EXHIBIT
13
 
 PORTIONS
OF ANNUAL REPORT TO STOCKHOLDERS




LINCOLN
PARK BANCORP




2008
Annual Report to Stockholders




Table
of Contents




Letter
      to Stockholders
                  2Selected
      Consolidated Financial Information and Other Data
                  3Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  5Report
      of Independent Registered Public Accounting Firm
                  18Consolidated
      Financial Statements
                  19Directors
      and Executive Officers
                  62Stockholder
      Information
                  63Market
      Information
                  64




Visit
our website at www.lincolnparksavings.com


1









31
Boonton Turnpike, Lincoln Park, New Jersey 07035


973-694-0330
FAX 973-694-3114


www.lincolnparksavings.com




March 29,
2009




Dear
Shareholders,




The Board
of Directors and I again thank you, our investors, for your continued commitment
to Lincoln Park Bancorp in these difficult economic times. Lincoln Park Bancorp
posted a small loss of $33,000 in 2008 due primarily to impairment losses from
securities of $460,000, compared with a profit of $60,000 in 2007.




Amidst
the economic chaos of 2008, Lincoln Park Bancorp increased its assets 33.8%
primarily by taking advantage of attractive borrowing rates at the Federal Home
Loan Bank and increasing deposits by $8 million. These funds enabled the Company
to increase investments in securities by 135.9% and our loan portfolio by 1.9%,
reflecting management’s plan to provide a more consistent and predictable source
of income for 2008. As part of this strategy, we also focus on maintaining safe
capital levels to ensure the health of the Bank.




The
Bank’s Board of Directors submitted an application to Treasury for TARP funding
in November 2008. At this date there have been no term sheets developed by the
U.S. Department of Treasury for banks in the mutual holding company structure,
such as Lincoln Park Savings. A final decision on accepting any funding will be
made when and if term sheets are developed by the U.S. Department of Treasury.
No final decision to accept funding has been made to date.




Lincoln
Park Bancorp will continue in 2009 doing business the old fashioned way, by
following conservative lending policies and providing high quality customer
service. We continue to rely on our most valuable asset, our outstanding and
dedicated employees, to make us stand out from our banking competitors. This
approach has worked for over 85 years and will continue to serve us well into
the future.




Sincerely,






David G.
Baker


President




2




LINCOLN
PARK BANCORP




SELECTED
CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA




The
following tables set forth selected consolidated financial and other data of
Lincoln Park Bancorp at and for the periods indicated. The selected data has
been derived in part from the audited consolidated financial statements of
Lincoln Park Bancorp. The following information is only a summary, and should be
read in conjunction with the consolidated financial statements and notes
presented elsewhere in the Annual Report.




At
      December 31,2008
                        
                        
                        2007
                        
                        
                        2006(In
      Thousands)Selected Financial Condition
      Data:Total
      assets
                        
                        $
                        137,420
                        
                        
                        $
                        102,665
                        
                        
                        $
                        93,970Loans
      receivable, net (1)
                        
                        
                        74,482
                        
                        
                        
                        73,085
                        
                        
                        
                        67,451Cash
      and cash equivalents
                        
                        
                        4,093
                        
                        
                        
                        2,502
                        
                        
                        
                        2,601Term
      deposits
                        
                        
                        —
                        
                        
                        
                        295
                        
                        
                        
                        190Securities
      available for sale
                        
                        
                        10,175
                        
                        
                        
                        1,521
                        
                        
                        
                        2,574Securities
      held to maturity
                        
                        
                        43,524
                        
                        
                        
                        21,242
                        
                        
                        
                        18,335Deposits
                        
                        
                        72,989
                        
                        
                        
                        64,967
                        
                        
                        
                        57,844FHLB
      advances
                        
                        
                        49,996
                        
                        
                        
                        23,552
                        
                        
                        
                        21,978Stockholders’
      equity
                        
                        
                        13,112
                        
                        
                        
                        13,146
                        
                        
                        
                        13,244







(1)
                    Net
      of loans in process, allowance for loan losses and deferred loan
      fees.





Years
      Ended December 31,2008
                          
                          
                          2007
                          
                          
                          2006(In
      Thousands,
                            Except
      Per Share Data)Selected Operations
      Data:Total
      interest income
                          
                          $
                          6,505
                          
                          
                          $
                          5,326
                          
                          
                          $
                          4,965Total
      interest expense
                          
                          
                          3,379
                          
                          
                          
                          3,123
                          
                          
                          
                          2,576Net
      interest income
                          
                          
                          3,126
                          
                          
                          
                          2,203
                          
                          
                          
                          2,389Provision
      for (recovery of) loan losses
                          
                          
                          135
                          
                          
                          
                          51
                          
                          
                          
                          (22
                          )Net
      interest income after provision for (recovery of) loan
    losses
                          
                          
                          2,991
                          
                          
                          
                          2,152
                          
                          
                          
                          2,411Non-interest
      income (loss)
                          
                          
                          (339
                          )
                          
                          
                          145
                          
                          
                          
                          134Non-interest
      expenses
                          
                          
                          2,553
                          
                          
                          
                          2,235
                          
                          
                          
                          2,042Income
      taxes
                          
                          
                          132
                          
                          
                          
                          2
                          
                          
                          
                          189Net
      income (loss)
                          
                          $
                          (33
                          )
                          
                          $
                          60
                          
                          
                          $
                          314Net
      income (loss) per share
                          
                          $
                          (0.02
                          )
                          
                          $
                          0.03
                          
                          
                          $
                          0.18


3




At
      or for the year ended December 31,2008
                        
                        
                        2007
                        
                        
                        2006Selected Financial Ratios and Other
      Data:Performance
      Ratios:Return
      on average assets (ratio of net income (loss) to average total
      assets)
                        
                        
                        (0.03
                        )%
                        
                        
                        0.06
                        %
                        
                        
                        0.33
                        %Return
      on average equity
                        
                        
                        (0.25
                        )
                        
                        
                        0.45
                        
                        
                        
                        2.37Net
      yield on average interest-earning assets
                        
                        
                        5.51
                        
                        
                        
                        5.57
                        
                        
                        
                        5.37Net
      interest rate spread (1)
                        
                        
                        2.28
                        
                        
                        
                        1.82
                        
                        
                        
                        2.15Average
      interest-earning assets to average interest-bearing
      liabilities
                        
                        
                        112.87
                        
                        
                        
                        114.77
                        
                        
                        
                        115.77Non-interest
      expense to average assets
                        
                        
                        2.10
                        
                        
                        
                        2.27
                        
                        
                        
                        2.15Efficiency
      ratio (2)
                        
                        
                        78.22
                        
                        
                        
                        95.80
                        
                        
                        
                        81.27Capital
      Ratios:Average
      equity to average total assets
                        
                        
                        10.81
                        
                        
                        
                        13.45
                        
                        
                        
                        13.97Tier
      1 leverage ratio (3)
                        
                        
                        8.29
                        
                        
                        
                        9.60
                        
                        
                        
                        10.37Tier
      1 risk-based ratio (3)
                        
                        
                        18.00
                        
                        
                        
                        17.22
                        
                        
                        
                        19.06Total
      risk-based capital ratio (3)
                        
                        
                        18.47
                        
                        
                        
                        17.55
                        
                        
                        
                        19.33Asset
      Quality Ratios:Net
      charge-offs to average nonperforming assets
                        
                        
                        5.25
                        
                        
                        
                        0.06
                        
                        
                        
                        0.07Net
      charge-offs to average loans outstanding
                        
                        
                        0.03
                        
                        
                        
                        —
                        
                        
                        
                        —Allowance
      for loan losses to gross loans outstanding
                        
                        
                        0.40
                        
                        
                        
                        0.26
                        
                        
                        
                        0.20Nonperforming
      loans to total loans
                        
                        
                        0.91
                        
                        
                        
                        0.62
                        
                        
                        
                        0.23Nonperforming
      assets to total assets
                        
                        
                        0.50
                        
                        
                        
                        0.42
                        
                        
                        
                        0.17Other
      Data:Number
      of full-service offices
                        
                        
                        2
                        
                        
                        
                        2
                        
                        
                        
                        1







(1)
                    Represents
      the difference between the average yield on interest-earning assets and
      the average cost of interest-bearing liabilities.(2)
                    Represents
      non-interest expenses divided by the sum of net interest income and
      non-interest income excluding gains and losses on
    securities.(3)
                    Capital
      ratios of Lincoln Park Savings
Bank.


