Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.T

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   YES o     NO T
 

 
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, computed by reference to the last sale price on June 30, 2007, as reported by the Nasdaq Capital Market, was approximately $10.6 million.

As of March 1, 2008, there was issued and outstanding 1,986,804 shares of the Registrant’s Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE:

 
(1)
Proxy Statement for the 2008 Annual Meeting of Stockholders of the Registrant (Part III).
 
(2)
 Annual Report to Stockholder (Part II and IV).


 
TABLE OF CONTENTS

 
ITEM 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
ITEM 2.
Properties
ITEM 3.
Legal Proceedings
ITEM 4.
Submission of Matters to a Vote of Security Holders
ITEM 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
ITEM 6.
Selected Financial Data
ITEM 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 7A.
Quantitative and Qualitative Disclosure about Market
ITEM 8.
Financial Statements and Supplementary Data
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
ITEM 9A.
Controls and Procedures
ITEM 9B.
Other Information
ITEM 10.
Directors, Executive Officers and Corporate Governance
ITEM 11.
Executive Compensation
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
ITEM 13.
Certain Relationships and Related Transactions and Director Independence
ITEM 14.
Principal Accountant Fees and Services
ITEM 15.
Exhibits and Financial Statement Schedules

 
PART I
 
ITEM 1.    Business
 
General

Jacksonville Bancorp, Inc. is a Federal corporation.  On May 3, 2002, Jacksonville Savings Bank completed its reorganization into the two-tier form of mutual holding company ownership.  At that time each outstanding share of Jacksonville Savings Bank’s common stock was converted into a share of Jacksonville Bancorp’s common stock.  Our only significant asset is our investment in Jacksonville Savings Bank.  We are majority owned by Jacksonville Bancorp, MHC, a Federal-chartered mutual holding company.

Jacksonville Savings Bank is an Illinois-chartered savings bank headquartered in Jacksonville, Illinois.  We conduct our business from our main office and six branches, two of which are located in Jacksonville and one of which is located in each of the following Illinois communities: Virden, Chapin, Concord and Litchfield.  We were originally chartered in 1916 as a state-chartered savings and loan association and converted to a state-chartered savings bank in 1992.  We have been a member of the Federal Home Loan Bank System since 1932.  Our deposits are insured by the Federal Deposit Insurance Corporation.  At December 31, 2007, Jacksonville Bancorp had total assets of $288.5 million, total deposits of $245.7 million, and stockholders’ equity of $22.6 million.

We are a community-oriented savings bank engaged primarily in the business of attracting retail deposits from the general public in our market area and using such funds together with borrowings and funds from other sources to primarily originate mortgage loans secured by one- to four-family residential real estate and consumer loans.  We also originate commercial and agricultural real estate loans, multi-family real estate loans and commercial and agricultural business loans.  Additionally, we invest in United States Government agency securities, bank-qualified, general obligation municipal issues, and mortgage-backed securities primarily issued or guaranteed by the United States Government or agencies thereof, and maintains a portion of its assets in liquid investments, such as overnight funds at the Federal Home Loan Bank.

Our principal sources of funds are customer deposits, proceeds from sale of loans, funds received from the repayment and prepayment of loans and mortgage-backed securities, and the sale, call, or maturity of investment securities.  Principal sources of income are interest income on residential, commercial and consumer loans, interest on investments, commissions and fees.  Our principal expenses are interest paid on deposits, employee compensation and benefits and occupancy and equipment expense.

We operate an investment center at our main office.  The investment center is operated through Financial Resources Group, Inc., the Bank’s wholly-owned subsidiary.  The investment center is not anticipated to have a material effect on our ability to attract retail deposits.

Our principal executive office is located at 1211 W. Morton, Jacksonville, Illinois, and our telephone number at that address is (217) 245-4111.

Market Area and Competition

We are a community-oriented savings institution offering a range of retail banking services to residents of our market area.  Our market area is Morgan, Macoupin and Montgomery Counties, Illinois.  Management believes that our offices are located in communities that can generally be characterized as stable residential communities of predominantly one- to four-family residences.  Our market for deposits is concentrated in the communities surrounding our main office and six branches.  We are the largest independent financial institution headquartered in our primary market area.

