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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period of to
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Commission File Number 000-49792
---------
Jacksonville Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
Federal 33-1002258
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(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
1211 West Morton Avenue
Jacksonville, Illinois 62650
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (217) 245-4111
Indicate by check whether issuer (1) has filed all reports required to be filed
by Sections 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.
[X] Yes [ ] No
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934).
[ ] Yes [X] No
As of July 31, 2003, there were 1,940,542 shares (*) of the Registrant's common
stock issued and outstanding.
(*) As of July 31, 2003, 1,038,738 shares were owned by Jacksonville Bancorp,
M.H.C., the Company's mutual holding company parent.
JACKSONVILLE BANCORP, INC.
FORM 10-Q
JUNE 30, 2003
TABLE OF CONTENTS
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PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 2003 and December 31 , 2002 (Unaudited) 1
Consolidated Statements of Income and Comprehensive Income for the Three Months
and Six Months Ended June 30, 2003 and 2002 (Unaudited) 2
Consolidated Statement of Stockholders' Equity for the Six Months Ended
June 30, 2003 (Unaudited) 3
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003
and 2002 (Unaudited) 4-5
Notes to Unaudited Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9-17
Item 3. Quantitative and Qualitative Disclosures about Market Risk 18-19
Item 4. Controls and Procedures 20
PART II OTHER INFORMATION 21
Signatures 22
EXHIBITS
Section 302 Certifications
Section 906 Certification
PART I - FINANCIAL INFORMATION
JACKSONVILLE BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2003 AND DECEMBER 31, 2002 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------
JUNE 30, DECEMBER 31,
ASSETS 2003 2002
--------------- ---------------
Cash and cash equivalents $ 11,242,250 $ 11,091,626
Federal funds sold 500,000 800,000
Investment securities - available for sale 95,441,234 72,922,995
Mortgage-backed securities - available for sale 4,420 2,822,119
Federal Home Loan Bank stock 1,335,500 1,279,200
Other investment securities 654,148 701,765
Loans receivable - net of allowance for loan loss of $2,602,906 and $2,073,095
as of June 30, 2003 and December 31, 2002, respectively 129,658,865 142,928,599
Loans held for sale - net 7,664,507 6,271,435
Premises and equipment - net 6,540,409 5,668,211
Goodwill 2,726,567 2,726,567
Core deposit intangible 398,618 438,480
Accrued interest receivable 1,671,937 1,719,477
Capitalized mortgage servicing rights 1,151,819 1,077,318
Income taxes receivable 248,846 222,241
Real estate owned 423,897 442,048
Other assets 1,493,068 1,391,812
------------- -------------
TOTAL ASSETS $ 261,156,085 $ 252,503,893
============= =============
TOTAL LIABILITES AND STOCKHOLDERS' EQUITY
Deposits $ 234,175,909 $ 225,303,617
Other borrowings 1,857,183 2,874,707
Advance payments by borrowers for taxes and insurance 785,690 442,439
Accrued interest payable 820,159 995,263
Deferred compensation payable 1,977,654 1,924,718
Other liabilities 810,352 710,738
------------- -------------
Total liabilities 240,426,947 232,251,482
------------- -------------
Preferred stock, $0.01 par value - authorized 10,000,000 shares;
none issued and outstanding - -
Common stock, $0.01 par value - authorized 20,000,000 shares;
issued and outstanding, 1,940,542 shares and 1,912,304 shares
at June 30, 2003 and December 31, 2002, respectively 19,405 19,213
Additional paid-in-capital 6,389,330 6,374,463
Retained earnings - substantially restricted 13,738,339 13,294,959
Accumulated other comprehensive income 582,064 563,776
------------- -------------
Total stockholders' equity 20,729,138 20,252,411
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 261,156,085 $ 252,503,893
============= =============
See accompanying notes to the unaudited consolidated financial statements.
1
JACKSONVILLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ---------------------------
2003 2002 2003 2002
INTEREST INCOME:
Loans $ 2,433,811 $ 2,934,572 $ 5,066,165 $ 6,031,905
Investment securities 760,892 835,078 1,523,518 1,468,514
Mortgage-backed securities 17,093 56,319 51,771 118,427
Other 28,927 43,196 47,419 81,655
------------ ------------ ------------ ------------
Total interest income 3,240,723 3,869,165 6,688,873 7,700,501
------------ ------------ ------------ ------------
INTEREST EXPENSE
Deposits 1,468,518 1,863,336 2,984,897 3,833,075
Other borrowings 4,248 2,861 10,003 6,092
------------ ------------ ------------ ------------
Total interest expense 1,472,766 1,866,197 2,994,900 3,839,167
------------ ------------ ------------ ------------
NET INTEREST INCOME 1,767,957 2,002,968 3,693,973 3,861,334
PROVISION FOR LOAN LOSSES 825,000 225,000 1,525,000 375,000
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 942,957 1,777,968 2,168,973 3,486,334
------------ ------------ ------------ ------------
OTHER INCOME:
Gains on sales of loans 320,964 46,428 592,903 162,572
Gains on sales of securities 279,994 106,254 279,994 106,254
Service charges on deposit accounts 174,899 171,745 333,851 332,064
Commission income 150,775 86,790 253,823 198,283
Loan servicing fees 101,121 92,621 199,611 175,730
Recovery from insurance company - - 562,500 -
Other 54,369 23,227 83,355 49,385
------------ ------------ ------------ ------------
Total other income 1,082,122 527,065 2,306,037 1,024,288
------------ ------------ ------------ ------------
OTHER EXPENSES:
Salaries and employee benefits 1,031,889 1,009,413 2,060,978 2,004,298
Occupancy and equipment expense 277,791 266,367 572,075 518,852
Data processing expense 70,709 49,075 130,444 97,488
Legal and accounting expense 38,050 20,511 63,439 42,053
Postage expense 32,731 39,018 68,452 73,935
Real estate owned expense 24,602 88,062 58,578 89,390
Advertising expense 23,996 38,353 54,682 73,311
Other 272,840 238,938 537,878 543,774
------------ ------------ ------------ ------------
Total other expenses 1,772,608 1,749,737 3,546,526 3,443,101
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAX 252,471 555,296 928,484 1,067,521
INCOME TAX 86,773 199,278 351,384 388,195
------------ ------------ ------------ ------------
