      management is to control this risk within limits approved by the Board and
      narrower guidelines approved by ALCO. These limits and guidelines reflect the
      Bank’s tolerance for interest rate risk. The Bank attempts to control interest
      rate risk by identifying and quantifying exposures. The Bank quantifies its
      interest rate risk exposures using sophisticated simulation and valuation models
      as well as simpler gap analyses performed by a third-party vendor specializing
      in this activity.





The
      Bank’s internal policy on interest rate risk specifies that if interest rates
      were to shift immediately up or down 200 basis points, estimated net interest
      income for the next 12 months should change by less than 15%. The most current
      simulation projects the Bank’s net interest income to be within the parameters
      of its internal policy and has not changed significantly from our December
      31,
      2006 disclosures in Form 10-K . Such simulation involves numerous
      assumptions and estimates, which are inherently subjective and are subject
      to
      substantial business and economic uncertainties. Accordingly, the actual effects
      of an interest rate shift under actual future conditions may be expected to
      vary
      significantly from those derived from the simulation to the extent that the
      assumptions used in the simulation differ from actual
      conditions.


18.





**Item
      4T. Controls and Procedures**





a.
              *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 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
                  their evaluation of those controls and procedures performed as
                  of the end
                  of the period covered by this report, the chief executive and principal
                  financial officer of the Company concluded that the Company’s disclosure
                  controls and procedures were
                  adequate.





b.
            *Changes
                in internal controls.*The Company made no significant changes in its internal control over
                financial reporting during its most recent quarter that has materially
                affected the Company’s internal control over financial
                reporting.


19.


PART
      II -
      OTHER INFORMATION





Item
                1.
            Legal
                Proceedings


There
      are
      no material pending legal proceedings to which we are a party or to which any
      of
      our properties are subject; nor are there material proceedings known to be
      contemplated by any governmental authority; nor are there any material
      proceedings known to us, pending or contemplated, in which any of our directors,
      officers, affiliates or any principal security holders, or any associate of
      any
      of the foregoing, is a party or has an interest adverse to us, except as set
      forth below.





On
      April
      11, 2006, The Jacksonville Bank was served with a Summons and a copy of the
      Complaint filed by Wells Fargo Financial Leasing, Inc. in the Circuit Court
      of
      the Fourth Judicial Circuit in and for Duval County, Florida. The basis of
      the
      Complaint stems from an erroneous wire transfer that was made by Wells Fargo
      on
      February 16, 2005 to one of our customers, offsetting an overdraft in our
      customer’s account in the amount of $33,143.95. The Bank retained the amount and
      Wells Fargo is pursuing the refund plus interest and costs. The Bank does not
      expect to incur any material loss with regard to this matter.





On
      September 13, 2006, The Jacksonville Bank was served with a Summons and a copy
      of a Complaint filed by Harrell & Harrell, P.A. in the Circuit Court of the
      Fourth Judicial Circuit in and for Duval County, Florida. The Complaint states
      that the Bank “cashed or otherwise converted instruments of Harrell &
Harrell, P.A. for the benefit of parties who were not entitled to enforce the
      instruments or receive payment.” The “parties” referred to are Daniel J. Glary
      and Jonathan B. Israel, local attorneys who are indebted to The Jacksonville
      Bank. The action calls for damages that exceed the sum of $15,000, exclusive
      of
      costs, interest and attorneys’ fees. Mediations did not result in any agreement;
      therefore, the lawsuit was dismissed on February 6, 2007. Harrell &
Harrell re-filed the lawsuit and the Bank’s counsel has filed motions to have
      the suit dismissed again.





On
      January 17, 2007, a Counterclaim to the aforementioned suit was filed by Daniel
      J. Glary versus Jonathan B. Israel, Angela C. McDonald, Scott M. Hall and The
      Jacksonville Bank asserting that Scott Hall and the Bank facilitated the
      wrongful taking of funds that belonged to others by Israel and McDonald. The
      suit against the Bank and Hall was dismissed; however, Glary has the right
      to
      re-file a modified suit until on or about May 20, 2007.





Item
                1A.
            Risk
                Factors


There
      have been no material changes from the risk factors disclosed in the Annual
      Report on Form 10-K for the year ended December 31, 2006.





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


None





Item
                3.
            Defaults
                Upon Senior Securities


None





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


None





Item
                5.
            Other
                Information


None


20.


Item
      6.  Exhibits


(a)
            Exhibit
                No. 3.1:
            Articles
                of Incorporation of the Company(1)Exhibit
                No. 3.2:
            Amended
                and Restated Bylaws of the Company(2)Exhibit
                No. 3.3:
            Amendment
                to Amended and Restated Bylaws of the Company(3)Exhibit
                No. 31.1:
            Certification
                of principal executive officer required by Rule 13a-14(a)/15d-14(a)
                of the
                Exchange ActExhibit
                No. 31.2:
            Certification
                of principal financial officer required by Rule 13a-14(a)/15d-14(a)
                of the
                Exchange ActExhibit
                No. 32:
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002




(1)
                Incorporated
                    herein by reference to Exhibit No. 3.1 to Form SB-2, Registration
                    Statement and amendments thereto, effective as of September 30,
                    1998,
                    Registration No.
                    333-64815.


(2)
                Incorporated
                    herein by reference to Exhibit No. 3.2 to Form 10-QSB for the
                    quarter
                    ended June 30, 2002, filed August 14,
                    2002.


(3)
                Incorporated
                    herein by reference to Exhibit No. 3.3 to Form 10-QSB for the
                    quarter
                    ended June 30, 2005, filed August 10,
                    2005.




21.


JACKSONVILLE
      BANCORP, INC.








SIGNATURES



















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














Date:
                May 14, 2007
            /s/
                Gilbert J. Pomar, IIIGilbert
                J. Pomar, IIIPresident
                and Chief Executive OfficerDate:
                May 14, 2007
            /s/
                Valerie A. KendallValerie
                A. KendallExecutive
                Vice Presidentand
                Chief Financial Officer



















22.