Edgar Filing: Lincoln Park Bancorp

t64032_10q.htm

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	September 30, 2008


o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________ to ________________________

Commission File Number 000-51078


LINCOLN PARK BANCORP
(Exact name of registrant as specified in its charter)

FEDERAL	61-1479859
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

31 Boonton Turnpike, Lincoln Park, New Jersey	07035
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number,
including area code	(973) 694-0330

None
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check X whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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

Larger Accelerated Filer o	Accelerated Filer o
Non-Accelerated Filer o (Do not check if a smaller reporting company)	Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes o No x

The number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 1,812,745 shares of common stock, par value $.01 per share, as of November 14, 2008.

LINCOLN PARK BANCORP AND SUBSIDIARY

INDEX


		Page Number

PART I - FINANCIAL INFORMATION

Item 1:	Financial Statements

	Consolidated Statements of Financial Condition at September 30, 2008 and December 31, 2007 (Unaudited)	3

	Consolidated Statements of Income for the Three Months and Nine Months Ended September 30, 2008 and 2007 (Unaudited)	4

	Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2008 and 2007 (Unaudited)	5

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and 2007 (Unaudited)	6

	Notes to Consolidated Financial Statements (Unaudited)	7 – 13

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14 –23

Item 3:	Quantitative and Qualitative Disclosure About Market Risk	24

Item 4:	Controls and Procedures	24

PART II - OTHER INFORMATION		25 – 26

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	26
Item 4:	Submission of Matters to a Vote of Security Holders	26
Item 5:	Other Information	26
Item 6:	Exhibits	26

SIGNATURES		27

PART I- FINANCIAL INFORMATION

ITEM 1. Financial Statements

LINCOLN PARK BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)


	September 30, 2008			December 31, 2007

ASSETS	(In thousands, except for share and per share amounts)


Cash and amounts due from depository institutions	$	1,331		$	1,380
Interest-bearing deposits in other banks		3,828			1,121

Total cash and cash equivalents		5,159			2,501

Term deposits		100			295
Securities available for sale		10,359			1,521
Securities held to maturity, fair value $44,020 and $21,113, respectively		44,180			21,243
Loans receivable, net of allowance for loan losses of $296 and $187, respectively		75,539			73,085
Premises and equipment		1,558			1,584
Federal Home Loan Bank of New York stock, at cost		2,629			1,195
Interest receivable		642			523
Other assets		403			718

Total assets	$	140,569		$	102,665

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:
Deposits:
Non-interest bearing deposits	$	3,396		$	2,054
Interest bearing deposits		67,821			62,913
Total deposits		71,217			64,967

Advances from Federal Home Loan Bank of New York		55,024			23,552
Advance payments by borrowers for taxes and insurance		441			399
Other liabilities		729			601

Total liabilities		127,411			89,519

Stockholders’ equity:
Preferred stock; no par value; 1,000,000 shares authorized;
none issued or outstanding		—			—
Common stock; $.01 par value; 5,000,000 shares authorized;
1,851,500 shares issued; 1,812,745 and 1,825,845 shares, respectively, outstanding		19			19
Additional paid-in capital		7,612			7,558
Retained earnings		6,502			6,307
Unearned ESOP shares		(313	)		(328	)
Treasury stock; 38,755 and 25,655 shares, respectively, at cost		(289	)		(200	)
Accumulated other comprehensive loss		(373	)		(210	)

Total stockholders’ equity		13,158			13,146

Total liabilities and stockholders’ equity	$	140,569		$	102,665

See notes to consolidated financial statements.

LINCOLN PARK BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended September 30,					Nine Months Ended September 30,

	2008		2007			2008			2007

	(In thousands, except for per share amounts)
Interest income:
Loans	$	1,043	$	1,072		$	3,125		$	3,079
Securities		681		273			1,425			811
Other interest-earning assets		19		16			54			42

Total interest income		1,743		1,361			4,604			3,932

Interest expense:
Deposits		457		573			1,485			1,601
Advances and other borrowed money		396		233			921			695

Total interest expense		853		806			2,406			2,296

Net interest income		890		555			2,198			1,636
Provision for loan losses		95		—			130			51

Net interest income after provision for loan losses		795		555			2,068			1,585

Non-interest income:
Fees and service charges		29		28			82			78
Loss on calls of securities held to maturity		—		—			(1	)		—
Gains on sales of securities available for sale		2		6			2			16
Miscellaneous		7		8			18			19

Total non-interest income		38		42			101			113

Non-interest expenses:
Salaries and employee benefits		290		257			826			716
Net occupancy expense of premises		47		44			120			99
Equipment		88		98			242			225
Advertising		11		14			47			40
Legal expense		21		12			73			57
Audit and accounting		30		28			82			81
Federal insurance premium		3		2			7			5
Miscellaneous		165		141			460			403

Total non-interest expenses		655		596			1,857			1,626

Income before income taxes		178		1			312			72
Income taxes		58		(12	)		111			8

Net income	$	120	$	13		$	201		$	64

Net income per common share:
Basic	$	0.07	$	0.01		$	0.11		$	0.04

Weighted average number of common shares and common stock equivalents outstanding:
Basic		1,762		1,788			1,766			1,788

Net income per common share:
Diluted	$	0.07	$	0.01		$	0.11		$	0.04

Weighted average number of common shares and common stock equivalents outstanding:
Diluted		1,762		1,788			1,766			1,788

See notes to consolidated financial statements.

LINCOLN PARK BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)


	Common Stock		Paid-in Capital		Retained Earnings			Unearned ESOP Shares			Treasury Stock			Accumulated Other Comprehensive Loss			Total
	(In thousands)
BALANCE -DECEMBER 31, 2006	$	19	$	7,485	$	6,252		$	(347	)	$	—		$	(165	)	$	13,244

Comprehensive income:

Net Income for the nine months ended September 30, 2007						64												64

Other comprehensive income:

Unrealized holding loss on securities available for sale, net of deferred income taxes (benefit) of ($3)															(20	)		(20	)

Directors’ retirement plan, net of deferred taxes of $9															13			13

Total Comprehensive Income																		57

ESOP Shares Released						(4	)		15									11

Restricted stock earned				24														24

Stock options earned				28														28

Treasury stock purchased												(50	)					(50	)


BALANCE -SEPTEMBER 30, 2007	$	19	$	7,537	$	6,312		$	(332	)	$	(50	)	$	(172	)	$	13,314

BALANCE -DECEMBER 31, 2007	$	19	$	7,558	$	6,307		$	(328	)	$	(200	)	$	(210	)	$	13,146

Comprehensive income:

Net Income for the nine months ended September 30, 2008						201												201

Other comprehensive income:

Unrealized holding loss on securities available for sale net of deferred tax (benefit) of ($0)															(175	)		(175	)

Directors’ retirement plan, net of deferred taxes $8															12			12

Total Comprehensive Income																		38

ESOP Shares Released						(6	)		15									9

Restricted stock earned				27														27

Stock options earned				27														27

Treasury stock purchased												(89	)					(89	)


BALANCE -SEPTEMBER 30, 2008	$	19	$	7,612	$	6,502		$	(313	)	$	(289	)	$	(373	)	$	13,158

See notes to consolidated financial statements.