NET INCOME $ 165,698 $ 356,018 $ 577,100 $ 679,326
OTHER COMPREHENSIVE INCOME - Unrealized gain
(loss) on securities available-for-sale (Net of tax of
$40,920, $365,090, $11,565, and $86,142, respectively) 64,707 577,322 18,288 136,218
------------ ------------ ------------ ------------
COMPREHENSIVE INCOME $ 230,405 $ 933,340 $ 595,388 $ 815,544
============ ============ ============ ============
NET INCOME PER COMMON SHARE, BASIC $ 0.09 $ 0.19 $ 0.30 $ 0.36
============ ============ ============ ============
NET INCOME PER COMMON SHARE, DILUTED $ 0.08 $ 0.18 $ 0.29 $ 0.35
============ ============ ============ ============
DIVIDENDS PAID PER COMMON SHARE $ 0.08 $ 0.08 $ 0.15 $ 0.15
============ ============ ============ ============
See accompanying notes to unaudited consolidated financial statements
2
JACKSONVILLE BANCORP, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated
Additional Other Total
Common Paid-in Retained Comprehensive Stockholders' Comprehensive
Stock Capital Earnings Income Equity Income
BALANCE, DECEMBER 31, 2002 $ 19,213 $ 6,374,463 $ 13,294,959 $ 563,776 $ 20,252,411
Net Income - - 577,100 - 577,100 577,100
Other comprehensive income -change in
net unrealized gains and losses on
securities available for sale
(net of tax) - - - 18,288 18,288 18,288
----------
Comprehensive Income - - - - - 595,388
==========
Exercise of stock options 192 14,867 - - 15,059
Dividends ($0.15 per share) - - (133,720) - (133,720)
---------- ------------ ------------ ----------- -------------
BALANCE, JUNE 30, 2003 $ 19,405 $ 6,389,330 $ 13,738,339 $ 582,064 $ 20,729,138
========== ============ ============ =========== =============
See accompanying notes to unaudited consolidated financial statements.
3
JACKSONVILLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30,
--------------------------------
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 577,100 $ 679,326
------------- -------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, amortization and accretion:
Premises and equipment 232,410 225,170
Accretion of loan fees and discounts, net (29,669) (28,466)
Amortization of investment premiums and discounts, net 360,607 (12,637)
Amortization of intangible assets 39,862 39,861
Provision for loan losses 1,525,000 375,000
Gains on sales of loans (592,903) (162,572)
Loss on sale of real estate owned 15,695 36,394
Gains on sales of securities (279,994) (106,254)
Stock dividends on FHLB stock (56,300) (32,700)
Changes in income taxes receivable (26,605) 604,179
Changes in other assets and liabilities (40,330) 588,455
------------- -------------
Net cash provided by operations before loan sales 1,724,873 2,205,756
Origination of loans for sale to Freddie Mac (73,436,040) (21,464,777)
Proceeds from sales of loans to Freddie Mac 72,561,370 25,066,017
------------- -------------
Net cash provided by operating activities 850,203 5,806,996
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Changes in federal funds sold, net 300,000 (1,000)
Maturity of investment securities available-for-sale 52,386,176 14,250,000
Proceeds from sale of investment and mortgage-backed securities 14,102,937 6,647,746
Principal payments received on mortgage-backed securities 490,678 811,029
Proceeds from sale of other real estate owned 472,881 638,398
Loan originations, net of repayments 11,256,474 3,038,751
Purchases of investment securities available-for-sale (86,683,475) (31,578,725)
Additions to premises and equipment (1,104,608) (144,245)
------------- -------------
Net cash (used in) investing activities (8,778,937) (6,338,046)
------------- -------------
4
JACKSONVILLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002 (UNAUDITED)
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SIX MONTHS ENDED
JUNE 30,
----------------------------------
2003 2002
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits $ 8,872,292 $ 2,242,844
Repayment of advances from Federal Home Loan Bank of Chicago
and other borrowings (1,017,524) (467,657)
Increase in advance payments by borrowers for taxes and insurance 343,251 48,791
Exercise of stock options 15,059 -
Dividends paid - common stock (133,720) (130,586)
-------------- --------------
Net cash provided by financing activities 8,079,358 1,693,392
-------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 150,624 1,162,342
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 11,091,626 13,397,002
-------------- --------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 11,242,250 $ 14,559,344
============== ==============
ADDITIONAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest on deposits $ 3,160,001 $ 4,013,789
Interest on other borrowings 10,003 6,014
Income taxes paid (received) 353,989 (215,984)
NONCASH INVESTING AND FINANCING ACTIVITIES:
Real estate acquired in settlement of loans $ 579,068 $ 344,472
Loans to facilitate sales of real estate owned 61,139 127,035
See accompanying notes to unaudited consolidated financial statements (Concluded)
5
JACKSONVILLE BANCORP, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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1. FINANCIAL STATEMENTS
The unaudited consolidated financial statements include the accounts of
Jacksonville Bancorp, Inc. and its wholly-owned subsidiary, Jacksonville
Savings Bank (the "Bank") and its wholly-owned subsidiary, Financial
Resources Group (the "Company"). All significant intercompany accounts and
transactions have been eliminated.
In the opinion of management, the prevailing unaudited financial statements
contain all adjustments (consisting of normal recurring accruals) necessary
for a fair presentation of the financial condition of the Company as of
June 30, 2003 and December 31, 2002 and the results of operations for the
three and six month periods ended June 30, 2003 and 2002. The results of
operations for the three and six month periods ended June 30, 2003 are not
necessarily indicative of the results which may be expected for the entire
year. These consolidated financial statements should be read in conjunction
with the consolidated financial statements of the Company for the year
ended December 31, 2002 filed as an exhibit to the Company's 10-K filed in
March 2003. The accounting and reporting policies of the Company and its
subsidiary conform to accounting principles generally accepted in the
United States of America and to the prevailing practices within the banking
industry.