4




LINCOLN
PARK BANCORP AND SUBSIDIARY


MANAGEMENT’S
DISCUSSION AND ANALYSIS OF


FINANCIAL
CONDITION AND RESULTS OF OPERATIONS




General




Lincoln
Park Bancorp (the “Company”) is the stock holding company of Lincoln Park
Savings Bank (the “Bank”), and LPS Investment Company is the wholly owned
subsidiary of the Bank. The Company is headquartered in Lincoln Park, New Jersey
and its principal business currently consists of the operations of the Bank.
Lincoln Park Bancorp, MHC, a mutual holding company formed in connection with
the Bank’s conversion to stock form and reorganization into the holding company
form of organization, which was consummated on December 16, 2004, owns 55.4% of
the Company’s outstanding common stock at December 31, 2008. The Bank’s results
of operations are dependent primarily on net interest income, which is the
difference between the income earned on its loan and securities portfolios and
its cost of funds, consisting of the interest paid on deposits and borrowings.
Results of operations are also affected by the Bank’s non-interest income and
expenses. The Bank’s non-interest income consists primarily of fees and other
service charges. The Bank’s non-interest expenses principally consist of
salaries and employee benefits, occupancy and equipment expenses, and other
expenses. Results of operations are also significantly affected by general
economic and competitive conditions, particularly changes in interest rates,
government policies, and actions of regulatory authorities. In 2008, the Company
was also materially affected by impairment charges related to
other-than-temporary impairment in our securities portfolio. Future changes in
applicable law, regulations, or government policies may materially impact the
Bank.




Forward-Looking
Statements




The
Company’s Annual Report and Form 10-K contains certain forward-looking
statements which are based on certain assumptions and describe future plans,
strategies, and expectations of the Company. These forwarding-looking statements
are generally identified by use of the words “believe”, “expect”, “intend”,
“anticipate”, “estimate”, “project”, or similar expressions. The Company’s
ability to predict results or the actual effect of the future plans or
strategies is inherently uncertain. Factors which could have a material adverse
effect on the operations of the Company and subsidiary include, but are not
limited to, changes in: interest rates, general economic conditions,
legislative/regulatory changes, monetary and fiscal policies of the U. S.
Government, including policies of U. S. Treasury and the Federal Reserve Board,
the quality and composition of loan and securities portfolios, demand for loan
products, deposit flows, competition, demand for financial services in the
Company’s market area and accounting principles and guidelines. The risks and
uncertainties should be considered in evaluating forward-looking statements and
undue reliance should not be placed on such statements. The Company does not
undertake – and specifically disclaims obligation – to publicly release the
result of any revisions which may be made to any forward-looking statements to
reflect events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.




Critical
Accounting Policies




We
consider accounting policies involving significant judgments and assumptions by
management that have, or could have, a material impact on the carrying value of
certain assets or on income to be critical accounting policies. Material
estimates that are particularly susceptible to significant changes relate to the
determination of the allowance for loan losses, the valuation of deferred income
tax assets and the determination of other-than-temporary impairment on
securities.




5




LINCOLN
PARK BANCORP AND SUBSIDIARY


MANAGEMENT’S
DISCUSSION AND ANALYSIS OF


FINANCIAL
CONDITION AND RESULTS OF OPERATIONS




Critical
Accounting Policies (Continued)




Determining
the amount of the allowance for loan losses necessarily involves a high degree
of judgment. We review the level of the allowance on a quarterly basis, at a
minimum, and establish the provision for loan losses based on the composition of
the loan portfolio, delinquency levels, loss experience, economic conditions,
and other factors related to the collectibility of the loan portfolio. We
establish provision for loan losses, which is charged to operations, at a level
necessary to absorb known and inherent losses that are both probable and
reasonably estimable at the date of the consolidated financial statements. In
evaluating the level of the allowance for loan losses, we consider historical
loss experience, the types of loans and the amount of loans in the loan
portfolio, adverse situations that may affect the borrower’s ability to repay,
the estimated value of any underlying collateral, peer group information, and
prevailing economic conditions. This evaluation is inherently subjective as it
requires estimates that are susceptible to significant revision as more
information becomes available or as future events change. We used the same
methodology and generally similar assumptions in assessing the allowance for
both years. The level of the allowance is based on estimates, and the ultimate
losses may vary from the estimates. We have allocated the allowance among
categories of loan types as well as classification status at each period-end
date. Assumptions and allocation percentages based on loan types and
classification status have been consistently applied. Non-performing loans are
assigned a higher percentage of allowance allocation.




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




We
evaluate on a quarterly basis whether any securities are other-than-temporarily
impaired. In making this determination, we consider the extent and duration of
the impairment, the nature and financial health of the issuer and our ability
and intent to hold securities for a period sufficient to allow for any
anticipated recovery in market value. Other considerations include a review of
the credit quality of the issuer and the existence of a guarantee or insurance,
if applicable to the security. If a security is determined to be
other-than-temporarily impaired, we record an impairment loss as a charge to
income for the period in which the impairment loss is determined to exist,
resulting in a reduction to our earnings for that period.




As of
December 31, 2008, we determined that nine equity securities in our available
for sale portfolio and one corporate bond in our held to maturity portfolio were
other-than-temporarily impaired. Accordingly, impairment losses of $262,000 on
the equity securities and $198,000 on the corporate bond were recorded. As the
impairment losses related to the equity securities are considered “capital” in
nature, they can not be deducted as losses for tax purposes except to offset
future capital gains, which are not currently foreseen. Accordingly, the
deferred tax benefit associated with impairment loss on equity securities has
been fully reserved. We estimate that the impact of these impairment losses,
assuming a 40% tax benefit on the bond impairment loss, was approximately
$381,000.




6




LINCOLN
PARK BANCORP AND SUBSIDIARY


MANAGEMENT’S
DISCUSSION AND ANALYSIS OF


FINANCIAL
CONDITION AND RESULTS OF OPERATIONS




Critical
Accounting Policies (Continued)




With the
exception of the securities described in the preceding paragraph, we concluded
that, as of December 31, 2008, any unrealized losses in the available for sale
and held to maturity security portfolios, which aggregated $633,000 on
sixty-three securities having an aggregate fair value of $16,798,000, were
temporary in nature due to market interest rates and not the underlying credit
quality of the issuers of the securities. Additionally, we have the intent and
ability to hold these investments for the time necessary to recover the
amortized cost. Future events that would materially change this conclusion and
require a charge to operations for an impairment loss include a change in the
credit quality of the issuers.




Federal
and state income taxes have been provided on the basis of reported income or
loss. The amounts reflected on the Company’s tax returns differ from these
provisions due principally to temporary differences in the reporting of certain
items for financial reporting and income tax reporting purposes. The tax effect
of these temporary differences is accounted for as deferred taxes applicable to
future periods. Deferred income tax expense or benefit is determined by
recognizing deferred tax assets and liabilities for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in earnings in the
period that includes the enactment date.




