United
States
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C.  20549
 
 FORM
10-K
 
 x
                Annual
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      the Fiscal Year Ended December 31, 2008oro
                Transition
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      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.
      Employerincorporation
      or organization)
                  Identification
      Number)31 Boonton Turnpike, Lincoln Park, New
      Jersey
                  07035(Address
      of Principal Executive Offices)
                  Zip
      Code
  (973)
694-0330
 (Registrant’s
telephone number, including area code)
  Securities
Registered Pursuant to Section 12(b) of the Act:
  None
  Securities
Registered Pursuant to Section 12(g) of the Act:
  Common Stock, par value
$0.01 per share
 (Title of
Class)
  
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
 YES o   NO x
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  YES o   NO x
 
 Indicate by check mark whether the
Registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports) and
(2) has been subject to such filing requirements for the past 90
days.  YES x   NO o
 
 Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of Registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.  x.
 
 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.  (Check one):
 
 Large
      accelerated filer  o
                Accelerated
      filer  o
                Non-accelerated
      filer  o
                Smaller
      reporting company  x
 
 Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Act).
 YES o   NO x
 
 As of March 19, 2009, there were issued
and outstanding 1,803,245 shares of the Registrant’s Common Stock, including
999,810 shares owned by Lincoln Park Bancorp, MHC.
 
 The aggregate market value of the
voting and non-voting common equity held by non-affiliates of the Registrant,
computed by reference to the last sale price on June 30, 2008 was $4.8
million.
 
 DOCUMENTS
INCORPORATED BY REFERENCE
 
 1.
                Portions
      of Annual Report to Stockholders (Parts II and IV)2.
                Proxy
      Statement for the 2009 Annual Meeting of Stockholders of the Registrant
      (Part III)
  
  Lincoln
Park Bancorp
 Annual
Report on Form 10-K
 For
The Year Ended
 December
31, 2008
 
 
 Table
of Contents
  ITEM 1.
                        Business
                        3ITEM 1A.
                        Risk Factors
                        39ITEM 1B.
                        Unresolved Staff Comments
                        39ITEM 2.
                        Properties
                        40ITEM 3.
                        Legal Proceedings
                        40ITEM 4.
                        Submission of Matters to a Vote of Security
      Holders
                        40ITEM 5.
                        Market for Registrant’s Common Equity, Related Stockholder
      Matters and Issuer Purchases of
      Securities
                        40ITEM 6.
                        Selected Financial Data
                        41ITEM 7.
                        Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
                        42ITEM 7A.
                        Quantitative and Qualitative Disclosures About Market
      Risk
                        42ITEM 8.
                        Financial Statements and Supplementary
    Data
                        42ITEM 9.
                        Changes In and Disagreements With Accountants on Accounting
      and Financial Disclosure
                        42ITEM 9A. (T)
                        Controls and Procedures
                        42ITEM 9B.
                        Other Information
                        43ITEM 10.
                        Directors, Executive Officers, Promoters, Control Persons
      and Corporate Governance
                        43ITEM 11.
                        Executive Compensation
                        43ITEM 12.
                        Security Ownership of Certain Beneficial Owners and
      Management and Related Stockholder Matters
                        43ITEM 13.
                        Certain Relationships and Related Transactions, and
      Director Independence
                        43ITEM 14.
                        Principal Accountant Fees and Services
                        44ITEM 15.
                        Exhibits and Financial Statement
    Schedules
                        44SIGNATURES
                        45
 
 
  PART
I
 ITEM
1.Business
  Forward
Looking Statements
  This
Annual Report 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 which 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, competition, changes in
accounting principles, policies, or guidelines, changes in legislation or
regulation, the effect of a dramatically slowing economy on our lending
portfolio, the impact of the U.S. government’s economic stimulus program and its
various financial institution rescue plans including TARP, and other economic,
competitive, governmental, regulatory, and technological factors affecting our
operations, pricing products and services.
 
 Lincoln
Park Bancorp, MHC
  Lincoln
Park Bancorp, MHC is the federally chartered mutual holding company parent of
Lincoln Park Bancorp.  Lincoln Park Bancorp, MHC is not currently
engaged in any business other than holding the majority of the voting stock of
Lincoln Park Bancorp.  The executive offices of Lincoln Park Bancorp,
MHC, are located at 31 Boonton Turnpike, Lincoln Park, New Jersey 07035, and its
telephone number is (973) 694-0330.  Lincoln Park Bancorp, MHC is
subject to comprehensive regulation and examination by the Office of Thrift
Supervision.  Lincoln Park Bancorp, MHC has applied for funds through
the U.S. Treasury CPP program, but as of year end funding for MHC’s have not
been authorized.
 
 Lincoln
Park Bancorp
  Lincoln
Park Bancorp is a federally chartered corporation which was organized in 2004 as
part of the mutual holding company reorganization of Lincoln Park Savings
Bank.  Our principal asset is our investment in Lincoln Park Savings
Bank.  We are a majority owned subsidiary of Lincoln Park Bancorp,
MHC.  In connection with the reorganization, which was completed on
December 16, 2004, we sold 851,690 shares of our common stock and issued 999,810
shares to our mutual holding company parent.  The net proceeds from
our stock offering totaled $7.8 million.  At December 31, 2008,
Lincoln Park Bancorp had consolidated assets of $137.4 million, deposits of
$73.0 million and stockholders’ equity of $13.1 million.  Lincoln Park
Bancorp is subject to comprehensive regulation and examination by the Office of
Thrift Supervision.
 
 Lincoln
Park Savings Bank
  General
  Lincoln
Park Savings Bank (“Lincoln Park Savings” or the “Bank”) is a New Jersey
chartered savings bank headquartered in Lincoln Park, New
Jersey.  Lincoln Park Savings was originally founded in
1923.  In connection with and prior to the mutual holding company
reorganization, Lincoln Park Savings Bank completed its conversion from a New
Jersey chartered savings and loan association to a New Jersey chartered savings
bank.  LPS Investment Company is the Bank’s wholly owned
subsidiary.  LPS Investment Company was recently formed as an
operating subsidiary of the Bank for the purpose of investing in stocks, bonds,
mortgages, and other securities, limited to the types of securities in which the
Bank is authorized to invest.  Lincoln Park Savings conducts business
from its main office located at 31 Boonton Turnpike in Lincoln Park, New
Jersey.  The telephone number at its main office is (973)
694-0330.  In July 2007, the Bank acquired the Montville, New Jersey
branch location of another New Jersey savings institution.  The Bank
acquired the building and furnishings and deposits of the location which totaled
approximately $756,000 and $3,501,000, respectively.  In connection
with the acquisition, the Bank recorded $52,500 in goodwill.  As of
December 31, 2008, total deposits for the branch totaled $10.3
million.
  3
  Our
principal business activity is the origination of mortgage loans secured by one-
to four-family residential real estate and consumer loans consisting primarily
of home equity loans and home equity lines of credit.  We also
originate loans secured by multi-family and commercial real estate and, to a
lesser extent, construction loans, and small business loans and lines of
credit.  We also invest in mortgage-backed and investment
securities.  We offer a variety of deposit accounts, including demand
deposits, savings and club accounts and certificates of deposit.  We
emphasize personal and efficient service for our customers.  Lincoln
Park Savings is subject to comprehensive regulation and examination by the
Commissioner of Banking and Insurance of the State of New Jersey and the Federal
Deposit Insurance Corporation, and we are a member of the Federal Home Loan Bank
system.
  Market
Area
  We
primarily serve communities located in Morris and Passaic Counties, New
Jersey.  Our primary market area is concentrated in the Borough of
Lincoln Park and in contiguous towns in Morris and Passaic
Counties.  During the past several years, the population and number of
households in Morris and Passaic Counties have increased
moderately.  Our market area is characterized by a high proportion of
single family and two- to four-family houses.  This market has a
diverse economy with a large number of small and medium-size business
establishments as well as corporate headquarters for Fortune 500
companies.  The market area also serves as a bedroom community for
nearby New York City as well as other nearby suburban areas in northern New
Jersey and downstate New York.  The unemployment rate has increased in
our market area but is lower than the national average.  Real estate
values have also declined in our market area, although the decline has been less
severe than in certain other areas.
  Competition
  We face
intense competition within our market area both in making loans and attracting
deposits.  Morris and Passaic Counties have a high concentration of
financial institutions, including large money center and regional banks,
community banks and credit unions.  Some of our competitors offer
products and services that we currently do not offer, such as trust services and
private banking.  As of December 31, 2008 our market share of deposits
represented less than 1% of deposits in each of Morris and Passaic
Counties.
  Our
competition for loans and deposits comes principally from commercial banks,
savings institutions, mortgage banking firms and credit unions.  We
face additional competition for deposits from short-term money market funds,
brokerage firms, mutual funds and insurance companies.  Our primary
focus is to build and develop profitable customer relationships across all lines
of business while maintaining our role as a community bank.
  Recent
Economic and Regulatory Developments
 
 The
United States economy entered a recession in the fourth quarter of
2007.  Throughout the course of 2008 and in the first quarter of 2009,
economic conditions continued to worsen, due in large part to the fallout from
the collapse of the sub-prime mortgage market. While we did not originate or
invest in sub-prime mortgages, our lending business is tied, in large part, to
the housing market.  Declines in home prices, increases in
foreclosures and higher unemployment have adversely affected the credit
performance of real estate-related loans, resulting in the write-down of asset
values. The continuing housing slump also has resulted in reduced demand for the
construction of new housing, further declines in home prices, and increased
delinquencies on residential, commercial and construction mortgage loans,
although our delinquencies have only increased moderately.  Further,
the ongoing concern about the stability of the financial markets in general has
caused many lenders to reduce or cease providing funding to borrowers. These
conditions may also cause a further reduction in loan demand, and increases in
our non-performing assets, net charge-offs and provisions for loan
losses.
  In
response to the financial crises affecting the banking system and financial
markets, the U.S. Congress has passed legislation and the U.S. Treasury has
promulgated programs designed to purchase assets from, provide equity capital
to, and guarantee the liquidity of the financial services
industry.  The U.S. government continues to evaluate and develop
various programs and initiatives designed to stabilize the financial and housing
markets and stimulate the economy, including the U.S. Treasury’s recently
announced financial stability plan and the recently announced foreclosure
prevention program.  There can be no assurance that actions of the
U.S. Government, Federal Reserve and other governmental and regulatory bodies
for the purpose of stabilizing the financial markets will achieve the intended
effect.  In
addition, new laws, regulations, and other regulatory changes will increase our
costs of regulatory compliance and of doing business, and otherwise affect our
operations. Our FDIC insurance premiums have increased, and may continue to
increase, because market developments have significantly depleted the insurance
fund of the FDIC and reduced the ratio of reserves to insured deposits. New
laws, regulations, and other regulatory changes, along with negative
developments in the financial services industry and the credit markets, may
significantly affect the markets in which we do business, the markets for and
value of our loans and investments, and our ongoing operations, costs and
profitability.  See “Regulation” herein for additional
information.
  4
  We own
common stock of the Federal Home Loan Bank of New York. We hold this stock to
qualify for membership in the Federal Home Loan Bank System and to be eligible
to borrow funds under the Federal Home Loan Bank of New York’s advance
program.  There is no market for our Federal Home Loan Bank of New
York common stock.  Recent published reports indicate that certain
member banks of the Federal Home Loan Bank System may be subject to accounting
rules and asset quality risks that could result in materially lower regulatory
capital levels.  In an extreme situation, it is possible that the
capitalization of a Federal Home Loan Bank, including the Federal Home Loan Bank
of New York, could be substantially diminished.  Consequently, we
believe that there is a risk that our investment in Federal Home Loan Bank of
New York common stock could be impaired at some time in the
future.  If this occurs, it would cause our earnings and stockholders’
equity to decrease by the after-tax amount of the impairment
charge.
  Several
Federal Home Loan Banks have suspended the payment of
dividends.  Although the Federal Home Loan Bank of New York has
continued to pay dividends through the fourth quarter of 2008, such dividends
have been reduced and such dividends may be discontinued in the
future.  The failure of the Federal Home Loan Bank of New York to pay
dividends for any quarter will reduce our earnings during that
quarter.
  Lending
Activities
 
 Our
principal lending activity has been the origination of first mortgage loans for
the purchase or refinancing of one- to four-family residential real
property.  We have historically retained all loans that we originate,
although we will occasionally enter into loan participations.  One- to
four-family residential real estate mortgage loans represented $45.9 million, or
61.5% of our total loan portfolio at December 31, 2008.  Consumer
loans totaled $24.7 million, or 33.2% of the total loan portfolio at December
31, 2008, and consisted primarily of home equity loans and home equity lines of
credit.  We also offer multi-family and commercial real estate loans
and to a lesser extent construction loans.  Commercial real estate
loans totaled $2.5 million, or 3.3% of the total loan portfolio at December 31,
2008.  On a limited basis, we originate consumer loans that are not
secured by real estate, including automobile loans, deposit account loans and
unsecured personal loans and lines of credit and small business term loans and
lines of credit.  The present economic difficulties, has led to a
drastic reduction in qualified loan applications.
  5
  Loan Portfolio
Composition.The following
table sets forth the composition of our loan portfolio by type of loan as of the
dates indicated.
  At
      December 31,2008
                  
                  
                  2007Amount
                  
                  
                  Percent
                  
                  
                  Amount
                  
                  
                  Percent(Dollars
      in Thousands)Real estate loans:One-
      to four-family
                  
                  $
                  45,876
                  
                  
                  
                  61.46
                  %
                  
                  $
                  46,584
                  
                  
                  
                  63.71
                  %Multi-family
                  
                  
                  776
                  
                  
                  
                  1.04
                  
                  
                  
                  841
                  
                  
                  
                  1.15Commercial
                  
                  
                  2,465
                  
                  
                  
                  3.30
                  
                  
                  
                  1,721
                  
                  
                  
                  2.35Construction/
      Land
                  
                  
                  70
                  
                  
                  
                  0.09
                  
                  
                  
                  388
                  
                  
                  
                  0.54Total
      real estate loans
                  
                  
                  49,187
                  
                  
                  
                  65.89
                  
                  
                  
                  49,534
                  
                  
                  
                  67.75Consumer loans:Passbook
      or certificate
                  
                  
                  38
                  
                  
                  
                  0.05
                  
                  
                  
                  51
                  
                  
                  
                  0.07Home
      equity lines of credit
                  
                  
                  6,475
                  
                  
                  
                  8.68
                  
                  
                  
                  4,749
                  
                  
                  
                  6.49Home
      equity
                  
                  
                  17,819
                  
                  
                  
                  23.87
                  
                  
                  
                  17,642
                  
                  
                  
                  24.13Automobile
                  
                  
                  168
                  
                  
                  
                  0.23
                  
                  
                  
                  155
                  
                  
                  
                  0.21Personal
      secured
                  
                  
                  123
                  
                  
                  
                  0.17
                  
                  
                  
                  123
                  
                  
                  
                  0.17Personal
      unsecured
                  
                  
                  84
                  
                  
                  
                  0.11
                  
                  
                  
                  175
                  
                  
                  
                  0.24Overdraft
      line of credit
                  
                  
                  29
                  
                  
                  
                  0.04
                  
                  
                  
                  24
                  
                  
                  
                  0.03Total
      consumer loans
                  
                  
                  24,736
                  
                  
                  
                  33.15
                  
                  
                  
                  22,919
                  
                  
                  
                  31.34Commercial
      business loans
                  
                  
                  717
                  
                  
                  
                  0.96
                  
                  
                  
                  666
                  
                  
                  
                  0.91Total
      loans
                  
                  
                  74,640
                  
                  
                  
                  100.00
                  %
                  
                  
                  73,119
                  
                  
                  
                  100.00
                  %Less:Loans
      in process
                  
                  
                  —
                  
                  
                  
                  
                  
                  
                  
                  —Allowance
      for loan losses
                  
                  
                  301
                  
                  
                  
                  
                  
                  
                  
                  187Deferred
      loan (costs), net
                  
                  
                  (143
                  )
                  
                  
                  
                  
                  
                  
                  (153
                  )158
                  
                  
                  
                  
                  
                  
                  
                  34Total
      loans receivable, net
                  
                  $
                  74,482
                  
                  
                  
                  
                  
                  
                  $
                  73,085
 
 6
  Maturity of Loan
Portfolio.  The following table shows the remaining contractual
maturity of our loans at December 31, 2008.  Mortgages which have
adjustable interest rates or that have balloon repayment features are shown as
maturing in the periods during which the contract is due. The table does not
include the effect of possible prepayments or due on sale clauses.
  One-
      to four-family
                      
                      
                      Multi-family
                      
                      
                      Commercial
                          real
      estate
                      
                      
                      Construction/
                          Land
                      
                      
                      Consumer
                      
                      
                      Commercial
      Business
                      
                      
                      Total(In
      Thousands)One
      year or less
                      
                      $
                      147
                      
                      
                      $
                      —
                      
                      
                      $
                      —
                      
                      
                      $
                      —
                      
                      
                      $
                      352
                      
                      
                      $
                      403
                      
                      
                      $
                      902After
      one year:More
      than one to three years
                      
                      
                      54
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      70
                      
                      
                      
                      439
                      
                      
                      
                      50
                      
                      
                      
                      613More
      than three to five years
                      
                      
                      55
                      
                      
                      
                      —
                      
                      
                      
                      170
                      
                      
                      
                      —
                      
                      
                      
                      2,046
                      
                      
                      
                      —
                      
                      
                      
                      2,271More
      than five to ten years
                      
                      
                      3,953
                      
                      
                      
                      —
                      
                      
                      
                      432
                      
                      
                      
                      —
                      
                      
                      
                      3,710
                      
                      
                      
                      —
                      
                      
                      
                      8,095More
      than ten to twenty years
                      
                      
                      9,958
                      
                      
                      
                      105
                      
                      
                      
                      448
                      
                      
                      
                      —
                      
                      
                      
                      12,383
                      
                      
                      
                      264
                      
                      
                      
                      23,158More
      than twenty years
                      
                      
                      31,709
                      
                      
                      
                      671
                      
                      
                      
                      1,415
                      
                      
                      
                      —
                      
                      
                      
                      5,806
                      
                      
                      
                      —
                      
                      
                      
                      39,601Total
      due after one year
                      
                      
                      45,729
                      
                      
                      
                      776
                      
                      
                      
                      2,465
                      
                      
                      
                      70
                      
                      
                      
                      24,384
                      
                      
                      
                      314
                      
                      
                      
                      73,738Total
      due
                      
                      $
                      45,876
                      
                      
                      $
                      776
                      
                      
                      $
                      2,465
                      
                      
                      $
                      70
                      
                      
                      $
                      24,736
                      
                      
                      $
                      717
                      
                      
                      $
                      74,640
 
 Fixed- and
Adjustable-Rate Loan Schedule.The following table
sets forth at December 31, 2008, the dollar amount of all fixed-rate and
adjustable-rate loans due after December 31, 2009.  Adjustable-
and floating-rate loans are included based on contractual
maturities.
  Due
      After December 31, 2009Fixed
                      
                      
                      Adjustable
                      
                      
                      Total(In
      Thousands)One-
      to four-family
                      
                      $
                      34,630
                      
                      
                      $
                      11,099
                      
                      
                      $
                      45,729Multi-family
                      
                      
                      213
                      
                      
                      
                      563
                      
                      
                      
                      776Commercial
      real estate
                      
                      
                      525
                      
                      
                      
                      1,940
                      
                      
                      
                      2,465Construction/Land
                      
                      
                      70
                      
                      
                      
                      —
                      
                      
                      
                      70Consumer
                      
                      
                      17,923
                      
                      
                      
                      6,461
                      
                      
                      
                      24,384Commercial
      business
                      
                      
                      264
                      
                      
                      
                      50
                      
                      
                      
                      314Total
      loans
                      
                      $
                      53,625
                      
                      
                      $
                      20,113
                      
                      
                      $
                      73,738
 
 7
  One- to
Four-Family Residential Loans.Our primary lending
activity consists of the origination of one- to four-family residential mortgage
loans that are primarily secured by properties located in Morris and Passaic
Counties.  At December 31, 2008, approximately $45.9 million, or 61.5%
of our loan portfolio, consisted of one- to four-family residential
loans.  Generally, one- to four-family residential mortgage loans are
originated in amounts up to 80% of the appraised value of the
property.  However, we make first mortgage loans and second mortgage
loans when we are the first lien holder with a loan-to-value ratio up to 85% for
properties secured by one- to four-family residences located in our community
reinvestment designated area.  Private mortgage insurance is not
required on loans with a loan-to-value ratio in excess of 80% in conjunction
with this program.  Fixed-rate loans are originated for terms of 15,
20, 25 and 30 years.  At December 31, 2008, our largest loan secured
by one- to four-family real estate had a principal balance of $698,000 and was
secured by a single-family residence.  This loan was performing in
accordance with its terms.
 