Certain amounts included in the 2002 consolidated statements have been
reclassified to conform to the 2003 presentation.
2. EARNINGS PER SHARE
EARNINGS PER SHARE - Basic earnings per share is determined by dividing net
income for the period by the weighted average number of common shares
outstanding. Diluted earnings per share considers the potential effects of
the exercise of the outstanding stock options under the Company's Stock
Option Plans.
The following reflects earnings per share calculations for the basic and
diluted methods:
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2003 2002 2003 2002
Net income available to common shareholders $ 165,698 $ 356,018 $ 577,100 $ 679,326
Basic potential common shares:
Weighted average shares outstanding 1,928,291 1,909,304 1,924,817 1,909,304
----------- ----------- ----------- -----------
Diluted potential common shares:
Stock option equivalents 39,592 38,587 32,166 31,698
----------- ----------- ----------- -----------
Diluted average shares outstanding 1,967,883 1,947,891 1,956,983 1,941,002
Basic earnings per share $ 0.09 $ 0.19 $ 0.30 $ 0.36
=========== =========== =========== ===========
Diluted earnings per share $ 0.08 $ 0.18 $ 0.29 $ 0.35
=========== =========== =========== ===========
6
3. REORGANIZATION INTO MID-TIER MUTUAL HOLDING COMPANY
On May 3, 2002, Jacksonville Savings Bank and Jacksonville Bancorp, M.H.C.,
the mutual holding company parent, reorganized into the two-tier mutual
holding company form of ownership by establishing a mid-tier stock holding
company, Jacksonville Bancorp, Inc. All outstanding shares of Jacksonville
Savings Bank common stock were converted on a one for one basis into shares
of Jacksonville Bancorp, Inc. common stock in the reorganization.
Jacksonville Bancorp, Inc. owns 100% of the outstanding shares of
Jacksonville Savings Bank.
4. STOCK OPTION PLANS
The Company's 1996 Stock Option Plan was adopted on April 23, 1996 with a
total of 83,625 shares of common stock reserved and awarded. Awards vested
20% per year and expire after ten years and are exercisable at a price of
$8.83 per share. The Company's 2001 Stock Option Plan was adopted on April
30, 2001 with a total of 87,100 shares reserved and awarded. Awards granted
in 2001 vested immediately and expire after ten years and are exercisable
at a price of $10 per share.
As permitted under accounting principles generally accepted in the United
States of America, grants of options under the plans are accounted for
under the recognition and measurement principles of APB Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related Interpretations.
Because options granted under the plans had an exercise price equal to
market value of the underlying common stock on the date of grant, no
stock-based employee compensation cost is included in determining net
income.
No options were granted in 2002 or 2003, therefore, there was no
compensation expense recognized for the three and six months ended June 30,
2003 or 2002, under APB Opinion No 25 or the fair value recognition
provisions of FAS No 123, .ACCOUNTING FOR STOCK-BASED COMPENSATION.
7
5. LOAN PORTFOLIO COMPOSITION
At June 30, 2003 and December 31, 2002, the composition of the Company's
loan portfolio was as follows:
06/30/03 12/31/02
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)
Real estate loans:
One-to-four family residential $ 38,886 30.0% $ 43,883 30.7%
Commercial and agricultural 19,826 15.3% 18,421 12.9%
Multi-family residential 2,621 2.0% 2,678 1.9%
---------- ----------
Total real estate loans 61,333 47.3% 64,982 45.5%
Commercial agricultural business loans 30,419 23.5% 31,502 22.0%
Consumer loans:
Home equity/home improvement 27,230 21.0% 31,181 21.8%
Automobile 8,229 6.3% 10,491 7.3%
Other 5,818 4.5% 7,127 5.0%
---------- ---------- -------
Total consumer loans 41,277 31.8% 48,799 34.1%
---------- ------- ---------- -------
Total loans receivable 133,029 102.6% 145,283 101.6%
Less:
Unearned discount and deferred loan fees, net 767 0.6% 281 0.2%
Allowance for loan losses 2,603 2.0% 2,073 1.4%
---------- ------- ---------- -------
Total loans receivable, net $ 129,659 100.0% $ 142,929 100.0%
========== ======= ========== =======
* * * * * *
8
JACKSONVILLE BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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Management's discussion and analysis of financial condition and results of
operations is intended to assist in understanding the financial condition and
results of the Company. Statements contained in this Form 10-Q, which are not
historical facts, are forward-looking statements, as the term is defined in the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements are subject to risks and uncertainties which could cause actual
results to differ materially from those currently anticipated due to a number of
factors, which include, but are not limited to, factors discussed in documents
filed by the Company with the Securities Exchange Commission from time to time.
The information contained in this section should be read in conjunction with the
unaudited consolidated financial statements and accompanying notes thereto.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains certain "forward-looking statements" which may be
identified by the use of words such as "believe," "expect," "anticipate,"
"should," "planned," "estimated," and "potential." Examples of forward-looking
statements include, but are not limited to, estimates with respect to our
financial condition, results of operations and business that are subject to
various factors that could cause actual results to differ materially from these
estimates and most other statements that are not historical in nature. These
factors include, but are not limited to, general and local economic conditions,
changes in interest rates, deposit flows, demand for mortgage and other loans,
real estate values, and competition; changes in accounting principles, policies,
or guidelines; changes in legislation or regulation; and other economic,
competitive, governmental, regulatory, and technological factors affecting our
operations, pricing of products and services.
