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 June 30, 2006
                               -------------

       |_|         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 Employer
incorporation or organization)                              Identification No.)

         100 North Laura Street, Suite 1000, Jacksonville, Florida 32202
                    (Address of principal executive offices)

                                 (904) 421-3040
                           (Issuer'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 |_|

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 |_|   Accelerated Filer |_|   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 |_|           No |X|

As of August 8, 2006, the latest  practicable  date, 1,725,852 of the issuer's
common shares, $.01 par value, were issued and outstanding.

<PAGE>

                           JACKSONVILLE BANCORP, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                           Page

PART I -FINANCIAL INFORMATION
<S>                                                                                                         <C>
        Item 1.    Consolidated Financial Statements (Unaudited)

              Consolidated Balance Sheets ............................................................      3

              Consolidated Statements of Income ......................................................      4

              Consolidated Statements of Changes in Shareholders' Equity..............................      5

              Consolidated Statements of Cash Flows ..................................................      6

              Notes to Consolidated Financial Statements .............................................      7

        Item 2.    Management's Discussion and Analysis of
                   Financial Condition and Results of Operation.......................................     12

        Item 3.    Quantitative and Qualitative Disclosures about Market Risk.........................     23

        Item 4.    Controls and Procedures............................................................     23

PART II - OTHER INFORMATION

        Item 1.    Legal Proceedings..................................................................     25

        Item 1A.   Risk Factors.......................................................................     25

        Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds........................     25

        Item 3.    Defaults Upon Senior Securities....................................................     25

        Item 4.    Submission of Matters to a Vote of Security Holders................................     25

        Item 5.    Other Information..................................................................     25

        Item 6.    Exhibits...........................................................................     25

SIGNATURES ...........................................................................................     27

CERTIFICATIONS........................................................................................     28
</TABLE>

                                       2.
<PAGE>

                           JACKSONVILLE BANCORP, INC.
                           CONSOLIDATED BALANCE SHEETS
                (Dollars in thousands, except per share amounts)

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

<TABLE>
<CAPTION>
                                                                                    June 30,          December 31,
                                                                                      2006                2005
                                                                                      ----                ----
                                                                                   (Unaudited)
<S>                                                                             <C>                <C>
ASSETS
Cash and due from banks                                                         $         8,619    $          4,399
Federal funds sold                                                                        5,176                 368
                                                                                ---------------    ----------------
     Total cash and cash equivalents                                                     13,795               4,767
Securities available for sale                                                            25,811              24,211
Securities held to maturity                                                                  50                  50
Loans, net of allowance for loan losses                                                 256,030             232,031
     of $2,378 at 2006 and $2,207 at 2005
Premises and equipment, net                                                               4,663               3,821
Bank-owned life insurance (BOLI)                                                          4,741               4,635
Federal Home Loan Bank (FHLB) stock                                                       1,838               1,062
Accrued interest receivable                                                               1,780               1,425
Other assets                                                                              1,278               1,042
                                                                                ---------------    ----------------

         Total assets                                                           $       309,986    $        273,044
                                                                                ===============    ================

LIABILITIES
Deposits
     Noninterest bearing                                                        $        36,953    $         40,582
     Money market, NOW and savings deposits                                             157,284             127,425
     Time deposits                                                                       61,573              66,204
                                                                                ---------------    ----------------
         Total deposits                                                                 255,810             234,211
FHLB advances                                                                            28,700              13,650
Subordinated debt                                                                         4,000               4,000
Accrued expenses and other liabilities                                                      559               1,337
                                                                                ---------------    ----------------
     Total liabilities                                                                  289,069             253,198

SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 8,000,000 shares authorized,
  1,723,652 and 1,716,366 shares issued                                                      18                  17
Additional paid-in capital                                                               17,724              17,526
Retained earnings                                                                         3,915               2,718
Treasury stock, 1,800 and 1,650 shares                                                      (54)                (54)
Accumulated other comprehensive loss                                                       (686)               (361)
                                                                                ----------------   ----------------
     Total shareholders' equity                                                          20,917              19,846
                                                                                ---------------    ----------------

         Total liabilities and shareholders' equity                             $      309,986     $        273,044
                                                                                ===============    ================
</TABLE>

--------------------------------------------------------------------------------
                 See accompanying notes to financial statements.


                                       3.
<PAGE>


                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)
                (Dollars in thousands, except per share amounts)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                            Three Months Ended      Six Months Ended
                                                               June 30,                 June 30,
                                                               --------                 --------
                                                          2006        2005          2006        2005
                                                      -----------------------   -----------------------
<S>                                                   <C>          <C>          <C>          <C>
Interest and dividend income
     Loans, including fees                            $    5,011   $    3,379   $    9,503   $    6,479
     Securities                                              309          247          574          497
     Other                                                    35           13          133           20
                                                      ----------   ----------   ----------   ----------
         Total interest income                             5,355        3,639       10,210        6,996

Interest expense
     Deposits                                              2,265        1,396        4,478        2,583
     FHLB advances                                           217           54          292          119
     Subordinated debt                                        79           59          153          113
     Other                                                     4            3            6           10
                                                      ----------   ----------   ----------   ----------
         Total interest expense                            2,565        1,512        4,929        2,825
                                                      ----------   ----------   ----------   ----------

Net interest income                                        2,790        2,127        5,281        4,171
Provision for loan losses                                    117          164          268          228
                                                      ----------   ----------   ----------   ----------

Net interest income after provision for loan losses        2,673        1,963        5,013        3,943