LINCOLN PARK BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
	2008			2007
	(In thousands)
Cash flows from operating activities:
Net income	$	201		$	64
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment		61			55
Amortization and accretion, net		46			56
Gain on calls and sales of securities available for sale		(2	)		(16	)
Loss on calls of securities held to maturity		1			—
Provision for loan losses		130			51
Increase in interest receivable		(119	)		(71	)
Decrease (increase) in other assets		421			(42	)
Deferred taxes		(114	)		(14	)
Increase (decrease) in accrued interest payable		92			(3	)
Increase in other liabilities		52			71
ESOP shares committed to be released		9			11
Restricted stock earned		27			24
Stock options earned		27			28
Net cash provided by operating activities		832			214

Cash flows from investing activities:
Purchases of term deposits		—			(297	)
Proceeds from maturities of term deposits		199			198
Purchase of securities available for sale		(10,628	)		(371	)
Principal repayments on securities available for sale		1,565			18
Proceeds from sale of securities available for sale		43			313
Purchases of securities held to maturity		(32,968	)		(934	)
Principal repayments on securities held to maturity		10,019			260
Net increase in loans receivable		(2,614	)		(6,335	)
Additions to premises and equipment		(35	)		(807	)
Purchase of Federal Home Loan Bank of New York stock		(1,962	)		(215	)
Redemption of Federal Home Loan Bank of New York stock		528			215
Net cash used in investing activities		(35,853	)		(7,955	)

Cash flows from financing activities:
Net increase in deposits		6,254			7,737
Proceeds from advances from Federal Home Loan Bank of New York		54,340			45,300
Repayments of advances from Federal Home Loan Bank of New York		(22,868	)		(45,356	)
Net increase in payments by borrowers for taxes and insurance		42			64
Purchase of treasury stock		(89	)		(50	)
Net cash provided by financing activities		37,679			7,695

Net increase (decrease) in cash and cash equivalents		2,658			(46	)
Cash and cash equivalents - beginning		2,501			2,601

Cash and cash equivalents - ending	$	5,159		$	2,555

Supplemental information:
Cash paid during the period for:
Interest on deposits and borrowings	$	2,314		$	2,299
Income taxes	$	17		$	11

See notes to consolidated financial statements.

LINCOLN PARK BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Lincoln Park Bancorp (the “Company”) and its wholly owned subsidiary, Lincoln Park Savings Bank (the “Bank”), and the Bank’s wholly owned subsidiary LPS Investment Company. The Company’s business is conducted principally through the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.

2. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as well as instructions for Form 10-Q and Rule 10-01 of regulation S-X. Accordingly, they do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, changes in stockholders’ equity and cash flows in conformity with GAAP. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the consolidated financial statements have been included. The results of operations for the three and nine months ended September 30, 2008, are not necessarily indicative of the results which may be expected for the entire fiscal year.

3. NET INCOME PER COMMON SHARE

Basic net income per common share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding, adjusted for unearned shares of the ESOP and unvested restricted stock awards. Diluted net income per common share is calculated by dividing net income by the weighted average number of shares of common stock and common stock equivalents outstanding decreased by the number of common shares that are assumed to be repurchased with the proceeds from the exercise or conversion of the common stock equivalents, if dilutive, (treasury stock method) along with the assumed tax benefit from the exercise of non-qualified options. Shares issued and reacquired during any period are weighted for the portion of the period they were outstanding. During the three and nine months ended September 30, 2008, all 67,020 outstanding stock options and 15,715 non-vested shares of restricted stock were anti-dilutive. During the three and nine months ended September 30, 2007, all 67,020 outstanding stock options and 16,890 non-vested shares were anti-dilutive.

4. CRITICAL ACCOUNTING POLICIES

We consider accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies. Material estimates that are particularly susceptible to significant changes relate to the determination of the allowance for loan losses. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Management reviews the level of the allowance on a quarterly basis, at a minimum, and establishes the provision for loan losses based on the composition of the loan portfolio, delinquency levels, loss experience, economic conditions, and other factors related to the collectability of the loan portfolio. Since there has been no material shift in the loan portfolio, the level of the allowance for loan losses has changed primarily due to changes in the size of the loan portfolio and the level of nonperforming loans.

We have allocated the allowance among categories of loan types as well as classification status at each period-end date. Assumptions and allocation percentages based on loan types and classification status have been consistently applied. Management regularly evaluates various risk factors related to the loan portfolio, such as type of loan, underlying collateral and payment status, and the corresponding allowance allocation percentages.

LINCOLN PARK BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4. CRITICAL ACCOUNTING POLICIES (Continued)

Although we believe that we use the best information available to establish the allowance for loan losses, future additions to the allowance may be necessary based on estimates that are susceptible to change as a result of changes in economic conditions and other factors. In addition, the regulatory authorities, as an integral part of their examinations process, periodically review our allowance for loan losses. Such agencies may require us to recognize adjustments to the allowance based on its judgments about information available to it at the time of their examinations.

5. FAIR VALUE DISCLOSURES

Effective January 1, 2008, the Company adopted the provisions of SFAS No. 157, “Fair Value Measurements”, for financial assets and financial liabilities. In accordance with Financial Accounting Standards Board Staff Position (FSP) No. 157-2, “Effective Date of FASB Statement No. 157,” the Company will delay application of SFAS 157 for non-financial assets and non-financial liabilities, until January 1, 2009. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact.

SFAS 157 requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, SFAS 157 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:


	Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

	Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability; either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correction or other means.

LINCOLN PARK BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5. FAIR VALUE DISCLOSURES (Continued)


	Level 3 Inputs – Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at the fair value effective January 1, 2008.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counter-party credit quality, the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Available for Sale Securities. Securities classified as available for sale are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the bond’s terms and conditions, among other things.

Impaired loans. Loans included in the following table are those accounted for under SFAS 114, “Accounting by Creditors for Impairment of a Loan,” in which the Company has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third party appraisals of the properties, or discounted cash flows based on the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value consists of the loan balances less valuation allowance as determined under SFAS 114.

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets and financial liabilities measured at fair value on a nonrecurring basis, such as long-lived assets measured at fair value for impairment assessment are reported utilizing Level 3 inputs.

LINCOLN PARK BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5. FAIR VALUE DISCLOSURES (Continued)

At September 30, 2008, the following table represents the fair value measurement on available for sale securities and impaired loans.