MID-TIER REORGANIZATION
On May 3, 2002, Jacksonville Savings Bank and Jacksonville Bancorp, M.H.C., the
mutual holding company parent, reorganized into the two-tier mutual holding
company form of ownership by establishing a mid-tier stock holding company,
Jacksonville Bancorp, Inc. All outstanding shares of Jacksonville Savings Bank
common stock were converted on a one for one basis into shares of Jacksonville
Bancorp, Inc. common stock in the reorganization. Jacksonville Bancorp, Inc.
owns 100% of the outstanding shares of Jacksonville Savings Bank.
FINANCIAL CONDITION
JUNE 30, 2003 COMPARED TO DECEMBER 31, 2002
Total assets grew $8,652,000 to $261,156,000 at June 30, 2003, from the
$252,504,000 at December 31, 2002. This increase is primarily due to an increase
in investment securities of $22,518,000. Loans receivable decreased $13,270,000
reflecting increased loan sales. Premises and equipment expense increased
$872,000 due to the ongoing expansion of the main office facility.
Mortgage-backed securities declined $2,818,000 due to principal prepayments,
sales, and the reinvestment of these funds into U.S. Agency securities. During
this same time frame, deposits increased $8,872,000 and other borrowings
decreased $1,018,000 due to lower balances on overnight repurchase agreements.
Stockholders' equity increased $477,000 to $20,729,000 at June 30, 2003. The
increase resulted from net income of $577,000 offset by the payment of $133,000
in dividends, an $18,000 increase in unrealized gains, net of tax, on
available-for-sale securities and $15,000 increase from the exercise of stock
options.
9
RESULTS OF OPERATIONS
COMPARISON OF OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2003
AND 2002
GENERAL: The Company reported net income for the three months ended June 30,
2003, of $166,000, or $0.09 per share of common stock, basic, and $0.08 per
share, diluted, compared to net income of $356,000, or $0.19 per share of common
stock, basic, and $0.18 per common share, diluted, for the three months ended
June 30, 2002. The decrease of $190,000 in net income is primarily due to a
$235,000 decline in net interest income and increases of $600,000 in provision
for loan losses and $23,000 in other expenses, offset by an increase in other
income of $555,000 and a decrease in income taxes of $113,000.
The Company reported net income for the six months ended June 30, 2003, of
$577,000, or $0.30 per share, basic, and $0.29 per share, diluted, compared to
net income of $679,000, or $0.36 per share, basic and $0.35 per share, diluted,
for the six months ended June 30, 2002. Net income decreased $102,000 during the
six months ended June 30, 2003 compared to the same period of 2002, due to an
increase of $1,150,000 in provision for loan losses, a decrease of $167,000 in
net interest income, and an increase of $103,000 in other expense, partially
offset by an increase in other income of $1,282,000 and a decrease in income
taxes of $37,000.
INTEREST INCOME: Total interest income decreased $628,000 and $1,012,000 during
the three and six months ended June 30, 2003, compared to the same respective
periods in 2002. The primary reason for the decreases is $501,000 and $966,000
in lower interest income on loans during the respective three and six month
periods. The average balance of the loan portfolio during the first half of 2003
equalled $143.4 million compared to $155.1 million for the first half of 2002.
The decrease in the average balance of loans is primarily due to increased sales
of loans to the secondary market. In addition, the loan portfolio's weighted
average yield decreased to 7.07% from 7.78% for the six months ended June 30,
2003 and 2002, respectively, reflecting the unprecedented decrease in market
interest rates.
Interest income on investment securities decreased $74,000 and increased $55,000
during the three and six months ended June 30, 2003, compared to the same
periods in 2002. The additional income during the first six months of 2003 is
primarily due to an increase in the portfolio resulting from the investment of
cash generated by loan sales. The average balance of the investment portfolio
increased to $81.2 million during the first half of 2003 compared to $50.7
million during the first half of 2002.
Interest income on mortgage-backed securities decreased $39,000 and $66,000
during the three and six months ended June 30, 2003, compared to the same
respective periods in 2002. The decrease is due to a decrease in the average
balance of mortgage-backed securities to $2.0 million from $3.7 million for the
six months ended June 30, 2003 and 2002, respectively, and a decrease in the
weighted average yield to 5.02% from 6.32% for the same periods.
Interest income on other investments, which include federal funds sold and
interest bearing deposit accounts, decreased $14,000 and $35,000 during the
three and six months ended June 30, 2003, compared to the same respective
periods in 2002. The decreased interest income from other investments is
primarily due to a lower weighted average yield of 1.10% from 1.56% for the six
months ended June 30, 2003 and 2002, respectively, due to the declining market
interest rate environment. The average balance of these investments equalled
$8.6 million and $10.5 million for the six months ended June 30, 2003 and 2002,
respectively.
INTEREST EXPENSE: Total interest expense for the three and six months ended June
30, 2003 decreased $393,000 and $844,000, respectively, from the same respective
periods in 2002. The decrease in interest expense was due to decreases in the
cost of deposits of $394,000 and $848,000 partially offset by increases in
interest expense on borrowed funds of $1,000 and $4,000 for the three and six
months ended June 30, 2003,
10
compared to the same in 2002. The average balance of deposits increased to
$216.0 million during the first half of 2003 compared to $206.5 million during
the first half of 2002, due to normal deposit growth. The weighted average cost
of deposits has decreased to 2.76% from 3.71% during the first six months of
2003 as compared to the six months ended June 30, 2002. The decreased cost of
funds is attributed to declining market rates of interest.
Interest paid on borrowings increased $1,000 and $4,000 during the three and six
months ended June 30, 2003, compared to the same period of 2002. The only
outstanding borrowed funds consist of securities sold under agreement to
repurchase. The increase in average balances to $1.6 million from $792,000 was
offset by decreased costs of 1.29% and 1.54% for the six months ended June 30,
2003 and 2002, respectively.
PROVISION FOR LOAN LOSSES: The provision for loan losses is determined by
management as the amount needed to replenish the allowance for loan losses,
after net charge-offs have been deducted, to a level considered adequate to
absorb inherent losses in the loan portfolio, in accordance with accounting
principles generally accepted in the United States of America.