Noninterest income
     Service charges on deposit accounts                     140          160          256          325
     Other income                                            133           81          231          139
                                                      ----------   ----------   ----------   ----------
         Total noninterest income                            273          241          487          464

Noninterest expense
     Salaries and employee benefits                          909          760        1,793        1,614
     Occupancy and equipment                                 385          293          737          583
     Other                                                   580          470        1,095          930
                                                      ----------   ----------   ----------   ----------
         Total noninterest expense                         1,874        1,523        3,625        3,127
                                                      ----------   ----------   ----------   ----------

Income before income taxes                                 1,072          681        1,875        1,280
Income tax expense                                           383          238          678          470
                                                      ----------   ----------   ----------   ----------

Net income                                            $      689   $      443   $    1,197   $      810
                                                      ==========   ==========   ==========   ==========

Weighted average:
     Common shares                                     1,721,889    1,710,527    1,720,171    1,709,325
     Dilutive stock options and warrants                  82,693       88,102       84,169       86,684
                                                      ----------   ----------   ----------   ----------
     Dilutive shares                                   1,804,582    1,798,629    1,804,340    1,796,009
                                                      ==========   ==========   ==========   ==========

Basic earnings per common share                       $      .40   $      .26   $      .70   $      .47
                                                      ==========   ==========   ==========   ==========
Diluted earnings per common share                     $      .38   $      .25   $      .66   $      .45
                                                      ==========   ==========   ==========   ==========
</TABLE>

--------------------------------------------------------------------------------
                 See accompanying notes to financial statements.

                                       4.
<PAGE>


                           JACKSONVILLE BANCORP, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                   (Unaudited)
                             (Dollars in thousands)



<TABLE>
<CAPTION>
                                           Common Stock
                                           ------------           Additional                             Accumulated Other
                                            Outstanding            Paid-In      Retained   Treasury Stock Comprehensive
                                        Shares        Amount       Capital      Earnings       Amount      Income (Loss)   Total
                                       ----------   ----------    ----------   ----------    ----------    ----------    ----------
<S>                                     <C>         <C>           <C>          <C>           <C>           <C>           <C>
Balance at January 1, 2005              1,708,366   $       17    $   17,381   $      546    $             $     (140)   $   17,804

Comprehensive income:
    Net income                                                                        810                                       810
    Change in unrealized gain (loss)
         on securities available for
         sale, net of tax effects                                                                                  26            26
                                                                                                                         ----------

    Total comprehensive income                                                                                                  836
Purchase of treasury stock                 (3,000)                                                  (83)                        (83)
Issuance of treasury stock                  1,500                                                    40                          40
Exercise of stock options,
    including tax benefits of $21           4,800                         69                                                     69
                                       ----------   ----------    ----------   ----------    ----------    ----------    ----------
Balance at June 30, 2005                1,711,666   $       17    $   17,450   $    1,356    $      (43)   $     (114)   $   18,666
                                       ==========   ==========    ==========   ==========    ==========    ==========    ==========

Balance at January 1, 2006              1,714,716   $       17    $   17,526   $    2,718    $      (54)   $     (361)   $   19,846

Comprehensive income:
    Net income                                                                      1,197                                     1,197
    Change in unrealized gain (loss)                                                                             (325)         (325)
         on securities available for
         sale, net of tax effects
                                                                                                                         ----------
    Total comprehensive income                                                                                                  872
Purchase of treasury stock                 (3,600)                                                 (112)                       (112)
Issuance of treasury stock                  3,450                          3                        112                         115
Compensation expense and exercise
    of common stock options,
    including tax benefits of $58           7,286            1           195                                                    196
                                       ----------   ----------    ----------   ----------    ----------    ----------    ----------
Balance at June 30, 2006                1,721,852   $       18    $   17,724   $    3,915    $      (54)   $     (686)   $   20,917
                                       ==========   ==========    ==========   ==========    ==========    ==========    ==========

Balance at April 1, 2005                1,707,666   $       17    $   17,395   $      913    $      (40)   $     (341)   $   17,944

Comprehensive income:
    Net income                                                                        443                                       443
    Change in unrealized gain (loss)
         on securities available for
         sale, net of tax effects                                                                                 227           227
                                                                                                                         ----------
    Total comprehensive income                                                                                                  670
Purchase of treasury stock                 (1,500)                                                  (43)                        (43)
Issuance of treasury stock                  1,500                                                    40                          40
Exercise of stock options,
    including tax benefits of $15           4,000           --            55                                                     55
                                       ----------   ----------    ----------   ----------    ----------    ----------    ----------
Balance at June 30, 2005                1,711,666   $       17    $   17,450   $    1,356    $      (43)   $     (114)   $   18,666
                                       ==========   ==========    ==========   ==========    ==========    ==========    ==========

Balance at April 1, 2006                1,719,852   $       18    $   17,653   $    3,226    $      (58)   $     (439)   $   20,400

Comprehensive income:
    Net income                                                                        689                                       689
    Change in unrealized gain (loss)                                                                             (247)         (247)
         on securities available for
         sale, net of tax effects
                                                                                                                         ----------
    Total comprehensive income                                                                                                  442
Purchase of treasury stock                 (1,800)                                                  (54)                        (54)
Issuance of treasury stock                  1,800                          1                         58                          59
Compensation expense and exercise
    of common stock options,
    including tax benefits of $16           2,000                         70                                                     70
                                       ----------   ----------    ----------   ----------    ----------    ----------    ----------
Balance at June 30, 2006                1,721,852   $       18    $   17,724   $    3,915    $      (54)   $     (686)   $   20,917
                                       ==========   ==========    ==========   ==========    ==========    ==========    ==========
</TABLE>

--------------------------------------------------------------------------------
                 See accompanying notes to financial statements.