			Fair Value Measurements at Reporting Date Using
(In thousands)
Description	9/30/2008		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Available-for-sale securities	$	10,359	$	244	$	10,115	$	—
Impaired Loans		269		—		—		269
Total	$	10,628	$	244	$	10,115	$	269

The following summarizes activity related to impaired loans measured at fair value for the three and nine month periods ended September 30, 2008.

Impaired Loans


	Three Months Ended September 30, 2008			Nine Months Ended September 30, 2008
	(In thousands)

Beginning balance	$	345		$	351
Additions		19			19
Payments and other credits		—			—
Reserve for loss		(95	)		(101	)
Ending Balance	$	269		$	269

Effective January 1, 2008, the Company adopted the provisions of SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115”. SFAS 159 permits the Company to choose to measure eligible items at fair value at specified election dates. Unrealized gains and losses on items for which the fair value measurement option has been elected are reported in earnings at each subsequent reporting date. The fair value option (i) may be applied instrument by instrument, with certain exceptions, thus the Company may record identical financial assets and liabilities at fair value or by another measurement basis permitted under generally accepted accounting principles, (ii) is irrevocable (unless a new election date occurs), and (iii) is applied only to entire instruments and not to portions of instruments. Adoption of SFAS 159 on January 1, 2008 did not have any material impact on the Company’s financial statements.

LINCOLN PARK BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6. DIRECTORS’ RETIREMENT PLAN

Periodic expenses for the Company’s Directors’ retirement plan were as follows:


	Three Months Ended September 30, 2008		Three Months Ended September 30, 2007		Nine Months Ended September 30, 2008		Nine Months Ended September 30, 2007

			(In thousands)

Service Cost	$	4	$	3	$	11	$	7
Interest Cost		6		5		18		15
Past Service Liability		7		7		22		22
Total	$	17	$	15	$	51	$	44

7. STOCK OPTIONS AND AWARDS

Under the Company’s Stock-Based Incentive Plan, stock options and restricted stock awards may be granted to outside directors and employees. At September 30, 2008 and December 31, 2007, options to purchase 67,020 shares of Company common stock were outstanding. Such options have an exercise price range of $7.00 to $9.00, a weighted average exercise price of $8.83, and at September 30, 2008, no intrinsic value and an average remaining life of 7.4 years. No options were granted, cancelled, forfeited, or exercised during the nine month periods ended September 30, 2008 and 2007.

At September 30, 2008 and December 31, 2007, there were 15,715 and 15,786 shares, respectively, of restricted stock that had been granted, but were not yet vested. Theses shares had a weighted average grant date fair value of $8.62. During the nine month periods ended September 30, 2008, there were no grants of restricted shares and 71 shares of prior grants vested. During the nine month period ended September 30, 2007, there were no grants of restricted shares and 74 shares of prior grants vested. At September 30, 2008, unrecognized future compensation costs related to restricted stock awards aggregated approximately $116,000 and are expected to be expensed over the next 5.1 years.

8. RECENT ACCOUNTING PRONOUNCEMENTS

FAS -157-2

In February 2008, the FASB issued FASB Staff Position (FSP) 157-2, “Effective Date of FASB Statement No. 157,” that permits a one-year deferral in applying the measurement provisions of Statement No. 157 to non-financial assets and non-financial liabilities (non-financial items) that are not recognized or disclosed at fair value in an entity’s financial statements on a recurring basis (at least annually). Therefore, if the change in fair value of a non-financial item is not required to be recognized or disclosed in the financial statements on an annual basis or more frequently, the effective date of application of Statement 157 to that item is deferred until fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. The Company, as permitted, has elected to defer the application of FAS 157 to non-financial items, and is currently evaluating the impact, if any, that the adoption of FSP 157-2 will have on the Company’s future consolidated financial statements.

LINCOLN PARK BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

8. RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

FAS - 157-3

In October 2008, the FASB issued FSP SFAS No. 157-3, “Determining the Fair Value of a Financial Asset When The Market for That Asset Is Not Active” (FSP 157-3), to clarify the application of the provisions of SFAS 157 in an inactive market and how an entity would determine fair value in an inactive market. FSP 157-3 is effective immediately and applies to our September 30, 2008 financial statements. The application of the provisions of FSP 157-3 did not materially affect our results of operations or financial condition as of and for the periods ended September 30, 2008.

SAB 109

Staff Accounting Bulletin No. 109 (SAB 109), “Written Loan Commitments Recorded at Fair Value Through Earnings” expresses the views of the staff regarding written loan commitments that are accounted for at fair value through earnings under generally accepted accounting principles. To make the staff’s views consistent with current authoritative accounting guidance, the SAB revises and rescinds portions of SAB No. 105, “Application of Accounting Principles to Loan Commitments.” Specifically, the SAB revises the SEC staff’s views on incorporating expected net future cash flows related to loan servicing activities in the fair value measurement of a written loan commitment. The SAB retains the staff’s views on incorporating expected net future cash flows related to internally-developed intangible assets in the fair value measurement of a written loan commitment. The staff expects registrants to apply the views in Question 1 of SAB 109 on a prospective basis to derivative loan commitments issued or modified in fiscal quarters beginning after December 15, 2007. SAB 109 did not have a material impact on our consolidated financial statements.

SAB 110

Staff Accounting Bulletin No. 110 (SAB 110) amends and replaces Question 6 of Section D.2 of Topic 14, “Share-Based Payment,” of the Staff Accounting Bulletin series. Question 6 of Section D.2 of Topic 14 expresses the views of the staff regarding the use of the “simplified” method in developing an estimate of expected term of “plain vanilla” share options and allows usage of the “simplified” method for share option grants prior to December 31, 2007. SAB 110 allows public companies which do not have historically sufficient experience to provide a reasonable estimate to continue use of the “simplified” method for estimating the expected term of “plain vanilla” share option grants after December 31, 2007. SAB 110 is effective January 1, 2008. SAB 110 did not have a material impact on our consolidated financial statements.

FASB Statement No. 141 (R)

FASB Statement No. 141 (R) “Business Combinations” was issued in December of 2007. This Statement establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. The Statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The guidance will become effective as of the beginning of a company’s fiscal year beginning after December 15, 2008. This new pronouncement will impact the Company’s accounting for business combinations completed beginning January 1, 2009.

LINCOLN PARK BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

8. RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

FASB Statement No. 161

In March 2008, the FASB issued Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133” (Statement 161). Statement 161 requires entities that utilize derivative instruments to provide qualitative disclosures about their objectives and strategies for using such instruments, as well as any details of credit-risk-related contingent features contained within derivatives. Statement 161 also requires entities to disclose additional information about the amounts and location of derivatives located within the financial statements, how the provisions of SFAS 133 has been applied, and the impact that hedges have on an entity’s financial position, financial performance, and cash flows. Statement 161 is effective for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company is currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.