The
determination of the amount of deferred tax assets more likely than not to be
realized is dependent on projections of future earnings, which are subject to
frequent change. The realization of deferred tax assets is assessed and a
valuation allowance is needed if it is more likely than not that all or a
portion of the deferred tax asset will not be realized. “More likely than not”
is defined as greater than a 50% chance. All available evidence, both positive
and negative is considered to determine whether, based on the weight of that
evidence, a valuation allowance is needed. Information about our current
financial position and results of operations for the current and preceding years
is readily available. This historical information is supplemented by all
currently available information about future years. The Company has determined
that, at December 31, 2008, the $112,000 deferred tax asset associated with the
impairment loss recorded on equity securities is not more likely than not to be
realized and, accordingly, has fully reserved that amount.




7




LINCOLN
PARK BANCORP AND SUBSIDIARY


MANAGEMENT’S
DISCUSSION AND ANALYSIS OF


FINANCIAL
CONDITION AND RESULTS OF OPERATIONS




Comparison
of Financial Condition at December 31, 2008 and 2007




Our total
assets increased by $34.7 million or 33.8%, to $137.4 million at December 31,
2008 from $102.7 million at December 31, 2007. During the year ended December
31, 2008, the level of cash and cash equivalents increased by $1.6 million, or
63.7%, to $4.1 million at December 31, 2008 from $2.5 million at December 31,
2007. Term deposits decreased $295,000 or 100.0% to $0 at December 31, 2008
when compared with $295,000 at December 31, 2007. The increase in cash and cash
equivalents was a result of normal operating activities of the Bank. The
decrease in term deposits resulted from maturities of three certificates of
deposit.




Securities
available for sale increased $8.7 million or 569.0% to $10.2 million at December
31, 2008 when compared with $1.5 million at December 31, 2007. The increase in
securities available for sale resulted primarily from purchases of Agency Backed
Collateralized Mortgage Obligations (CMOs). During the year ended December 31,
2008, purchases of securities available for sale amounted to $10.6 million,
which was offset by sales of $46,000 and principal repayments of $1.7 million.
In the quarter ended December 31, 2008, an other-than-temporary impairment loss
of $262,000 was recorded in the available for sale equity portfolio. These
losses related to two common equity securities and seven closed end mutual
funds.




Securities
held to maturity increased $22.3 million or 105.0% to $43.5 million at December
31, 2008 when compared with $21.2 million at December 31, 2007. During the
year ended December 31, 2008, purchases of securities held to maturity amounted
to $36.1 million which offset maturities, calls, and repayments of $13.6
million. In the quarter ended December 31, 2008, $198,000 was recorded as an
other-than-temporary impairment loss in the corporate bond portfolio. The loss
was related to an automobile company bond.




Loans
receivable amounted to $74.5 million and $73.1 million at December 31, 2008 and
2007, respectively, representing an increase of $1.4 million or 1.9%. Such
increase was primarily the result of loan originations totaling $16.0 million,
which exceeded repayments totaling $14.5 million.




Other
assets decreased $196,000 or 27.3% to $522,000 at December 31, 2008 from
$718,000 at December 31, 2007. The decrease was primarily due to a change in a
disbursement account to an attorney in the amount of $270,000 for a loan that
was originated but not closed as of December 31, 2007, offset by increases in
deferred income tax accounts.




Total
deposits increased $8.0 million or 12.4% to $73.0 million at December 31, 2008
from $65.0 million at December 31, 2007. The increase in deposits was due to a
management decision to be more competitive with deposit rates. Advances from the
FHLB increased $26.4 million or 112.3% to $50.0 million at December 31, 2008
when compared with $23.6 million at December 31, 2007. The increase in deposits
and borrowings facilitated the purchase of securities.




Other
liabilities increased $301,000 or 50.1% to $902,000 at December 31, 2008 when
compared to $601,000 at December 31, 2007. The increase was primarily due to
increases in accrued expenses for the directors’ retirement plan and increases
in current income taxes payable.




8




LINCOLN
PARK BANCORP AND SUBSIDIARY


MANAGEMENT’S
DISCUSSION AND ANALYSIS OF


FINANCIAL
CONDITION AND RESULTS OF OPERATIONS




Comparison
of Financial Condition at December 31, 2008 and 2007 (Continued)




Stockholders’
equity remained unchanged at $13.1 million at December 31, 2008 and December 31,
2007, respectively, reflecting a net loss of $33,000, and $83,000 in aggregate
expenses for the ESOP, restricted stock, and stock options for the twelve months
ended December 31, 2008. Accumulated other comprehensive loss decreased by
$54,000, reflecting the recording of $47,000 unrealized losses on securities
available for sale, and a $20,000 net change in pension costs, net of deferred
income taxes of $13,000. The Company also purchased $138,000 of its common stock
at an average price of $6.13, which is reflected as treasury stock in the
stockholders’ equity section of the consolidated Statement of
Condition.




Comparison
of Operating Results for the Years Ended December 31, 2008 and 2007




General. The Company had a net
loss of $33,000 for the year ended December 31, 2008 as compared to net income
of $60,000 for the year ended December 31, 2007. The net loss reflects
impairment losses of $460,000 on securities, and increases of $84,000 in
provision for loan losses, $318,000 in non-interest expenses and $130,000 in
income taxes, partially offset by an increase in net interest income of
$923,000.




Interest Income. Interest
income increased by $1.8 million to $6.5 million for the year ended December 31,
2008, from $5.3 million for the year ended December 31, 2007. The increase in
interest income was due to increases of $32,000 in interest income from loans
and $1.1 million in interest income on securities. The increase in interest
income was a result of an increase of $22.4 million or 23.4% in the average
balance of interest-earning assets to $118.0 million during the year ended
December 31, 2008 when compared to $95.6 million during the year ended December
31, 2007, offset by a decrease of six basis points in the yield on
interest-earning assets from 5.57% in 2007 to 5.51% in 2008.




Interest
income from loans receivable increased $32,000, or 0.8%, to $4.18 million for
the year ended December 31, 2008, from $4.14 million for the year ended December
31, 2007. The increase was due to a $2.3 million or 3.20% increase in the
average balance of loans receivable to $74.0 million in 2008 from $71.7 million
in 2007, offset by a decrease in the average yield to 5.64% in 2008 from 5.78%
in 2007.




Interest
income on securities, including available for sale and held to maturity
securities, increased $1.1 million, or 102.0% to $2.3 million for the year ended
December 31, 2008 from $1.1 million for the year ended December 31, 2007. This
was primarily due to increases in the average balance of taxable securities to
$38.1 million in 2008 from $20.7 million in 2007 and the average yield of
taxable securities to 5.91% in 2008 from 5.28% in 2007. During 2008, the Company
purchased $46.7 million in securities, primarily collateralized mortgage
obligations, in order to increase portfolio yield. The average balance of tax
exempt securities remained unchanged at $566,000 in 2008 and 2007. The average
yield on tax exempt securities decreased to 4.24% from 5.30% in
2007.




Interest
income on other interest-earning assets remained unchanged at $57,000 for the
years ended December 31, 2008 and 2007. The average balance of other
interest-earning assets increased by $2.7 million to $5.4 million in 2008 from
$2.6 million in 2007, offset by a decrease in the yield to 1.06% in 2008 from
2.18% in 2007.




9




LINCOLN
PARK BANCORP AND SUBSIDIARY


MANAGEMENT’S
DISCUSSION AND ANALYSIS OF


FINANCIAL
CONDITION AND RESULTS OF OPERATIONS




Comparison
of Operating Results for the Years Ended December 31, 2008 and 2007
(Continued)




Interest Expense. Total
interest expense increased $256,000, or 8.2%, to $3.4 million for 2008 from $3.1
million for 2007. The increase in interest expense resulted from a $21.2 million
increase in the average balance on total interest bearing liabilities to $104.5
million in 2008 from $83.3 million in 2007, offset by a decrease of 52 basis
points in the cost of interest bearing liabilities to 3.23% in 2008 from 3.75%
in 2007.