 We
originate our fixed-rate loans in conformity with Freddie Mac
guidelines.  However, our policy has been to retain in portfolio the
fixed-rate loans we originate.
 
 We also
offer adjustable-rate mortgage loans for one- to four-family properties with an
interest rate based on the United States Treasury index.  The interest
rates on these loans adjust annually or every three years from the outset of the
loan or adjust annually after a five-, seven- or ten-year initial fixed rate
period.  We originated $1.9 million of adjustable-rate one- to
four-family residential loans during the year ended December 31,
2008.  Our adjustable rate-mortgage loans provide for maximum rate
adjustments of 200 basis points per adjustment, with a lifetime maximum rate of
600 basis points above the initial interest rate.  Our adjustable rate
mortgage loans amortize over terms of up to 40 years.
 
 Adjustable-rate
mortgage loans decrease the risk associated with changes in market interest
rates by periodically repricing, but involve other risks because, as interest
rates increase, the underlying payments by the borrower increase, thus
increasing the potential for default by the borrower.  At the same
time, the marketability of the underlying collateral may be adversely affected
by higher interest rates.  Upward adjustment of the contractual
interest rate is also limited by the maximum periodic and lifetime interest rate
adjustments permitted by our loan documents, and therefore, is potentially
limited in effectiveness during periods of rapidly rising interest
rates.  At December 31, 2008, $11.1 million or 24.2% of our one- to
four-family residential loans had adjustable rates of interest.
 
 All one-
to four-family residential mortgage loans that we originate include
“due-on-sale” clauses, which give us the right to declare a loan immediately due
and payable in the event that, among other things, the borrower sells or
otherwise disposes of the real property subject to the mortgage and the loan is
not repaid.
 
 Regulations
limit the amount that a savings institution may lend relative to the appraised
value of the real estate securing the loan, as determined by an appraisal of the
property at the time the loan is originated.  For all loans, we
utilize outside independent appraisers approved by the board of
directors.  All borrowers are required to obtain title
insurance.  We also require homeowner’s insurance and fire and
casualty insurance and, where circumstances warrant, flood insurance on
properties securing real estate loans.
 
 Commercial and
Multi-Family Real Estate Loans.At December 31, 2008,
$2.5 million, or 3.3% of our total loan portfolio consisted of commercial real
estate loans secured by mixed use properties (properties combining residential
and commercial space), office buildings and other commercial properties. We have
generally originated adjustable rate commercial real estate loans with interest
rates that adjust every five years based upon the five year Federal Home Loan
Bank of New York advance rate, and which amortize over periods up to 25
years.  The maximum loan-to-value ratio of our commercial real estate
loans is 75%.  We expanded our product base in December of 2006 to
offer commercial real estate loans with three and five year interest rate
adjustments with rates tied to either the Wall Street Journal Prime Rate or the
three or five year treasury securities, which amortize over periods up to 20
years.  We also introduced fixed rate commercial real estate loans
with maximum amortized terms of 15 years and a limited Interest Only Mortgage
with rates adjusting every 6 months tied to the Wall Street Journal Prime, with
a maximum amortized term of 10 years and a maximum loan to value ratio of
60%.  At December 31, 2008, we had 11 commercial real estate loans
with an average outstanding balance of $224,000.  At December 31,
2008, all of our loans secured by commercial real estate were performing in
accordance with their terms. All commercial real estate loans are secured by
properties located within Northern New Jersey.
  8
  Loans
secured by multi-family real estate (other than mixed use properties listed
above) totaled approximately $776,000 or 1.0%, of the total loan portfolio at
December 31, 2008.  Multi-family real estate loans generally are
secured by rental properties, including walk-up apartments.  At
December 31, 2008, we had three multi-family loans with an average principal
balance of $259,000, and the largest multi-family real estate loan had a
principal balance of $563,000.  Two of our multi-family loans
represent participation interests in loans originated by the New Jersey Thrift
Institutions Community Investment Corporation.  These participation
interests are secured by low and moderate income multi-family properties located
in Wayne Township and in Paterson, New Jersey.  As of December 31,
2008, all of our loans secured by multi-family real estate loans were performing
in accordance with their terms.  Multi-family real estate loans
generally are offered with interest rates that adjust after three to five years
and are tied to either the FHLB of New York advance rate, the Prime Rate as
published in the Wall Street Journal or the three or five year treasury
securities. Adjustable rate multi-family loans are originated for terms of up to
20 to 25 years, and fixed rate multi-family loans are originated on a limited
basis and are for terms up to 15 years.
 
 We
consider a number of factors in originating commercial and multi-family real
estate loans.  We evaluate the qualifications and financial condition
of the borrower (including credit history), profitability and expertise, as well
as the value and condition of the mortgaged property securing the
loan.  When evaluating the qualifications of the borrower, we consider
the financial resources of the borrower, the borrower’s experience in owning or
managing similar property and the borrower’s payment history with us and other
financial institutions.  In evaluating the property securing the loan,
the factors we consider include the net operating income of the mortgaged
property before debt service and depreciation, the debt service coverage ratio
(the ratio of net operating income to debt service) to ensure that it is at
least 130% of the monthly debt service, and the ratio of the loan amount to the
appraised value of the mortgaged property.  Commercial and
multi-family real estate loans are originated in amounts up to 75% of the
appraised value of the mortgaged property securing the loan.  All
commercial and multi-family real estate loans are appraised by outside
independent appraisers approved by the board of directors.  Personal
guarantees are often obtained from commercial and multi-family real estate
borrowers.  We generally do not originate commercial and multi-family
real estate loans secured by industrial properties.
 
 Loans
secured by commercial and multi-family real estate generally are larger than
one- to four-family residential loans and involve greater credit
risk.  Commercial and multi-family real estate loans often involve
large loan balances to single borrowers or groups of related
borrowers.  Repayment of these loans depends to a large degree on the
results of operations and management of the properties securing the loans or the
businesses conducted on such property, and may be affected to a greater extent
by adverse conditions in the real estate market or the economy in
general.  Accordingly, the nature of these loans makes them more
difficult for management to monitor and evaluate.
 
 Consumer
Loans.We are authorized to make loans for a variety of
personal and consumer purposes.  As of December 31, 2008, consumer
loans totaled $24.7 million, or 33.2% of our total loan
portfolio.  Our consumer loans consist primarily of home equity loans
and home equity lines of credit.  Our procedure for underwriting
consumer loans includes an assessment of the applicant’s credit history and
ability to meet existing obligations and payments of the proposed loan, as well
as an evaluation of the value of the collateral security, if any.
 
 The
largest component of our consumer loans consists of home equity loans and home
equity lines of credit which totaled $24.3 million, or 32.5% of our total loan
portfolio, as of December 31, 2008.  Home equity loans and home equity
lines of credit are generally made for owner-occupied homes, and are secured by
first or second mortgages on residences.  Home equity loans may have a
term of up to 20 years, and are originated at a fixed rate of
interest.  Home equity lines of credit are revolving lines of credit
and have adjustable rates of interest.  We offer home equity loans and
lines of credit up to $350,000.  At December 31, 2008, our home equity
loans had an average balance of $80,000 and our home equity lines of credit had
an average balance of $43,000.  Currently home equity loans and lines
of credit have a maximum loan to value ratio of 75% (including any senior lien
on the collateral property), although we will originate such loans with a
loan-to-value ratio up to 85% within our community reinvestment designated area,
provided Lincoln Park Savings has the first lien on the property securing the
loan.  We currently offer home equity lines of credit with a draw
period of 10 years and a repayment period of 20 years, and generally at rates
tied to the prime interest rate as published in The Wall Street
Journal.
  9
  Automobile
loans accounted for $168,000 of our consumer loans at December 31,
2008.  Our automobile loans generally have terms that do not exceed
fiveyears and
carry a fixed rate of interest.  Generally, automobile loans are made
in amounts up to 85% of the purchase price on new vehicles, and up to 80% of the
National Automobile Dealers Association retail value on used
vehicles.  Collision and comprehensive insurance is required on all
automobile loans.  We require a lien on the title to the vehicle
securing the loan.
 
 We make
loans secured by deposit accounts up to 90% of the amount of the available
deposit balance.  We also make personal loans and overdraft lines of
credit that are not secured by any collateral.  We have the authority
to make other consumer loans that may or may not be secured.
 
 Consumer
loans generally entail greater risk than residential loans, particularly in the
case of loans that are unsecured or are secured by assets that tend to
depreciate in value, such as automobiles.  In these cases, repossessed
collateral for a defaulted consumer loan may not provide an adequate source of
repayment for the outstanding loan, and the remaining value often does not
warrant further substantial collection efforts against the
borrower.
 
 Construction/Land
Loans.At December 31,
2008, we had no construction loans.  At December 31, 2008, we had
$70,000 in land loans. We currently offer adjustable-rate and fixed-rate
residential construction loans for the construction of owner-occupied,
single-family residences.These loans generally
are offered to borrowers who have a contract for construction of a single family
residence on property they own at the time of the loan
origination.  Construction loans generally have terms of nine months
to one year, but typically are structured to become permanent mortgage loans
once construction is completed.  During the construction period,
construction loans require the payment of interest only.  Construction
loans will generally be made in amounts up to 80% of the appraisal value of the
property.  Funds are disbursed in accordance with a schedule
reflecting the completion of portions of the project.
 
 Construction
loans generally have greater credit risk than one- to four-family residential
mortgage loans.  The risk of loss on a construction loan depends upon
the accuracy of the initial estimate of the value of the property at completion
of construction compared to the estimated cost of construction.  If
the estimated cost of construction is inaccurate, we may have to advance funds
beyond the original amount committed in order to protect the value of the
property.
 
 Other
Loans.We
have authority to make secured and unsecured commercial business loans, and have
closed four commercial loans to local small businesses.  We anticipate
that commercial business lines of credit, as well as other commercial business
loans, will continue to grow over the next several years as we increase our
marketing of these products.  At December 31, 2008, our largest
business line of credit consisted of a $810,000 loan secured by various pieces
of property, with an outstanding balance of $229,000 at December 31,
2008.
 
 Origination and
Servicing of Loans.Loan origination activities are
concentrated in our primary market area of Morris and Passaic Counties, New
Jersey.  New loans are generated primarily from walk-in customers,
customer referrals, and other parties with whom we do business, and from the
efforts of directors and employees and advertising.  Loan applications
are underwritten and processed at our main office.  We service all
loans that we originate.
  We have
not been an active purchaser or seller of loans.  In 2003, we sold a
participation interest in a portion of a loan where the total loan principal
exceeded our loans to one borrower limit.  We retained the servicing
of the loan.  Similarly, we will occasionally purchase a participation
interest in loans originated by other financial institutions.
  10
  The
following table shows our loan origination, purchases, sales and repayment
activities for the periods indicated.
  Years
      Ended December 31,2008
                    
                    
                    2007(In
      Thousands)Beginning
      of period
                    
                    $
                    73,085
                    
                    
                    $
                    67,451Originations by Type:Real
      estate mortgage:One-
      to four-family
                    
                    
                    4,399
                    
                    
                    
                    7,270Multi-family
                    
                    
                    —
                    
                    
                    
                    —Commercial
                    
                    
                    895
                    
                    
                    
                    —Construction
                    
                    
                    350
                    
                    
                    
                    —Consumer:Passbook
      or certificate
                    
                    
                    24
                    
                    
                    
                    115Home
      equity lines of credit
                    
                    
                    4,341
                    
                    
                    
                    4,320Home
      equity
                    
                    
                    5,000
                    
                    
                    
                    6,572Automobile
                    
                    
                    88
                    
                    
                    
                    75Personal
      secured/unsecured
                    
                    
                    19
                    
                    
                    
                    81Overdraft
      line of credit
                    
                    
                    132
                    
                    
                    
                    110Commercial
      Business
                    
                    
                    716
                    
                    
                    
                    1,000Total
      loans originated
                    
                    
                    15,964
                    
                    
                    
                    19,543Purchases:Total
      purchases
                    
                    
                    —
                    
                    
                    
                    —Sales:Total
      sales
                    
                    
                    —
                    
                    
                    
                    —Principal
      repayments
                    
                    
                    14,422
                    
                    
                    
                    13,822Total
      reductions
                    
                    
                    14,422
                    
                    
                    
                    13,822Decrease
      in other items, net
                    
                    
                    (145
                    )
                    
                    
                    (87
                    )Net
      increase
                    
                    
                    1,397
                    
                    
                    
                    5,634Ending
      balance
                    
                    $
                    74,482
                    
                    
                    $
                    73,085
 
 Loan Approval
Procedures and Authority.  The loan approval process is
intended to assess the borrower’s ability to repay the loan, the viability of
the loan, and the adequacy of the value of the property that will secure the
loan.  To assess the borrower’s ability to repay, we review the
employment and credit history and information on the historical and projected
income and expenses of mortgagors.  All loans up to $200,000 may be
approved by certain of our officers pursuant to delegated loan approval
authority or by our Loan Committee. Our Loan Committee consists of two
directors, the President, and the Vice President of Lending.  The
President and/or one Director and Vice President of Lending have a combined
lending authority up to $100,000.  The Vice President of Lending and
an Assistant Vice President have a combined lending authority of up to
$50,000.  Three of the four members of the Loan Committee may approve
loans up to $200,000.  All loans in excess of $200,000 must be
approved by the board of directors.  In addition, the board of
directors ratifies all loans approved by management.
  We
require appraisals of all real property securing loans.  Appraisals
are performed by independent licensed appraisers.  All appraisers are
approved by the board of directors annually.  We require fire and
extended coverage insurance in amounts at least equal to the principal amount of
the loan.
  Non-performing
and Problem Assets
  Lincoln
Park Savings commences collection efforts when a loan becomes 11 days past due
with system generated reminder notices. Subsequent late charge and delinquent
notices are issued and the account is monitored on a regular basis thereafter.
Personal, direct contact with the borrower is attempted early in the collection
process as a courtesy reminder and later to determine the reason for the
delinquency and to safeguard Lincoln Park Savings’ collateral. When a loan is
more than 60 days past due, the credit file is reviewed and, if deemed
necessary, information is updated or confirmed and collateral
re-evaluated.  We make every effort to contact the borrower and
develop a plan of repayment to cure the delinquency.  All loans 30
days past due and greater are reported to the board of directors. Upon direction
of the board of directors, if no repayment plan is in process, the file is
referred to counsel for the commencement of foreclosure or other collection
efforts.
  11
  Loans are
placed on non-accrual status when they are contractually 90 days or more
delinquent, unless management’s review of each specific loan is fully
collectible.  When loans are placed on non-accrual status, unpaid
accrued interest is fully reserved, and further income is recognized only to the
extent received.  Loans are removed from non-accrual status when their
delinquency status is reduced to less than 90 days.
  Non-performing
Loans.At
December 31, 2008, $681,000 or 0.91% of our total loans were non-performing
loans.
  Non-performing
Assets.  The table below sets forth the amounts and categories
of our non-performing assets at the dates indicated.  During the
periods presented, we did not have any troubled debt
restructurings.
  At
      December 31,2008
                      
                      
                      2007(Dollars
      in Thousands)Non-accruing loans:One-
      to four-family
                      
                      $
                      205
                      
                      
                      $
                      246Multi-family
                      
                      
                      —
                      
                      
                      
                      —Commercial
      real estate
                      
                      
                      —
                      
                      
                      
                      —Construction
                      
                      
                      —
                      
                      
                      
                      —Consumer
      – home equity loans/lines of credit
                      
                      
                      204
                      
                      
                      
                      185Consumer
      – other
                      
                      
                      —
                      
                      
                      
                      —Commercial
      business
                      
                      
                      —
                      
                      
                      
                      —Total
                      
                      
                      409
                      
                      
                      
                      431Accruing loans delinquent 90 days or
      more:One-
      to four-family
                      
                      
                      41
                      
                      
                      
                      —Multi-family
                      
                      
                      —
                      
                      
                      
                      —Commercial
      real estate
                      
                      
                      —
                      
                      
                      
                      —Construction
                      
                      
                      —
                      
                      
                      
                      —Consumer
      – home equity loans/lines of credit
                      
                      
                      —
                      
                      
                      
                      —Consumer
      – other
                      
                      
                      2
                      
                      
                      
                      21Commercial
      business
                      
                      
                      229
                      
                      
                      
                      —Total
                      
                      
                      272
                      
                      
                      
                      21Foreclosed
      assets
                      
                      
                      —
                      
                      
                      
                      ——Total
      non-performing assets
                      
                      $
                      681
                      
                      
                      $
                      452Total
      as a percentage of total assets
                      
                      
                      0.50
                      %
                      
                      
                      0.44
                      %Total
      as a percent of total loans
                      
                      
                      0.91
                      %
                      
                      
                      0.62
                      %Allowance
      for loan loss related to non-performing loans
                      
                      $
                      147
                      
                      
                      $
                      39
 
 For the
years ended December 31, 2008 and 2007, gross interest income which would have
been recorded had our non-accruing loans been current in accordance with their
original terms amounted to approximately $28,000 and $24,000,
respectively.  Interest income recognized on these loans for the years
ended December 31, 2008 and 2007, was approximately $1,000 and $10,000,
respectively.
  Other Loans of
Concern.At December 31, 2008, we had nine single-family loans
with an aggregate balance of $1.9 million, and no consumer loans, with respect
to which known information about the possible credit problems of the borrowers
or the cash flows of the security properties have caused management to have some
doubts as to the ability of the borrowers to comply with repayment terms of the
loans and which may result in such loans being classified as
non-performing.  These loans, which are over 30 days but less than 90
days delinquent, are placed on Lincoln Park Savings’ watch list and are closely
monitored.
  12
  Delinquent
Loans. The following table sets forth our loan delinquencies by type, by
amount and by percentage of type at the dates indicated.
 