FASB Statement No. 162

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” This Statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. This Statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” The Company is currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.

EITF 06-11

In June 2007, the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards” (“EITF 06-11”). EITF 06-11 states that an entity should recognize a realized tax benefit associated with dividends on non-vested equity shares, non-vested equity share units and outstanding equity share options charged to retained earnings as an increase in additional paid in capital. The amount recognized in additional paid in capital should be included in the pool of excess tax benefits available to absorb potential future tax deficiencies on share-based payment awards. EITF 06-11 should be applied prospectively to income tax benefits of dividends on equity-classified share-based payment awards that are declared in fiscal years beginning after December 15, 2007. EITF 06-11 did not have an impact on our consolidated financial statements.

FSP EITF 03-6-1

In June 2008, the FASB issued FASB Staff Position (FSP) EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” This FSP clarifies that all outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends participate in undistributed earnings with common shareholders. Awards of this nature are considered participating securities and the two-class method of computing basic and diluted earnings per share must be applied. This FSP is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.

LINCOLN PARK BANCORP AND SUBSIDIARY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2.

Forward-Looking Statements

This Form 10-Q may include certain forward-looking statements based on current management expectations. The actual results of the Company could differ materially from those management expectations. Factors that could cause future results to vary from current management expectations include, but are not limited to, general economic conditions, legislative and regulatory changes, monetary and fiscal policies of the federal government, changes in tax policies, rates and regulations of federal, state and local tax authorities, changes in interest rates, deposit flows, the cost of funds, demand for loan products, demand for financial services, competition, changes in the quality or composition of loan and investment portfolios of the Bank, changes in accounting principles, policies or guidelines, and other economic, competitive, governmental and technological factors affecting the Company’s operations, markets, products, services and prices.

Recent Developments

There have been significant disruptions in the U.S. and international financial system during the period covered by this report. In response to the financial crises affecting the overall banking system and financial markets in the United States, on October 3, 2008, the Emergency Economic Stabilization Act of 2008 (“EESA”) was enacted. Under the EESA, the United States Treasury Department (“Treasury”) has authority, among other things, to purchase mortgages, mortgage backed securities and certain other financial instruments from financial institutions for the purpose of stabilizing and providing liquidity to the U.S. financial markets.

On October 14, 2008, the Treasury announced the Troubled Asset Relief Program (“TARP”)--Capital Purchase Program, pursuant to which the Treasury intends to make preferred stock investments in participating financial institutions that will qualify as Tier I capital. In conjunction with the purchase of preferred stock, which will yield 5% for the first five years that it is outstanding, and 9% thereafter, until it is redeemed, the Treasury will receive warrants to purchase common stock with an aggregate market price equal to 15% of the preferred investment. The Capital Purchase Program also has other terms and conditions, including limitations of cash dividends, restrictions on treasury stock repurchases and executive compensation limitations.

The Company has applied for the maximum amount of additional capital allowed under the program based on the Company’s level of total risk-weighted assets. The Company’s application to participate in the program is subject to approval from the Treasury.

In addition, the Federal Deposit Insurance Corporation (“FDIC”) has implemented a Temporary Liquidity Guarantee Program. The Temporary Liquidity Guarantee Program has two primary components: the Debt Guarantee Program, by which the FDIC will guarantee the payment of certain newly-issued senior unsecured debt, and the Transaction Account Guarantee Program, by which the FDIC will guarantee certain noninterest-bearing transaction accounts. The Company and the Bank, by regulation, are automatically participating in the Temporary Liquidity Guarantee Program through December 5, 2008.

The Company has carefully evaluated each of these two programs. The Company does not have any unsecured debt at September 30, 2008, and therefore does not believe that it qualifies to participate in the Debt Guarantee Program, and anticipates that it will formally “opt-out” of the Debt Guarantee Program by December 5, 2008. The Bank intends to continue to participate in the Transaction Account Guarantee Program providing unlimited federal deposit insurance to certain noninterest-bearing transaction accounts held at the Bank. The cost of continuing to participate in the Transaction Account Guarantee Program is not expected to have a significant impact on the operations of the Company.

LINCOLN PARK BANCORP AND SUBSIDIARY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Recent Developments (Cont’d)

The FDIC insures deposits at FDIC insured financial institutions up to certain limits. The FDIC charges insured financial institutions premiums to maintain the Deposit Insurance Fund. The FDIC has proposed an increase in the assessment rate schedule for the first quarter of 2009 that would increase deposit insurance premiums by 7 basis points (to a range from 12 to 50 basis points) for the first quarter of 2009. The proposed rule would also alter the way the Federal Deposit Insurance Corporation calculates federal deposit insurance assessment rates beginning in the second quarter of 2009 and thereafter.

Under the proposed rule, the FDIC would first establish an institution’s initial base assessment rate. This initial base assessment rate would range, depending on the risk category of the institution, from 10 to 45 basis points. The FDIC would then adjust the initial base assessment (higher or lower) to obtain the total base assessment rate. The adjustments to the initial base assessment rate would be based upon an institution’s levels of unsecured debt, secured liabilities, and brokered deposits. The total base assessment rate would range from 8 to 77.5 basis points of the institution’s deposits.

As a result of these measures, it is likely that the premiums the Bank pays for FDIC insurance will increase, which would adversely affect net income. The impact of such measures cannot be assessed at this time.

The actions described above, together with additional actions announced by the Treasury and other regulatory agencies, continue to develop. It is not clear at this time what impact EESA, TARP, other liquidity and funding initiatives of the Treasury and other bank regulatory agencies that have been previously announced, and any additional programs that may be initiated in the future will have on the financial markets and the financial services industry. The extreme levels of volatility currently being experienced could continue to effect the U.S. banking industry and the broader U.S. and global economies, which will have an affect on all financial institutions, including the Company.

Comparison of Financial Condition at September 30, 2008 and December 31, 2007

Our total assets increased by $37.9 million, or 36.9%, to $140.6 million at September 30, 2008, from $102.7 million at December 31, 2007. At September 30, 2008, the level of cash and cash equivalents increased $2.7 million or 106.3% to $5.2 million. Term deposits decreased $195,000 to $100,000 at September 30, 2008 as compared to $295,000 at December 31, 2007. The decrease in term deposits was due to the maturities of two certificates of deposit.

Securities available for sale increased by $8.8 million or 581.1% to $10.4 million at September 30, 2008, from $1.5 million at December 31, 2007. The increase was due to purchases of Collateralized Mortgage Obligations (CMOs) of $10.6 million, offset by maturities of $1.0 million of U.S. Government Agency step-up bonds and principal repayments of $565,000. Securities held to maturity increased by $22.9 million or 108.0% to $44.2 million at September 30, 2008 compared to $21.2 million at December 31, 2007. During the nine months ended September 30, 2008, purchases of Collateralized Mortgage Obligations amounted to $33.0 million, maturities and calls on securities held to maturity amounted to $8.8 million and repayments on securities held to maturity amounted to $1.2 million. The increased securities balances were funded by increased deposits and advances from the FHLB.