The provision for loan losses increased $600,000 and $1,150,000 during the three
and six months ended June 30, 2003 compared to the same periods in 2002. The
additional provision was made to bring the allowance for loan losses to a level
deemed adequate following management's evaluation of the repayment capacity and
collateral protection afforded by each problem credit identified by management.
This review also considered the current economic downturn in the local economy,
which has resulted in increased bankruptcies and foreclosures in the Company's
market area and which have further contributed to the recent increases in
delinquencies and charge-offs.
During the fourth quarter of 2002, with the help of an outside consultant, the
Company revised its lending policies and procedures in order to strengthen
underwriting practices. The Company also hired an additional loan collector
during the first quarter of 2003 to help manage the level of delinquencies,
bankruptcies, and foreclosures. In order to address the rising trend in
delinquencies and loan losses and prevent any further deterioration in asset
quality, the Company hired an experienced senior loan administrator who began
employment during July 2003. This individual will oversee all lending functions
of the Company and will aid in the collection and workout of problem credits, as
well as review and/or enhance all lending policies and procedures.
The allowance for loan losses increased to $2,603,000 at June 30, 2003 from
$2,073,000 at December 31, 2002. The increase is the result of the provision for
loan losses exceeding the net charge-offs. Net charge-offs increased to $995,000
during the first half of 2003 compared to net charge-offs of $399,000 during the
first half of 2002. Set forth below is a table regarding the Bank's
nonperforming assets.
11
06/30/03 12/31/02
-------- --------
(Dollars in Thousands)
Non-accruing loans:
One-to-four family residential 968 769
Commerical and agricultural real estate 445 186
Commercial and agricultural business 1,046 301
Home equity/Home improvement 1,072 1,860
Automobile 264 196
Other consumer 88 198
--------- ---------
Total 3,883 3,510
========= =========
Accruing loans delinquent more than 90 days:
One-to-four family residential 244 64
Commerical and agricultural real estate 69 259
Automobile 28 -
Other consumer 8 28
--------- ---------
Total 349 351
========= =========
Foreclosed assets:
One-to-four family residential 424 422
Commercial and agricultural real estate - 20
Automobile 44 38
--------- ---------
Total 468 480
========= =========
Total nonperforming assets $ 4,700 $ 4,341
========= =========
Total as a percentage of total assets 1.80% 1.72%
In the ordinary course of business, the Company has made a number of estimates
and assumptions relating to the reporting of operations and financial condition
in preparing its financial statements in conformity with accounting principles
generally accepted in the United States of America. Actual results could differ
significantly from those estimates under different assumptions and conditions.
The Company believes that critical accounting policies, which include the
allowance for loan losses, are those most important to the portrayal of the
Company's financial condition and results and requires management's most
difficult, subjective and complex judgements, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain.
The allowance for loan losses is a material estimate that is susceptible to
significant changes in the near term and is established through a provision for
loan losses. The allowance is based upon past loan experience and other factors
which, in management's judgement, deserve current recognition in estimating loan
losses. The balance of the allowance is based on ongoing, quarterly assessments
of the probable estimated losses in the loan portfolio. The evaluation includes
a review of all loans on which full collectibility may not be reasonably
assured. Management uses an internal asset classification system as a means of
reporting problem and potential problem assets. Management maintains a watch
list of problem credits, which are presented to the Board of Directors
quarterly. This list includes those loans rated as "watch," "substandard,"
"doubtful," and "loss." Loans rated as "watch" include loans to borrowers
displaying a weak and/or leveraged financial condition that may also be having
difficulty servicing the debt. Loans rated "substandard" are assets inadequately
protected by the net worth or paying capacity of the obligor or of the pledged
collateral. The Company does not have any loans graded as "doubtful" and all
loans rated as "loss" have been charged off. All nonaccrual loans are
automatically placed on the watch list.
12
The following table shows the aggregate principal amount of potential problem
credits on the Company's watch list at June 30, 2003 and December 31, 2002.
06/30/03 12/31/02
-------- --------
(Dollars in thousands)
Watch credits $ 4,127 $ 4,084
Substandard credits 8,070 4,298
--------- ---------
Total watch list credits $ 12,197 $ 8,382
========= =========
The allowance is calculated by estimating the exposure on identified problem
loan and portfolio segments and applying loss factors to the remainder of the
portfolio based upon an internal risk grade of such loans or pools of loans.
Changes in risk grades of both performing and nonperforming loans affect the
amount of the allowance. Loss factors are based primarily on historical loss
experience over the past three to five years, and may be adjusted for other
significant conditions that, in management's judgement, affect the
collectibility of the loan portfolio.
Since the allowance for loan losses is based upon estimates of probable losses,
the amount actually observed can vary significantly from the estimated amounts.
The historical loss factors attempt to reduce this variance by taking into
account recent loss experience. Management evaluates several other conditions in
connection with the allowance, including general economic and business
conditions, credit quality trends, collateral values, loan volumes and
concentrations, seasoning of the portfolio, and regulatory examination results.
Management believes it uses the best information available to make such
determinations. If circumstances differ substantially from the assumptions used
in making determinations, future adjustments to the allowance for loan losses
may be necessary and results of operations could be affected. While the Company
believes it has established its existing allowance for loan losses in conformity
with accounting principles generally accepted in the United States, there can be
no assurance that regulators, in reviewing the Bank's loan portfolio, will not
request an increase in the allowance for loan losses. Because future events
affecting borrowers and collateral cannot be predicted with certainty, there can
be no assurance that increases to the allowance will not be necessary if loan
quality deteriorates. Management will continue to monitor the loan portfolio and
assess the adequacy of the allowance at least quarterly.
OTHER INCOME: Total other income increased $555,000 and $1,282,000 during the
three and six months ended June 30, 2003, compared to the same periods of 2002.