Interest
expense on deposits decreased $221,000 to $2.0 million in 2008 from $2.2 million
in 2007. The decrease in expense during 2008 resulted from a decrease in the
average cost of interest-bearing deposits to 2.97% in 2008 from 3.55% in 2007,
partially offset by an increase in the average balance of interest-bearing
deposits to $65.9 million in 2008 from $61.4 million in 2007. Interest rates
declined for all deposit categories, reflecting lower market interest rates. The
average balance of interest-bearing demand accounts increased $789,000 or 6.5%
to $12.9 million in 2008 from $12.1 million in 2007. The average balance of
savings and club accounts decreased $674,000, or 5.5%, to $11.6 million for the
year ended December 31, 2008 from $12.3 million for the year ended
December 31, 2007. The average balance of certificates of deposit increased
$4.5 million or 12.0% to $41.4 million in 2008 from $36.9 million in
2007.




The
interest expense on borrowed money increased $477,000 to $1.4 million in 2008
from $942,000 in 2007. The increase during 2008 was due to an increase of $16.6
million in the average balance of borrowed money to $38.6 million in 2008 from
$22.0 million in 2007, partially offset by a decrease in the average cost of
borrowed money to 3.67% in 2008 from 4.29% in 2007, reflecting decreasing market
interest rates during 2008.




Net Interest Income. Net
interest income increased $923,000, or 41.9%, to $3.1 million for 2008 from $2.2
million for 2007. The improvement in net interest income was due to the
increased level of earning assets and an improved net interest spread, which was
2.28% and 1.82% during the years ended December 31, 2008 and 2007,
respectively.




Provision for Loan Losses.
Based on our evaluation of the factors mentioned above we had a provision of
$135,000 for the year ended December 31, 2008, as compared to a provision of
$51,000 for the year ended December 31, 2007. We used the same methodology and
generally similar assumptions in assessing the allowance for both years. The
allowance for loan losses was $301,000, or 0.40% of total loans outstanding at
December 31, 2008, as compared with $187,000, or 0.26% of total loans
outstanding at December 31, 2007. The allowance for loan losses at December 31,
2008 consisted of $147,000 of specific allowances and $154,000 of general
allowances. At December 31, 2007, the allowance for loan losses was entirely
general allowances. The level of the allowance is based on estimates, and the
ultimate losses may vary from the estimates.




Non-interest Income (Loss).
Non-interest income (loss) decreased by $484,000 to ($339,000) for the year
ended December 31, 2008, as compared to $145,000 for the year ended December 31,
2007. The decrease in the 2008 period resulted primarily from recording current
year impairment losses of $460,000 in securities available for sale and held to
maturity, and losses of $17,000 on sales and calls of securities recorded in
2008 as compared to gains of $15,000 in 2007, partially offset by an increase of
$10,000 in fees and service charges.




10




LINCOLN
PARK BANCORP AND SUBSIDIARY
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
 FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
  Comparison
of Operating Results for the Years Ended December 31, 2008 and 2007
(Continued)
  Non-interest Expenses.
Non-interest expenses for the years ended December 31, 2008 and 2007 were $2.6
million and $2.2 million, respectively, reflecting an increase of $318,000 or
14.2%. Salaries and employee benefits increased $89,000 or 9.1% to $1.1 million
from $983,000, primarily as a result of an increase in full time personnel in
general and also to staff the Montville Branch. Occupancy expense increased
$18,000 or 12.6% to $161,000 from $143,000, due to increases in costs of repairs
and maintenance. Equipment expenses increased $27,000 or 9.0% to $328,000 from
$301,000, primarily due to purchases, upgrading and maintenance of software and
other equipment. Audit and accounting fees increased by $37,000 or 33.9% to
$146,000 in 2008 as compared to $109,000 in the 2007 period. This increase was
due to additional audit requirements of the STAR-ATM network, an independent
evaluation of the interest rate risk model and a general increase in audit
expenses. Legal Fees increased by $30,000 or 37.0% to $111,000 in the 2008
period from $81,000 during the same period in 2007. This increase relates to the
settlement of legal action by a former employee and also legal fees associated
with impaired loans. For the period ended December 31, 2008, miscellaneous
non-interest expenses increased by $110,000 to $662,000 or 20.0% as compared to
$552,000 for the same period ended December 31, 2007. This increase was related
primarily to increases in Director fees of $67,000, consultant fees of $30,000,
and internet and website related fees of $8,000. We expect that our non-interest
expenses will increase in future years as a result of a proposed FDIC special
assessment payable in 2009 of 20 basis points on all insured deposits, and as a
result of increases in FDIC insurance premiums.
  Income Tax Expense. The
provision for income taxes totaled $132,000 and $2,000 in 2008 and 2007,
respectively. The increase in the provision for income taxes was primarily due
to our increased pre-tax income of $99,000 in 2008 compared with $62,000 in
2007. A more significant factor was a 100% deferred tax valuation allowance
recorded on the $112,000 deferred tax benefit associated with the $262,000
impairment loss on equity securities. The losses on equity securities are
considered capital losses which can only be recovered through future offsetting
capital gains. As such future capital gains are not presently foreseen, the
deferred tax asset related to equity security impairment losses is not
more-likely-than-not to be recognized.
 11
  LINCOLN
PARK BANCORP AND SUBSIDIARY
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
 FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
  Average
Balance Sheet
  The
following table presents, at the date and for the periods indicated, the total
dollar amount of interest income from average interest earning assets and the
resultant yields, as well as the interest expense on average interest-bearing
liabilities, expressed both in dollars and rates. No tax equivalent adjustments
were made. All average balances are monthly average balances. Non-accruing loans
have been included in the table as loans carrying a zero yield. The amortization
of loan fees is included in computing interest income; however, such fees are
not material.
  At
      December 31, 2008
                                                    
                                                    
                                                    Year
      Ended December 31,2008
                                                    
                                                    
                                                    2007Outstanding
                                                      Balance
                                                    
                                                    
                                                    Yield/
      Cost
                                                    
                                                    
                                                    Average
                                                      Outstanding
                                                      Balance
                                                    
                                                    
                                                    Interest
                                                      Earned/
                                                      Paid
                                                    
                                                    
                                                    Yield/
      Cost
                                                    
                                                    
                                                    Average
                                                      Outstanding
                                                      Balance
                                                    
                                                    
                                                    Interest
                                                      Earned/
                                                      Paid
                                                    
                                                    
                                                    Yield/
      Cost(Dollars
      in Thousands)Interest-earning
      assets:Loans
      receivable (1)
                                                    
                                                    $
                                                    74,482
                                                    
                                                    
                                                    
                                                    5.63
                                                    %
                                                    
                                                    $
                                                    74,001
                                                    
                                                    
                                                    $
                                                    4,176
                                                    
                                                    
                                                    
                                                    5.64
                                                    %
                                                    
                                                    $
                                                    71,706
                                                    
                                                    
                                                    $
                                                    4,144
                                                    
                                                    
                                                    
                                                    5.78
                                                    %Taxable
      securities (2)(3)
                                                    
                                                    
                                                    53,133
                                                    
                                                    
                                                    
                                                    5.84
                                                    %
                                                    
                                                    
                                                    38,059
                                                    
                                                    
                                                    
                                                    2,248
                                                    
                                                    
                                                    
                                                    5.91
                                                    %
                                                    
                                                    
                                                    20,744
                                                    
                                                    
                                                    
                                                    1,095
                                                    
                                                    
                                                    
                                                    5.28
                                                    %Tax-exempt
      securities(2)
                                                    
                                                    
                                                    566
                                                    
                                                    
                                                    
                                                    4.15
                                                    %
                                                    
                                                    
                                                    566
                                                    
                                                    
                                                    
                                                    24
                                                    
                                                    
                                                    
                                                    4.24
                                                    %
                                                    
                                                    
                                                    566
                                                    
                                                    
                                                    
                                                    30
                                                    
                                                    
                                                    
                                                    5.30
                                                    %Other
      interest-earning assets
                                                    
                                                    
                                                    5,131
                                                    
                                                    
                                                    