                                       5.
<PAGE>


                           JACKSONVILLE BANCORP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                             (Dollars in thousands)

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

<TABLE>
<CAPTION>
                                                                          Six Months Ended
                                                                              June 30,
                                                                        2006           2005
                                                                        ----           ----
<S>                                                                   <C>         <C>
Cash flows from operating activities
     Net income                                                       $  1,197    $    810
     Adjustments to reconcile net income to net cash from operating
       activities:
         Depreciation and amortization                                     245         212
         Net amortization of deferred loan fees                            (76)        (89)
         Provision for loan losses                                         268         228
         Premium amortization, net of accretion                             23         (16)
         Increase in cash surrender value of BOLI                         (106)        (30)
         Stock-based compensation                                          180          78
         Loss on disposal of assets                                          9          --
         Net change in accrued interest receivable and other assets       (436)       (270)
         Net change in accrued expenses and other liabilities             (779)       (305)
                                                                      --------    --------
              Net cash from operating activities                           525         618

Cash flows from investing activities
     Purchases of securities available for sale                         (3,949)     (3,373)
     Proceeds from maturities of securities available for sale           1,805       3,263
     Loan (originations) payments, net                                 (24,191)    (21,220)
     Purchase of BOLI                                                       --      (4,500)
     Additions to premises and equipment, net                           (1,054)       (229)
     Purchases of Federal Home Loan Bank stock                            (776)       (792)
                                                                      --------    --------
         Net cash from investing activities                            (28,165)    (26,851)

Cash flows from financing activities
     Net change in deposits                                             21,599       9,701
     Net change in short-term FHLB advances                             15,050      12,500
     Proceeds from long-term FHLB advances                                  --       3,000
     Proceeds from exercise of stock options                                73          48
     Excess tax benefits from stock-based payment arrangements              58          21
     Purchase of treasury stock                                           (112)        (83)
                                                                      --------    --------
         Net cash from financing activities                             36,668      25,187
                                                                      --------    --------

Net change in cash and cash equivalents                                  9,028      (1,046)
Cash and cash equivalents at beginning of period                         4,767       6,735
                                                                      --------    --------

Cash and cash equivalents at end of period                            $ 13,795    $  5,689
                                                                      ========    ========

Supplemental disclosures of cash flow information
     Cash paid during the period for
         Interest                                                     $  4,858    $  2,801
         Income taxes                                                    1,340         781
</TABLE>

                                       6.
<PAGE>


                           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  subsidiaries  are
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, 2005.

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 June 30, 2006 and 2005 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, 2005 consolidated
balance  sheet  was  derived  from  the  Company's  December  31,  2005  audited
consolidated financial statements.

NOTE 2 - STOCK-BASED COMPENSATION AND STOCK PLANS
Prior to January 1, 2006,  the  Company  followed  the  provisions  of SFAS 148,
Accounting for Stock-Based  Compensation--Transition  and Disclosure ("Statement
148"),  which  provides  transition  methods  to  and  enhances  the  disclosure
requirements of SFAS 123,  Accounting for Stock-Based  Compensation  ("Statement
123"). As permitted under Statement 123, the Company  followed the guidelines of
Accounting  Principles  Board  Opinion No. 25,  Accounting  for Stock  Issued to
Employees  ("Opinion  25") and  disclosed  pro  forma  compensation  expense  in
accordance  with  Statement 148. No  compensation  expense for stock options was
recorded in the financial statements prior to January 1, 2006.

On December 16, 2004, the Financial  Accounting  Standards Board ("FASB") issued
SFAS 123R (Revised 2004),  Share-Based Payment ("Statement 123(R)"),  which is a
revision of Statement 123.  Statement 123(R)  supersedes  Opinion 25. Generally,
the  approach  in  Statement  123(R) is similar  to the  approach  described  in
Statement 123.  However,  Statement 123(R) requires all share-based  payments to
employees,  including grants of employee stock options,  to be recognized in the
Statement  of Income  based on their fair  values.  Pro forma  disclosure  is no
longer an alternative method under Statement 123(R).

Statement  123(R) is effective for fiscal years  beginning  after June 15, 2005.
The Company adopted Statement 123(R) using the "modified  prospective" method in
which  compensation  cost is recognized  beginning  with the effective  date (a)
based on the  requirement  of  Statement  123(R)  for all  stock-based  payments
granted after the effective date and (b) based on the  requirements of Statement
123 for all awards granted to employees prior to the effective date of Statement
123(R) that remain unvested as of the effective date. Additionally, compensation
costs for the  portion  of  outstanding  awards for which  service  has not been
rendered  (such as  unvested  options)  that are  outstanding  as of the date of
adoption are  recognized  as the remaining  services are  rendered.  The Company
recognizes  the fair value of  stock-based  compensation  awards in salaries and
benefits in the condensed  consolidated  statement of income on a  straight-line
basis over the vesting period.