 At
      December 31, 2008
                
                
                At
      December 31, 200760-89
      Days
                
                
                90
      Days or More
                
                
                60-89
      Days
                
                
                90
      Days or MoreNumber
                    of
      Loans
                
                
                Principal
                    Balance
                    of
      Loans
                
                
                Number
                    of
      Loans
                
                
                Principal
                    Balance
                    of
      Loans
                
                
                Number
                    of
      Loans
                
                
                Principal
                    Balance
                    of
      Loans
                
                
                Number
                    of
      Loans
                
                
                Principal
                    Balance
                    of
      Loans(Dollars
      in Thousands)Real estate mortgage:One-
      to four-family
                
                
                2
                
                
                $
                649
                
                
                
                2
                
                
                $
                246
                
                
                
                —
                
                
                $
                —
                
                
                
                2
                
                
                $
                246Multi-
      family
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Commercial
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Construction
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Total
      real estate loans
                
                
                2
                
                
                
                649
                
                
                
                2
                
                
                
                246
                
                
                
                —
                
                
                
                —
                
                
                
                2
                
                
                
                246Consumer:Passbook
      or certificate
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Home
      equity lines of credit
                
                
                1
                
                
                
                49
                
                
                
                2
                
                
                
                204
                
                
                
                —
                
                
                
                —
                
                
                
                1
                
                
                
                185Home
      equity
                
                
                1
                
                
                
                322
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Automobile
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Personal
      unsecured
                
                
                —
                
                
                
                —
                
                
                
                1
                
                
                
                2
                
                
                
                —
                
                
                
                —
                
                
                
                2
                
                
                
                22Overdraft
      line of credit
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Total
      consumer loans
                
                
                2
                
                
                
                371
                
                
                
                3
                
                
                
                206
                
                
                
                —
                
                
                
                —
                
                
                
                3
                
                
                
                207Commercial  business
                
                
                —
                
                
                
                —
                
                
                
                1
                
                
                
                229
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Total
      delinquent loans
                
                
                4
                
                
                $
                1,020
                
                
                
                6
                
                
                $
                681
                
                
                
                —
                
                
                $
                —
                
                
                
                5
                
                
                $
                453Delinquent
      loans to total loans
                
                
                
                
                
                
                1.37
                %
                
                
                
                
                
                
                0.91
                %
                
                
                
                
                
                
                —
                %
                
                
                
                
                
                
                0.62
                %
  13
  Classified
Assets.Federal and state
regulations and our Asset Classification Policy provide that loans and other
assets of lesser quality should be classified as “substandard,” “doubtful” or
“loss” assets.  An asset is considered “substandard” if it is
inadequately protected by the current net worth and paying capacity of the
obligor or of the collateral pledged, if any. “Substandard” assets include those
characterized by the “distinct possibility” that we will sustain “some loss” if
the deficiencies are not corrected.  Assets classified as “doubtful”
have all of the weaknesses inherent in those classified “substandard,” with the
added characteristic that the weaknesses present make “collection or liquidation
in full,” on the basis of currently existing facts, conditions, and values,
“highly questionable and improbable.” Assets classified as “loss” are those
considered “uncollectible” and of such little value that their continuance as
assets without the establishment of a specific loss reserve is not
warranted.  We classify an asset as “special mention” if the asset has
a potential weakness that warrants management’s close
attention.  While such assets are not impaired, management has
concluded that if the potential weakness in the asset is not addressed, the
value of the asset may deteriorate, adversely affecting the repayment of the
asset.
  We are
required to establish general allowances for loan losses in an amount deemed
prudent by management for loans classified substandard or doubtful, as well as
for other problem loans.  General allowances represent loss allowances
which have been established to recognize the inherent losses associated with
lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets.  When we classify problem
assets as “loss,” we are required either to establish a specific allowance for
losses equal to 100% of the amount of the asset so classified or to charge off
such amount.  Our determination as to the classification of our assets
and the amount of our valuation allowances is subject to review by federal and
state regulators which can order the establishment of additional general or
specific loss allowances.
 
 On the
basis of management’s review of our assets, at December 31, 2008 we had
classified assets totaling $732,000, consisting of $732,000 classified as
substandard and $0 classified as doubtful.  The substandard assets
consist of three non-accrual loans totaling $409,000, secured by single family
residential properties, two loans totaling $270,000 which were delinquent over
90 days and still accruing interest, one secured by single-family residential
property and the other secured by various pieces of property, and one corporate
bond that has sub-investment grade rating.  At December 31, 2008, none
of our assets were classified as loss.
  At
December 31, 2008, we had classified $1.9 million of our mortgage and consumer
loans as special mention.  These loans consist of seven mortgage loans
and two home equity loans secured by single-family residential
property.
 
 The loan
portfolio is reviewed on a regular basis to determine whether any loans require
classification in accordance with applicable regulations.  Not all
classified assets constitute non-performing assets.
 
 Allowance
for Loan Losses
 
 Our allowance for loan losses is
maintained at a level necessary to absorb loan losses which are both probable
and reasonably estimable.  Management, in determining the allowance
for loan losses, considers the losses inherent in its loan portfolio and changes
in the nature and volume of loan activities, along with general economic and
real estate market conditions.  We utilize a two-tier approach: (1)
identification of impaired loans and establishment of specific loss allowances
on such loans; and (2) establishment of general valuation allowances on the
remainder of our loan portfolio.  We maintain a loan review system,
which allows for a periodic review of our loan portfolio and the early
identification of potential impaired loans.  Such system takes into
consideration, among other things, delinquency status, size of loans, type and
market value of collateral and financial condition of the
borrowers.  Specific loan loss allowances are established for
identified losses based on a review of such information.  A loan
evaluated for impairment is considered to be impaired when, based on current
information and events, it is probable that we will be unable to collect all
amounts due according to the contractual terms of the loan
agreement.  All loans identified as impaired are evaluated
independently.  We do not aggregate such loans for evaluation
purposes.  Loan impairment is measured based on the present value of
expected future cash flows discounted at the loan’s effective interest rate or,
as a practical expedient, at the loan’s observable market price or the fair
value of the collateral if the loan is collateral dependent.  General
loan loss allowances are based upon a combination of factors including, but not
limited to, actual loan loss experience, composition of the loan portfolio,
current economic conditions and management’s judgment.  The allowance
is increased through provisions charged against current earnings and recoveries
of previously charged-off loans.  Loans which are determined to be
uncollectible are charged against the allowance.  While management
uses available information to recognize probable and reasonably estimable loan
losses, future loss provisions may be necessary based on changing economic
conditions.  The Company has changed its policy to reflect payments
received on impaired loans that are subject to specific loan loss allowances to
be applied to principal first and then subsequently to interest.  For
all other loans, payments received will continue to be applied first to interest
and then to principal.  The allowance for loan losses as of December
31, 2008 is maintained at a level that represents management’s best estimate of
losses inherent in the loan portfolio, and such losses were both probable and
reasonably estimable. This estimation is inherently subjective as it requires
estimates and assumptions that are susceptible to significant revisions as more
information becomes available. Although we believe that we have established the
allowance at a level to absorb probable and estimable losses, future additions
to the allowance for loan losses may be necessary if economic and other
conditions in the future differ substantially from the current operating
environment.
  14
  In addition, federal and state
regulators, as an integral part of their examination process, periodically
review our allowance for loan losses.  Such agencies may require that
we recognize additions to the allowance based on their judgments of information
available to them at the time of their examination.
 
 Allowance for
Loan Losses.  The following
table analyzes changes in the allowance for the periods presented.  We
had a recovery of $1,000 for the period ended December 31, 2008, and no
recoveries for the period ended December 31, 2007.
 
 At
      or For the Years Ended
                        December
      31,2008
                    
                    
                    2007(Dollars
      in Thousands)Balance
      at beginning of period
                    
                    $
                    187
                    
                    
                    $
                    136Total
      charge-offs
                    
                    
                    (22
                    )
                    
                    
                    —Total
      recoveries
                    
                    
                    1
                    
                    
                    
                    —Net
      charge-offs
                    
                    
                    (21
                    )
                    
                    
                    —Provision
      charged to operations
                    
                    
                    135
                    
                    
                    
                    51Ending
      balance
                    
                    $
                    301
                    
                    
                    $
                    187Ratio
      of non-performing assets to total assets at the end of
    period
                    
                    
                    0.50
                    %
                    
                    
                    0.38
                    %Ratio
      of net charge-offs during the period to average loans outstanding during
      the period
                    
                    
                    0.03
                    %
                    
                    
                    0.00
                    %Ratio
      of net charge-offs during the period to non-performing assets at the
      beginning of the period
                    
                    
                    4.65
                    %
                    
                    
                    0.00
                    %
  15
  Allocation of
Allowance for Loan Losses.The following table
presents an analysis of the allocation of the allowance for loan losses at the
dates indicated.  The allocation of the allowance to each category is
not necessarily indicative of future loss in any particular category and does
not restrict the use of the allowance to absorb losses in other
categories.
 
 At
      December 31,2008
                
                
                2007Amount
      of
                    Loan
      Loss Allowance
                
                
                Loan
                    Amounts
                    by
                    Category
                
                
                Percent
                    of
      Loans
                    in
      Each
                    Category
                    to
      Total
                    Loans
                
                
                Amount
      of
                    Loan
      Loss Allowance
                
                
                Loan
                    Amounts
                    by
                    Category
                
                
                Percent
                    of
      Loans
                    in
      Each
                    Category
                    to
      Total
                    Loans(Dollars
      in Thousands)Real estate mortgage:One-
      to four-family
                
                $
                127
                
                
                $
                45,876
                
                
                
                61.46
                %
                
                $
                91
                
                
                $
                46,584
                
                
                
                63.71
                %Multi-
      family
                
                
                4
                
                
                
                776
                
                
                
                1.04
                
                
                
                4
                
                
                
                841
                
                
                
                1.15Commercial
                
                
                12
                
                
                
                2,465
                
                
                
                3.30
                
                
                
                9
                
                
                
                1,721
                
                
                
                2.35Construction/Land
                
                
                —
                
                
                
                70
                
                
                
                0.09
                
                
                
                2
                
                
                
                388
                
                
                
                0.53Consumer:Passbook
      or certificate
                
                
                —
                
                
                
                38
                
                
                
                0.05
                
                
                
                —
                
                
                
                51
                
                
                
                0.07Home
      equity
                
                
                45
                
                
                
                17,819
                
                
                
                23.87
                
                
                
                44
                
                
                
                17,642
                
                
                
                24.13Home
      equity lines of credit
                
                
                105
                
                
                
                6,475
                
                
                
                8.68
                
                
                
                30
                
                
                
                4,749
                
                
                
                6.49Automobile
                
                
                2
                
                
                
                168
                
                
                
                0.23
                
                
                
                1
                
                
                
                155
                
                
                
                0.21Personal
      secured/unsecured
                
                
                1
                
                
                
                207
                
                
                
                0.28
                
                
                
                3
                
                
                
                298
                
                
                
                0.41Overdraft
      line of credit
                
                
                —
                
                
                
                29
                
                
                
                0.04
                
                
                
                —
                
                
                
                24
                
                
                
                0.03Commercial
      Business
                
                
                5
                
                
                
                717
                
                
                
                0.96
                
                
                
                3
                
                
                
                666
                
                
                
                0.91Total
                
                $
                301
                
                
                $
                74,640
                
                
                
                100.00
                %
                
                $
                187
                
                
                $
                73,119
                
                
                
                100.00
                %
 
 Each
quarter, management evaluates the total balance of the allowance for loan losses
based on several factors that are not loan specific, but are reflective of the
inherent losses in the loan portfolio.  This process includes, but is
not limited to, a periodic review of loan collectibility in light of historical
experience, the nature and volume of loan activity, conditions that may affect
the ability of the borrower to repay, the underlying value of collateral, if
applicable, and economic conditions in our immediate market
area.  First, we group loans by delinquency status.  All
loans 90 days or more delinquent are evaluated individually, based primarily on
the value of the collateral securing the loan.  Specific loss
allowances are established as required by this analysis.  All loans
for which a specific loss allowance has not been assigned are segregated by type
and a loss allowance is established by using loss experience data and
management’s judgment concerning other matters it considers
significant.  The allowance is allocated to each category of loan
based on the results of the above analysis.
 
 Investments
 
 Our
investment portfolio at December 31, 2008 consisted of $7.8 million in United
States Government agency securities, $502,000 of corporate bonds, $565,000 of
municipal bonds, $731,000 in mortgage-backed securities, $170,000 in equity
securities, $43.9 million in collateralized mortgage obligations,
$2.4 million in Federal Home Loan Bank of New York stock and $2.7 million
in other interest-earning assets, consisting of regular and term deposits at
other financial institutions.  Our investment policy objectives are to
maintain liquidity within the guidelines established by the board of
directors.  Our policy is to invest only in securities with an
investment grade rating at the time of purchase however equity securities do not
have a rating.  In addition, the market value of all securities and
the credit rating of all non-U.S. Government issues are monitored monthly to
determine whether any other than temporary losses exist.
 
 CMOs are
debt securities issued by a special-purpose entity that aggregates pools of
mortgages and mortgage-backed securities and creates 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.
 
 16
 
 We also
invest in mortgage-backed securities, all of which are guaranteed by the United
States Government or agencies or government sponsored enterprises.  At
December 31, 2008, our mortgage-backed securities portfolio totaled $731,000, or
0.53% of total assets, and consisted of $341,000 in fixed-rate securities, and
$390,000 in adjustable rate securities guaranteed by Ginnie Mae, Fannie Mae or
Freddie Mac.
 
 Investments
in mortgage-backed securities and CMOs involve a risk that actual payments will
be greater or less than the prepayment rate estimated at the time of purchase,
which may require adjustments to the amortization of any premium or acceleration
of any discount relating to such interests, thereby affecting the net yield on
our securities.  We periodically review current prepayment speeds to
determine whether prepayment estimates require modification that could cause
amortization or accretion adjustments.
 
 Although
corporate bonds may offer higher yields than U.S. Government or agency
securities of comparable duration, corporate bonds also have a higher risk of
default due to possible adverse changes in the credit-worthiness of the
issuer.  At December 31, 2008, we recorded $198,000 in
other-than-temporary impairment losses on an automobile related
bond.  This corporate bond will mature in January 2011 and has not yet
missed an interest payment.  Our corporate bond portfolio (other than
the automobile related bond that is carried at its $52,000 fair market value as
of December 31, 2008) includes one $250,000 AAA/AAA bond that matures on May 30,
2018 and has an unrealized loss of $9,000 as of December 31, 2008, and one
$200,000 AA3/A bond that matures on March 31, 2013 and has an unrealized loss of
$58,000 as of December 31, 2008.  Both corporate bond positions are
“held to maturity”.
 
 All of
our $7.8 million of U.S. Government agency securities at December 31, 2008 were
“step-up” securities.  These securities require the issuer to pay
increased interest rates in the future according to pre-determined schedules and
formulas.  Our portfolio currently contains securities that provide
for various interest rate increases at various repricing
intervals.  At December 31, 2008, the repricing periods ranged from
every year to every five years, and the interest rate adjustments ranged from
1/2 of 1% to 1% per adjustment. In addition, these securities are callable at
the option of the issuers.  Although designed to protect the investor
in a rising rate environment, the rate increases on these securities may not
keep pace with rising interest rates in a rapidly rising interest rate
environment. In addition, because of the call feature, the securities may be
called by the issuer at a time when Lincoln Park Savings is not able to reinvest
the proceeds of the called security at a rate comparable to what it was earning
on the security.
 
 At
December 31, 2008, equity securities totaled $170,000.  All equity
positions that had a greater than 5% unrealized loss for 12 or more consecutive
months as of 12/31/08 have been written down to fair market value at December
31, 2008.  The Company recorded other-than-temporary impairment losses
of $262,000 in the available for sale equity securities portfolio for the year
ended December 31, 2008.  These impairments were the result of writing
down two common equity securities for $20,000 and seven closed end mutual funds
for $242,000.  The remaining six equity positions have a total
unrealized loss $28,000 as of December 31, 2008.   While
management has concluded, based upon its evaluations of each security, that
these six securities were not other-than-temporarily impaired as of December 31,
2008, ongoing re-assessments will be made on a quarterly basis.
  17
  The
following table sets forth the carrying value of our securities portfolio at the
dates indicated.  The carrying value represents fair value for
available for sale securities, and amortized cost for held to maturity
securities.
 
 At
      December 31,2008
                  
                  
                  2007Carrying
                      Value
                  
                  
                  %
      of Total
                  
                  
                  Carrying
                      Value
                  
                  
                  %
      of Total(Dollars
      in Thousands)Investment
      securities available for sale:U.S.
      Government agencies
                  
                  $
                  —
                  
                  
                  
                  —
                  %
                  
                  $
                  1,000
                  
                  
                  
                  3.94
                  %Mortgage-backed
      securities
                  
                  
                  51
                  
                  
                  
                  0.09
                  
                  
                  
                  62
                  
                  
                  
                  0.24Collateralized
      mortgage obligations
                  
                  
                  9,954
                  
                  
                  
                  16.92
                  
                  
                  
                  —
                  
                  
                  
                  —Equity
      Securities
                  
                  
                  170
                  
                  
                  
                  0.29
                  
                  
                  
                  459
                  
                  
                  
                  1.81Total
                  
                  
                  10,175
                  
                  
                  
                  17.30
                  
                  
                  
                  1,521
                  
                  
                  
                  5.99Investment
      securities held to maturity:U.S.
      Government agencies
                  
                  
                  7,848
                  
                  
                  
                  13.34
                  
                  
                  
                  14,749
                  
                  
                  
                  58.13Corporate
      bonds
                  
                  
                  502
                  
                  
                  
                  0.85
                  
                  
                  
                  1,054
                  
                  
                  
                  4.15Municipal
      bonds
                  
                  
                  565
                  
                  
                  
                  0.96
                  
                  
                  
                  566
                  
                  
                  
                  2.23Mortgage-backed
      securities
                  
                  
                  680
                  
                  
                  
                  1.16
                  
                  
                  
                  796
                  
                  
                  
                  3.14Collateralized
      mortgage obligations
                  
                  
                  33,929
                  
                  
                  
                  57.67
                  
                  
                  
                  4,077
                  
                  
                  
                  16.07Total
                  
                  
                  43,524
                  
                  
                  
                  73.98
                  
                  
                  
                  21,242
                  
                  
                  
                  83.72Other
      interest-earning assets:Interest-earning
      deposits
                  
                  
                  2,728
                  
                  
                  
                  4.64
                  
                  
                  
                  1,121
                  
                  
                  
                  4.42Term
      deposits
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  295
                  
                  
                  
                  1.16FHLB
      stock
                  
                  
                  2,403
                  
                  
                  
                  4.08
                  
                  
                  
                  1,195
                  
                  
                  
                  4.715,131
                  
                  
                  
                  8.72
                  
                  
                  
                  2,611
                  
                  
                  
                  10.29Total
                  
                  $
                  58,830
                  
                  
                  
                  100.00
                  %
                  
                  $
                  25,374
                  
                  
                  
                  100.00
                  %
 
 The
following table sets forth the composition of our mortgage-backed securities and
collateralized mortgage obligations at the dates indicated.
 