                                                    2.31
                                                    %
                                                    
                                                    
                                                    5,360
                                                    
                                                    
                                                    
                                                    57
                                                    
                                                    
                                                    
                                                    1.06
                                                    %
                                                    
                                                    
                                                    2,613
                                                    
                                                    
                                                    
                                                    57
                                                    
                                                    
                                                    
                                                    2.18
                                                    %Total
      interest-earning assets
                                                    
                                                    
                                                    133,312
                                                    
                                                    
                                                    
                                                    5.58
                                                    %
                                                    
                                                    
                                                    117,986
                                                    
                                                    
                                                    
                                                    6,505
                                                    
                                                    
                                                    
                                                    5.51
                                                    %
                                                    
                                                    
                                                    95,629
                                                    
                                                    
                                                    
                                                    5,326
                                                    
                                                    
                                                    
                                                    5.57
                                                    %Non-interest-earning
      assets
                                                    
                                                    
                                                    4,108
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    3,507
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    3,042Total
      assets
                                                    
                                                    $
                                                    137,420
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    121,493
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    98,671Interest-bearing
      liabilities:Interest-bearing
      deposits:Demand
                                                    
                                                    $
                                                    14,468
                                                    
                                                    
                                                    
                                                    1.98
                                                    %
                                                    
                                                    $
                                                    12,869
                                                    
                                                    
                                                    
                                                    278
                                                    
                                                    
                                                    
                                                    2.16
                                                    %
                                                    
                                                    $
                                                    12,080
                                                    
                                                    
                                                    
                                                    306
                                                    
                                                    
                                                    
                                                    2.53
                                                    %Savings
      and club
                                                    
                                                    
                                                    11,235
                                                    
                                                    
                                                    
                                                    1.00
                                                    %
                                                    
                                                    
                                                    11,649
                                                    
                                                    
                                                    
                                                    116
                                                    
                                                    
                                                    
                                                    1.00
                                                    %
                                                    
                                                    
                                                    12,323
                                                    
                                                    
                                                    
                                                    124
                                                    
                                                    
                                                    
                                                    1.02
                                                    %Certificates
      of deposit
                                                    
                                                    
                                                    44,217
                                                    
                                                    
                                                    
                                                    3.38
                                                    %
                                                    
                                                    
                                                    41,400
                                                    
                                                    
                                                    
                                                    1,566
                                                    
                                                    
                                                    
                                                    3.78
                                                    %
                                                    
                                                    
                                                    36,950
                                                    
                                                    
                                                    
                                                    1,751
                                                    
                                                    
                                                    
                                                    4.74
                                                    %Borrowed
      money
                                                    
                                                    
                                                    49,996
                                                    
                                                    
                                                    
                                                    3.66
                                                    %
                                                    
                                                    
                                                    38,613
                                                    
                                                    
                                                    
                                                    1,419
                                                    
                                                    
                                                    
                                                    3.67
                                                    %
                                                    
                                                    
                                                    21,971
                                                    
                                                    
                                                    
                                                    942
                                                    
                                                    
                                                    
                                                    4.29
                                                    %Total
      interest-bearing liabilities
                                                    
                                                    
                                                    119,916
                                                    
                                                    
                                                    
                                                    3.10
                                                    %
                                                    
                                                    
                                                    104,531
                                                    
                                                    
                                                    
                                                    3,379
                                                    
                                                    
                                                    
                                                    3.23
                                                    %
                                                    
                                                    
                                                    83,324
                                                    
                                                    
                                                    
                                                    3,123
                                                    
                                                    
                                                    
                                                    3.75
                                                    %Non-interest-bearing
      liabilities:Non-interest-bearing
      demand
                                                    
                                                    
                                                    3,069
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    2,859
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    1,236Other
                                                    
                                                    
                                                    1,323
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    970
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    8354,392
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    3,829
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    2,071Total
      liabilities
                                                    
                                                    
                                                    124,308
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    108,360
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    85,395Equity
                                                    
                                                    
                                                    13,112
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    13,133
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    13,276Total
      liabilities and equity
                                                    
                                                    $
                                                    137,420
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    121,493
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    98,671Net
      interest income
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    3,126
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    2,203Interest
      rate spread (4)
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    2.48
                                                    %
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    2.28
                                                    %
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    1.82
                                                    %Net
      interest margin (5)
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    2.65
                                                    %
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    2.30
                                                    %Net
      interest-earning assets
                                                    
                                                    $
                                                    13,396
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    13,455
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    12,305Ratio
      of interest-earning assets to interest-bearing liabilities
                                                    
                                                    
                                                    1.11
                                                    x
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    1.13
                                                    x
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    1.15
                                                    x
  
 (1)
                          Loans
      receivable are net of the allowance for loan losses.(2)
                          Includes
      both available for sale and held to maturity
securities.(3)
                          Includes
      stock in Federal Home Loan Bank of New York.(4)
                          Net
      interest rate spread represents the difference between the yield on
      interest-earning assets and the cost of interest-bearing
      liabilities.(5)
                          Net
      interest margin represents net interest income as a percentage of
      interest-earning
assets.
 12
  LINCOLN
PARK BANCORP AND SUBSIDIARY
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
 FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
  Rate/Volume
Analysis
  The
following table presents the extent to which changes in interest rates and
changes in the volume of interest-earning assets and interest-bearing
liabilities have affected the Bank’s interest income and interest expense during
the periods indicated. Information is provided in each category with respect to:
(i) changes attributable to changes in volume (changes in volume multiplied by
prior rate); (ii) changes attributable to changes in rate (changes in rate
multiplied by prior volume); and the net change. The changes attributable to the
combined impact of volume and rate changes have been allocated on a proportional
basis between changes in volume and rate.
  Year
      Ended December 31,2008
      vs. 2007Increase/(Decrease)
                              Due
      to
                            
                            
                            Total
                              Increase
                              (Decrease)Volume
                            
                            
                            Rate(In
      Thousands)Interest income:Loans
      receivable
                            
                            $
                            133
                            
                            
                            $
                            (101
                            )
                            
                            $
                            32Taxable
      securities
                            
                            
                            1,010
                            
                            
                            
                            143
                            
                            
                            
                            1,153Tax-exempt
      securities
                            
                            
                            —
                            
                            
                            
                            (6
                            )
                            
                            
                            (6
                            )Other
      interest-earning assets
                            
                            
                            39
                            
                            
                            
                            (39
                            )
                            
                            
                            —Total
      interest income
                            
                            
                            1,182
                            
                            
                            
                            (3
                            )
                            
                            
                            1,179Interest expense:Interest-bearing
      deposits:Demand
                            
                            
                            19
                            
                            
                            
                            (47
                            )
                            
                            
                            (28
                            )Savings
      and club accounts
                            
                            
                            (7
                            )
                            
                            
                            (1
                            )
                            
                            
                            (8
                            )Certificates
      of deposits
                            
                            
                            196
                            
                            
                            
                            (381
                            )
                            
                            
                            (185
                            )Borrowed
      money
                            
                            
                            629
                            
                            
                            
                            (152
                            )
                            
                            
                            477Total
      interest expense
                            
                            
                            837
                            
                            
                            
                            (581
                            )
                            