                                       7.
<PAGE>

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


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

The Company recorded stock-based compensation expense for the periods ended June
30,  2006 and 2005 as follows,  the  components  of which are further  discussed
below:

<TABLE>
<CAPTION>
                                                   For the Three Months Ended    For the Six Months Ended
                                                   --------------------------    ------------------------
                                                     June 30,  June 30,             June 30,  June 30,
                                                       2006       2005                 2006     2005
                                                     -------   --------             --------  -------
<S>                                                 <C>        <C>                  <C>
         Stock Options                              $     31   $     --             $     62       --
         Stock Issued for Director Compensation           59         40                  115       78
         Restricted Stock                                  3         --                    3       --
                                                     -------   --------             --------  -------
         Total                                       $    93   $     40             $    180       78
                                                     =======   ========             ========  =======
</TABLE>


The recorded  amounts of stock-based  compensation  expense for stock options in
2006 represent  amortization  related to stock-based payments in accordance with
Statement  123(R).  The Company  recognized no tax benefits related to the above
stock option  expense,  as all stock options  expensed above are incentive stock
options.  However, the Company recognized tax benefits of $16 and $58 related to
the exercise of nonqualified stock options during the three and six months ended
June 30, 2006, respectively. In addition, the Company recognized tax benefits of
$1 related to restricted stock expense for the three and six month periods.

SFAS 123R requires the recognition of stock-based compensation for the number of
awards that are  ultimately  expected  to vest.  As a result,  for most  awards,
recognized  stock  compensation was reduced for estimated  forfeitures  prior to
vesting  primarily based on historical  annual forfeiture rates of approximately
2.56%.  Estimated  forfeitures will be reassessed in subsequent  periods and may
change based on new facts and  circumstances.  Prior to January 1, 2006,  actual
forfeitures  were  accounted  for as they  occurred for purposes of required pro
forma stock compensation disclosures.

During 2005, the Company  accounted for stock-based  payments to employees using
Opinion 25's  intrinsic  value method and recognized no  compensation  costs for
employee stock options in prior years. Had the Company adopted  Statement 123(R)
in 2005,  the  impact of that  Standard  would have  approximated  the impact of
Statement  123 in the  disclosure of pro forma net income and earnings per share
described as follows:

<TABLE>
<CAPTION>
                                                  For the Three Months      For the Six Months
                                                   Ended June 30, 2005      Ended June 30, 2005
                                                  ---------------------    ---------------------

<S>                                                    <C>                   <C>
         Net income as reported                        $           443       $           810
         Deduct:  Stock-based compensation
              expense determined under fair
              value based method                                    30                    59
                                                       ---------------       ---------------
         Pro forma net income                          $           413       $           751
                                                       ===============       ===============
</TABLE>


                                       8.
<PAGE>

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


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


<TABLE>
<CAPTION>
<S>                                                    <C>                   <C>
              Basic--as reported                       $           .26       $           .47
              Basic--pro forma                         $           .24       $           .44

              Diluted--as reported                     $           .25       $           .45
              Diluted--pro forma                       $           .23       $           .42
</TABLE>

Following  approval by the shareholders at the 2003 Annual Meeting,  the Company
established the Directors' Stock Purchase Plan for non-employee directors. Under
this Stock Purchase Plan, Directors may elect to receive shares of the Company's
common stock as an alternative to the equivalent  amounts of cash for director's
fees.  A total of  100,000  shares  of the  Company's  common  stock  were  made
available for issuance, all of which remained available at June 30, 2006, as all
transactions executed to date were open market purchases.  The Company's expense
in connection with this Plan was $115 and $78, for the six months ended June 30,
2006  and  2005,  respectively,  which is  included  in  other  expenses  in the
Consolidated Statements of Income.

On April 25, 2006, the Company's shareholders approved the Jacksonville Bancorp,
Inc.  2006 Stock  Incentive  Plan (the "2006  Plan").  Under the 2006 Plan,  the
Compensation  Committee  of the  Board of  Directors,  or other  such  committee
appointed  by  the  Board,   consisting  of  only   "non-employee,   independent
directors," has full authority to select the eligible individuals to whom awards
will be granted, the types of awards granted, the number of shares subject to an
award,  the exercise  price,  and other terms and conditions of the award. Up to
20,000 shares of the Company's common stock,  par value of $.01 per share,  will
be  available  for  issuance  for  awards  under the 2006  Plan,  in the form of
incentive stock options,  restricted stock, restricted stock units,  performance
grants,  and  stock  appreciation  rights.  Shares  subject  to an award  may be
authorized  and  unissued  shares,  treasury  shares,  or shares of common stock
purchased  on the open market.  Any award that  expires or is forfeited  for any
reason is returned to the 2006 Plan. On April 25, 2006, 904 shares of restricted
stock were granted under the 2006 Plan, with a vesting date of March 9, 2008.

The 2006 Plan is a new plan and does not supersede the Company's  original Stock
Option Plan,  adopted by the  Company's  shareholders  on April 26, 2000,  which
continues to govern  awards made under it. Under the  Company's  original  Stock
Option  Plan,  options  to buy stock are  granted  to  directors,  officers  and
employees.  Options  available to be issued under the original Stock Option Plan
are equal to 15% of the total shares outstanding. At June 30, 2006, the original
Stock Option Plan  provided for the issuance of up to 258,278  shares,  of which
34,421 shares remain available for issuance.

Stock options are granted  under both stock option plans with an exercise  price
equal to or greater than the stock fair market  value at the date of grant.  All
stock options granted have ten-year lives, generally containing vesting terms of
three to five years. Certain grants have been made that vest immediately. Common
stock issued upon exercise of stock options are newly-issued shares.

The fair value of each option  award is estimated on the date of grant using the
Black Scholes-Merton  Closed-Form  ("Black-Scholes") option valuation model that
uses the assumptions  such as expected stock price  volatility,  expected option
life,  risk-free  interest rate, and dividend yield.  Expected  volatilities are
based on  historical  volatilities  of the  Company's  stock.  The Company  uses
historical data to estimate option  exercises and employee  terminations  within
the valuation  model.  The expected term of options granted is determined  using
historical data adjusted for known factors that would alter historical  exercise
behavior,  including announced  retirement dates. The risk-free rate for periods
within the  contractual  life of the option is based on the U.S.  Treasury yield
curve in effect at the time of grant.  The dividend yield is zero as the Company
has not  historically  paid any  dividends  and does not  anticipate  payment of
dividends in the future.