CMOs are debt securities issued by a special-purpose entity that aggregate pools of mortgages and mortgage-backed securities and create different classes of securities with varying maturities and amortization schedules, as well as a residual interest, with each class possessing different risk characteristics. The cash flows from the underlying collateral are generally divided into “tranches” or classes that have descending priorities with respect to the distribution of principal and interest cash flows, while cash flows on pass-through mortgage-backed securities are distributed pro rata to all security holders. All of the CMOs in our investment portfolio are rated “AAA” by at least one of the major investment securities rating services.

LINCOLN PARK BANCORP AND SUBSIDIARY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comparison of Financial Condition at September 30, 2008 and December 31, 2007 (Cont’d.)

Our securities portfolio may be impacted by fluctuations in market value, potentially reducing accumulated other comprehensive income and/or earnings. Fluctuations in market value may be caused by increases or decreases in interest rates, lower market prices for securities and lower investor demand. Our securities portfolio is evaluated for other-than-temporary impairment on at least a quarterly basis. If this evaluation shows an impairment to cash flow connected with one or more securities, a potential loss to earnings may occur.

Loans receivable amounted to $75.5 million and $73.1 million at September 30, 2008 and December 31, 2007, respectively, representing an increase of $2.5 million or 3.4%. The increase in loans resulted primarily from increases of $1.1 million in loans secured by one to four family residential mortgages, $600,000 in home equity loans and $1.2 million in home equity lines of credit. The increase in loans receivable was funded by increases in deposits.

Federal Home Loan Bank of New York (“FHLB”) stock increased $1.4 million to $2.6 million at September 30, 2008, from $1.2 million at December 31, 2007. Purchase of FHLB stock amounted to $2.0 million and redemption of FHLB stock amounted to $528,000. The increased level of FHLB stock owned is due to the increased level of FHLB advances outstanding.

Other assets decreased $315,000 or 43.9% to $403,000 at September 30, 2008 from $718,000 at December 31, 2007. The decrease was primarily due to the closing of a loan in the amount of $270,000, that was originated and disbursed to an attorney in December of 2007, but closed in January of 2008.

Total deposits increased $6.3 million or 9.6% to $71.2 million at September 30, 2008 from $65.0 million at December 31, 2007. The increase in deposits was due to a management decision to be more competitive with deposit rates.

Advances from FHLB increased $31.5 million or 133.6% to $55.0 million at September 30, 2008 compared to $23.6 million at December 31, 2007. At September 30, 2008, advances of $16.2 million were convertible advances with call features. The proceeds from new advances were primarily used to fund the purchase of securities.

Stockholders’ equity increased by $12,000 or 0.1% to $13.16 million at September 30, 2008 from $13.15 million at December 31, 2007, reflecting net income of $201,000 for the nine months ended September 30, 2008, and the amortization of $63,000 for ESOP shares, restricted stock shares, and stock options earned, for the nine months ended September 30, 2008. Partially offsetting these increases was a comprehensive loss of $163,000, which primarily represented unrealized losses on available for sale securities, and $89,000 for the purchase of treasury stock.

Our financial results may be adversely affected by changes in prevailing economic conditions, including decreases in real estate values, changes in interest rates which may cause a decrease in interest rate spreads, adverse employment conditions, the monetary and fiscal policies of the federal government and other significant external events. Decreases in real estate values could potentially adversely affect the value of property used as collateral for our mortgage loans. In the event that we are required to foreclose on a property securing a mortgage loan, there can be no assurance that we will recover funds in an amount equal to any remaining loan balance as a result of prevailing general economic conditions, real estate values and other factors associated with the ownership of real property. As a result, the market value of the real estate underlying the loans may not, at any given time, be sufficient to satisfy the outstanding principal amount of the loans. Consequently, we could sustain loan losses and potentially incur a higher provision for loan loss expense. Adverse changes in the economy may also have a negative effect of the ability of borrowers to make timely repayments of their loans, which could have an adverse impact on earnings.

LINCOLN PARK BANCORP AND SUBSIDIARY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comparison of Operating Results for the Three Months Ended September 30, 2008 and 2007

General. Net income increased by $107,000, or 823.1%, to $120,000 for the three months ended September 30, 2008, from $13,000 for the three months ended September 30, 2007. The increase in net income reflects primarily an increase in total interest income partially offset by increases in total interest expense, provision for loan losses, non-interest expenses, and income taxes.

Interest Income. Interest income increased $382,000, or 28.1%, to $1.7 million for the three months ended September 30, 2008, from $1.4 million for the three months ended September 30, 2007. Interest income from loans decreased by $29,000, or 2.7%, for the three months ended September 30, 2008. The decrease was due to a $1.0 million, or 1.4%, increase in the average balance of loans to $74.5 million during the three months ended September 30, 2008 from $73.4 million for the three months ended September 30, 2007, offset by a decrease in the average yield to 5.60% from 5.84%. Interest income from securities, including available for sale and held to maturity, increased $408,000, or 149.5%, to $681,000 for the three months ended September 30, 2008, from $273,000 for the three months ended September 30, 2007. The average yield on these securities increased to 5.76% for the three months ended September 30, 2008 as compared to 4.98% for the three months ended September 30, 2007. The average balance of securities was $47.3 million during the three months ended September 30, 2008 as compared to $21.9 million for the three months ended September 30, 2007. Interest income from other interest-earning assets increased $3,000, or 18.8%, to $19,000 for the three months ended September 30, 2008, from $16,000 for the three months ended September 30, 2007 due to an increase in the average balance of other interest-earning assets to $4.5 million in 2008 from $1.5 million in 2007, offset by a decrease in the average yield to 1.69 % in 2008 from 3.99% in 2007.

Interest Expense. Total interest expense increased $47,000, or 5.8%, to $853,000 for the three months ended September 30, 2008, from $806,000 for the three months ended September 30, 2007. The interest expense on interest-bearing deposits decreased by $116,000 or 20.2% to $457,000 for the quarter ended September 30, 2008, compared to $573,000 in the comparable 2007 period. The decrease in interest expense on interest bearing deposits resulted from a decrease in the average cost to 2.72% for the three months ended September 30, 2008 from 3.61% for the 2007 comparable period. The average balance of interest bearing deposits increased by $4.1 million to $67.3 million for the quarter ended September 30, 2008, from $63.2 million for the quarter ended September 30, 2007.