The increase in other income is mostly comprised of a $562,500 insurance
recovery received during the first quarter of 2003. This amount represents the
negotiated settlement with the Company's insurance carrier regarding a loan
defalcation discovered during 2001. The remainder of the increase in other
income is primarily due to increased gains on the sale of loans to the secondary
market of $275,000 and $430,000 for the three and six months ended June 30, 2003
compared to the same periods of 2002. Gains on the sales of securities increased
$174,000 during both the three and six month time frames. Approximately $14.1
million and $6.6 million of available-for-sale securities were sold during the
second quarters of 2003 and 2002, respectively. Brokerage commissions increased
$64,000 and $56,000 during the three and six months ended June 30, 2003 compared
to 2002.
OTHER EXPENSES: Total other expenses increased $23,000 and $103,000 during the
three and six months ended June 30, 2003 compared to the three and six months
ended June 30, 2002. The increase in other expenses for the three months ended
June 30, 2003 compared to 2002 were mostly due to $22,000 in salaries, $22,000
in data processing expense, and $18,000 in legal and accounting expense
partially offset by a decrease of $63,000 in real estate owned expense. Changes
for the six months ended June 30, 2003 compared to the comparative period in
2002 include increases of $57,000 in salaries, $53,000 in occupancy expenses,
and $33,000 in data processing expense, offset by a decrease of $31,000 in real
estate owned expense. The
13
increases in data processing and occupancy expense are mostly due to additional
costs related to the offering of check imaging services beginning in February
2003.
INCOME TAXES: The provision for income taxes decreased $113,000 and $37,000
during the three and six months ended June 30, 2003, compared to the first half
of 2002. The increase is directly attributable to a decrease in net income of
$190,000 and $102,000 for the three and six months ended June 30, 2003 compared
to 2002.
LIQUIDITY AND CAPITAL RESOURCES: The Company's most liquid assets are cash and
cash equivalents. The levels of these assets are dependent on the Company's
operating, financing, and investing activities. At June 30, 2003 and December
31, 2002, cash and cash equivalents totalled $11.2 million and $11.1 million,
respectively. The Company's primary sources of funds include principal and
interest repayments on loans (both scheduled and prepayments), maturities and
calls of investment securities and principal repayments from mortgage-backed
securities (both scheduled and prepayments). During the past twelve months, the
most significant sources of funds have been deposit growth and loan sales to the
secondary market. These funds have been used for new loan originations and the
purchase of investment securities.
While scheduled loan repayments and proceeds from maturing investment securities
and principal repayments on mortgage-backed securities are relatively
predictable, deposit flows and early prepayments are more influenced by interest
rates, general economic conditions, and competition. The Company attempts to
price its deposits to meet asset-liability objectives and stay competitive with
local market conditions.
Liquidity management is both a short-term and long-term responsibility of
management. The Company adjusts its investments in liquid assets based upon
management's assessment of (i) expected loan demand, (ii) projected purchases of
investment and mortgage-backed securities, (iii) expected deposit flows, (iv)
yields available on interest-bearing deposits, and (v) liquidity of its
asset-liability management program. Excess liquidity is generally invested in
interest-earning overnight deposits and other short-term U.S. Agency
obligations. If the Company requires funds beyond its ability to generate them
internally, it has the ability to borrow funds from the FHLB. The Company may
borrow from the FHLB under a blanket agreement which assigns all investments in
FHLB stock as well as qualifying first mortgage loans equal to 150% of the
outstanding balance as collateral to secure the amounts borrowed. This borrowing
arrangement is limited to a maximum of 30% of the Company's total assets or
twenty times the balance of FHLB stock held by the Company. At June 30, 2003,
the Company had no outstanding advances and approximately $26.7 million
available to it under the above-mentioned borrowing arrangement.
The Company maintains minimum levels of liquid assets as established by the
Board of Directors. The Company's year-to-date liquidity ratios at June 30, 2003
and December 31, 2002 were 43.8% and 34.4%, respectively. This ratio represents
the volume of short-term liquid assets as a percentage of net deposits and
borrowings due within one year.
The Company must also maintain adequate levels of liquidity to ensure the
availability of funds to satisfy loan commitments. The Company anticipates that
it will have sufficient funds available to meet its current commitments
principally through the use of current liquid assets and through its borrowing
capacity discussed above. The following table summarizes these commitments at
June 30, 2003 and December 31, 2002.
06/30/03 12/31/02
-------- --------
(Dollars in thousands)
Commitments to fund loans - own portfolio $ 18,720 $ 15,672
Commitments for loan sales to Freddie Mac 17,034 6,155
Standby letters of credit 414 226
14
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined) and Tier 1 capital (as
defined) to average assets (as defined). Management believes, at June 30, 2003,
that the Bank meets all its capital adequacy requirements.
Under Illinois law, Illinois-chartered savings banks are required to maintain a
minimum core capital to total assets ratio of 3%. The Illinois Commissioner of
Savings and Residential Finance (the Commissioner) is authorized to require a
savings bank to maintain a higher minimum capital level if the Commissioner
determines that the savings bank's financial condition or history, management or
earnings prospects are not adequate. If a savings bank's core capital ratio
falls below the required level, the Commissioner may direct the savings bank to
adhere to a specific written plan established by the Commissioner to correct the
savings bank's capital deficiency, as well as a number of other restrictions on
the savings bank's operations, including a prohibition on the declaration of
dividends by the savings bank's board of directors. At June 30, 2003, the Bank's
core capital ratio was 6.69% of total average assets, which exceeded the
required amount.
The Bank is also required to maintain regulatory capital requirements imposed by
the Federal Deposit Insurance Corporation. The Bank's actual ratios at June 30,
2003 and the required minimums to be considered adequately capitalized are shown
in the table below. In order to be considered well-capitalized, the Bank must
maintain: (i) Tier 1 Capital to Average Assets of 5.0%, (ii) Tier 1 Capital to
Risk-Weighted Assets of 6.0%, and (iii) Total Capital to Risk-Weighted Assets of
10.0%.