 At
      December 31,2008
                  
                  
                  2007Book
      Value
                  
                  
                  %
      of Total
                  
                  
                  Book
      Value
                  
                  
                  %
      of Total(Dollars
      in Thousands)Mortgage-backed
      securities held to maturity:Ginnie
      Mae
                  
                  $
                  303
                  
                  
                  
                  44.56
                  %
                  
                  $
                  363
                  
                  
                  
                  45.60
                  %Freddie
      Mac
                  
                  
                  11
                  
                  
                  
                  1.62
                  
                  
                  
                  12
                  
                  
                  
                  1.51Fannie
      Mae
                  
                  
                  366
                  
                  
                  
                  53.82
                  
                  
                  
                  421
                  
                  
                  
                  52.89Total
                  
                  $
                  680
                  
                  
                  
                  100.00
                  %
                  
                  $
                  796
                  
                  
                  
                  100.00
                  %
 
 At
      December 31,2008
                  
                  
                  2008Book
      Value
                  
                  
                  %
      of Total
                  
                  
                  Book
      Value
                  
                  
                  %
      of Total(Dollars
      in Thousands)Mortgage-backed
      securities available for sale:Ginnie
      Mae
                  
                  $
                  51
                  
                  
                  
                  100.00
                  %
                  
                  $
                  62
                  
                  
                  
                  100.00
                  %Freddie
      Mac
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Fannie
      Mae
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Total
                  
                  $
                  51
                  
                  
                  
                  100.00
                  %
                  
                  $
                  62
                  
                  
                  
                  100.00
                  %
 
 At
      December 31,2008
                  
                  
                  2007Book
      Value
                  
                  
                  %
      of Total
                  
                  
                  Book
      Value
                  
                  
                  %
      of Total(Dollars
      in Thousands)Other
      mortgage-backed securities held to maturity:Collateralized
      mortgage obligations issued or guaranteed by FNMA, FHLMC, or
      GNMA.
                  
                  $
                  32,879
                  
                  
                  
                  96.91
                  %
                  
                  $
                  2,992
                  
                  
                  
                  73.39
                  %All
      other collateralized mortgage obligations
                  
                  
                  1,050
                  
                  
                  
                  3.09
                  
                  
                  
                  1,085
                  
                  
                  
                  26.61Total
                  
                  $
                  33,929
                  
                  
                  
                  100.00
                  %
                  
                  $
                  4,077
                  
                  
                  
                  100.00
                  %
  18
  The
composition and maturities of the investment securities portfolio as of December
31, 2008, excluding Federal Home Loan Bank of New York stock, are indicated in
the following table.  Maturities are based upon on the final
contractual payment dates, and do not reflect the impact of prepayments or early
redemptions that may occur.  State and municipal securities yields
have not been adjusted to a tax-equivalent basis.
 
 At
      December 31, 2008
                  
                  
                  Total
      Investment SecuritiesLess
      than 1 Year
                  
                  
                  1
      to 5 Years
                  
                  
                  5
      to 10 Years
                  
                  
                  Over
      10 YearsAmortized
      Cost
                  
                  
                  Weighted
      Average Interest Rate
                  
                  
                  Amortized
      Cost
                  
                  
                  Weighted
      Average Interest Rate
                  
                  
                  Amortized
      Cost
                  
                  
                  Weighted
      Average Interest Rate
                  
                  
                  Amortized
      Cost
                  
                  
                  Weighted
      Average Interest Rate
                  
                  
                  Amortized
                      Cost
                  
                  
                  Weighted
      Average Interest Rate
                  
                  
                  Market
      Value(Dollars
      in Thousands)Available
      for Sale:Equity
                  
                  $
                  198
                  
                  
                  
                  —
                  %
                  
                  $
                  —
                  
                  
                  
                  —
                  %
                  
                  $
                  —
                  
                  
                  
                  —
                  %
                  
                  $
                  —
                  
                  
                  
                  —
                  %
                  
                  $
                  198
                  
                  
                  
                  —
                  %
                  
                  $
                  170Collateralized
      Mortgage Obligations
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  9,939
                  
                  
                  
                  5.82
                  
                  
                  
                  9,939
                  
                  
                  
                  5.82
                  
                  
                  
                  9,954Mortgage-backed
      securities
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  52
                  
                  
                  
                  5.23
                  
                  
                  
                  52
                  
                  
                  
                  5.23
                  
                  
                  
                  51Total
      available for sale
                  
                  $
                  198
                  
                  
                  
                  —
                  %
                  
                  $
                  —
                  
                  
                  
                  —
                  %
                  
                  $
                  —
                  
                  
                  
                  —
                  %
                  
                  $
                  9,991
                  
                  
                  
                  5.82
                  %
                  
                  $
                  10,189
                  
                  
                  
                  5.70
                  %
                  
                  $
                  10,175Held
      to Maturity:U.S.
      Government agencies
                  
                  $
                  —
                  
                  
                  
                  —
                  %
                  
                  $
                  —
                  
                  
                  
                  —
                  %
                  
                  $
                  1,850
                  
                  
                  
                  6.12
                  %
                  
                  $
                  5,998
                  
                  
                  
                  5.73
                  %
                  
                  $
                  7,848
                  
                  
                  
                  5.82
                  %
                  
                  $
                  7,844Corporate
      bonds
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  252
                  
                  
                  
                  5.66
                  
                  
                  
                  250
                  
                  
                  
                  6.00
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  502
                  
                  
                  
                  5.83
                  
                  
                  
                  434Municipal
      bonds
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  335
                  
                  
                  
                  4.08
                  
                  
                  
                  230
                  
                  
                  
                  4.23
                  
                  
                  
                  565
                  
                  
                  
                  4.14
                  
                  
                  
                  568Collateralized
      Mortgage Obligations
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  33,939
                  
                  
                  
                  5.89
                  
                  
                  
                  33,929
                  
                  
                  
                  5.89
                  
                  
                  
                  33,668Mortgage-backed
      securities
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  11
                  
                  
                  
                  8.39
                  
                  
                  
                  669
                  
                  
                  
                  5.04
                  
                  
                  
                  680
                  
                  
                  
                  5.09
                  
                  
                  
                  687Total
      held to maturity
                  
                  $
                  —
                  
                  
                  
                  —
                  %
                  
                  $
                  252
                  
                  
                  
                  5.66
                  %
                  
                  $
                  2,446
                  
                  
                  
                  5.84
                  %
                  
                  $
                  40,836
                  
                  
                  
                  5.84
                  %
                  
                  $
                  43,524
                  
                  
                  
                  5.84
                  %
                  
                  $
                  43,201Total
      securities
                  
                  $
                  198
                  
                  
                  
                  —
                  %
                  
                  $
                  252
                  
                  
                  
                  5.66
                  %
                  
                  $
                  2,446
                  
                  
                  
                  5.84
                  %
                  
                  $
                  50,827
                  
                  
                  
                  5.84
                  %
                  
                  $
                  53,713
                  
                  
                  
                  5.81
                  %
                  
                  $
                  53,376
 
 19
  The
following table shows securities purchase, sale and repayment activities of
Lincoln Park Savings for the periods indicated.
 
 Years
      Ended December 31,2008
                  
                  
                  2007(In
      Thousands)Available
      for Sale:Purchases:Adjustable-rate
                  
                  $
                  —
                  
                  
                  $
                  —Fixed-rate
                  
                  
                  10,628
                  
                  
                  
                  417Total
      purchases
                  
                  
                  10,628
                  
                  
                  
                  417Sales:Adjustable-rate
                  
                  
                  —
                  
                  
                  
                  —Fixed-rate
                  
                  
                  (46
                  )
                  
                  
                  (412
                  )Total
      sales
                  
                  
                  (46
                  )
                  
                  
                  (412
                  )Principal
      repayments
                  
                  
                  (1,689
                  )
                  
                  
                  (1,022
                  )Other
      items, net
                  
                  
                  (239
                  )
                  
                  
                  (36
                  )Net
      increase (decrease)
                  
                  $
                  8,654
                  
                  
                  $
                  (1,053
                  )
 
 Years
      Ended December 31,2008
                  
                  
                  2007(In
      Thousands)Held
      to Maturity:Purchases:Adjustable-rate
                  
                  $
                  —
                  
                  
                  $
                  —Fixed-rate
                  
                  
                  36,091
                  
                  
                  
                  4,158Total
      purchases
                  
                  
                  36,091
                  
                  
                  
                  4,158Sales:Adjustable-rate
                  
                  
                  —
                  
                  
                  
                  —Fixed-rate
                  
                  
                  —
                  
                  
                  
                  —Total
      sales
                  
                  
                  —
                  
                  
                  
                  —Principal
      repayments
                  
                  
                  (13,602
                  )
                  
                  
                  (1,172
                  )Other
      items, net
                  
                  
                  (207
                  )
                  
                  
                  (78
                  )Net
      increase
                  
                  $
                  22,282
                  
                  
                  $
                  2,908
 
 Sources
of Funds
 
 General.Deposits
have traditionally been the primary source of funds for use in lending and
investment activities.  We also use borrowings, primarily FHLB
advances, to supplement cash flow needs, lengthen the maturities of liabilities
for interest rate risk purposes and to manage the cost of funds.  In
addition, funds are derived from scheduled loan payments, investment maturities,
loan prepayments, retained earnings and income on earning
assets.  While scheduled loan payments and income on earning assets
are relatively stable sources of funds, deposit inflows and outflows can vary
widely and are influenced by prevailing interest rates, market conditions and
levels of competition.
 
 Deposits. Our deposits are
generated primarily from residents within our primary market area.  We
offer a selection of deposit instruments, including demand deposits consisting
of non-interest bearing and NOW accounts, passbook savings, statement savings
and club accounts, and fixed-term certificates of deposit.  Deposit
account terms vary, with the principal differences being the minimum balance
required, the amount of time the funds must remain on deposit and the interest
rate.  We do not accept brokered deposits.
 
 Interest rates paid, maturity terms,
service fees and withdrawal penalties are established on a periodic
basis.  Deposit rates and terms are based primarily on current
operating strategies and market rates, liquidity requirements, rates paid by
competitors and growth goals. Personalized customer service and long-standing
relationships with customers are relied upon to attract and retain
deposits.
  20
  The flow of deposits is influenced
significantly by general economic conditions, changes in money market and other
prevailing interest rates and competition.  The variety of deposit
accounts offered allows us to be competitive in obtaining funds and responding
to changes in consumer demand.  Based on experience, we believe that
our deposits are relatively stable.  However, the ability to attract
and maintain deposits, and the rates paid on these deposits, have been and will
continue to be significantly affected by market conditions.  At
December 31, 2008, $44.2 million, or 60.6% of our deposit accounts were
certificates of deposit, of which $39.0 million have maturities of one year or
less.
 
 Deposits.  The
following table sets forth the dollar amount of deposits in the various types of
deposit programs we offered as of the dates indicated.
 
 At
      December 31,2008
                  
                  
                  2007Balance
                  
                  
                  Percent
                  
                  
                  Weighted
      Average
                      Rate
                  
                  
                  Balance
                  
                  
                  Percent
                  
                  
                  Weighted
      Average
                      Rate(Dollars
      in Thousands)Non-interest-bearingdemand
                  
                  $
                  3,069
                  
                  
                  
                  4.21
                  %
                  
                  
                  —
                  %
                  
                  $
                  2,054
                  
                  
                  
                  3.16
                  %
                  
                  
                  —
                  %Interest-bearingdemand
                  
                  
                  14,468
                  
                  
                  
                  19.82
                  
                  
                  
                  1.98
                  
                  
                  
                  12,114
                  
                  
                  
                  18.65
                  
                  
                  
                  2.24Savings
      and club
                  
                  
                  11,235
                  
                  
                  
                  15.39
                  
                  
                  
                  1.00
                  
                  
                  
                  11,616
                  
                  
                  
                  17.88
                  
                  
                  
                  1.01Certificate
      of deposit
                  
                  
                  44,217
                  
                  
                  
                  60.58
                  
                  
                  
                  3.38
                  
                  
                  
                  39,183
                  
                  
                  
                  60.31
                  
                  
                  
                  4.69Total
      deposits
                  
                  $
                  72,989
                  
                  
                  
                  100.00
                  %
                  
                  
                  2.59
                  %
                  
                  $
                  64,967
                  
                  
                  
                  100.00
                  %
                  
                  
                  3.50
                  %
 
 The following table sets forth the
deposit activities for the periods indicated.
 
 Years
      Ended December 31,2008
                  
                  
                  2007(Dollars
      in Thousands)Beginning
      of period
                  
                  $
                  64,967
                  
                  
                  $
                  57,844Net
      deposits increase
                  
                  
                  6,057
                  
                  
                  
                  4,939Interest
      credited on deposit accounts
                  
                  
                  1,965
                  
                  
                  
                  2,184Ending
      balance
                  
                  
                  72,989
                  
                  
                  $
                  64,967Percent
      increase from beginningof
      period
                  
                  
                  12.35
                  %
                  
                  
                  12.32
                  %
 
 The following table indicates the
amount of certificates of deposit as of December 31, 2008, by time remaining
until maturity.
 
 Three
      months
                    or
      less
                
                
                Over
      three
                    months
      to six
                    months
                
                
                Over
      six
                    months
      to nine months
                
                
                Over
      nine
                    months
      to
                    twelve
      months
                
                
                Over
      twelve
                    months
                
                
                Total(In
      Thousands)Certificate
      of deposit:Less
      than $100,000
                
                $
                9,627
                
                
                $
                8,605
                
                
                $
                4,304
                
                
                $
                4,040
                
                
                $
                4,266
                
                
                $
                30,842$100,000
      or more
                
                
                5,623
                
                
                
                2,640
                
                
                
                2,112
                
                
                
                2,016
                
                
                
                984
                
                
                
                13,375Total
                
                $
                15,250
                
                
                $
                11,245
                
                
                $
                6,416
                
                
                $
                6,056
                
                
                $
                5,250
                
                
                $
                44,217
 
 21
 
 The
following table presents, by rate category, our certificate of deposit accounts
as of the dates indicated.
  At
      December 31,2008
                      
                      
                      2007Amount
                      
                      
                      Percent
                      
                      
                      Amount
                      
                      
                      Percent(Dollars
      in Thousands)Certificate
      of deposit rates:1.00%
      - 1.99%
                      
                      
                      $
                      —
                      
                      
                      
                      —
                      %
                      
                      $
                      —
                      
                      
                      
                      —
                      %2.00%
      - 2.99%
                      
                      
                      
                      7,254
                      
                      
                      
                      16.41
                      
                      
                      
                      —
                      
                      
                      
                      —3.00%
      - 3.99%
                      
                      
                      
                      32,261
                      
                      
                      
                      72.96
                      
                      
                      
                      3,558
                      
                      
                      
                      9.084.00%
      - 4.99%
                      
                      
                      
                      4,702
                      
                      
                      
                      10.63
                      
                      
                      
                      15,294
                      
                      
                      
                      39.035.00%
      - 5.99%
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      20,331
                      
                      
                      
                      51.896.00%
      - 6.99%
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Total
                      
                      
                      $
                      44,217
                      
                      
                      
                      100.00
                      %
                      
                      $
                      39,183
                      
                      
                      
                      100.00
                      %
 
 The
following table presents, by rate category, the remaining period to maturity of
certificate of deposit accounts outstanding as of December 31,
2008.
  Maturity
      Date1
      Year
                      or
      Less
                  
                  
                  Over
      1
                      to
      2 Years
                  
                  
                  Over
      2
                      to
      3 Years
                  
                  
                  Over
                      3
      Years
                  
                  
                  Total(In
      Thousands)Interest
      rate:1.00%
      - 1.99%
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  —2.00%
      - 2.99%
                  
                  
                  
                  7,026
                  
                  
                  
                  228
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  7,2543.00%
      - 3.99%
                  
                  
                  
                  28,807
                  
                  
                  
                  3,046
                  
                  
                  
                  75
                  
                  
                  
                  333
                  
                  
                  
                  32,2614.00%
      - 4.99%
                  
                  
                  
                  3,134
                  
                  
                  
                  1,067
                  
                  
                  
                  79
                  
                  
                  
                  422
                  
                  
                  
                  4,7025.00%
      - 5.99%
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —6.00%
      - 6.99%
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Total
                  
                  
                  $
                  38,967
                  
                  
                  $
                  4,341
                  
                  
                  $
                  154
                  
                  
                  $
                  755
                  
                  
                  $
                  44,217
 
 Borrowings.  We
may obtain advances from the Federal Home Loan Bank of New York upon the
security of the common stock we own in the Federal Home Loan Bank and our
qualifying residential mortgage loans and mortgage-backed securities, provided
certain standards related to creditworthiness are met.  These advances
are made pursuant to several credit programs, each of which has its own interest
rate and range of maturities.  Federal Home Loan Bank advances are
generally available to meet seasonal and other withdrawals of deposit accounts
and to permit increased lending.  Using FHLB advances is a significant
part of our operating strategy.  As of December 31, 2008, we had FHLB
advances in the amount of $50.0 million, which represented 40.2% of total
liabilities.  As a member of the Federal Home Loan Bank of New York,
Lincoln Park Savings can currently borrow additional funds up to approximately
$6.6 million from the Federal Home Loan Bank.
 
 The
following table sets forth certain information regarding FHLB advances for the
periods indicated.  We had no other material borrowings during the
periods.
 
 At
      or For the Years Ended
                      December
      31,2008
                  
                  
                  2007(Dollars
      in Thousands)Maximum balance:FHLB
      advances
                  
                  $
                  55,024
                  
                  
                  $
                  23,552Average Balance:FHLB
      advances
                  
                  $
                  38,613
                  
                  
                  $
                  21,971Weighted average interest rate at year
      end:FHLB
      advances
                  
                  
                  3.66
                  %
                  
                  
                  4.18
                  %
 
 22
 
 The contractual maturities of FHLB
advances at December 31, 2008, are as follows:
 
 Amount
                  
                  
                  Weighted
                    Average
      Rate(Dollars
      in Thousands)Within
      one year
                  
                  $
                  4,909
                  
                  
                  
                  2.67
                  %After
      one through five years
                  
                  
                  25,627
                  
                  
                  
                  3.91After
      five through fifteen years
                  
                  
                  19,460
                  
                  
                  
                  3.58Total
                  
                  $
                  49,996
                  
                  
                  
                  3.66
                  %
 
 Subsidiary
Activities
 
 Lincoln
Park Bancorp has one subsidiary, Lincoln Park Savings.  Lincoln Park
Savings’ wholly owned   subsidiary is LPS Investment
Company.  LPS Investment Company was formed as an operating subsidiary
of the Bank for the purpose of investing in stocks, bonds, mortgages, and other
securities, limited to the types of securities in which the Bank is authorized
to invest.
 