The interest expense on borrowed money increased by $163,000, or 70.0%, to $396,000 in the 2008 period from $233,000 in the comparable 2007 period. The increase was due to an increase of $23.8 million in the average balance of borrowed money to $45.1 million in the 2008 period from $21.3 million in the 2007 period, offset by a decrease in the cost of borrowed money to 3.51% in 2008 from 4.38% in 2007.

Net Interest Income. Net interest income increased $335,000, or 60.4%, to $890,000 for the three months ended September 30, 2008 from $555,000 for the three months ended September 30, 2007. Our interest rate spread increased to 2.52% in 2008 from 1.81% in 2007, reflecting a 78 basis points decrease in the cost of our total interest bearing liabilities that exceeded a 7 basis points decrease in the yield on our interest-earning assets. Our net interest margin increased to 2.85% from 2.30%.

Provision for Loan Losses. We establish provisions for loan losses, which are charged to operations, at a level necessary to absorb known and inherent losses that are both probable and reasonably estimable at the date of the financial statements. In evaluating the level of the allowance for loan losses, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events change.

LINCOLN PARK BANCORP AND SUBSIDIARY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comparison of Operating Results for the Three Months Ended September 30, 2008 and 2007 (Cont’d.)

Based on our evaluation of these factors, a provision of $95,000 for loan losses was required for the three months ended September 30, 2008. There was no allowance for the three months ended September 30, 2007. We had no charge offs during the three month periods ending September 30, 2008 and 2007. We used the same methodology and generally similar assumptions in assessing the allowance for both periods. The allowance for loan losses was $296,000 or 0.39% of gross loans outstanding at September 30, 2008, as compared with $201,000, or 0.27% of gross loans outstanding at June 30, 2008, and $187,000, or 0.25% of gross loans outstanding at September 30, 2007. The level of the allowance is based on estimates and the ultimate losses may vary from the estimates.

Non-interest Income. Non-interest income decreased by $4,000, or 9.52%, to $38,000 for the three months ended September 30, 2008 as compared to $42,000 for the three months ended September 30, 2007. This decrease was primarily due to a decrease of $4,000 in income from gains on sale of securities available for sale. There was a gain of $2,000 in available for sale securities for the three months ending September 30, 2008, as compared to $6,000 for the same period in 2007.

Non-interest Expenses. Non-interest expenses were $655,000 and $596,000 for the three months ended September 30, 2008 and 2007, respectively, representing an increase of $59,000 or 9.9%. The increase in non-interest expenses was primarily due to increases of $33,000 in salaries and employee benefit expenses and $24,000 in miscellaneous expenses.

Salary and employee benefits increased by $33,000, or 12.8%, to $290,000 for the three months ended September 30, 2008, from $257,000 in the 2007 comparable period. The increase was due to an addition of full time personnel in general.

Miscellaneous expense increased by $24,000, or 17.0%, to $165,000 for the three months ended September 30, 2008, from $141,000 in the 2007 comparable period. The increase was mainly due to increases in consulting and other services and director fees.

Income Tax Expense. The provision for income taxes increased to $58,000 for the three months ended September 30, 2008, from a benefit of $12,000 for the three months ended September 30, 2007. The increase in the provision for income taxes was primarily due to an increase of $177,000 in income before income taxes to $178,000 for the three months ended September 30, 2008, as compared to $1,000 for the three months ended September 30, 2007.

Comparison of Operating Results for the Nine Months Ended September 30, 2008 and 2007

General. Net income increased $137,000, or 214.1%, to $201,000 for the nine months ended September 30, 2008, compared to $64,000 for the same 2007 period. The increase in net income during the 2008 period resulted primarily from an increase in total interest income, partially offset by increases in total interest expense, provision for loan losses, non-interest expense, and income taxes.

Interest Income. Interest income increased $672,000, or 17.1%, to $4.6 million for the nine months ended September 30, 2008, from $3.9 million for the nine months ended September 30, 2007. The increase in interest income was primarily due to increases of $614,000 in interest income from securities and $46,000 in interest income from loans.

LINCOLN PARK BANCORP AND SUBSIDIARY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comparison of Operating Results for the Nine Months Ended September 30, 2008 and 2007 (Cont’d)

Interest income from loans increased by $46,000, or 1.5%, to $3.13 million for the nine months ended September 30, 2008, from $3.08 million for the same 2007 period. The increase was due to a $2.8 million, or 3.9%, increase in the average balance of loans to $73.8 million in 2008 from $71.1 million in 2007. The average yield on loans decreased to 5.64% in 2008 from 5.78% in 2007. Interest income from securities, including available for sale and held to maturity, increased $614,000, or 75.7%, to $1.4 million for the nine months ended September 30, 2008, from $811,000 for the nine months ended September 30, 2007. The average balance of securities increased to $34.5 million in 2008 when compared to $22.0 million in 2007. The average yield on securities increased by 59 basis points to 5.51% for the nine months ended September 30, 2008, when compared to 4.92% for the same period in 2007. Interest income from other interest-earning assets increased $12,000, or 28.6%, to $54,000 for the nine months ended September 30, 2008 when compared to $42,000 for the nine months ended September 30, 2007. The average balance of other interest earning assets increased to $3.6 million during the nine months ended September 30, 2008, when compared to $1.4 million during the nine months ended in September of 2007, partially offset by a decrease in the average yield. The average yield on other interest earning assets was 2.00% for the nine months ended September 30, 2008 when compared to 3.90% for the same period in 2007.

Interest Expense. Total interest expense increased by $110,000, or 4.8%, to $2.4 million for the nine months ended September 30, 2008, from $2.3 million for the nine months ended September 30, 2007. The interest expense on interest-bearing deposits decreased by $116,000, or 7.2%, in 2008. The decrease in the interest expense on the interest-bearing deposits was due to a decrease in the average cost to 3.07% from 3.53%, reflecting a decrease in market interest rates between the comparable periods. The decrease in the average cost of interest-bearing deposits was partially offset by an increase in the average balance of interest-bearing deposits to $64.5 million in 2008 from $60.5 million in 2007. The interest expense on borrowed money increased by $226,000, or 32.5%, to $921,000 in the 2008 period from $695,000 in the comparable 2007 period. The increase in interest expense on borrowed money was due to an increase of $12.1 million in the average balance of borrowed money to $33.7 million in 2008 from $21.6 million in 2007, partially offset by a decrease of 66 basis points in the cost of borrowed money to 3.64% in 2008 from 4.30% in 2007.

Net Interest Income. Net interest income increased $562,000, or 34.4%, to $2.2 million for the nine months ended September 30, 2008 from $1.6 million for the nine months ended September 30, 2007. Our interest rate spread increased to 2.22% in 2008 from 1.82% in 2007, reflecting a decrease of 46 basis points in the cost of our interest-bearing liabilities that exceeded a decrease of 6 basis points in the yield on interest-earning assets. Our net interest margin increased to 2.62% from 2.31%.