                                       9.
<PAGE>

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


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


The  Company  believes  that the use of the  Black-Scholes  model meets the fair
value  measurement  objectives of Statement  123(R) and reflects all substantive
characteristics  of the instruments being valued.  There were no options granted
during the six months ended June 30, 2006 or 2005;  therefore,  no valuation was
performed for those periods.

The following  table reports stock option  activity for the three and six months
ended June 30, 2006:

<TABLE>
<CAPTION>
                                                                        Weighted
                                                     Weighted            Average
                                                      Average           Remaining      Aggregate       Weighted
                                    Number of         Exercise         Contractual      Intrinsic       Average
                                      Options           Price              Term          Value          Fair Value
                                      -------           -----              ----          -----          ----------

<S>                                   <C>            <C>                  <C>           <C>            <C>
Outstanding at January 1, 2006        193,857        $    13.94                         $   3,501      $      5.41
Granted                                    --                --                                --               --
Exercised                              (5,286)            10.00                               111             3.50
Forfeited                                  --                --                                --               --
                                    ------------------------------------------------------------------------------

Outstanding at March 31, 2006         188,571        $    14.05               5.92      $   3,385      $      5.46
Granted                                    --                --                                --               --
Exercised                              (2,000)            10.00                                43             4.32
Forfeited                                  --                --                                --               --
                                    ------------------------------------------------------------------------------

Outstanding at June 30, 2006          186,571        $    14.09               5.70          2,967      $      5.47
Fully vested and expected to vest     181,795             14.09               5.70          2,892             5.47
                                    ------------------------------------------------------------------------------

Exercisable at June 30, 2006          141,671        $    11.19               5.09      $   2,556      $      4.66
                                    ==============================================================================
</TABLE>

As of June 30,  2006,  there was $324 of total  unrecognized  compensation  cost
related to unvested stock options granted. The cost is expected to be recognized
over a remaining weighted average period of 1.6 years.

The following  table reports  restricted  stock  activity  during the six months
ended June 30, 2006:


                                                                     Aggregate
                                          Number of                  Intrinsic
                                           Shares                      Value
                                        -------------             -------------
Unvested shares at January 1, 2006                 --
Shares granted                                    904
Shares vested and distributed                      --
Shares forfeited                                  (54)
                                        --------------            -------------
Unvested shares at June 30, 2006                  850             $      25,500

                                      10.
<PAGE>

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


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



NOTE 3 - 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 June 30, 2006 and December 31, 2005:


<TABLE>
<CAPTION>
                                           Adequately
                                           Capitalized        June 30, 2006   December 31, 2005
                                           Requirement             Actual          Actual
                                           -------------      --------------   ----------------
<S>                                              <C>              <C>              <C>
Tier 1 Capital (to Average Assets)
Consolidated                                    >4%               8.54%            9.06%
Bank                                            >4%               8.26%            8.34%

Tier 1 Capital (to Risk Weighted Assets)
Consolidated                                    >4%               9.59%           10.05%
Bank                                            >4%               9.27%            9.25%

Total Capital (to Risk Weighted Assets)
Consolidated                                    >8%              10.48%           10.97%
Bank                                            >8%              10.16%           10.17%
</TABLE>

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 June 30, 2006, 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.

NOTE 4 - FHLB ADVANCES
FHLB  advances at June 30, 2006  consisted  of a $3,000 fixed rate advance and a
$25,700 overnight advance.  The interest rate on the overnight advance was 5.57%
at June 30, 2006.  The interest  rate on the fixed rate  advance,  which matures
April 11, 2008, is 4.36%. The advances are  collateralized  by a blanket lien on
the Company's residential and commercial real estate loan portfolio. The Company
had $13,650 in advances outstanding at December 31, 2005, which consisted of the
$3,000 fixed rate advance discussed above and $10,650 in overnight advances.

                                       11.
<PAGE>

                           JACKSONVILLE BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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
mortgage-backed  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.  In the fourth  quarter of 2005,  the Bank
launched a business banking  initiative,  which will likely result in additional
noninterest  fee income.  In  addition,  the Bank opened its fourth  location in
February 2006 and fifth  location in June of 2006 in key areas of  Jacksonville,
which give us additional visibility and access to businesses and individuals and
will likely result in additional loan and deposit growth.

                                      12.
<PAGE>

                           JACKSONVILLE BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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  remain strong and
have not shown signs of weakness or potential downturn. 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.
Beginning in June 2004, the Federal Reserve implemented a tightening policy that
has resulted in 17 interest rate increases in the prime rate, which was 8.25% at
July 13,  2006.  These rate  increases  have  improved  our yield on our earning
assets,  but also serve to  increase  our cost of funds by  increasing  interest
rates paid on deposits  tied to the prime rate, 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 June 30, 2006 compared to December
31, 2005,  and the results of operations for the three and six months ended June
30, 2006 compared with the same periods in 2005.  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 JUNE 30, 2006 AND DECEMBER 31, 2005

Total assets  increased  $37.0 million,  or 14%, from $273.0 million at December
31, 2005 to $310.0  million at June 30,  2006.  During the six months ended June
30, 2006, the Company  experienced net loan growth of $24.0 million, or 10%. The
increase in net loans was driven by increases in commercial real estate loans of
$19.5 million,  or 13%, and  residential  real estate loans of $6.0 million,  or
10%. The Company  funded the increase in earning  assets  through an increase in
deposits of $21.6  million and an increase in Federal Home Loan Bank advances of
$15.1 million.