 Personnel
  As of
December 31, 2008, we had 17 full-time employees and 7 part-time
employees.  Our employees are not represented by any collective
bargaining group.  Management believes that we have good relations
with our employees.
  FEDERAL
AND STATE TAXATION
  Federal
Taxation
  General.Lincoln Park
Bancorp and Lincoln Park Savings are subject to federal income taxation in the
same general manner as other corporations, with some exceptions discussed
below.  Lincoln Park Savings’ tax returns have not been audited during
the past five years.  The following discussion of federal taxation is
intended only to summarize certain pertinent federal income tax matters and is
not a comprehensive description of the tax rules applicable to Lincoln Park
Bancorp or Lincoln Park Savings.
 
 Method of
Accounting.For federal
income tax purposes, Lincoln Park Savings currently reports its income and
expenses on the accrual method of accounting and uses a tax year ending December
31 for filing its federal income tax returns.
 
 Bad Debt
Reserves.Prior to the
Small Business Protection Act of 1996 (the “1996 Act”), Lincoln Park Savings was
permitted to establish a reserve for bad debts and to make annual additions to
the reserve.  These additions could, within specified formula limits,
be deducted in arriving at our taxable income.  Lincoln Park Savings
was required to use the specific charge-off method in computing its bad debt
deduction beginning with its 1996 federal tax return.  Savings
institutions were required to recapture any excess reserves over those
established as of December 31, 1987 (base year reserve).  Lincoln Park
Savings had approximately $730,000 of reserves subject to
recapture.
 
 Taxable
Distributions and Recapture.Prior to the
1996 Act, bad debt reserves created prior to January 1, 1988 were subject to
recapture into taxable income should Lincoln Park Savings fail to meet certain
thrift asset and definitional tests.  Federal legislation has
eliminated these thrift related recapture rules.
 
 At
December 31, 2008, our total federal pre-1988 base year reserve was
approximately $730,000.  However, under current law, pre-1988 base
year reserves remain subject to recapture should Lincoln Park Savings make
certain non-dividend distributions, repurchase any of its stock, pay dividends
in excess of tax earnings and profits, or cease to maintain a bank
charter.
 
 Alternative
Minimum Tax.The Internal
Revenue Code of 1986, as amended (the “Code”) imposes an alternative minimum tax
(“AMT”) at a rate of 20% on a base of regular taxable income plus certain tax
preferences (“alternative minimum taxable income” or “AMTI”).  The AMT
is payable to the extent such AMTI is in excess of an exemption amount and the
AMT exceeds the regular income tax.  Net operating losses can offset
no more than 90% of AMTI.  Certain payments of alternative minimum tax
may be used as credits against regular tax liabilities in future
years.  Lincoln Park Savings has not been subject to the alternative
minimum tax and has no such amounts available as credits for
carryover.
  23
  Net Operating
Loss Carryovers.A financial
institution may carry back net operating losses to the preceding two taxable
years and forward to the succeeding 20 taxable years.  At December 31,
2008, Lincoln Park Savings had no net operating loss carryforwards for federal
income tax purposes.
 
 Corporate
Dividends-Received Deduction.Lincoln Park
Bancorp may exclude from its income 100% of dividends received from Lincoln Park
Savings as a member of the same affiliated group of corporations.  The
corporate dividends-received deduction is 80% in the case of dividends received
from corporations with which a corporate recipient does not file a consolidated
return, and corporations which own less than 20% of the stock of a corporation
distributing a dividend may deduct only 70% of dividends received or accrued on
their behalf.
 
 State
Taxation
  New Jersey State
Taxation.Lincoln Park Bancorp,
Lincoln Park Savings and LPS Investment Company file New Jersey Corporation
Business tax returns.  Generally, the income of savings institutions
in New Jersey, which is calculated based on federal taxable income, subject to
certain adjustments, is subject to the New Jersey Corporation Business
tax.  Lincoln Park Bancorp, Lincoln Park Savings and LPS Investment
Company are not currently under audit with respect to its New Jersey income tax
returns and their state tax returns have not been audited for the past five
years.
 
 Under New
Jersey legislation, a taxpayer will pay the greater of 9% of its taxable income
or the Alternate Minimum Assessment (AMA).  There are two methods of
calculating the AMA, the gross profits method and the gross receipts
method.  The taxpayer has the option of choosing either of these
methods, but once an election is made, the taxpayer must use the same method for
the next four years.  Under the gross receipts method, the tax is
calculated by multiplying the gross receipts by the applicable factor, which
ranges from 0.139% to 0.4%.  Under the gross profits method, the tax
is calculated by multiplying the gross profits by the applicable factor, which
ranges from 0.28% to 0.8%.  The AMA for an affiliated group consisting
of five or more members may not exceed $20.0 million.  The AMA for tax
years beginning after June 30, 2006, shall be zero.
 
 New
Jersey income tax law does not allow for a taxpayer to file a tax return on a
combined or consolidated basis with another member of the affiliated group where
there is common ownership.  However, if the taxpayer cannot
demonstrate by clear and convincing evidence that the tax filing discloses the
true earnings of the taxpayer on its business carried on in the State of New
Jersey, the New Jersey Director of the Division of Taxation may, at the
director’s discretion, require the taxpayer to file a consolidated return of the
entire operations of the affiliated group or controlled group, including its own
operations and income.
 
 REGULATION
  General
  Lincoln
Park Savings is a New Jersey chartered savings bank.  Its deposit
accounts are insured up to applicable limits by the Federal Deposit Insurance
Corporation under the Savings Association Insurance Fund (the
“SAIF”).  Lincoln Park Savings is subject to extensive regulation,
examination and supervision by the Commissioner of the New Jersey Department of
Banking and Insurance as the issuer of its charter, and by the Federal Deposit
Insurance Corporation as the deposit insurer.  Lincoln Park Savings
must file reports with the New Jersey Commissioner and the Federal Deposit
Insurance Corporation concerning its activities and financial condition, and it
must obtain regulatory approval prior to entering into certain transactions,
such as mergers with, or acquisitions of, other depository institutions and
opening or acquiring branch offices.  The New Jersey Commissioner and
the Federal Deposit Insurance Corporation conducts periodic examinations to
assess Lincoln Park Savings’ compliance with various regulatory
requirements.  This regulation and supervision establishes a
comprehensive framework of activities in which a savings bank can engage and is
intended primarily for the protection of the deposit insurance fund and
depositors and not for the purpose of protecting stockholders.  The
regulatory structure also gives the regulatory authorities extensive discretion
in connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory
purposes.  Prior to the conversion of Lincoln Park Savings from a New
Jersey savings and loan association to a New Jersey savings bank, Lincoln Park
Savings was subject to examination and supervision by the Office of Thrift
Supervision.
  24
  Lincoln
Park Bancorp is a federal corporation, and Lincoln Park Bancorp, MHC is a
federal mutual holding company.  Lincoln Park Bancorp and Lincoln Park
Bancorp, MHC are required to file certain reports with, and otherwise comply
with the rules and regulations of the Office of Thrift Supervision.
  Any
change in such laws and regulations, whether by the New Jersey Commissioner, the
Federal Deposit Insurance Corporation, the Office of Thrift Supervision or
through legislation, could have a material adverse impact on Lincoln Park
Savings and Lincoln Park Bancorp and their operations and
stockholders.
  New
Jersey Banking Regulation
 
 Activity
Powers.  Lincoln Park Savings derives its lending, investment
and other activity powers primarily from the applicable provisions of the New
Jersey Banking Act and its related regulations.  Under these laws and
regulations, savings banks, including Lincoln Park Savings, generally may invest
in:
  (1)
                        real
      estate mortgages;(2)
                        consumer
      and commercial loans;(3)
                        specific
      types of debt securities, including certain corporate debt securities and
      obligations of federal, state and local governments and
      agencies;(4)
                        certain
      types of corporate equity securities; and(5)
                        certain
      other
assets.
 A savings
bank may also invest pursuant to a “leeway” power that permits investments not
otherwise permitted by the New Jersey Banking Act.  “Leeway”
investments must comply with a number of limitations on the individual and
aggregate amounts of “leeway” investments.  Lincoln Park Savings does
not currently have any “leeway” investments.  A savings bank may also
exercise trust powers upon approval of the New Jersey
Commissioner.  Lincoln Park Savings currently does not have trust
powers.  New Jersey savings banks may exercise those powers, rights,
benefits or privileges authorized for national banks or out-of-state banks or
for federal or out-of-state savings banks or savings associations, provided that
before exercising any such power, right, benefit or privilege, prior approval by
the New Jersey Commissioner by regulation or by specific authorization is
required.  The exercise of these lending, investment and activity
powers are limited by federal law and the related regulations.  See
“—Federal Banking Regulation—Activity Restrictions on State-Chartered Banks”
below.
  Loans-to-One-Borrower
Limitations.  With certain specified exceptions, a New Jersey
chartered savings bank may not make loans or extend credit to a single borrower
and to entities related to the borrower in an aggregate amount that would exceed
15% of the bank’s capital funds.  A savings bank may lend an
additional 10% of the bank’s capital funds if secured by collateral meeting the
requirements of the New Jersey Banking Act.  Lincoln Park Savings
currently complies with applicable loans-to-one-borrower
limitations.
  Dividends.  Under
the New Jersey Banking Act, a stock savings bank may declare and pay a dividend
on its capital stock only to the extent that the payment of the dividend would
not impair the capital stock of the savings bank.  In addition, a
stock savings bank may not pay a dividend unless the savings bank would, after
the payment of the dividend, have a surplus of not less than 50% of its capital
stock, or the payment of the dividend would not reduce the
surplus.  Federal law may also limit the amount of dividends that may
be paid by Lincoln Park Savings.  See “—Federal Banking
Regulation—Prompt Corrective Action” below.
  25
  Minimum Capital
Requirements.  Regulations of the New Jersey Commissioner
impose on New Jersey chartered depository institutions, including Lincoln Park
Savings, minimum capital requirements similar to those imposed by the Federal
Deposit Insurance Corporation on insured state banks.  See “—Federal
Banking Regulation—Capital Requirements.”
  Examination and
Enforcement.  The New Jersey Department of Banking and
Insurance may examine Lincoln Park Savings whenever it deems an examination
advisable.  The Department examines Lincoln Park Savings at least
every two years.  The New Jersey Commissioner may order any savings
bank to discontinue any violation of law or unsafe or unsound business practice
and may direct any director, officer, attorney or employee of a savings bank
engaged in an objectionable activity, after the Commissioner has ordered the
activity to be terminated, to show cause at a hearing before the Commissioner
why such person should not be removed.
  Federal
Banking Regulation
  Capital
Requirements.Federal Deposit Insurance Corporation
regulations require banks to maintain minimum levels of capital.  The
Federal Deposit Insurance Corporation regulations define two tiers, or classes,
of capital.
  Tier 1
capital is comprised of the sum of:
  ●
                    common
      stockholders’ equity, excluding the unrealized appreciation or
      depreciation, net of tax, from available for sale
    securities;●
                    non-cumulative
      perpetual preferred stock, including any related retained earnings;
      and●
                    minority
      interests in consolidated subsidiaries minus all intangible assets, other
      than qualifying servicing rights and any net unrealized loss on marketable
      equity securities.
 The
components of Tier 2 capital currently include:
  ●
                            cumulative
      perpetual preferred stock;●
                            certain
      perpetual preferred stock for which the dividend rate may be reset
      periodically;●
                            hybrid
      capital instruments, including mandatory convertible
      securities;●
                            term
      subordinated debt;●
                            intermediate
      term preferred stock;●
                            allowance
      for possible loan losses; and●
                            up
      to 45% of pretax net unrealized holding gains on available for sale equity
      securities with readily determinable fair market
  values.
 Allowance
for possible loan losses includible in Tier 2 capital is limited to a maximum of
1.25% of risk-weighted assets.  Overall, the amount of Tier 2 capital
that may be included in total capital cannot exceed 100% of Tier 1
capital.  The Federal Deposit Insurance Corporation regulations
establish a minimum leverage capital requirement for banks in the strongest
financial and managerial condition, with a rating of 1 (the highest examination
rating of the Federal Deposit Insurance Corporation for banks) under the Uniform
Financial Institutions Rating System, of not less than a ratio of 3.0% of Tier 1
capital to total assets.  For all other banks, the minimum leverage
capital requirement is 4.0%, unless a higher leverage capital ratio is warranted
by the particular circumstances or risk profile of the depository
institution.
  26
  The
Federal Deposit Insurance Corporation regulations also require that banks meet a
risk-based capital standard.  The risk-based capital standard requires
the maintenance of a ratio of total capital, which is defined as the sum of Tier
1 capital and Tier 2 capital, to risk-weighted assets of at least 8% and a ratio
of Tier 1 capital to risk-weighted assets of at least 4%.  In
determining the amount of risk-weighted assets, all assets, plus certain off
balance sheet items, are multiplied by a risk-weight of 0% to 100%, based on the
risks the Federal Deposit Insurance Corporation believes are inherent in the
type of asset or item.
  The
federal banking agencies, including the Federal Deposit Insurance Corporation,
have also adopted regulations to require an assessment of an institution’s
exposure to declines in the economic value of a bank’s capital due to changes in
interest rates when assessing the bank’s capital adequacy.  Under such
a risk assessment, examiners will evaluate a bank’s capital for interest rate
risk on a case-by-case basis, with consideration of both quantitative and
qualitative factors.  According to the agencies, applicable
considerations include:
  ●
                    the
      quality of the bank’s interest rate risk management
    process;●
                    the
      overall financial condition of the bank; and●
                    the
      level of other risks at the bank for which capital is
    needed.
 Institutions
with significant interest rate risk may be required to hold additional
capital.  The agencies also issued a joint policy statement providing
guidance on interest rate risk management, including a discussion of the
critical factors affecting the agencies’ evaluation of interest rate risk in
connection with capital adequacy.
  The
Federal Deposit Insurance Corporation adopted regulations, effective April 1,
2002, establishing minimum regulatory capital requirements for equity
investments in non-financial companies.  The regulations apply a
series of marginal capital charges that range from 8% to 25% depending upon the
size of the aggregate equity investment portfolio of the banking organization
relative to its Tier 1 capital.  The capital charge would be applied
by making a deduction, which would be based on the adjusted carrying value of
the equity investment from the organization’s Tier 1 capital.  We do
not believe this capital requirement will have a material adverse effect upon
our operations.  However, we will have to take this requirement into
consideration should we, at some point in the future, decide to invest in
non-financial companies.
  The following table shows the Bank’s
leverage ratio, Tier 1 risk-based capital ratio, and total risk-based capital
ratio at December 31, 2008, under the Federal Deposit Insurance Corporation
capital requirements:
  As
      of December 31, 2008
                
                
                To
      be Well Capitalized
                
                
                ExcessHistorical
                    Capital
                
                
                Percent
      of
                    Assets(1)
                
                
                Amount
                
                
                Percent
                
                
                Amount
                
                
                Percent(Dollars
      in Thousands)Regulatory
      Tier 1 leverage capital
                
                $
                11,492
                
                
                
                8.29
                %
                
                $
                6,928
                
                
                
                5.00
                %
                
                $
                4,564
                
                
                
                3.29
                %Tier 1
      risk-based capital
                
                
                11,492
                
                
                
                18.00
                
                
                
                3,830
                
                
                
                6.00
                
                
                
                7,662
                
                
                
                12.00Total
      risk-based capital
                
                
                11,793
                
                
                
                18.47
                
                
                
                6,384
                
                
                
                10.00
                
                
                
                5,409
                
                
                
                8.47
 _______________________________
 (1)
                For
      purposes of calculating Regulatory Tier 1 leverage capital, assets are
      based on adjusted average leverage assets.  In calculating Tier
      1 risk based capital and total risk-based capital, assets are based on
      total risk-weighted assets.
 