To Be Well- Minimum
Capitalized Required Actual
----------- -------- ------
Tier 1 Capital to Average Assets 5.00% 4.00% 6.69%
Tier 1 Capital to Risk-Weighted Assets 6.00% 4.00% 11.83%
Total Capital to Risk-Weighted Assets 10.00% 8.00% 13.09%
Future capital levels should benefit from the decision of Jacksonville Bancorp,
MHC, to waive its right to receive dividends on the class of Company common
stock it holds, subject to the receipt of regulatory non-objection.
EFFECT OF INFLATION AND CHANGING PRICES: The consolidated financial statements
and related financial data presented herein have been prepared in accordance
with accounting principles generally accepted in the United States of America,
which require the measurement of financial position and operating results in
terms of historical dollars, without considering the change in relative
purchasing power of money over time due to inflation. The impact of inflation is
reflected in increased cost of the Company's operations. Unlike most industrial
companies, virtually all the assets and liabilities of a financial institution
are monetary in nature. As a result, interest rates generally have a more
significant impact on a financial institution's performance than do general
levels of inflation. Interest rates do not necessarily move in the same
direction or to the same extent as the prices of goods and services.
15
CONSOLIDATED AVERAGE BALANCE SHEET AND INTEREST RATES
(Dollars in Thousands)
- ------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED JUNE 30,
-------------------------------------------------------------------------
2003 2002
----------------------------------- -------------------------------------
AVERAGE AVERAGE
BALANCE INTEREST YIELD/COST BALANCE INTEREST YIELD/COST
----------------------------------- -------------------------------------
Interest-earnings assets:
Loans $ 140,259 $ 2,434 6.94% $ 153,656 $ 2,935 7.64%
Investment securities 85,990 761 3.54% 54,374 835 6.14%
Mortgage-backed securities 1,513 17 4.52% 3,557 56 6.33%
Other 10,548 29 1.10% 10,399 43 1.66%
--------- ------- --------- -------
Total interest-earning assets 238,310 3,241 5.44% 221,986 3,869 6.97%
Non-interest earnings assets 16,341 18,871
--------- ---------
Total assets $ 254,651 $ 240,857
========= =========
Interest-bearing liabilities:
Deposits $ 219,022 $ 1,469 2.68% $ 208,043 $ 1,863 5.15%
Short-term borrowings 1,396 4 1.22% 731 3 5.78%
--------- ------- --------- -------
Total interest-bearing liabilities 220,418 1,473 2.67% 208,774 1,866 5.09%
Non-interest bearing liabilities 13,593 12,834
Stockholders' equity 20,640 19,249
--------- ---------
Total liabilities/stockholders' equity $ 254,651 $ 240,857
========= =========
Net interest income $ 1,768 $ 2,003
======= =======
Interest rate spread (average yield earned
minus average rate paid) 2.77% 3.40%
==== ====
Net interest margin (net interest income
divided by average interest-earning assets) 2.97% 3.61%
==== ====
ANALYSIS OF VOLUME AND RATE CHANGES
(Dollars in thousands)
--------------------------------------------------------------------------------
THREE MONTHS ENDED JUNE 30,
--------------------------------------------------------------------------------
2003 COMPARED TO 2002
INCREASE(DECREASE) DUE TO
------------------------------
RATE VOLUME NET
------------------------------
Interest-earnings assets:
Loans $ (256) $ (245) $ (501)
Investment securities (441) 367 (74)
Mortgage-backed securities (13) (26) (39)
Other (15) 1 (14)
-------- -------- --------
Total net change in income on
interest-earning assets (725) 97 (628)
-------- -------- --------
Interest-bearing liabilities:
Deposits (488) 94 (394)
Other borrowings (1) 2 1
-------- -------- --------
Total net change in expense on
interest-bearing liabilities (489) 96 (393)
-------- -------- --------
Net change in net interest income $ (236) $ 1 $ (235)
======== ======== ========
16
CONSOLIDATED AVERAGE BALANCE SHEET AND INTEREST RATES
(Dollars in Thousands)
- ------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30,
-------------------------------------------------------------------------
2003 2002
----------------------------------- -------------------------------------
AVERAGE AVERAGE
BALANCE INTEREST YIELD/COST BALANCE INTEREST YIELD/COST
----------------------------------- -------------------------------------
Interest-earnings assets:
Loans $ 143,406 $ 5,066 7.07% $ 155,060 $ 6,032 7.78%
Investment securities 81,216 1,524 3.75% 50,677 1,469 5.80%
Mortgage-backed securities 2,062 52 5.02% 3,746 118 6.32%
Other 8,649 47 1.10% 10,453 82 1.56%
--------- ------- --------- -------
Total interest-earning assets 235,333 6,689 5.68% 219,936 7,701 7.00%
Non-interest earnings assets 17,586 19,684
--------- ---------
Total assets $ 252,919 $ 239,620
========= =========
Interest-bearing liabilities:
Deposits $ 215,999 $ 2,985 2.76% $ 206,546 $ 3,833 3.71%
Short-term borrowings 1,552 10 1.29% 792 6 1.54%
--------- ------- --------- -------
Total interest-bearing liabilities 217,551 2,995 2.75% 207,338 3,839 3.70%
Non-interest bearing liabilities 14,857 13,033
Stockholders' equity 20,511 19,249
--------- ---------
Total liabilities/stockholders' equity $ 252,919 $ 239,620
========= =========
Net interest income $ 3,694 $ 3,862
======= =======
Interest rate spread (average yield earned
minus average rate paid) 2.93% 3.30%
==== ====
Net interest margin (net interest income
divided by average interest-earning assets) 3.14% 3.51%
==== ====
ANALYSIS OF VOLUME AND RATE CHANGES
(Dollars in thousands)
--------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------------------------------
2003 COMPARED TO 2002
INCREASE(DECREASE) DUE TO
------------------------------
RATE VOLUME NET
------------------------------
Interest-earnings assets:
Loans $ (531) $ (435) $ (966)
Investment securities (633) 688 55
Mortgage-backed securities (21) (45) (66)
Other (22) (13) (35)
-------- -------- --------
Total net change in income on
interest-earning assets (1,207) 195 (1,012)
-------- -------- --------
Interest-bearing liabilities:
Deposits (1,017) 169 (848)
Other borrowings (1) 5 4
-------- -------- --------
Total net change in expense on
interest-bearing liabilities (1,018) 174 (844)
-------- -------- --------
Net change in net interest income $ (189) $ 21 $ (168)
======== ======== ========
17
JACKSONVILLE BANCORP, INC.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------------------
The Company's policy in recent years has been to reduce its interest rate risk
by better matching the maturities of its interest rate sensitive assets and
liabilities, selling its long-term fixed-rate residential mortgage loans with
terms of 15 years or more to Freddie Mac, originating adjustable rate loans,
balloon loans with terms ranging from three to five years and originating
consumer and commercial business loans, which typically are for a shorter
duration and at higher rates of interest than one-to-four family loans. The
Company also maintains a portfolio of mortgage-backed securities, virtually all
of which have adjustable interest rates. The remaining investment portfolio has
been laddered to better match the interest-bearing liabilities. With respect to
liabilities, the Company has attempted to increase its savings and transaction
deposit accounts, which management believes are more resistant to changes in
interest rates than certificate accounts. The Board of Directors appoints the
Asset-Liability Management Committee (ALCO), which is responsible for reviewing
the Company's asset and liability policies. The ALCO meets quarterly to review
interest rate risk and trends, as well as liquidity and capital ratio
requirements.