                                      13.
<PAGE>


                           JACKSONVILLE BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Total deposits  increased $21.6 million,  or 9%, from $234.2 million at December
31, 2005 to $255.8  million at June 30,  2006.  During the six months ended June
30, 2006,  noninterest bearing deposits decreased $3.6 million to $37.0 million,
and money market,  NOW and savings  deposits  increased  $29.9 million to $157.3
million.  Average core deposit growth of $59.0  million,  or 44%, over the first
six months of 2005 has  lessened  the  Company's  dependence  on the national CD
market, which contributed favorably to our risk profile.

Investment securities available for sale increased $1.6 million to $25.8 million
at June 30, 2006.  During the six months ended June 30, 2006, we purchased  $3.9
million of securities and received $1.8 million in proceeds from  maturities and
principal repayments. Of the $3.9 million of securities purchased in the current
year, approximately $770,000 was invested in tax-exempt municipal securities.

Total shareholders'  equity increased by $1.1 million, or 6%, from $19.8 million
at December 31, 2005 to $20.9  million at June 30, 2006.  The increase is mainly
attributable  to net income of $1.2 million.  At June 30, 2006,  the Company had
8,000,000  authorized  shares of $.01 par value common stock, of which 1,723,652
shares were issued and  1,721,852  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 June 30, 2006.

COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005

NET INCOME

Net income  increased  $387,000,  or 48%, from $810,000 for the six months ended
June 30, 2005 to $1.2 million for the six months  ended June 30,  2006.  Diluted
earnings  per share  increased  $.21 from $.45 for the six months ended June 30,
2005 to $.66 for the six months ended June 30, 2006. This increase in net income
and diluted  earnings per share was due to an increase in net  interest  income,
offset by an increase in  provision  for loan losses,  noninterest  expenses and
income tax expense.  Net interest income increased as a result of an increase in
interest-earning  assets,  as well as an increase in the average  interest rates
earned on those  assets.  Occupancy  and  equipment  expenses  accounted for the
largest portion of the increase in noninterest  expenses.  Salaries and employee
benefits increased  primarily due to the expense of stock options resulting from
adoption of FAS 123(R) on January 1, 2006 along with the costs  associated  with
the opening of two additional  branches during the first six months of 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  $1.1
million,  or 27.0% from $4.2  million for the six months  ended June 30, 2005 to
$5.3 million for the six months ended June 30, 2006. This increase resulted from
an  increase  in  interest  income of $3.2  million,  offset by an  increase  in
interest  expense of $2.1  million.  The average net interest  margin  increased
eight basis  points  from 3.72% for the six months  ended June 30, 2005 to 3.80%
for the six months ended June 30, 2006. Refer to the table and discussion on the
following pages for a detailed analysis of the increase in net interest income.

                                      14.
<PAGE>

                           JACKSONVILLE BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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.


<TABLE>
<CAPTION>
                                                                      Six Months Ended June 30,
                                                             2006                                       2005
                                                 -------------------------------           -----------------------------
                                                  Average                  Average         Average                Average
                                                  Balance      Interest     Rate           Balance     Interest     Rate
                                                  -------      --------     ----           -------     --------     ----
                                                                             (Dollars in thousands)
<S>                                             <C>            <C>          <C>         <C>            <C>          <C>
Interest-earning assets:
     Loans (1)                                  $   247,804    $  9,503     7.73%       $   199,880    $  6,479     6.54%
     Securities (2)                                  26,926         574     4.30             25,085         497     4.00
     Other interest-earning assets (3)                5,541         133     4.84              1,209          20     3.34
                                                -----------    --------                 -----------    --------
         Total interest-earning assets              280,271      10,210     7.35            226,174       6,996     6.24
                                                               --------                                --------
     Noninterest-earning assets (4)                  13,311                                   8,886
                                                -----------                             -----------

         Total assets                           $   293,582                             $   235,060
                                                ===========                             ===========

Interest-bearing liabilities:
     Savings and NOW deposits                   $    18,376    $    166     1.82        $    23,371    $    123     1.06
     Money market deposits                          136,120       2,931     4.34             76,922       1,310     3.43
     Time deposits                                   65,757       1,381     4.24             74,296       1,150     3.12
     FHLB advances                                   11,865         292     4.96              7,500         119     3.20
     Subordinated debt                                4,000         153     7.71              4,000         113     5.70
     Other interest-bearing liabilities (5)             214           6     5.65                657          10     3.07
                                                -----------    --------                 -----------    --------
         Total interest-bearing liabilities         236,332       4,929     4.21            186,746       2,825     3.05
                                                               --------                                --------
     Noninterest-bearing liabilities                 36,901                                  30,255
     Shareholders' equity                            20,349                                  18,059
                                                -----------                             -----------
         Total liabilities and
           shareholders' equity                 $   293,582                             $   235,060
                                                ===========                             ===========

Net interest income                                            $  5,281                                $  4,171
                                                               ========                                ========

Interest rate spread (6)                                                    3.14%                                    3.19%
                                                                            ====                                     ====
Net interest margin (7)                                                     3.80%                                    3.72%
                                                                            ====                                     ====
</TABLE>

----------
(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.

                                      15.
<PAGE>

                           JACKSONVILLE BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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.