                            
                            256Net
      change in interest income
                            
                            $
                            344
                            
                            
                            $
                            579
                            
                            
                            $
                            923
 13
  LINCOLN
PARK BANCORP AND SUBSIDIARY
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
 FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
  Management
of Market Risk
  General. The majority of our
assets and liabilities are monetary in nature. Consequently, our most
significant form of market risk is interest rate risk. Our assets, consisting
primarily of mortgage loans and mortgage-related securities, have longer
maturities than our liabilities, consisting primarily of deposits and FHLB
advances. As a result, a principal part of our business strategy is to manage
interest rate risk and reduce the exposure of our net interest income to changes
in market interest rates. Our full board of directors is responsible for
evaluating the interest rate risk inherent in our assets and liabilities, for
determining the level of risk that is appropriate, given our business strategy,
operating environment, capital, liquidity and performance objectives, and for
managing this risk consistent with the guidelines approved by the board of
directors. Senior management monitors the level of interest rate risk and
reports to the board of directors on a regular basis with respect to our
asset/liability policies and interest rate risk position.
  We have
emphasized the origination of fixed-rate mortgage loans for retention in our
portfolio in order to maximize our net interest income. We accept increased
exposure to interest rate fluctuations as a result of our investment in such
loans. In a period of rising interest rates, our net interest rate spread and
net interest income may be negatively affected. In addition, we have sought to
manage and mitigate our exposure to interest rate risks in the following
ways:
  •
                    We
      maintain moderate levels of short-term liquid assets. At December 31,
      2008, our short-term liquid assets totaled $4.1
million;•
                    We
      originate for portfolio adjustable-rate mortgage loans. At December 31,
      2008, our adjustable-rate mortgage loans totaled $11.1
      million;•
                    We
      attempt to increase the maturity of our liabilities as market conditions
      allow. In particular, in recent years, we have emphasized intermediate- to
      long-term FHLB advances as a source of funds. At December 31, 2008, we had
      $45.1 million of FHLB advances with terms to maturity of over one through
      thirteen years;•
                    We
      invest in mortgage-backed securities and collateralized mortgage
      obligations (CMOs), providing for increased yield in our portfolio.
      However, CMOs are often highly sensitive to changes in interest rates and
      any resulting change in the rate at which homeowners sell their
      properties, refinance, or otherwise pre-pay their loans. We may not only
      be subject to this prepayment risk, but also exposed to significant market
      and liquidity risks; and•
                    We
      invest in securities with step-up rate features providing for increased
      interest rates prior to maturity according to a pre-determined schedule
      and formula. However, these step-up rates may not keep pace with rising
      interest rates in the event of a rapidly rising rate environment. In
      addition, these investments may be called at the option of the
      issuer.
 14
  LINCOLN
PARK BANCORP AND SUBSIDIARY
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
 FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
  Management
of Market Risk (Continued)
  Net Portfolio Value. The
Company utilizes an outside vendor to prepare the computation of amounts by
which the net present value of the Company’s cash flow from assets, liabilities
and off-balance sheet items (the Company’s net portfolio value or “NPV”) would
change in the event of a range of assumed changes in market interest rates. The
vendor provides the Company with an interest rate sensitivity report of net
portfolio value. The vendor’s simulation model uses a discounted cash flow
analysis and an option-based pricing approach to measuring the interest rate
sensitivity of net portfolio value. The model estimates the economic value of
each type of asset, liability and off-balance sheet contract under the
assumption that the yield curve increases or decreases instantaneously by 200
basis points. A basis point equals one-hundredth of one percent, and 100 basis
points equal one percent. An increase in interest rates from 3% to 5% would
mean, for example, a 200 basis point increase in the “Change in Interest Rates”
column below. The vendor provides us the results of the interest rate
sensitivity model, which is based on information we provide to them to estimate
the sensitivity of our net portfolio.
  The table
below sets forth, as of December 31, 2008, the latest date for which the vendor
has provided Lincoln Park Savings an interest rate sensitivity report of net
portfolio value and the estimated changes in our net portfolio value that would
result from the designated instantaneous changes in the yield
curve.
  Change
      in
                                                                                                                    Interest
      Rates
                                                                                                                    (basis
      points)
                                                                                                                  
                                                                                                                  
                                                                                                                  Net
      Portfolio Value
                                                                                                                  
                                                                                                                  
                                                                                                                  Net
      Portfolio Value as a Percentage
                                                                                                                    of
      Present Value of AssetsEstimated
                                                                                                                    NPV
                                                                                                                  
                                                                                                                  
                                                                                                                  Amount
      of
                                                                                                                    Change
                                                                                                                  
                                                                                                                  
                                                                                                                  Percent
      of
                                                                                                                    Change
                                                                                                                  
                                                                                                                  
                                                                                                                  NPV
      Ratio
                                                                                                                  
                                                                                                                  
                                                                                                                  Change
      in Basis
                                                                                                                    Points(Dollars
      in Thousands)+200
                                                                                                                  
                                                                                                                  
                                                                                                                  $
                                                                                                                  8,781
                                                                                                                  
                                                                                                                  
                                                                                                                  $
                                                                                                                  (1,780
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (17
                                                                                                                  )%
                                                                                                                  
                                                                                                                  
                                                                                                                  6.99
                                                                                                                  %
                                                                                                                  
                                                                                                                  (105)
      basis points0
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  10,561
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  8.04
                                                                                                                  %
                                                                                                                  
                                                                                                                  —
      basis points-200
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  11,955
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  1,394
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  13
                                                                                                                  %
                                                                                                                  
                                                                                                                  
                                                                                                                  8.71
                                                                                                                  %
                                                                                                                  
                                                                                                                  67
      basis
points
  The table
above indicates that at December 31, 2008, in the event of a 200 basis point
decrease in interest rates, we would experience a 13% increase in net portfolio
value. In the event of a 200 basis point increase in interest rates, we would
experience a 17% decrease in net portfolio value.
  Certain
shortcomings are inherent in the methodology used in the above interest rate
risk measurement. Modeling changes in net portfolio value require making certain
assumptions that may or may not reflect the manner in which actual yields and
costs respond to changes in market interest rates. In this regard, the net
portfolio value table presented assumes that the composition of our
interest-sensitive assets and liabilities existing at the beginning of a period
remains constant over the period being measured and assumes that a particular
change in interest rates is reflected uniformly across the yield curve
regardless of the duration or repricing of specific assets and liabilities.
Accordingly, although the net portfolio value table provides an indication of
our interest rate risk exposure at a particular point in time, such measurements
are not intended to and do not provide a precise forecast of the effect of
changes in market interest rates on its net interest income and will differ from
actual results.
  15
  LINCOLN
PARK BANCORP AND SUBSIDIARY
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
 FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
  Liquidity
and Capital Resources
  The Bank
is required to maintain levels of liquid assets sufficient to ensure the Bank’s
safe and sound operation. Liquidity is the ability to meet current and future
financial obligations of a short-term nature. The Bank adjusts its liquidity
levels in order to meet funding needs for deposit outflows, payment of real
estate taxes from escrow accounts on mortgage loans, repayment of borrowings,
when applicable, and loan funding commitments. The Bank also adjusts its
liquidity level as appropriate to meet its asset/liability
objectives.
  The
Bank’s primary sources of funds are deposits, amortization and prepayments of
loans and mortgage-backed securities principal, FHLB advances, maturities of
investment securities and funds provided from operations. While scheduled loan
and mortgage-backed securities amortization and maturing investment securities
are a relatively predictable source of funds, deposit flow and loan and
mortgage-backed securities prepayments are greatly influenced by market interest
rates, economic conditions and competition.
  The
Bank’s liquidity, represented by cash and cash equivalents, is a product of its
operating, investing and financing activities.
  The
primary sources of investing activity are lending and the purchase of
securities. Net loans amounted to $74.5 million and $73.1 million at December
31, 2008 and 2007, respectively. Securities available for sale totaled $10.2
million and $1.5 million at December 31, 2008 and 2007, respectively. Securities
held to maturity totaled $43.5 million and $21.2 million at December 31, 2008
and 2007, respectively. In addition to funding new loan production and
securities purchases through operating and financing activities, such activities
were funded by principal repayments on existing loans and mortgage-backed
securities, and borrowings from the Federal Home Loan Bank of New York
(FHLB).
  Liquidity
management is both a daily and long-term function of business management. Excess
liquidity is generally invested in short-term investments, such as federal funds
and interest-bearing deposits. If the Bank requires funds beyond its ability to
generate them internally, borrowing agreements exist with the FHLB which provide
an additional source of funds. At December 31, 2008, advances from the FHLB
amounted to $50.0 million, and an additional $6.6 million borrowings are still
available at the FHLB.
  The Bank
anticipates that it will have sufficient funds available to meet its current
loan commitments. At December 31, 2008, the Bank has outstanding commitments to
originate loans of $633,000 and to fund lines of credit of $8.0 million.
Certificates of deposit scheduled to mature in one year or less at December 31,
2008, totaled $39.0 million. Management believes that, based upon its experience
and the Bank’s deposit flow history, a significant portion of such deposits will
remain with the Bank.
  We are
subject to various regulatory capital requirements administered by the Federal
Deposit Insurance Corporation, including a risk-based capital measure. The
risk-based capital guidelines include both a definition of capital and a
framework for calculating risk-weighted assets by assigning balance sheet assets
and off-balance sheet items to broad risk categories. At December 31, 2008, we
exceeded all of our regulatory capital requirements. We are considered “well
capitalized” under regulatory guidelines.
  16
  LINCOLN
PARK BANCORP AND SUBSIDIARY
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
 FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
  Contractual
Obligations and Off-Balance Sheet Arrangements
  In the
normal course of business, the Bank enters into off-balance sheet arrangements
consisting of commitments to fund mortgage loans and lines of credit secured by
real estate. For more information regarding these commitments, see Note 14 of
the Notes to Consolidated Financial Statements.
  Effect
of Inflation and Changing Prices
  The
consolidated financial statements and related consolidated financial data
presented in this report have been prepared in accordance with accounting
principles generally accepted in the United States of America, which require the
measurement of financial position and operating results in terms of historical
dollars without considering the change in the relative purchasing power of money
over time due to inflation. The primary impact of inflation on our operations is
reflected in increased operating costs. Unlike most industrial companies,
virtually all the assets and liabilities of a financial institution are monetary
in nature. As a result, interest rates generally have a more significant impact
on a financial institution’s performance than do general levels of inflation.
Interest rates do not necessarily move in the same direction or to the same
extent as the prices of goods and services.
  17
  