During 2002, the Company began using a comprehensive asset/liability software
package provided by a third-party vendor to perform interest rate sensitivity
analysis for all product categories. The primary focus of the Company's analysis
is on the effect of interest rate increases and decreases on net interest
income. Management believes that this analysis reflects the potential effects on
current earnings of interest rate changes. Call criteria and prepayment
assumptions are taken into consideration for investment securities and loans.
All of the Company's interest sensitive assets and liabilities are analyzed by
product type and repriced based upon current offering rates. The software
performs interest rate sensitivity analysis by performing rate shocks of plus or
minus 300 basis points in 100 basis point increments.
The following table shows projected results at June 30, 2003 and December 31,
2002 of the impact on net interest income from an immediate change in interest
rates, as well as the benchmarks established by the ALCO. The results are shown
as a dollar and percentage change in net interest income over the next twelve
months.
Change in Net Interest Income
(Dollars in thousands)
------------------------------------------------------------------
6/30/03 12/31/02 ALCO
----------------------------------------------------
Rate Shock: $ Change % Change $ Change % Change Benchmark
------------------------------------------------------------------
+ 200 basis points (166) (1.95)% 202 2.60% > (20.00)%
+ 100 basis points (185) (2.17)% 211 2.71% > (12.50)%
- 100 basis points (229) (2.69)% 222 2.86% > (12.50)%
- 200 basis points (251) (2.95)% 227 2.92% > (20.00)%
The foregoing computations are based upon numerous assumptions, including
relative levels of market interest rates, prepayments, and deposit mix. The
computed estimates should not be relied upon as a projection of actual results.
Despite the limitations on precision inherent in these computations, management
believes that the information provided is reasonably indicative of the effect of
changes in interest rate levels on the net earning capacity of the Company's
current mix of interest earning assets and interest bearing liabilities.
Management continues to use the results of these computations, along with the
results of its computer model projections, in order to maximize current earnings
while positioning the Company to minimize the effect of a prolonged shift in
interest rates that would adversely affect future results of operations.
18
At the present time, the most significant market risk affecting the Company is
interest rate risk. Other market risks such as foreign currency exchange risk
and commodity price risk do not occur in the normal business of the Company. The
Company also is not currently using trading activities or derivative instruments
to control interest rate risk.
19
JACKSONVILLE BANCORP, INC.
CONTROLS AND PROCEDURES
- --------------------------------------------------------------------------------
Under the supervision and with the participation of the Company's management,
including the Chief Executive Officer and Chief Financial Officer, the Company
has evaluated the effectiveness of the design and operation of its disclosure
controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the
Exchange Act) as of the end of the period covered by this quarterly report.
Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that, as of the end of the period covered by this quarterly
report, the Company's disclosure controls and procedures are effective 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 Securities and
Exchange Commission's rules and forms. There has been no change in the Company's
internal control over financial reporting during the most recent fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
20
PART II - OTHER INFORMATION
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
At the Company's annual meeting of stockholders held on April 22,
2003, the following matters were submitted to a vote:
1. The election of the following persons as directors for a
three-year term:
Name Votes For Votes Withheld
---- --------- --------------
Roger D. Cannell 1,749,336 6,787
Richard A. Foss 1,748,686 7,437
Michael R. Goldasich 1,748,737 7,386
The election of the following person as director for a two-year
term:
Name Votes For Votes Withheld
---- --------- --------------
Harmon B. Deal III 1,749,523 6,600
2. The ratification of the appointment of McGladrey & Pullen, LLP as
auditors for the Company for the year ended December 31, 2003.
Votes For Against Abstain
--------- ------- -------
1,746,775 7,936 1,412
Item 5. Other Information
-----------------
None.
Item 6. Exhibits
--------
31.1 - Certification of the Chief Executive Officer Pursuant to Rule
13a-14(a)/15d-14(a)
31.2 - Certification of the Chief Financial Officer Pursuant to Rule
13a-14(a)/15d-14(a)
32.1 - Certification of the Chief Executive Officer and Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
Exhibits on Form 8-K
--------------------
Item 9 FD disclosure - Earnings Release filed with SEC on July 14,
2003
21
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.
JACKSONVILLE BANCORP, INC.
Registrant
Date: 08/11/2003 /s/ Richard A. Foss
---------------------- -------------------------------------------
Richard A. Foss
President and Chief Executive Officer
/s/ Diana S. Tone
-------------------------------------------
Diana S. Tone
Chief Financial Officer
22