<TABLE>
<CAPTION>
                                                             Six Months Ended June 30,
                                                               2006 Versus 2005 (1)
                                                      Increase (decrease) due to changes in:
                                                                                       Net
                                                      Volume         Rate            Change
                                                   ------------   ------------    ------------
                                                                 (Dollars in thousands)
<S>                                                <C>            <C>             <C>
     Interest income:
         Loans                                     $      1,715   $      1,309    $      3,024
         Securities                                          38             39              77
         Other interest-earning assets                      100             13             113
                                                   ------------   ------------    ------------
     Total interest income                                1,853          1,361           3,214
                                                   ------------   ------------    ------------

     Interest expense:
         Savings and NOW deposits                           (31)            74              43
         Money market deposits                            1,207            414           1,621
         Time deposits                                     (144)           375             231
         FHLB advances                                       89             84             173
         Subordinated debt                                   --             40              40
         Other interest-bearing liabilities                  (9)             5              (4)
                                                   -------------  ------------    -------------
     Total interest expense                               1,112            992           2,104
                                                   ------------   ------------    ------------

     Increase in net interest income               $        741   $        369    $      1,110
                                                   ============   ============    ============
</TABLE>
----------
     (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 six months of 2006 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  and
residential  real estate  loans.  The Company  also  experienced  growth in core
deposit  products,  with the largest increase  occurring in money market 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
$741,000.

                                      16.
<PAGE>

RATE VARIANCE. The increase in short-term interest rates by the Federal Reserve,
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.

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 111  basis  points  to 7.35% for the six
months  ended June 30,  2006,  whereas,  the average rate paid by the Company on
interest-bearing  liabilities  increased  116 basis points to 4.21% for the same
period driving the $369,000 positive rate variance.

NET INTEREST  MARGIN.  Net interest margin  increased by eight basis points from
3.72% to 3.80% when  comparing  the first six months of 2006 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 loss.

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 2005 Annual  Report on Form
10-K.

                                      17.
<PAGE>

                           JACKSONVILLE BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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 June 30, 2006 and December 31, 2005 are as follows:

<TABLE>
<CAPTION>
                                                                                     June 30,         December 31,
                                                                                       2006               2005
                                                                                       ----               ----
                                                                                        (Dollars in thousands)

<S>                                                                               <C>               <C>
     Nonaccruing loans                                                            $          154    $           319
     Loans past due over 90 days still on accrual (1)                                         --                447
                                                                                  --------------    ---------------
     Total nonperforming loans                                                               154                766
     Foreclosed assets, net                                                                   --                 --
                                                                                  --------------    ---------------
     Total nonperforming assets                                                   $          154    $           766
                                                                                  ==============    ===============

     Allowance for loan losses                                                    $        2,378    $         2,207

     Nonperforming loans and foreclosed assets as a percent of total assets                 .05%               .28%
     Nonperforming loans as a percent of gross loans                                        .06%               .33%
     Allowance for loan losses as a percent of nonperforming loans                     1,544.16%            288.12%
</TABLE>

----------
(1)   The  $447,000  loans  past  due  over 90 days and  still  on  accrual  was
      comprised  of one  outstanding  loan  which  was  brought  current  by the
      customer in January 2006.

ALLOWANCE AND PROVISION FOR LOAN LOSSES

The  allowance  for loan losses grew by $171,000  during the first six months of
2006,  amounting to $2.4 million at June 30, 2006 as compared to $2.2 million at
December 31, 2005.  The  allowance  represented  approximately  .92% and .94% of
total  loans at both dates,  respectively.  During the first six months of 2006,
the Company had  charge-offs  of $99,000,  recoveries  of $2,000 and  recorded a
$268,000  provision  for loan losses  compared to  charge-offs  of $102,000,  no
recoveries  and a provision for loan losses of $228,000 for the first six months
of 2005. The larger provision for loan losses in 2006 resulted  primarily from a
continued loan growth and management's assessment of local and national economic
conditions.

                                      18.
<PAGE>

                           JACKSONVILLE BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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.

Based on the results of the analysis  performed by  management at June 30, 2006,
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 June 30,
2006. 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.

                                      19.
<PAGE>

                           JACKSONVILLE BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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 $487,000 for the six months ended June 30, 2006, compared
to $464,000 for the 2005 period.  The increase was  primarily due to an increase
in other income of $92,000 driven by the increase in cash surrender value of the
BOLI asset  recorded as  tax-free  noninterest  income,  offset by a decrease in
service charges on deposit accounts. The decrease in income from service charges
was primarily the result of a reduction in return check charges and  maintenance
and activity charges.

Noninterest  expense increased to $3.6 million for the six months ended June 30,
2006,  from $3.1 million for the six months  ended June 30,  2005.  Salaries and
employee  benefits and  occupancy  and  equipment  accounted for the majority of
noninterest  expense,  increasing  $333,000 over the same quarter of 2005.  This
increase is a result of the absorption of additional 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.  Salaries  and
employee  benefits  also  increased due to $65,000 in  stock-based  compensation
expense resulting from the adoption of FAS 123(R) on January 1, 2006.

Income taxes for the six months ended June 30, 2006 were  $678,000 (an effective
rate of 36.16%)  compared to income  taxes of $470,000  for the six months ended
June 30, 2005 (an  effective tax rate of 36.72%).  Income tax expense  increased
due to the increase in net income, while the effective tax rate decreased due to
the tax-free  noninterest income earned on the BOLI in the current period, which
wasn't purchased until May 2005, as well as tax-free income earned on additional
municipal securities.