 As the
table shows, as of December 31, 2008, Lincoln Park Savings was considered “well
capitalized” under Federal Deposit Insurance Corporation
guidelines.
  Activity Restrictions on
State-Chartered Banks.Section 24 of the Federal Deposit
Insurance Act, as amended, (“FDIA”) which was added by the FDIC Improvement Act
of 1991 (“FDIC Improvement Act”), generally limits the activities and
investments of state-chartered Federal Deposit Insurance Corporation insured
banks and their subsidiaries to those permissible for national banks and their
subsidiaries, unless such activities and investments are specifically exempted
by Section 24 of the FDIA or consented to by the Federal Deposit Insurance
Corporation.
  27
  Before
making a new investment or engaging in a new activity that is not permissible
for a national bank or otherwise permissible under Section 24 of the FDIA, an
insured bank must seek approval from the Federal Deposit Insurance Corporation
to make such investment or engage in such activity.  The Federal
Deposit Insurance Corporation will not approve the activity unless the bank
meets its minimum capital requirements and the Federal Deposit Insurance
Corporation determines that the activity does not present a significant risk to
the Federal Deposit Insurance Corporation insurance funds.  Certain
activities of subsidiaries that are engaged in activities permitted for national
banks only through a “financial subsidiary” are subject to additional
restrictions.
  The Gramm-Leach-Bliley Act
(“Gramm-Leach”) permits a state-chartered savings bank to engage, through
financial subsidiaries, in any activity in which a national bank may engage
through a financial subsidiary and on substantially the same terms and
conditions.  In general, Gramm-Leach permits a national bank that is
well-capitalized and well-managed to conduct, through a financial subsidiary,
any activity permitted for a financial holding company other than insurance
underwriting, insurance investments, real estate investment or development or
merchant banking.  The total assets of all such financial subsidiaries
may not exceed the lesser of 45% of the bank’s total assets or $50
billion.  The bank must have policies and procedures to assess the
financial subsidiary’s risk and protect the bank from such risk and potential
liability, must not consolidate the financial subsidiary’s assets with the
bank’s and must exclude from its own assets and equity all equity investments,
including retained earnings, in the financial subsidiary.  State
chartered savings banks may retain subsidiaries in existence as of March 11,
2000 and may engage in activities that are not authorized under Gramm-Leach;
otherwise, Gramm-Leach will preempt all state laws regarding the permissibility
of certain activities for state chartered banks if such state law is in conflict
with the provisions of Gramm-Leach (with the exception of certain insurance
activities), regardless of whether the state law would authorize broader or more
restrictive activities.  Although Lincoln Park Savings meets all
conditions necessary to establish and engage in permitted activities through
financial subsidiaries, it has not yet determined whether or the extent to which
it will seek to engage in such activities.
  Federal Home Loan Bank
System.  Lincoln Park Savings is a member of the FHLB system,
which consists of twelve regional FHLBs, each subject to supervision and
regulation by the Federal Housing Finance Board (“FHFB”).  The FHLB
provides a central credit facility primarily for member thrift institutions as
well as other entities involved in home mortgage lending.  It is
funded primarily from proceeds derived from the sale of consolidated obligations
of the FHLBs.  It makes loans to members (i.e., advances) in
accordance with policies and procedures, including collateral requirements,
established by the respective boards of directors of the FHLBs.  These
policies and procedures are subject to the regulation and oversight of the
FHFB.  All long-term advances are required to provide funds for
residential home financing.  The FHFB has also established standards
of community or investment service that members must meet to maintain access to
such long term advances.  Lincoln Park Savings, as a member of the
FHLB of New York, is required to purchase and hold shares of capital stock in
that FHLB in an amount at least equal to the greater of (i) 1% of the aggregate
principal amount of its unpaid mortgage loans, home purchase contracts and
similar obligations at the beginning of each year; (ii) 0.3% of its assets; or
(iii) 5% (or such greater fraction as established by the FHLB) of its advances
from the FHLB as of December 31, 2003.  Pursuant to Gramm-Leach, the
foregoing minimum share ownership requirements will be replaced by regulations
to be promulgated by the FHFB.  Gramm-Leach specifically provides that
the minimum requirements in existence immediately prior to adoption of
Gramm-Leach shall remain in effect until such regulations are
adopted.  Lincoln Park Savings is in compliance with these
requirements.
  Enforcement.The
Federal Deposit Insurance Corporation has extensive enforcement authority over
insured savings banks, including Lincoln Park Savings.  This
enforcement authority includes, among other things, the ability to assess civil
money penalties, to issue cease and desist orders and to remove directors and
officers.  In general, these enforcement actions may be initiated in
response to violations of laws and regulations and to unsafe or unsound
practices.
  The
Federal Deposit Insurance Corporation is required, with some exceptions, to
appoint a receiver or conservator for an insured state bank if that bank is
“critically undercapitalized.” For this purpose, “critically undercapitalized”
means having a ratio of tangible capital to total assets of less than
2%.  The Federal Deposit Insurance Corporation may also appoint a
conservator or receiver for a state bank on the basis of the institution’s
financial condition or upon the occurrence of certain events,
including:
  28
  ●
                        insolvency,
      or when the assets of the bank are less than its liabilities to depositors
      and others;●
                        substantial
      dissipation of assets or earnings through violations of law or unsafe or
      unsound practices;●
                        existence
      of an unsafe or unsound condition to transact business;●
                        likelihood
      that the bank will be unable to meet the demands of its depositors or to
      pay its obligations in the normal course of business;
  and●
                        insufficient
      capital, or the incurring or likely incurring of losses that will deplete
      substantially all of the institution’s capital with no reasonable prospect
      of replenishment of capital without federal
  assistance.
 Insurance of Deposit
Accounts.Lincoln Park Savings is a member of the Deposit
Insurance Fund, which is administered by the Federal Deposit Insurance
Corporation. Deposit accounts at Lincoln Park Savings are insured by the Federal
Deposit Insurance Corporation, generally up to a maximum of $100,000 for each
separately insured depositor and up to a maximum of $250,000 for self-directed
retirement accounts. However, the Federal Deposit Insurance Corporation
increased the deposit insurance available on all deposit accounts to $250,000,
effective until December 31, 2009.  In addition, certain
noninterest-bearing transaction accounts maintained with financial institutions
participating in the Federal Deposit Insurance Corporation’s Temporary Liquidity
Guarantee Program are fully insured regardless of the dollar amount until
December 31, 2009.  Lincoln Park Savings has opted to participate in
the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee
Program.  See “—Temporary Liquidity Guarantee Program.”
 
 The Federal Deposit Insurance
Corporation imposes an assessment against all depository institutions for
deposit insurance. This assessment is based on the risk category of the
institution and, prior to 2009, ranged from five to 43 basis points of the
institution’s deposits. On February 27, 2009, the Federal Deposit Insurance
Corporation published a final rule raising the current deposit insurance
assessment rates to a range from 12 to 45 basis points beginning April 1,
2009.  Additionally, on February 27, 2009, the Federal Deposit
Insurance Corporation issued an interim final rule that would impose a special
20 basis points special assessment on all insured deposits as of June 30, 2009,
which would be payable on September 30, 2009.  The Federal Deposit
Insurance Corporation may assess additional special premiums in the
future.
 
 Insurance of deposits may be terminated
by the Federal Deposit Insurance Corporation upon a finding that an institution
has engaged in unsafe or unsound practices, is in an unsafe or unsound condition
to continue operations or has violated any applicable law, regulation, rule,
order or condition imposed by the Federal Deposit Insurance Corporation. We do
not currently know of any practice, condition or violation that might lead to
termination of our deposit insurance.
 
 In addition to the Federal Deposit
Insurance Corporation assessments, the Financing Corporation (“FICO”) is
authorized to impose and collect, with the approval of the Federal Deposit
Insurance Corporation, assessments for anticipated payments, issuance costs and
custodial fees on bonds issued by the FICO in the 1980s to recapitalize the
former Federal Savings and Loan Insurance Corporation. The bonds issued by the
FICO are due to mature in 2017 through 2019. For the quarter ended December 31,
2008, the annualized FICO assessment was equal to 1.10 basis points for each
$100 in domestic deposits maintained at an institution.
 
 Temporary Liquidity Guarantee
Program.  On October 14, 2008, the Federal Deposit Insurance
Corporation announced a new program – the Temporary Liquidity Guarantee
Program.  This program has two components. One guarantees newly issued
senior unsecured debt of a participating organization, up to certain limits
established for each institution, issued between October 14, 2008 and June 30,
2009. The Federal Deposit Insurance Corporation will pay the unpaid principal
and interest on a Federal Deposit Insurance Corporation-guaranteed debt
instrument upon the uncured failure of the participating entity to make a timely
payment of principal or interest in accordance with the terms of the
instrument.  The guarantee will remain in effect until June 30, 2012.
In return for the Federal Deposit Insurance Corporation’s guarantee,
participating institutions will pay the Federal Deposit Insurance Corporation a
fee based on the amount and maturity of the debt.  We opted not to
participate in this component of the Temporary Liquidity Guarantee
Program.
  29
  The other component of the program
provides full federal deposit insurance coverage for non-interest bearing
transaction deposit accounts, regardless of dollar amount, until December 31,
2009. An annualized 10 basis point assessment on balances in noninterest-bearing
transaction accounts that exceed the existing deposit insurance limit of
$250,000 will be assessed on a quarterly basis to insured depository
institutions that have not opted out of this component of the Temporary
Liquidity Guarantee Program.  We opted to participate in this
component of the Temporary Liquidity Guarantee Program.
 
 U.S. Treasury’s Troubled Asset
Relief Program Capital Purchase Program.  On October 3, 2008,
the Emergency Economic Stabilization Act of 2008 was enacted that provides the
U.S. Secretary of the Treasury with broad authority to implement certain actions
to help restore stability and liquidity to U.S. markets. One of the provisions
resulting from the legislation is the Troubled Asset Relief Program Capital
Purchase Program (“CPP”), which provides direct equity investment in perpetual
preferred stock by the U.S. Treasury Department in qualified financial
institutions. The program is voluntary and requires an institution to comply
with a number of restrictions and provisions, including limits on executive
compensation, stock redemptions and declaration of dividends.  The CPP
provides for a minimum investment of one percent of total risk-weighted assets
and a maximum investment equal to the lesser of three percent of total
risk-weighted assets or $25 billion. Participation in the program is not
automatic and is subject to approval by the U.S. Treasury
Department.  We have applied to participate in the CPP.
  Transactions with Affiliates of
Lincoln Park Savings.Transactions between an insured bank,
such as Lincoln Park Savings, and any of its affiliates is governed by Sections
23A and 23B of the Federal Reserve Act.  An affiliate of a bank is any
company or entity that controls, is controlled by or is under common control
with the bank.  Currently, a subsidiary of a bank that is not also a
depository institution generally is not treated as an affiliate of the bank for
purposes of Sections 23A and 23B, but the Federal Reserve Board has
proposed a comprehensive regulation implementing Sections 23A and 23B, which
would establish certain exceptions to this policy.
  Section
23A:
  ●
                  limits
      the extent to which the bank or its subsidiaries may engage in “covered
      transactions” with any one affiliate to an amount equal to 10% of such
      bank’s capital stock and retained earnings, and limits all such
      transactions with all affiliates to an amount equal to 20% of such capital
      stock and retained earnings; and●
                  requires
      that all such transactions be on terms that are consistent with safe and
      sound banking practices.
 The term
“covered transaction” includes the making of loans, purchase of assets, issuance
of guarantees and other similar types of transactions.  Further, most
loans by a bank to any of its affiliates must be secured by collateral in
amounts ranging from 100 to 130 percent of the loan amounts.  In
addition, any covered transaction by a bank with an affiliate and any purchase
of assets or services by a bank from an affiliate must be on terms that are
substantially the same, or at least as favorable to the bank, as those that
would be provided to a non-affiliate.
  In
addition, provisions of the BHCA prohibit extensions of credit to a bank’s
insiders and their related interests by any other institution that has a
correspondent banking relationship with the bank, unless such extension of
credit is on substantially the same terms as those prevailing at the time for
comparable transactions with other persons and does not involve more than the
normal risk of repayment or present other unfavorable features.
 
 Prohibitions Against Tying
Arrangements.Banks are subject to the prohibitions of
12 U.S.C. Section 1972 on certain tying arrangements.  A
depository institution is prohibited, subject to some exceptions, from extending
credit to or offering any other service, or fixing or varying the consideration
for such extension of credit or service, on the condition that the customer
obtain some additional service from the institution or its affiliates or not
obtain services of a competitor of the institution.
 