  Report
of Independent Registered Public Accounting Firm
  To the
Board of Directors and Stockholders
 Lincoln
Park Bancorp and Subsidiaries
 Lincoln
Park, New Jersey
  We have
audited the accompanying consolidated statements of financial condition of
Lincoln Park Bancorp and Subsidiaries (the “Company”) as of December 31,
2008 and 2007, and the related consolidated statements of operations, changes in
stockholders’ equity, and cash flows for the years then ended. The Company’s
management is responsible for these consolidated financial statements. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
  In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Lincoln Park
Bancorp and Subsidiaries as of December 31, 2008 and 2007, and the
consolidated results of their operations and their cash flows for the years then
ended, in conformity with accounting principles generally accepted in the United
States of America.
  (beard miller compay llp logo)
  Beard
Miller Company LLP
 Clark,
New Jersey
 March 23,
2009
 18




LincolnParkBancorp andSubsidiaryConsolidatedStatements of Financial
      Condition
   December
      31,2008
                                  
                                  
                                  2007(In
      thousands, except for share and per share amounts)ASSETSCash
      and amounts due from depository institutions
                                  
                                  $
                                  1,365
                                  
                                  
                                  $
                                  1,381Interest-bearing
      deposits
                                  
                                  
                                  2,728
                                  
                                  
                                  
                                  1,121Cash
      and Cash Equivalents
                                  
                                  
                                  4,093
                                  
                                  
                                  
                                  2,502Term
      deposits
                                  
                                  
                                  —
                                  
                                  
                                  
                                  295Securities
      available for sale
                                  
                                  
                                  10,175
                                  
                                  
                                  
                                  1,521Securities
      held to maturity (estimated fair value $43,201 and $21,113,
      respectively)
                                  
                                  
                                  43,524
                                  
                                  
                                  
                                  21,242Loans
      receivable, net of allowance for loan losses of $301 and $187,
      respectively
                                  
                                  
                                  74,482
                                  
                                  
                                  
                                  73,085Premises
      and equipment
                                  
                                  
                                  1,540
                                  
                                  
                                  
                                  1,584Federal
      Home Loan Bank of New York (“FHLB”) stock
                                  
                                  
                                  2,403
                                  
                                  
                                  
                                  1,195Interest
      receivable
                                  
                                  
                                  681
                                  
                                  
                                  
                                  523Other
                                  
                                  
                                  522
                                  
                                  
                                  
                                  718Total
      Assets
                                  
                                  $
                                  137,420
                                  
                                  
                                  $
                                  102,665Liabilities
      andStockholders’
      EquityDeposits:Non-interest
      bearing deposits
                                  
                                  $
                                  3,069
                                  
                                  
                                  $
                                  2,054Interest
      bearing deposits
                                  
                                  
                                  69,920
                                  
                                  
                                  
                                  62,913Total
      Deposits
                                  
                                  
                                  72,989
                                  
                                  
                                  
                                  64,967Short-term
      advances from the FHLB
                                  
                                  
                                  1,000
                                  
                                  
                                  
                                  5,000Long
      term advances from the FHLB
                                  
                                  
                                  48,996
                                  
                                  
                                  
                                  18,552Advance
      payments by borrowers for taxes and insurance
                                  
                                  
                                  421
                                  
                                  
                                  
                                  399Other
                                  
                                  
                                  902
                                  
                                  
                                  
                                  601Total
      Liabilities
                                  
                                  
                                  124,308
                                  
                                  
                                  
                                  89,519Stockholders’
      EquityPreferred
      stock; no par value; 1,000,000 shares authorized; none issued or
      outstanding
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —Common
      stock; $0.01 par value; 5,000,000 shares authorized; 1,851,500 shares
      issued; 1,803,245 and 1,825,845 shares, respectively,
      outstanding
                                  
                                  
                                  19
                                  
                                  
                                  
                                  19Paid-in
      capital
                                  
                                  
                                  7,631
                                  
                                  
                                  
                                  7,558Retained
      earnings
                                  
                                  
                                  6,264
                                  
                                  
                                  
                                  6,307Unearned
      ESOP shares
                                  
                                  
                                  (308
                                  )
                                  
                                  
                                  (328
                                  )Treasury
      stock; 48,255 and 25,655 shares, respectively, at cost
                                  
                                  
                                  (338
                                  )
                                  
                                  
                                  (200
                                  )Accumulated
      other comprehensive loss
                                  
                                  
                                  (156
                                  )
                                  
                                  
                                  (210
                                  )Total
      Stockholders’ Equity
                                  
                                  
                                  13,112
                                  
                                  
                                  
                                  13,146Total
      Liabilities and Stockholders’ Equity
                                  
                                  $
                                  137,420
                                  
                                  
                                  $
                                  102,665
  See
notes to consolidated financial statements.
 19
  LincolnParkBancorp andSubsidiaryConsolidatedStatements of
Operations
  Years
      Ended December 31,2008
                      
                      
                      2007(IN THOUSANDS,
      EXCEPT FOR PERSHARE
      AMOUNTS)InterestIncomeLoans,
      including fees
                      
                      $
                      4,176
                      
                      
                      $
                      4,144Securities
                      
                      
                      2,272
                      
                      
                      
                      1,125Other
      interest-earning assets
                      
                      
                      57
                      
                      
                      
                      57Total
      Interest Income
                      
                      
                      6,505
                      
                      
                      
                      5,326InterestExpenseNOW
      and money market
                      
                      
                      278
                      
                      
                      
                      306Savings
      and club
                      
                      
                      116
                      
                      
                      
                      124Certificates
      of deposit
                      
                      
                      1,566
                      
                      
                      
                      1,751Borrowings
                      
                      
                      1,419
                      
                      
                      
                      942Total
      Interest Expense
                      
                      
                      3,379
                      
                      
                      
                      3,123Net
      Interest Income
                      
                      
                      3,126
                      
                      
                      