COMPARISON  OF  OPERATING  RESULTS FOR THE THREE  MONTHS ENDED JUNE 30, 2006 AND
2005

Net income for the second  quarter  of 2006 was  $689,000,  or $.38 per  diluted
share, as compared to $443,000,  or $.25 per diluted share,  earned for the same
quarter last year.  The largest  components of the increase in net income are an
increase in net interest income of $663,000 and an increase in other noninterest
income of $52,000,  offset by a $20,000  decrease in service  charges on deposit
accounts,  a $351,000 increase in noninterest  expense and an increase in income
tax expense of $145,000.

Net interest  income  increased by $663,000,  or 33%,  from $2.1 million for the
second quarter of 2005 to $2.8 million for the current quarter.  The increase is
primarily  comprised  of a positive  volume  variance of $387,000 and a positive
rate  variance of  $276,000.  The reasons for the positive  volume  variance and
positive rate variance are the same as those discussed above with respect to the
six-month periods.

The  increase in other  noninterest  income and  decrease in service  charges on
deposit accounts,  as well as the increase in salaries,  occupancy and equipment
expense,  and other operating are the same as those discussed above with respect
to the six-month periods.

                                      20.
<PAGE>

                           JACKSONVILLE BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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
10.48%, 9.59% and 8.54%, respectively, at June 30, 2006.

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 first fund loan
growth.  Any  remaining  cash is used  primarily  to  reduce  borrowings  and to
purchase  investment  securities.  During  the  first six  months  of 2006,  the
Company's  cash and cash  equivalent  position  increased by $9.0  million.  The
increase  in cash  mainly  resulted  from an  increase  in deposit  accounts  of
approximately  $21.6 million from $234.2  million at December 31, 2005 to $255.8
million at June 30, 2006, as well as FHLB advances of $15.1  million,  offset by
net loan originations of $24.2 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 June 30, 2006,  the Company had $31.0 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
$84.4 million do not represent legal commitments to extend credit on the part of
the other banks.

RECENT ACCOUNTING PRONOUNCEMENTS

In March 2006,  the FASB issued  Statement No. 156,  Accounting for Servicing of
Financial Assets--an Amendment to Statement No. 140 ("Statement 156"). Statement
156 requires an entity to recognize a servicing asset or servicing  liability if
certain criteria exist in the contract;  requires initial fair value measurement
of all  separately  identifiable  servicing  assets and  servicing  liabilities;
permits use of either the amortization  method or fair value measurement  method
for  each  class  of  separately   recognized   servicing  assets  or  servicing
liabilities;   permits  a  one-time   reclassification   of   available-for-sale
securities to trading securities for servicing assets and servicing liabilities;
and requires separate presentation of servicing assets and servicing liabilities
subsequently measured at fair value.  Statement 156 is effective in fiscal years
beginning after  September 15, 2006 (January 1, 2007).  Adoption is not expected
to have a material impact on the financial condition,  results of operations, or
liquidity of the Company.

                                      21.
<PAGE>

                           JACKSONVILLE BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

In  July  2006,  the  FASB  released   Interpretation  No.  48,  Accounting  for
Uncertainty of Income Taxes." This interpretation  revises the recognition tests
for tax positions  taken in tax returns such that a tax benefit is recorded only
when it is more  likely  than not that the tax  position  will be  allowed  upon
examination by taxing authorities. The amount of such a tax benefit to record is
the largest amount that is more likely than not to be allowed.  Any reduction in
deferred  tax  assets  or  increase  in  tax  liabilities   upon  adoption  will
correspondingly reduce retained earnings. The Company has not yet determined the
effect of adopting this Interpretation, which is effective on January 1, 2007.

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,
2005 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, 2005  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.

ITEM 4. 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.

                                      22.
<PAGE>

                           JACKSONVILLE BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

b.    Changes in internal controls.  The Company made no 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.


                                      23.
<PAGE>


                           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  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.

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,
            2005.

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

            On April  25,  2006,  the  Company  held an  annual  meeting  of the
            shareholders of its common stock to vote on the following matters:

            1. To elect five persons to the Company's Board of Directors.

            The following table sets forth the votes for and votes withheld with
            respect to the election of the directors:

            Director Nominee      Votes Cast For           Votes Withheld
            ----------------      --------------           --------------

            D. Michael Carter         889,860                    1,800
            Melvin Gottlieb           880,460                   11,200
            James M. Healey           889,060                    2,600
            John C. Kowkabany         889,860                    1,800
            Bennett A. Tavar          889,860                    1,800

            The following  directors'  term of office  continued  after the 2006
            Annual Meeting: Rudolph A. Kraft, R.C. Mills, Gilbert J. Pomar, III,
            Donald E. Roller, John W. Rose, John R. Schultz,  Price W. Schwenck,
            Charles F. Spencer and Gary L. Winfield, M.D.

                                      24.
<PAGE>

            2. To approve the 2006 Stock Incentive Plan.

            The  following  table sets forth the votes for,  votes  against  and
            votes  withheld  with  respect  to the  approval  of the 2006  Stock
            Incentive Plan:

                  For:  860,647     Against:  30,013          Abstain:   1,000

Item 5.     Other Information
            None

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 Act
            Exhibit No. 31.2: Certification of principal financial officer
                              required by Rule 13a-14(a)/15d-14(a) of the
                              Exchange Act
            Exhibit 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.

                                      25.
<PAGE>


                           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:  August 8, 2006                 /s/ Gilbert J. Pomar, III
                                      ------------------------------------------
                                      Gilbert J. Pomar, III
                                      President and Chief Executive Officer

Date:  August 8, 2006                 /s/ Valerie A. Kendall
                                      ------------------------------------------
                                      Valerie A. Kendall
                                      Executive Vice President
                                      and Chief Financial Officer

                                      26.