The economy of our market area consists primarily of agriculture and related businesses, light industry and state and local government.  The largest employers in our primary market area are Pactiv Corporation, Passavant Area Hospital, and the State of Illinois.
 
 
We face significant competition in attracting deposits from commercial banks, other savings institutions and credit unions.  We face additional competition for deposits from short-term money market funds, other corporate and government securities funds and other financial institutions such as brokerage firms and insurance companies.  We also face significant competition in the origination of loans from savings institutions, mortgage banking companies, credit unions, insurance companies and commercial banks.

Lending Activities

General.  Historically, our principal lending activity has been the origination of mortgage loans for the purpose of financing or refinancing one- to four-family residential properties in our local market areas.  We also emphasize consumer lending, primarily the origination of home equity loans and loans secured by automobiles.  At December 31, 2007, our loans receivable totaled $177.7 million, of which $50.5 million, or 28.7% consisted of one- to four-family residential mortgage loans.  The remainder of our loans receivable at such date consisted of commercial and agricultural real estate loans (25.1%), multi-family residential loans (2.7%), commercial and agricultural business loans (20.8%), and consumer loans (23.7%).  Of the amount included in consumer loans, $30.1 million, or 17.1% of total loans consisted of home equity and home improvement loans.  During the year ended December 31, 2007 the loan portfolio increased to $177.7 million from $156.7 million at December 31, 2006.  One-to-four family residential real estate loans increased $9.8 million (24.2%), commercial and agricultural real estate loans increased $4.5 million (11.4%), and commercial and agricultural business loans increased $3.7 million (11.3%) during 2007.

We have made our interest-earning assets more interest rate sensitive by, among other things, originating variable interest rate loans, such as adjustable-rate mortgage loans and balloon loans with terms ranging from three to five years, as well as medium-term consumer loans and commercial business loans.  Our ability to originate adjustable-rate mortgage loans is substantially affected by market interest rates.

We originate fixed-rate residential mortgage loans secured by one- to four-family residential properties with terms up to 30 years.  We sell a significant portion of our one- to four-family fixed-rate residential mortgage loan originations directly to Freddie Mac.  We also sell one- to four-family fixed-rate residential mortgage loan originations to the Federal Home Loan Bank Mortgage Partnership Finance Program.  During 2007, we retained a portion of the fixed-rate residential loans in our portfolio.   During the years ended December 31, 2007 and 2006, we sold $10.2 million and $16.6 million of fixed-rate residential mortgage loans, respectively.  Loans are generally sold without recourse and with servicing retained.  At December 31, 2007 we were servicing approximately $129.9 million in loans for which it received servicing income of approximately $336,000 for the year ended December 31, 2007.
 

 
Analysis of Loan Portfolio

Set forth below are selected data relating to the composition of our loan portfolio, excluding loans held for sale, by type of loan as of the dates indicated.

   
At December 31,
  
   
   
   
   
   
 
   
Amount
    
Percent
    
Amount
    
Percent
    
Amount
    
Percent
    
Amount
    
Percent
    
Amount
    
Percent
  
   
(Dollars in Thousands)
  
Real estate loans:
                                                            
One- to four-family residential (1)
   $ 50,459       28.7 %   $ 40,635       26.2 %   $ 40,126       28.2 %   $ 41,616       33.1 %   $ 40,304       31.7 %
Commercial and agricultural (1)
     44,100       25.1       39,592       25.6       33,859       23.8       24,587       19.5       21,401       16.8  
Multi-family residential
     4,741       2.7       5,877       3.8       6,010       4.2       2,207       1.8       2,376       1.9  
Total real estate loans
     99,300       56.5       86,104       55.6       79,995       56.2       68,410       54.4       64,081       50.4  
                                                                                 
Commercial and agricultural business loans
     36,539       20.8       32,837       21.2       28,679       20.2       26,227       20.8       29,763       23.4  
Consumer loans:
                                                                                
Home equity/home improvement
     30,087       17.1       27,202       17.6       26,382       18.5       24,322       19.3       23,614       18.6  
Automobile
     5,334       3.0       5,275       3.4       4,580