Provision for Loan Losses. Based on our evaluation, we recorded provision for loan losses of $130,000 for the nine months ended September 30, 2008, and $51,000 for the nine months ended September 30, 2007. We had $21,000 in charge-offs during the nine months ended September 30, 2008 and no charge-offs during the nine months ended September 30, 2007. We used the same methodology and generally similar assumptions in assessing the allowance for both periods. The allowance for loan losses was $296,000 or 0.39% of gross loans outstanding at September 30, 2008, as compared with $187,000, or 0.26% of gross loans outstanding at December 31, 2007, and $187,000, or 0.25% of gross loans outstanding at September 30, 2007. The level of the allowance is based on estimates, and the ultimate losses may vary from the estimates.

Non-interest Income. Non-interest income decreased by $12,000, or 10.6%, to $101,000 for the nine months ended September 30, 2008, as compared to $113,000 for the nine months ended September 30, 2007. The decrease in non-interest income was primarily due to a decrease of $14,000 in income from gains on sale of securities available for sale. There was a gain of $2,000 in income from sales of securities available for sale for the nine months ended September 30, 2008, as compared to $16,000 for the same period in 2007.

LINCOLN PARK BANCORP AND SUBSIDIARY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comparison of Operating Results for the Nine Months Ended September 30, 2008 and 2007 (Cont’d.)

Non-interest Expenses. Non-interest expenses were $1.9 million and $1.6 million for the nine months ended September 30, 2008 and 2007, respectively, representing an increase of $231,000, or 14.2%. The increase in non-interest expenses was primarily due to increases of $110,000 in salary and employee benefits, $17,000 in equipment expense, $21,000 in occupancy expense, $16,000 in legal expense, $7,000 in advertising expense and $57,000 in miscellaneous expense.

Salaries and employee benefits increased by $110,000, or 15.4%, to $826,000 in 2008 from $716,000 in 2007. The increase was due to an addition of full time personnel in general. Equipment expenses increased by $17,000, or 7.6%, to $242,000 for the nine months ended September 30, 2008, from $225,000 in the 2007 comparable period, primarily due to purchases of new equipment, upgrading and maintenance of software and other equipment. Occupancy expense increased by $21,000, or 21.2%, to $120,000 for the nine months ended September 30, 2008, from $99,000 for the 2007 comparable period. Such increase was mainly due to the additional expense of the Montville branch. Advertising expenses increased $7,000, or 17.5%, to $47,000 in 2008 from $40,000 in 2007 due to an effort to advertise more in our local community. Legal fees increased by $16,000 to $73,000 for the nine months ended September 30, 2008, from $57,000 for the 2007 comparable period. This increase was primarily due to costs incurred to defend against a legal action brought by Donald Hom, former President of Lincoln Park Savings. Miscellaneous expenses increased by $57,000, or 14.1%, to $460,000 for the nine months ended September 30, 2008, when compared to $403,000 during the same 2007 period. This increase was primarily due to increases in consulting and other services and director fees.

Income Tax Expense. The provision for income taxes increased to $111,000 for the nine months ended September 30, 2008 from $8,000 for the nine months ended September 30, 2007. The increase in the provision for income taxes was primarily due to an increase in income before income taxes of $240,000 to $312,000 for the nine months ended September 30, 2008, as compared to $72,000 for the nine months ended September 30, 2007.

Management of Market Risk

General. The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of mortgage loans, have longer maturities than our liabilities, consisting primarily of deposits. As a result, a principal part of our business strategy is to manage interest rate risk and reduce the exposure of our net interest income to changes in market interest rates. Our full board of directors is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors. Senior management monitors the level of interest rate risk and reports to the board of directors on a regular basis with respect to our asset/liability policies and interest rate risk position.

We have emphasized the origination of fixed-rate mortgage loans for retention in our portfolio in order to maximize our net interest income. We accept increased exposure to interest rate fluctuations as a result of our investment in such loans. In a period of rising interest rates, our net interest rate spread and net interest income may be negatively affected. In addition, we have sought to manage and mitigate our exposure to interest rate risks in the following ways:

	●	We maintain moderate levels of short-term liquid assets. At September 30, 2008, our short-term liquid assets totaled $5.2 million;

	●	We originate for portfolio adjustable-rate mortgage loans and adjustable home equity lines of credit. At September 30, 2008, our adjustable-rate mortgage loans totaled $11.5 million and our adjustable home equity lines of credit totaled $6.0 million;

LINCOLN PARK BANCORP AND SUBSIDIARY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management of Market Risk (Cont’d)


	●	We attempt to increase the maturity of our liabilities as market conditions allow. In particular, since 2004, we have emphasized intermediate- to long-term FHLB advances as a source of funds. At September 30, 2008, we had $40.5 million of FHLB advances with terms to maturity of greater than three to thirteen years. The following table sets forth the Bank’s advances from the Federal Home Loan Bank of New York, grouped by maturity date at September 30, 2008:

	Amount		Weighted Average Rate
	(In thousands)

One year or less		8,516		2.72	%
One year through three years		6,035		4.00	%
Three years through five years		21,951		3.88	%
Over five years		18,521		3.57	%
Total		55,023		3.61	%

●

We invest in securities with step-up rate features providing for increased interest rates prior to maturity according to a pre-determined schedule and formula. However, these step-up rates may not keep pace with rising interest rates in the event of a rapidly rising rate environment. In addition, these investments may be called at the option of the issuer.

Net Portfolio Value. The Company utilizes an outside vendor to prepare the computation of accounts by which the net present value of the Bank’s cash flow from assets, liabilities and off-balance sheet items (the Bank’s net portfolio value or “NPV”) would change in the event of a range of assumed changes in market interest rates. The vendor provides the Company with an interest rate sensitivity report of net portfolio value by utilizing a simulation model that uses a discounted cash flow analysis and an option-based pricing approach to measuring the interest rate sensitivity of net portfolio value. The model estimates the economic value of each type of asset, liability and off-balance sheet contract under the assumption that the yield curve increases or decreases instantaneously by 200 basis points. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 5% would mean, for example, a 200 basis point increase in the change of interest rates.

LINCOLN PARK BANCORP AND SUBSIDIARY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management of Market Risk (Cont’d)

The following table sets forth the Bank’s NPV as of June 30, 2008, the most recent date the Bank’s NPV was calculated.