 Privacy
Standards.  Effective July 1, 2001, financial institutions,
such as Lincoln Park Bancorp and Lincoln Park Savings, became subject to Federal
Deposit Insurance Corporation regulations implementing the privacy protection
provisions of Gramm-Leach.  These regulations require Lincoln Park
Bancorp and Lincoln Park Savings to disclose their privacy policy, including
identifying with whom they share “non-public personnel information” to customers
at the time of establishing the customer relationship and annually
thereafter.
  30
  The
regulations also require Lincoln Park Bancorp and Lincoln Park Savings to
provide their customers with initial and annual notices that accurately reflect
its privacy policies and practices.  In addition, Lincoln Park Bancorp
and Lincoln Park Savings are required to provide their customers with the
ability to “opt-out” of having Lincoln Park Bancorp and Lincoln Park Savings
share their non-public personal information with unaffiliated third parties
before they can disclose such information, subject to certain
exceptions.  The implementation of these regulations has not had a
material adverse effect on Lincoln Park Bancorp and Lincoln Park
Savings.  Gramm-Leach also provides for the ability of each state to
enact legislation that is more protective of consumers’ personal information.
Currently there are a number of privacy bills pending in the New Jersey
legislature.  No action has been taken on any of these bills, and we
cannot predict whether any of them will become law or what impact, if any, these
bills will have if enacted into law.
  On February 1, 2001, the Federal
Deposit Insurance Corporation and other federal banking agencies adopted
guidelines establishing standards for safeguarding customer information to
implement certain provisions of Gramm-Leach.  The guidelines describe
the agencies’ expectations for the creation, implementation and maintenance of
an information security program, which would include administrative, technical
and physical safeguards appropriate to the size and complexity of the
institution and the nature and scope of its activities. The standards set forth
in the guidelines are intended to insure the security and confidentiality of
customer records and information, protect against any anticipated threats or
hazards to the security or integrity of such records and protect against
unauthorized access to or use of such records or information that could result
in substantial harm or inconvenience to any customer.  We implemented
the guidelines prior to their effective date of July 1, 2001 and such
implementation did not have a material adverse effect on our
operations.
  Uniform Real Estate Lending
Standards.Under the FDIA, the federal banking agencies
adopted uniform regulations prescribing standards for extensions of credit that
are secured by liens on interests in real estate or made for the purpose of
financing the construction of a building or other improvements to real
estate.  Under the joint regulations adopted by the federal banking
agencies, all insured depository institutions must adopt and maintain written
policies that establish appropriate limits and standards for extensions of
credit that are secured by liens or interests in real estate or are made for the
purpose of financing permanent improvements to real estate.  These
policies must establish loan portfolio diversification standards, prudent
underwriting standards, including loan-to-value limits, that are clear and
measurable, loan administration procedures, and documentation, approval and
reporting requirements.  The real estate lending policies must reflect
consideration of the Interagency Guidelines for Real Estate Lending Policies
that have been adopted by the federal bank regulators.
  The
Interagency Guidelines, among other things, require a depository institution to
establish internal loan-to-value limits for real estate loans that are not in
excess of the following supervisory limits:
  ●
                        for
      loans secured by raw land, the supervisory loan-to-value limit is 65% of
      the value of the collateral;●
                        for
      land development loans, or loans for the purpose of improving unimproved
      property prior to the erection of structures, the supervisory limit is
      75%;●
                        for
      loans for the construction of commercial, multi-family or other
      non-residential property, the supervisory limit is 80%;●
                        for
      loans for the construction of one- to four-family residential properties,
      the supervisory limit is 85%; and●
                        for
      loans secured by other improved property, for example, farmland, completed
      commercial property and other income-producing property including
      non-owner occupied, one- to four-family property, the limit is
      85%.
  31
 Although
no supervisory loan-to-value limit has been established for owner-occupied, one-
to four-family and home equity loans, the Interagency Guidelines state that for
any such loan with a loan-to-value ratio that equals or exceeds 90% at
origination, an institution should require appropriate credit enhancement in the
form of either mortgage insurance or readily marketable collateral.
  Lincoln
Park Savings has established, however, internal loan-to-value limits for real
estate loans that are equal to or more stringent than the maximum limits
currently imposed under federal law.
  Community Reinvestment Act and Fair
Lending Laws.All Federal Deposit
Insurance Corporation insured institutions have a responsibility under the
Community Reinvestment Act and related regulations to help meet the credit needs
of their communities, including low- and moderate-income
neighborhoods.  In connection with its examination of a state
chartered savings bank, the Federal Deposit Insurance Corporation is required to
assess the institution’s record of compliance with the Community Reinvestment
Act.  Among other things, the current Community Reinvestment Act
regulations replace the prior process-based assessment factors with a new
evaluation system that rates an institution based on its actual performance in
meeting community needs.  In particular, the current evaluation system
focuses on three tests:
  ●
                    a
      lending test, to evaluate the institution’s record of making loans in its
      service areas;●
                    an
      investment test, to evaluate the institution’s record of investing in
      community development projects, affordable housing, and programs
      benefiting low or moderate income individuals and businesses;
      and●
                    a
      service test, to evaluate the institution’s delivery of services through
      its branches, ATMs and other
offices.
  An
institution’s failure to comply with the provisions of the Community
Reinvestment Act could, at a minimum, result in regulatory restrictions on its
activities.  We received an outstanding Community Reinvestment Act
rating in our most recently completed federal examination, which was conducted
by the Office of Thrift Supervision in March 2004.
  In
addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit
lenders from discriminating in their lending practices on the basis of
characteristics specified in those statutes.  The failure to comply
with the Equal Credit Opportunity Act and the Fair Housing Act could result in
enforcement actions by the Federal Deposit Insurance Corporation, as well as
other federal regulatory agencies and the Department of Justice.
  Safety and Soundness
Standards.Pursuant to the requirements of FDIA, as amended by
the Riegle Community Development and Regulatory Improvement Act of 1994, each
federal banking agency, including the Federal Deposit Insurance Corporation, has
adopted guidelines establishing general standards relating to internal controls,
information and internal audit systems, loan documentation, credit underwriting,
interest rate exposure, asset growth, asset quality, earnings, compensation,
fees and benefits.  In general, the guidelines require, among other
things, appropriate systems and practices to identify and manage the risks and
exposures specified in the guidelines.  The guidelines prohibit
excessive compensation as an unsafe and unsound practice and describe
compensation as excessive when the amounts paid are unreasonable or
disproportionate to the services performed by an executive officer, employee,
director, or principal stockholder.
  In
addition, the Federal Deposit Insurance Corporation adopted regulations to
require a bank that is given notice by the Federal Deposit Insurance Corporation
that it is not satisfying any of such safety and soundness standards to submit a
compliance plan to the Federal Deposit Insurance Corporation.  If,
after being so notified, a bank fails to submit an acceptable compliance plan or
fails in any material respect to implement an accepted compliance plan, the
Federal Deposit Insurance Corporation may issue an order directing corrective
and other actions of the types to which a significantly undercapitalized
institution is subject under the “prompt corrective action” provisions of
FDIA.  If a bank fails to comply with such an order, the Federal
Deposit Insurance Corporation may seek to enforce such an order in judicial
proceedings and to impose civil monetary penalties.
  32
  Prompt Corrective
Action.The FDIC Improvement Act also established a system of
prompt corrective action to resolve the problems of undercapitalized
institutions.  The Federal Deposit Insurance Corporation, as well as
the other federal banking regulators, adopted regulations governing the
supervisory actions that may be taken against undercapitalized
institutions.  The regulations establish five categories, consisting
of “well capitalized,” “adequately capitalized,” “undercapitalized,”
“significantly undercapitalized” and “critically undercapitalized.” The Federal
Deposit Insurance Corporation’s regulations define the five capital categories
as follows:
  An
institution will be treated as “well capitalized” if:
  ●
                    its
      ratio of total capital to risk-weighted assets is at least
      10%;●
                    its
      ratio of Tier 1 capital to risk-weighted assets is at least 6%;
      and●
                    its
      ratio of Tier 1 capital to total assets is at least 5%, and it is not
      subject to any order or directive by the Federal Deposit Insurance
      Corporation to meet a specific capital
level.
  An
institution will be treated as “adequately capitalized” if:
  ●
                    its
      ratio of total capital to risk-weighted assets is at least 8%;
      or●
                    its
      ratio of Tier 1 capital to risk-weighted assets is at least 4%;
      and●
                    its
      ratio of Tier 1 capital to total assets is at least 4% (3% if the bank
      receives the highest rating under the Uniform Financial Institutions
      Rating System) and it is not a well-capitalized
    institution.
  An
institution will be treated as “undercapitalized” if:
  ●
                    its
      total risk-based capital is less than 8%; or●
                    its
      Tier 1 risk-based capital is less than 4%; and●
                    its
      leverage ratio is less than 4% (or less than 3% if the institution
      receives the highest rating under the Uniform Financial Institutions
      Rating System).
  An
institution will be treated as “significantly undercapitalized” if:
  ●
                    its
      total risk-based capital is less than 6%;●
                    its
      Tier 1 capital is less than 3%; or●
                    its
      leverage ratio is less than
3%.
  An
institution that has a tangible capital to total assets ratio equal to or less
than 2% would be deemed to be “critically undercapitalized.”
  The
severity of the action authorized or required to be taken under the prompt
corrective action regulations increases as a bank’s capital decreases within the
three undercapitalized categories.  All banks are prohibited from
paying dividends or other capital distributions or paying management fees to any
controlling person if, following such distribution, the bank would be
undercapitalized.  The Federal Deposit Insurance Corporation is
required to monitor closely the condition of an undercapitalized bank and to
restrict the growth of its assets.  An undercapitalized bank is
required to file a capital restoration plan within 45 days of the date the bank
receives notice that it is within any of the three undercapitalized categories,
and the plan must be guaranteed by any parent holding company.  The
aggregate liability of a parent holding company is limited to the lesser
of:
  33
  ●
                  an
      amount equal to five percent of the bank’s total assets at the time it
      became “undercapitalized,” or●
                  the
      amount that is necessary (or would have been necessary) to bring the bank
      into compliance with all capital standards applicable with respect to such
      bank as of the time it fails to comply with the
  plan.
 If a bank
fails to submit an acceptable plan, it is treated as if it were “significantly
undercapitalized.” Banks that are significantly or critically undercapitalized
are subject to a wider range of regulatory requirements and
restrictions.
  The
Federal Deposit Insurance Corporation has a broad range of grounds under which
it may appoint a receiver or conservator for an insured depository
bank.  If one or more grounds exist for appointing a conservator or
receiver for a bank, the Federal Deposit Insurance Corporation may require the
bank to issue additional debt or stock, sell assets, be acquired by a depository
bank holding company or combine with another depository bank.  Under
the FDIA, the Federal Deposit Insurance Corporation is required to appoint a
receiver or a conservator for a critically undercapitalized bank within 90 days
after the bank becomes critically undercapitalized or to take such other action
that would better achieve the purposes of the prompt corrective action
provisions.  Such alternative action can be renewed for successive
90-day periods.  However, if the bank continues to be critically
undercapitalized on average during the quarter that begins 270 days after it
first became critically undercapitalized, a receiver must be appointed, unless
the Federal Deposit Insurance Corporation makes certain findings, including that
the bank is viable.
  Loans
to a Bank’s Insiders
  Federal Regulation.A bank’s
loans to its executive officers, directors, any owner of 10% or more of its
stock (each, an insider) and any of certain entities affiliated with any such
person (an insider’s related interest) are subject to the conditions and
limitations imposed by Section 22(h) of the Federal Reserve Act and the Federal
Reserve Board’s Regulation O thereunder.  Under these restrictions,
the aggregate amount of the loans to any insider and the insider’s related
interests may not exceed the loans-to-one-borrower limit applicable to national
banks, which is comparable to the loans-to-one-borrower limit applicable to
Lincoln Park Savings’ loans.  See “—New Jersey Banking
Regulation—Loans-to-One Borrower Limitations.” All loans by a bank to all
insiders and insiders’ related interests in the aggregate may not exceed the
bank’s unimpaired capital and unimpaired surplus.  With certain
exceptions, loans to an executive officer, other than loans for the education of
the officer’s children and certain loans secured by the officer’s residence, may
not exceed the lesser of (1) $100,000 or (2) the greater of $25,000 or 2.5% of
the bank’s unimpaired capital and surplus.  Regulation O also requires
that any proposed loan to an insider or a related interest of that insider be
approved in advance by a majority of the board of directors of the bank, with
any interested directors not participating in the voting, if such loan, when
aggregated with any existing loans to that insider and the insider’s related
interests, would exceed either (1) $500,000 or (2) the greater of $25,000 or 5%
of the bank’s unimpaired capital and surplus.  Generally, such loans
must be made on substantially the same terms as, and follow credit underwriting
procedures that are not less stringent than, those that are prevailing at the
time for comparable transactions with other persons.
  An
exception is made for extensions of credit made pursuant to a benefit or
compensation plan of a bank that is widely available to employees of the bank
and that does not give any preference to insiders of the bank over other
employees of the bank.
  In
addition, provisions of the BHCA prohibit extensions of credit to a bank’s
insiders and their related interests by any other institution that has a
correspondent banking relationship with the bank, unless such extension of
credit is on substantially the same terms as those prevailing at the time for
comparable transactions with other persons and does not involve more than the
normal risk of repayment or present other unfavorable features.
  New Jersey
Regulation.  Provisions of the New Jersey Banking Act impose
conditions and limitations on the liabilities to a savings bank of its directors
and executive officers and of corporations and partnerships controlled by such
persons that are comparable in many respects to the conditions and limitations
imposed on the loans and extensions of credit to insiders and their related
interests under Regulation O, as discussed above.  The New Jersey
Banking Act also provides that a savings bank that is in compliance with
Regulation O is deemed to be in compliance with such provisions of the New
Jersey Banking Act.
  34
  Federal
Reserve System
  Under
Federal Reserve Board regulations, Lincoln Park Savings is required to maintain
non-interest-earning reserves against its transaction
accounts.  Lincoln Park Savings is in compliance with these
requirements.  Because required reserves must be maintained in the
form of either vault cash, a non-interest-bearing account at a Federal Reserve
Bank or a pass-through account as defined by the Federal Reserve Board, the
effect of this reserve requirement is to reduce Lincoln Park Savings’
interest-earning assets.
  Internet
Banking
  Technological
developments are significantly altering the ways in which most companies,
including financial institutions, conduct their business.  The growth
of the Internet is prompting banks to reconsider business strategies and adopt
alternative distribution and marketing systems.  The federal bank
regulatory agencies have conducted seminars and published materials targeted to
various aspects of internet banking, and have indicated their intention to
reevaluate their regulations to ensure that they encourage banks’ efficiency and
competitiveness consistent with safe and sound banking practices. We cannot
assure you that the bank regulatory agencies will adopt new regulations that
will not materially affect any of our internet operations or restrict any such
further operations.
  The
USA PATRIOT Act
  In
response to the events of September 11th, the
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, or the USA PATRIOT Act, was signed
into law on October 26, 2001.  The USA PATRIOT Act gives the federal
government new powers to address terrorist threats through enhanced domestic
security measures, expanded surveillance powers, increased information sharing,
and broadened anti-money laundering requirements.  By way of
amendments to the Bank Secrecy Act, Title III of the USA PATRIOT Act takes
measures intended to encourage information sharing among bank regulatory
agencies and law enforcement bodies.  Further, certain provisions of
Title III impose affirmative obligations on a broad range of financial
institutions, including banks, thrifts, brokers, dealers, credit unions, money
transfer agents and parties registered under the Commodity Exchange
Act.
  Among
other requirements, Title III of the USA PATRIOT Act imposes the following
requirements with respect to financial institutions:
  ●
                        Pursuant
      to Section 352, all financial institutions must establish anti-money
      laundering programs that include, at minimum: (i) internal policies,
      procedures, and controls; (ii) specific designation of an anti-money
      laundering compliance officer; (iii) ongoing employee training programs;
      and (iv) an independent audit function to test the anti-money laundering
      program.●
                        Section
      326 of the Act authorizes the Secretary of the Department of Treasury, in
      conjunction with other bank regulators, to issue regulations that provide
      for minimum standards with respect to customer identification at the time
      new accounts are opened.●
                        Section
      312 of the Act requires financial institutions that establish, maintain,
      administer, or manage private banking accounts or correspondence accounts
      in the United States for non-United States persons or their
      representatives (including foreign individuals visiting the United States)
      to establish appropriate, specific, and, where necessary, enhanced due
      diligence policies, procedures, and controls designed to detect and report
      money laundering.●
                        Financial
      institutions are prohibited from establishing, maintaining, administering
      or managing correspondent accounts for foreign shell banks (foreign banks
      that do not have a physical presence in any country), and will be subject
      to certain record keeping obligations with respect to correspondent
      accounts of foreign banks.●
                        Bank
      regulators are directed to consider a holding company’s effectiveness in
      combating money laundering when ruling on Federal Reserve Act and Bank
      Merger Act applications.
  35
 The
federal banking agencies have implemented regulations pursuant to the USA
PATRIOT Act.  These regulations require financial institutions to
adopt the policies and procedures contemplated by the USA PATRIOT
Act.
  Lincoln
Park Savings has adopted the policies and programs required by the USA PATRIOT
Act, and has taken steps to implement and enforce those policies and
programs.  The policies adopted by Lincoln Park Savings relate to such
matters as Bank Secrecy Act, customer identification, and anti-money laundering
compliance.  Lincoln Park Savings from time to time reviews and
updates its USA PATRIOT Act and other regulatory compliance programs to ensure
that all applicable regulatory requirements are being satisfied.  See
“Recent Regulatory Developments.”
  Sarbanes-Oxley
Act of 2002
  On
July 30, 2002, the President signed into law the Sarbanes-Oxley Act of 2002
(the “Act”), which implemented legislative reforms intended to address corporate
and accounting fraud.  In addition to the establishment of a new
accounting oversight board that will enforce auditing, quality control and
independence standards and will be funded by fees from all publicly traded
companies, the Act places certain restrictions on the scope of services that may
be provided by accounting firms to their public company audit
clients.  Any non-audit services being provided to a public company
audit client will require preapproval by the company’s audit
committee.  In addition, the Act makes certain changes to the
requirements for partner rotation after a period of time.  The Act
requires chief executive officers and chief financial officers, or their
equivalent, to certify to the accuracy of periodic reports filed with the
Securities and Exchange Commission, subject to civil and criminal penalties if
they knowingly or willingly violate this certification
requirement.  In addition, under the Act, counsel will be required to
report evidence of a material violation of the securities laws or a breach of
fiduciary duty by a company to its chief executive officer or its chief legal
officer, and, if such officer does not appropriately respond, to report such
evidence to the audit committee or other similar committee of the board of
directors or the board itself.
  Under the
Act, longer prison terms will apply to corporate executives who violate federal
securities laws; the period during which certain types of suits can be brought
against a company or its officers is extended; and bonuses issued to top
executives prior to restatement of a company’s financial statements are now
subject to disgorgement if such restatement was due to corporate
misconduct.  Executives are also prohibited from insider trading
during retirement plan “blackout” periods, and loans to company executives
(other than loans by financial institutions permitted by federal rules and
regulations) are restricted.  In addition, a provision directs that
civil penalties levied by the Securities and Exchange Commission as a result of
any judicial or administrative action under the Act be deposited to a fund for
the benefit of harmed investors.  The Federal Accounts for Investor
Restitution provision also requires the Securities and Exchange Commission to
develop methods of improving collection rates.  The legislation
accelerates the time frame for disclosures by public companies, as they must
immediately disclose any material changes in their financial condition or
operations.  Directors and executive officers must also provide
information for most changes in ownership in a company’s securities within two
business days of the change.
  The Act
also increases the oversight of, and codifies certain requirements relating to
audit committees of public companies and how they interact with the company’s
“registered public accounting firm.”  Audit Committee members must be
independent and are absolutely barred from accepting consulting, advisory or
other compensatory fees from the issuer.  In addition, companies must
disclose whether at least one member of the committee is a “financial expert”
(as such term is defined by the Securities and Exchange Commission) and if not,
why not.  Under the Act, a company’s registered public accounting firm
is prohibited from performing statutorily mandated audit services for a company
if such company’s chief executive officer, chief financial officer, comptroller,
chief accounting officer or any person serving in equivalent positions had been
employed by such firm and participated in the audit of such company during the
one-year period preceding the audit initiation date.  The Act also
prohibits any officer or director of a company or any other person acting under
their direction from taking any action to fraudulently influence, coerce,
manipulate or mislead any independent accountant engaged in the audit of the
company’s financial statements for the purpose of rendering the financial
statements materially misleading.  The Act also requires the
Securities and Exchange Commission to prescribe rules requiring inclusion of any
internal control report and assessment by management in the annual report to
shareholders.  The Act requires the company’s registered public
accounting firm that issues the audit report to attest to and report on the
company’s internal controls.
  36
  We
anticipate that we will incur additional expense in complying with the
provisions of the Act and the regulations that have been promulgated to
implement the Act.  Those expenses could have a material impact on our
results of operations or financial condition.
  Holding
Company Regulation
  General.  Federal
law allows a state savings bank, such as Lincoln Park Savings, that qualifies as
a “Qualified Thrift Lender,” discussed below, to elect to be treated as a
savings association for purposes of the savings and loan company provisions of
the Home Owners’ Loan Act.  Such election results in its holding
company being regulated as a savings and loan holding company by the Office of
Thrift Supervision rather than as a bank holding company by the Federal Reserve
Board.  Lincoln Park Bancorp and Lincoln Park Bancorp, MHC have made
such election.
  Lincoln Park Bancorp, MHC and Lincoln
Park Bancorp are nondiversified savings and loan holding companies within the
meaning of the Home Owners’ Loan Act.  As such, Lincoln Park Bancorp,
MHC and Lincoln Park Bancorp are registered with the Office of Thrift
Supervision and are subject to Office of Thrift Supervision regulations,
examinations, supervision and reporting requirements.  In addition,
the Office of Thrift Supervision has enforcement authority over Lincoln Park
Bancorp and Lincoln Park Bancorp MHC, and their subsidiaries.  Among
other things, this authority permits the Office of Thrift Supervision to
restrict or prohibit activities that are determined to be a serious risk to the
subsidiary savings institution.  As federal corporations, Lincoln Park
Bancorp and Lincoln Park Bancorp, MHC are generally not subject to state
business organization laws.
  Permitted
Activities.  Pursuant to Section 10(o) of the Home Owners’ Loan
Act and Office of Thrift Supervision regulations and policy, a mutual holding
company and a federally chartered mid-tier holding company such as Lincoln Park
Bancorp may engage in the following activities: (i) investing in the stock of a
savings association; (ii) acquiring a mutual association through the merger of
such association into a savings association subsidiary of such holding company
or an interim savings association subsidiary of such holding company; (iii)
merging with or acquiring another holding company, one of whose subsidiaries is
a savings association; (iv) investing in a corporation, the capital stock of
which is available for purchase by a savings association under federal law or
under the law of any state where the subsidiary savings association or
associations share their home offices; (v) furnishing or performing management
services for a savings association subsidiary of such company; (vi) holding,
managing or liquidating assets owned or acquired from a savings subsidiary of
such company; (vii) holding or managing properties used or occupied by a savings
association subsidiary of such company; (viii) acting as trustee under deeds of
trust; (ix) any other activity (A) that the Federal Reserve Board, by
regulation, has determined to be permissible for bank holding companies under
Section 4(c) of the Bank Holding Company Act of 1956, unless the Director, by
regulation, prohibits or limits any such activity for savings and loan holding
companies; or (B) in which multiple savings and loan holding companies were
authorized (by regulation) to directly engage on March 5, 1987; (x) any activity
permissible for financial holding companies under Section 4(k) of the Bank
Holding Company Act, including securities and insurance underwriting; and (xi)
purchasing, holding, or disposing of stock acquired in connection with a
qualified stock issuance if the purchase of such stock by such savings and loan
holding company is approved by the Director.  If a mutual holding
company acquires or merges with another holding company, the holding company
acquired or the holding company resulting from such merger or acquisition may
only invest in assets and engage in activities listed in (i) through (xi) above,
and has a period of two years to cease any nonconforming activities and divest
of any nonconforming investments.
  The Home Owners’ Loan Act prohibits a
savings and loan holding company, including Lincoln Park Bancorp and Lincoln
Park Bancorp, MHC, directly or indirectly, or through one or more subsidiaries,
from acquiring more than 5% of another savings institution or holding company
thereof, without prior written approval of the Office of Thrift
Supervision.  It also prohibits the acquisition or retention of, with
certain exceptions, more than 5% of a nonsubsidiary company engaged in
activities other than those permitted by the Home Owners’ Loan Act; or acquiring
or retaining control of an institution that is not federally
insured.  In evaluating applications by holding companies to acquire
savings institutions, the Office of Thrift Supervision must consider the
financial and managerial resources, future prospects of the company and
institution involved, the effect of the acquisition on the risk to the insurance
fund, the convenience and needs of the community and competitive
factors.
  37
  The Office of Thrift Supervision is
prohibited from approving any acquisition that would result in a multiple
savings and loan holding company controlling savings institutions in more than
one state, subject to two exceptions: (i) the approval of interstate supervisory
acquisitions by savings and loan holding companies, and (ii) the acquisition of
a savings institution in another state if the laws of the state of the target
savings institution specifically permit such acquisitions.  The states
vary in the extent to which they permit interstate savings and loan holding
company acquisitions.
  Waivers of
Dividends byLincoln
ParkBancorp, MHC.  Office of Thrift Supervision regulations require
Lincoln Park Bancorp, MHC to notify the Office of Thrift Supervision of any
proposed waiver of its receipt of dividends from Lincoln Park
Bancorp.  The Office of Thrift Supervision reviews dividend waiver
notices on a case-by-case basis, and, in general, does not object to any such
waiver if the mutual holding company’s board of directors determines that such
waiver is consistent with such directors’ fiduciary duties to the mutual holding
company’s members and the dividend waiver is not detrimental to the safe and
sound operation of the subsidiary savings bank.  In addition, as a
condition to its approval of the reorganization the Federal Deposit Insurance
Corporation has required that (i)  any dividends waived by Lincoln Park
Bancorp, MHC must be retained by Lincoln Park Bancorp or Lincoln Park Savings
and segregated, earmarked or otherwise identified in the books and records of
Lincoln Park Bancorp or Lincoln Park Savings, (ii) the amount of waived
dividends will be taken into account in any valuation of Lincoln Park Savings
and factored into the calculation used in establishing a fair and reasonable
basis for exchanging shares in any subsequent conversion of Lincoln Park
Bancorp, MHC to stock form, and (iii) any waived dividends shall not be
available for payment to, or the value thereof transferred to, minority
stockholders, by any means, including through dividend payments or on
liquidation.  The plan of reorganization also provides that if Lincoln
Park Bancorp, MHC converts to stock form in the future, to the extent required
by applicable state or federal law, regulation or policy, the benefit to
minority stockholders of any waived dividends would reduce the percentage of the
converted company’s shares of common stock issued to minority stockholders in
connection with a conversion transaction.  We anticipate that Lincoln
Park Bancorp, MHC will waive dividends paid by Lincoln Park
Bancorp.
  Conversion ofLincoln
ParkBancorp, MHCto Stock
Form.  Office of Thrift Supervision regulations permit Lincoln
Park Bancorp, MHC to convert from the mutual form of organization to the capital
stock form of organization.  There can be no assurance when, if ever,
a conversion transaction will occur.  In a conversion transaction a
new holding company would be formed as the successor to Lincoln Park Bancorp
(the “New Holding Company”), Lincoln Park Bancorp, MHC’s corporate existence
would end, and certain depositors of Lincoln Park Savings would receive the
right to subscribe for additional shares of the New Holding
Company.  In a conversion transaction, each share of common stock held
by stockholders other than Lincoln Park Bancorp, MHC (“minority stockholders”)
would be automatically converted into a number of shares of common stock of the
New Holding Company determined pursuant an exchange ratio described in the plan
of reorganization that ensures that minority stockholders own the same
percentage of common stock in the New Holding Company as they owned in Lincoln
Park Bancorp immediately prior to the conversion transaction, subject only (if
required by applicable federal or state law, regulation or policy) to any
adjustment necessary to reflect the benefit to minority stockholders of the
waiver of dividends by Lincoln Park Bancorp, MHC and any assets held by Lincoln
Park Bancorp, MHC (other than common stock of Lincoln Park Bancorp) and to
reflect the receipt of cash in lieu of fractional shares.  Under
Office of Thrift Supervision regulations, minority stockholders would not be
diluted because of any dividends waived by Lincoln Park Bancorp, MHC (and waived
dividends would not be considered in determining an appropriate exchange ratio),
in the event Lincoln Park Bancorp, MHC converts to stock form.  The
total number of shares held by minority stockholders after a conversion
transaction also would be increased by any purchases by minority stockholders in
the stock offering conducted as part of the conversion transaction.
  Federal
Securities Laws
  Lincoln
Park Bancorp common stock is registered with Securities and Exchange Commission
under the Securities Exchange Act of 1934.  Lincoln Park Bancorp is
subject to the information, proxy solicitation, insider trading restrictions and
other requirements under the Securities Exchange Act of 1934.
  38
  Lincoln
Park Bancorp common stock held by persons who are affiliates (generally
officers, directors and principal stockholders) of Lincoln Park Bancorp may not
be resold without registration or unless sold in accordance with certain resale
restrictions.  If Lincoln Park Bancorp meets specified current public
information requirements, each affiliate of Lincoln Park Bancorp is able to sell
in the public market, without registration, a limited number of shares in any
three-month period.
  Regulatory
Developments
  On July
30, 2004, Lincoln Park Savings entered into a Stipulation and Consent to
Issuance of an Order of Assessment of Civil Money Penalties with the Office of
Thrift Supervision.  The Stipulation was based upon findings by the
Office of Thrift Supervision of certain weaknesses by Lincoln Park Savings in
implementing policies and procedures relating to Bank Secrecy Act
compliance.  Specifically, the Office of Thrift Supervision advised
that Lincoln Park Savings had failed to implement the independent testing
component of the Bank Secrecy Act compliance program required by Office of
Thrift Supervision regulations.  Pursuant to the Stipulation and the
related Order of Assessment of Civil Money Penalties, Lincoln Park Savings
agreed to pay to the Office of Thrift Supervision a penalty in the amount of
$10,000.  Lincoln Park Savings also retained an independent accounting
firm to perform a compliance consulting review for Lincoln Park
Savings.  That firm has presented its compliance consulting report to
the Board of Directors, and the Board has adopted certain changes in the
compliance program as recommended in the report.  These changes
include additional training of bank personnel in Bank Secrecy Act related
matters, and implementing new policies and procedures in Bank Secrecy Act
compliance, including the proper preparation of currency transaction
reports.
  In
addition, in connection with the Board’s authorization of the execution of the
Stipulation and Order, the Board adopted resolutions at the request of the
Office of Thrift Supervision providing that Lincoln Park Savings will implement
an appropriate written Bank Secrecy Act compliance program, that it will take
actions to ensure that the compliance program is managed by a qualified officer
and that involved bank personnel receive appropriate training, that it will
independently test the compliance program on no less than a semi-annual basis
and that the compliance officer will report to the Board and the Board will
review and evaluate the compliance program on no less than a quarterly
basis.
  Lincoln
Park Savings has taken the following steps to implement the recommendations of
the compliance consulting report and the foregoing
resolutions.  Lincoln Park Savings has obtained a new records
management register to facilitate compliance with the record keeping
requirements applicable to the sale of monetary instruments.  In
addition, new procedures have been adopted to ensure the proper completion of
currency transaction reports.  Further, Deborah Corvelli, has been
designated as the manager of our Bank Secrecy Act compliance program, and in
that role has been monitoring the new register on a regular basis. The BSA
officer is responsible for reviewing all currency transaction reports for
accuracy prior to filing. Officers of the Bank have attended Bank Secrecy Act
compliance courses and have scheduled training sessions for our staff regarding
Bank Secrecy Act compliance, including specifically the use of the new records
management register and the proper completion of currency transaction
reports.  In addition, the Board of Directors plans to monitor and
evaluate our Bank Secrecy Act compliance program on a quarterly
basis.  We have also retained an independent accounting firm to
perform an independent assessment of our Bank Secrecy Act compliance program on
an annual basis.
  ITEM
1A.Risk
Factors
  Not applicable to a smaller reporting
company.
 
 ITEM
1B.Unresolved Staff
Comments
  Not applicable to a smaller reporting
company.
  39
 ITEM
2.Properties
  The following table provides certain
information with respect to our offices as of December 31, 2008:
 
 Location
                    
                    Leased
                      or
      Owned
                    
                    Year
      Acquired
                    
                    Net
      Book Value of Real
                        PropertyMain
      Office:
                      31
      Boonton Turnpike
                      Lincoln
      Park, NJ 07035
                    
                    Owned
                    
                    1963
                    
                    $
                    751,685Montville
      Branch:
                      193
      Changebridge Road
                      Montville,
      NJ 07045
                    
                    Owned
                    
                    2007
                    
                    $
                    789,067
 
 The net book value of our premises,
land and equipment was approximately $1.5 million at December 31,
2008.
 
 For
information regarding the Company’s investment in mortgages and mortgage-related
securities, see “Item 1. Business” herein.
 
 ITEM
3.Legal
Proceedings
  On
September 13, 2007, Lincoln Park Savings was 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, alleged an employment-related claim pursuant to the
New Jersey Conscientious Employee Protection Act ( N.J.S.34:19-1 et
seq.).  The complaint was referred to special counsel for Lincoln Park
Savings for defense,and
the defense was assumed by Lincoln Park Savings’ insurance
carrier.  The case was settled and dismissed in December 2008 with all
but the sum of $25,000, representing the loss retention, covered by the
insurance carrier.
 
 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
4.Submission of
Matters to a Vote of Security Holders
  No
matters were submitted to a vote of stockholders during the fourth quarter of
the year under report.
  PART
II
  ITEM
5.Market for
Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Securities
  (a)      Our
common stock is traded on the OTC Electronic Bulletin Board under the symbol
"LPBC". Lincoln Park Bancorp, MHC owns 999,810 shares, or 55.4% of our
outstanding common stock. The approximate number of holders of record of Lincoln
Park Bancorp's common stock as of March 23, 2009 was 220.  Certain
shares of Lincoln Park Bancorp are held in "nominee" or "street" name and
accordingly, the number of beneficial owners of such shares is not known or
included in the foregoing number. The following table presents quarterly market
information for Lincoln Park Bancorp's common stock for the two-year period
ended December 31, 2008.  Lincoln Park Bancorp began trading on the
Electronic Bulletin Board on December 24, 2004.  The quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission,
and may not represent actual transactions.  The following information
was provided by the Electronic Bulletin Board.
  40
  Fiscal
      Period
                  
                  High
                  
                  
                  Low
                  
                  
                  DividendsQuarter
      ended March 31, 2007
                  
                  $
                  10.00
                  
                  
                  $
                  8.65
                  
                  
                  $
                  0.00Quarter
      ended June 30, 2007
                  
                  
                  9.00
                  
                  
                  
                  8.36
                  
                  
                  
                  0.00Quarter
      ended September 30, 2007
                  
                  
                  8.50
                  
                  
                  
                  7.30
                  
                  
                  
                  0.00Quarter
      ended December 31, 2007
                  
                  
                  8.00
                  
                  
                  
                  6.00
                  
                  
                  
                  0.00Quarter
      ended March 31, 2008
                  
                  
                  6.25
                  
                  
                  
                  5.10
                  
                  
                  
                  0.00Quarter
      ended June 30, 2008
                  
                  
                  7.00
                  
                  
                  
                  5.00
                  
                  
                  
                  0.00Quarter
      ended September 30, 2008
                  
                  
                  7.00
                  
                  
                  
                  5.75
                  
                  
                  
                  0.00Quarter
      ended December 31, 2008
                  
                  
                  6.45
                  
                  
                  
                  3.00
                  
                  
                  
                  0.00
 
 Dividend
payments by Lincoln Park Bancorp are dependent primarily on dividends it
receives from Lincoln Park Savings Bank, because Lincoln Park Bancorp will have
no source of income other than dividends from Lincoln Park Savings Bank,
earnings from the investment of proceeds from the sale of shares of common stock
retained by Lincoln Park Bancorp, and interest payments with respect to Lincoln
Park Bancorp's loan to the Employee Stock Ownership Plan.  New Jersey
law imposes limitations on dividends by New Jersey stock savings
banks.  See "Regulation—New Jersey Banking
Regulation—Dividends."
 
 Set forth
below is information as of December 31, 2008 regarding equity compensation
plans.  Other than the ESOP, Lincoln Park Bancorp does not have any
equity compensation plans that were not approved by its
stockholders.
  Plan
                                                                                
                                                                                Number
      of securities to be
                                                                                  issued
      upon exercise of
                                                                                  outstanding
      options and rights
                                                                                
                                                                                
                                                                                Weighted
      average
                                                                                  exercise
      price
                                                                                
                                                                                
                                                                                Number
      of securities remaining available for issuance under
                                                                                  planEquity
      compensation plans approved by stockholders
                                                                                
                                                                                
                                                                                90,225
                                                                                (1)
                                                                                
                                                                                $
                                                                                8.83
                                                                                (2)
                                                                                
                                                                                
                                                                                36,787
                                                                                (3)Equity
      compensation plans not approved by stockholders
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —Total
                                                                                
                                                                                
                                                                                90,225
                                                                                (1)
                                                                                
                                                                                $
                                                                                8.83
                                                                                (2)
                                                                                
                                                                                
                                                                                36,787
                                                                                (3)
 _____________
 (1)
              Includes
      23,205 shares of restricted stock and 67,020 options to purchase shares of
      common stock awarded under the 2005 Plan.(2)
              Relates
      to 67,020 outstanding stock options.(3)
              Includes
      13,084 shares of restricted stock available for future issuance and 23,703
      options to purchase shares of common stock under the 2005
      Plan.
 
 In
addition, reference is made to the “Market for Common Stock” section of Lincoln
Park Bancorp’s 2008 Annual Report to Stockholders, which is incorporated herein
by reference.
 
 (b)
                Not
      applicable.(c)
                During the fourth
      quarter of 2008, the Company repurchased shares of its common stock as
      follows:
 
 Period
                        
                        #
      of Shares
                            Purchased
                        
                        
                        Average
      Price Paid
                            Per
      Share
                        
                        
                        Total
      Shares Purchased
                        
                        
                        Maximum
      Number of Shares that may still
                            be
      purchased under the repurchase
                            programOct.
      1 – Oct. 31
                        
                        
                        —
                        
                        
                        $
                        —
                        
                        
                        
                        38,755
                        
                        
                        
                        44,805Nov.
      1 – Nov. 30
                        
                        
                        9,500
                        
                        
                        
                        5.20
                        
                        
                        
                        48,255
                        
                        
                        
                        35,305Dec.
      1 – Dec. 31
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        48,255
                        
                        
                        
                        35,305
 
 ITEM
6.Selected
Financial Data
  Not applicable to a smaller reporting
company.
  41
  ITEM
7.Management’s Discussion and
Analysis of Financial Condition and Results of
Operations
  The
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” section of Lincoln Park Bancorp’s 2008 Annual Report to Stockholders
is incorporated herein by reference.  For off-balance sheet
arrangements, see Note 14 of the “Notes to Consolidated Financial Statements”
within the Annual Report.
  ITEM
7A.Quantitative and Qualitative
Disclosures About Market Risk
  The
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” section of Lincoln Park Bancorp’s 2008 Annual Report to Stockholders
is incorporated herein by reference.
 
 ITEM
8.Financial
Statements and Supplementary Data
  The
consolidated financial statements included in Lincoln Park Bancorp’s 2008 Annual
Report to Stockholders are incorporated herein by reference.
  ITEM
9.Changes In and
Disagreements With Accountants on Accounting and Financial
Disclosure
  None.
  ITEM 9A.
(T)Controls and
Procedures
  (a)      
Evaluation of disclosure 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 Rule 13a-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 Chief Financial Officer concluded that, as of the end of
the period covered by this report, our disclosure controls and procedures were
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 SEC’s rules and forms.
  (b) Management’s
Report on Internal Control over Financial Reporting
 
 The
management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting.  The Company's
internal control system is a process designed to provide reasonable assurance to
the management and board of directors regarding the preparation and fair
presentation of published consolidated financial statements.
  The
Company's internal control over financial reporting includes policies and
procedures that pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect transactions and disposition of assets;
provide reasonable assurances that transactions are recorded as necessary to
permit preparation of consolidated financial statements in accordance with U.S.
generally accepted accounting principles, and that receipts and expenditures are
being made only in accordance with authorizations of management and the
directors of the Company; and provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use or disposition of the
Company's assets that could have a material effect on our consolidated financial
statements.
  All
internal control systems, no matter how well designed, have inherent
limitations.  Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to consolidated financial
statement preparation and presentation.  Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
  The
Company's management assessed the effectiveness of internal control over
financial reporting as of December 31, 2008.  In making this
assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated
Framework.  Based on its assessment, management believes that,
as of December 31, 2008, the Company's internal control over financial reporting
is effective based on those criteria.
  42
  This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management’s report in this annual report.
 
 David
      G. Baker
                Nandini
      S. MallyaPresident
      and Chief Executive Officer
                Chief
      Financial Officer
 
 (c)     
Changes in internal control.
 
 There has
been no change in the Company’s internal control over financial reporting during
the Company’s fourth quarter of fiscal year 2008 that has materially affected,
or is reasonably likely to materially affect, the Company’s internal control
over financial reporting.
  ITEM
9B.Other
Information
  None.
  PART
III
  ITEM
10.Directors, Executive
Officers, and Corporate Governance
  Lincoln
Park Bancorp has adopted a Code of Ethics that applies to Lincoln Park Bancorp’s
principal executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions.  The
Code of Ethics may be accessed on Lincoln Park Bancorp’s website at
www.lincolnparksavings.com.  The Code of Ethics was also filed as
Exhibit 14 to Lincoln Park Bancorp’s Form 10-KSB for the year ended December 31,
2004.
  Information
concerning Directors and executive officers of Lincoln Park Bancorp is
incorporated herein by reference from our definitive Proxy Statement (the “Proxy
Statement”), specifically the section captioned “Proposal I—Election of
Directors.”  Information concerning corporate governance matters is
incorporated herein by reference from our Proxy Statement, specifically the
section captioned “Proposal I – Election of Directors.”
  ITEM
11.Executive
Compensation
  Information
concerning executive compensation is incorporated herein by reference from our
Proxy Statement, specifically the section captioned “Proposal I — Election of
Directors.”
  ITEM
12.Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder
Matters
  Information
concerning security ownership of certain owners and management is incorporated
herein by reference from our Proxy Statement, specifically the sections
captioned “Voting Securities and Principal Holders Thereof” and “Proposal I —
Election of Directors.”
  ITEM
13.Certain Relationships and
Related Transactions, and Director Independence
  Information
concerning relationships and transactions, and director independence, is
incorporated herein by reference from our Proxy Statement, specifically the
sections captioned “Transactions with Certain Related Persons” and “Board
Independence,” respectively.
  43
  ITEM
14.Principal Accountant Fees
and Services
  Information
concerning principal accountant fees and services is incorporated herein by
reference from our Proxy Statement, specifically the section captioned “Proposal
II—Ratification of Appointment of Independent Registered Public Accounting
Firm.”
  PART
IV
  ITEM
15.Exhibits and Financial
Statement Schedules
  Financial Statements(A)
                Report
      of Independent Registered Public Accounting Firm(B)
                Consolidated
      Statements of Financial Condition(C)
                Consolidated
      Statements of Operations(D)
                Consolidated
      Statements of Changes In Stockholders’ Equity(E)
                Consolidated
      Statements of Cash Flows(F)
                Notes
      to Consolidated Financial StatementsFinancial Statement
    SchedulesExhibits3.1
                Charter
      of Lincoln Park Bancorp*3.2
                Bylaws
      of Lincoln Park Bancorp*4
                Form
      of Common Stock Certificate of Lincoln Park Bancorp*10.1
                Employee
      Stock Ownership Plan*10.2
                Lincoln
      Park Bancorp 2005 Stock-Based Incentive Plan****10.3
                Lincoln
      Park Bancorp Director Retirement Plan**13
                Annual
      Report to Stockholders14
                Code
      of Ethics***21
                Subsidiaries
      of Registrant*23
                Consent
      of Beard Miller Company LLP31.1
                Certification
      of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities
      Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of 200231.2
                Certification
      of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities
      Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of 200232
                Certification
      of 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______________________________*
                Incorporated
      by reference to the Registration Statement on Form SB-2 of Lincoln Park
      Bancorp (file no. 333-116639), originally filed with the Securities and
      Exchange Commission on June 18, 2004.**
                Incorporated
      by reference to the Current Report on Form 8-K of Lincoln Park Bancorp
      (file no. 000-51078), filed with the Securities and Exchange Commission on
      March 15, 2006.***
                Incorporated
      by reference to the Annual Report on Form 10-KSB of Lincoln Park Bancorp
      (file no. 000-51078), filed with the Securities and Exchange Commission on
      March 30, 2005.****
                Incorporated
      by reference to the definitive proxy statement of Lincoln Park Bancorp
      (file no. 000-51078) for the special meeting of stockholders held on
      December 22, 2005, as filed with the Securities and Exchange Commission on
      November 22, 2005.
  44
  SIGNATURES
  Pursuant to the requirements of Section
13 of the Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 LINCOLN
      PARK BANCORPDate:
      March 30, 2009
                    By:
                    /s/ David G. BakerDavid
      G. BakerPresident
      and Chief Executive Officer(Duly
      Authorized
Representative)
 
 Pursuant to the requirements of the
Securities Exchange of 1934, this report has been signed by the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated.
 
 Signatures
                    
                    Title
                    
                    Date/s/
      David G. Baker
                    
                    President
      and Chief Executive
                    
                    March
      30, 2009David
      G. Baker
                    
                    Officer
      (Principal ExecutiveOfficer),
      Director/s/ Nandini Mallya
                    
                    Vice
      President and Treasurer
                    
                    March
      30, 2009Nandini
      Mallya
                    
                    (Principal
      Financial andAccounting
      Officer)/s/ Stanford Stoller
                    
                    Chairman
      of the Board and
                    
                    March
      30, 2009Stanford
      Stoller
                    
                    Director/s/ Henry Fitschen
                    
                    Director
                    
                    March
      30, 2009Henry
      Fitschen/s/ John F. Feeney
                    
                    Director
                    
                    March
      30, 2009John
      F. Feeney/s/ Edith M.
      Perrotti
                    
                    Director
                    
                    March
      30, 2009Edith
      M. Perrotti






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