Change in			Net Portfolio Value						Net Portfolio Value as a Percentage
Interest Rates									of Present Value of Assets
(basis points)
	Estimated NPV			Amount of Change			Percent of Change			NPV Ratio		Change in Basis Points
							(Dollars in Thousands)
+200	$	14,965		$	(2,613	)	(14.87	)%		12.91	%		(142) basis points
0		17,578			—		—			14.33			— basis points
-200		18,981			1,403		7.98			14.74			41 basis points

The table above indicates that at June 30, 2008 in the event of a 200 basis point decrease in interest rates, we would experience a 7.98% increase in net portfolio value. In the event of a 200 basis point increase in interest rates, we would experience a 14.87% decrease in net portfolio value.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in net portfolio value require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the net portfolio value table presented assumes that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the net portfolio value table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on its net interest income and will differ from actual results.

Liquidity and Capital Resources

The Bank is required to maintain levels of liquid assets sufficient to ensure the Bank’s safe and sound operation. Liquidity is the ability to meet current and future financial obligations of a short-term nature. The Bank adjusts its liquidity levels in order to meet funding needs for deposit outflows, payment of real estate taxes from escrow accounts on mortgage loans, repayment of borrowings, when applicable, and loan funding commitments. The Bank also adjusts its liquidity level as appropriate to meet its asset/liability objectives.

The Bank’s primary sources of funds are deposits, amortization and prepayments of loans and mortgage-backed securities principal, FHLB advances, maturities of investment securities and funds provided from operations. While scheduled loan and mortgage-backed securities amortization and maturing investment securities are a relatively predictable source of funds, deposit flow and loan and mortgage-backed securities prepayments are greatly influenced by market interest rates, economic conditions and competition.

LINCOLN PARK BANCORP AND SUBSIDIARY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources (Cont’d)

The Bank’s liquidity, represented by cash and cash equivalents, is a product of its operating, investing and financing activities.

The primary sources of investing activity are lending and the purchase of securities. Net loans amounted to $75.5 million and $73.1 million at September 30, 2008 and December 31, 2007, respectively. Securities available for sale totaled $10.4 million at September 30, 2008 and $1.5 million at December 31, 2007, respectively. Securities held to maturity totaled $44.2 million and $21.2 million at September 30, 2008 and December 31, 2007, respectively. In addition to funding new loan production and securities purchases through operating and financing activities, such activities were funded by principal repayments on existing loans, mortgage-backed securities, and borrowings from FHLB.

Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in short-term investments, such as federal funds and interest-bearing deposits. If the Bank requires funds beyond its ability to generate them internally, borrowing agreements exist with the FHLB which provide an additional source of funds. At September 30, 2008, advances from the FHLB amounted to $55.0 million, and approximately $3.2 million of additional borrowings are still available at the FHLB. The Bank used borrowed funds available through the Federal Home Loan Bank of New York at low interest rates, primarily to purchase government agency backed collateralized mortgage obligations offered at profitable rates. By matching the terms of borrowing to the expected average life of the securities, the Bank is able to manage the interest rate risk more effectively in the present market. The yield from these securities allows the Bank to pursue its income projection plan, even as the market for loans deteriorates.

The Bank anticipates that it will have sufficient funds available to meet its current loan commitments. At September 30, 2008, the Bank had outstanding commitments of $1.3 million to originate loans, standby letters of credit of $49,000, and unused lines of credit of $8.3 million. Certificates of deposit scheduled to mature in one year or less at September 30, 2008, totaled $38.5 million. Management believes that, based upon its experience and the Bank’s deposit flow history, a significant portion of such deposits will remain with the Bank.

The following table sets forth the Bank’s capital position at September 30, 2008, as compared to the minimum regulatory capital requirements:

	Actual					Minimum Capital Requirements					To Be Well Capitalized Under Prompt Corrective Actions Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio

	(Dollars in thousands)
Total Risk Based Capital
(to risk-weighted assets)	$	11,686		17.88	%	$	5,227		8.00	%	$	6,534		10.00	%

Tier 1 Capital
(to risk-weighted assets)		11,390		17.43	%		2,614		4.00	%		3,921		6.00	%

Core (Tier 1) Capital
(to average total assets)		11,390		8.86	%		5,140		4.00	%		6,425		5.00	%

Tangible Capital
(to average total assets)		11,390		8.86	%		1,927		1.50	%		—		—

LINCOLN PARK BANCORP AND SUBSIDIARY

CONTROLS AND PROCEDURES

ITEM 3. Quantitative and Qualitative Disclosure about Market Risk

Not applicable. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Management of Market Risk” herein.

ITEM 4. Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer has concluded that, as of the end of the period covered by this report, our 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 applicable time periods specified by the SEC’s rules and forms.

There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

LINCOLN PARK BANCORP AND SUBSIDIARY

PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings


	Lincoln Park Savings has, on September 13, 2007, been served with a Summons and Complaint in the matter of Donald Hom v. Lincoln Park Savings Bank and The Board of Directors of Lincoln Park Savings Bank, Superior Court of New Jersey, Law Division, Morris County, Docket No., MRS-L-1548-07. The complaint by Donald Hom, former President and CEO of Lincoln Park Savings, alleges an employment related claim pursuant to the New Jersey Conscientious Employee Protection Act (N.J.S. 34:19-1 et seq.) The complaint has been referred to special counsel for Lincoln Park Savings for defense.

	Except as noted above, neither the Company nor the Bank is involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business, which involve amounts in the aggregate believed by management to be immaterial to the financial condition of the Company and the Bank.

ITEM 1A. Risk Factors

	Not applicable.

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

	a)	Not applicable

	b)	Not applicable

	c)	Information regarding the Company’s purchases of its equity securities (common stock) during the three months ended September 30, 2008 is summarized below:

	Total Number of Shares Purchased	Average Price Paid For Shares	Total Number of Shares Purchased Under a Publicly Announced Repurchase Plan	Maximum Number of Shares That May Yet Be Purchased Under Repurchase Plan
July 1- July 31	—	—	25,655	57,905
August 1- August 31	13,100	$ 6.80	38,755	44,805
September 1- September 30	—	—	38,755	44,805

On August 27, 2007, the Company announced that its Board of Directors authorized a stock repurchase program to repurchase up to 41,780 shares. On May 30, 2008, the Company announced that its Board of Directors authorized an increase in the repurchase program by 41,780 shares. As of September 30, 2008, an additional 44,805 shares remains to be purchased under the program as revised.

LINCOLN PARK BANCORP AND SUBSIDIARY

PART II – OTHER INFORMATION


ITEM 3. Defaults Upon Senior Securities

	Not applicable.

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

	Not applicable.

ITEM 5. Other Information

	Not applicable.

ITEM 6. Exhibits

	The following Exhibits are filed as part of this report.

		31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
		31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
		32	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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.


		LINCOLN PARK BANCORP

Date:	November 14, 2008		/s/ David G. Baker
			David G. Baker
			President and Chief Executive Officer

Date:	November 14, 2008		/s/ Nandini Mallya
			Nandini Mallya
			Vice President and Treasurer
			(Chief Financial Officer)