                      2,203ProvisionforLoanLosses
                      
                      
                      135
                      
                      
                      
                      51Net
      Interest Income after Provision for Loan Losses
                      
                      
                      2,991
                      
                      
                      
                      2,152Non-InterestIncome(loss)Fees
      and service charges
                      
                      
                      113
                      
                      
                      
                      103Impairment
      (loss) of securities held to maturity
                      
                      
                      (198
                      )
                      
                      
                      —Impairment
      (loss) of securities available for sale
                      
                      
                      (262
                      )
                      
                      
                      —Loss
      on calls of securities held to maturity
                      
                      
                      (1
                      )
                      
                      
                      —(Loss)
      gain on sales of securities available for sale
                      
                      
                      (16
                      )
                      
                      
                      15Other
                      
                      
                      25
                      
                      
                      
                      27Total
      Non-Interest Income (Loss)
                      
                      
                      (339
                      )
                      
                      
                      145Non-InterestExpensesSalaries
      and employee benefits
                      
                      
                      1,072
                      
                      
                      
                      983Occupancy
      expense of premises
                      
                      
                      161
                      
                      
                      
                      143Equipment
                      
                      
                      328
                      
                      
                      
                      301Advertising
                      
                      
                      61
                      
                      
                      
                      59Audit
      and accounting
                      
                      
                      146
                      
                      
                      
                      109Legal
      Fees
                      
                      
                      111
                      
                      
                      
                      81Federal
      insurance premium
                      
                      
                      12
                      
                      
                      
                      7Miscellaneous
                      
                      
                      662
                      
                      
                      
                      552Total
      Non-Interest Expenses
                      
                      
                      2,553
                      
                      
                      
                      2,235Income
      before Income Taxes
                      
                      
                      99
                      
                      
                      
                      62IncomeTaxes
                      
                      
                      132
                      
                      
                      
                      2Net
      Income (loss)
                      
                      $
                      (33
                      )
                      
                      $
                      60Net
      Income (loss) per Share - Basic
                      
                      $
                      (0.02
                      )
                      
                      $
                      0.03Weighted
      Average Number of Common Shares Outstanding :Basic
                      
                      
                      1,763
                      
                      
                      
                      1,784Net
      Income (loss) per Common Share:Diluted
                      
                      $
                      (0.02
                      )
                      
                      $
                      0.03Weighted
      Average Number of Common Shares Outstanding:Diluted
                      
                      
                      1,763
                      
                      
                      
                      1,785
  See
notes to consolidated financial statements.
 20
  LincolnParkBancorp andSubsidiary
  Consolidated
Statements of Changes in Stockholders’ Equity
 Years
Ended December 31, 2008 and 2007
  Common
                                Stock
                              
                              
                              Paid-in
                                Capital
                              
                              
                              Retained
                                Earnings
                              
                              
                              Unearned
                                ESOP
                                Shares
                              
                              
                              Treasury
                                Stock
                              
                              
                              Accumulated
                                Other
                                Comprehensive
                                Loss
                              
                              
                              Total(In
      thousands)BALANCE
      -DECEMBER 31, 2006
                              
                              $
                              19
                              
                              
                              $
                              7,485
                              
                              
                              $
                              6,252
                              
                              
                              $
                              (347
                              )
                              
                              $
                              —
                              
                              
                              $
                              (165
                              )
                              
                              $
                              13,244Comprehensive
      income:Net
      Income
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              60
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              60Other
      comprehensive income:Realized
      gain on sale of securities available for sale, net of deferred income
      taxes of $6
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (9
                              )
                              
                              
                              (9
                              )Unrealized
      holding loss on securities available for sale, net of deferred income tax
      (benefit) of ($11)
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (45
                              )
                              
                              
                              (45
                              )Directors’
      retirement plan, net of deferred taxes of $6
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              9
                              
                              
                              
                              9Total
      Comprehensive Income
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              15ESOP
      Shares Released
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (5
                              )
                              
                              
                              19
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              14Restricted
      stock earned
                              
                              
                              
                              
                              
                              
                              36
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              36Stock
      options earned
                              
                              
                              
                              
                              
                              
                              37
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              37Treasury
      stock purchased (25,655) shares
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (200
                              )
                              
                              
                              
                              
                              
                              
                              (200
                              )BALANCE
      -DECEMBER 31, 2007
                              
                              
                              19
                              
                              
                              
                              7,558
                              
                              
                              
                              6,307
                              
                              
                              
                              (328
                              )
                              
                              
                              (200
                              )
                              
                              
                              (210
                              )
                              
                              
                              13,146Comprehensive
      income:Net
      Loss
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (33
                              )
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (33
                              )Other
      comprehensive income:Impairment
      loss recognized on available for sale equity securities (no tax
      effect)
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              262
                              
                              
                              
                              262Realized
      loss on sale of available for sale equity securities (no tax
      effect)
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              16
                              
                              
                              
                              16Unrealized
      holding loss on securities available for sale net of deferred income tax
      (benefit) of ($5)
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (236
                              )
                              
                              
                              (236
                              )Directors’
      retirement plan, net of deferred taxes $8
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              12
                              
                              
                              
                              12Total
      Comprehensive Income
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              21ESOP
      Shares Released
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (10
                              )
                              
                              
                              20
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              10Restricted
      stock earned
                              
                              
                              
                              
                              
                              
                              36
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              36Stock
      options earned
                              
                              
                              
                              
                              
                              
                              37
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              37Treasury
      stock purchased (22,600 shares)
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (138
                              )
                              
                              
                              
                              
                              
                              
                              (138
                              )BALANCE
      -DECEMBER 31, 2008
                              
                              $
                              19
                              
                              
                              $
                              7,631
                              
                              
                              $
                              6,264
                              
                              
                              $
                              (308
                              )
                              
                              $
                              (338
                              )
                              
                              $
                              (156
                              )
                              
                              $
                              13,112
  See
notes to consolidated financial statements.
 21
  Lincoln
      Park Bancorp and Subsidiary
  Consolidated
Statements of Cash Flows
  Years
      Ended December 31,2008
                    
                    
                    2007(In
      thousands)Cash
      Flows from Operating ActivitiesNet
      (loss) income
                    
                    $
                    (33
                    )
                    
                    $
                    60Adjustments
      to reconcile net (loss) income to net cash provided by operating
      activities:Depreciation
      of premises and equipment
                    
                    
                    80
                    
                    
                    
                    73Amortization
      and accretion, net
                    
                    
                    53
                    
                    
                    
                    109Loss
      (gain) on sale of securities available for sale
                    
                    
                    16
                    
                    
                    
                    (15
                    )Impairment
      losses on securities available for sale
                    
                    
                    262
                    
                    
                    
                    —Loss
      on calls of securities held to maturity
                    
                    
                    1
                    
                    
                    
                    —Impairment
      loss on securities held to maturity
                    
                    
                    198
                    
                    
                    
                    —Provision
      for loan losses
                    
                    
                    135
                    
                    
                    
                    51Increase
      in interest receivable
                    
                    
                    (158
                    )
                    
                    
                    (33
                    )Decrease
      (increase) in other assets
                    
                    
                    403
                    
                    
                    
                    (321
                    )Increase
      in accrued interest payable
                    
                    
                    77
                    
                    
                    
                    1Deferred
      income tax benefit
                    
                    
                    (220
                    )
                    
                    
                    (39
                    )Increase
      in other liabilities
                    
                    
                    238
                    
                    
                    
                    66ESOP
      shares committed to be released
                    
                    
                    10
                    
                    
                    
                    14Restricted
      stock earned
                    
                    
                    36
                    
                    
                    
                    36Stock
      options
                    
                    
                    37
                    
                    
                    
                    37Net
      Cash Provided by Operating Activities
                    
                    
                    1,135
                    
                    
                    
                    39Cash
      Flows from Investing ActivitiesPurchases
      of term deposits
                    
                    
                    —
                    
                    
                    
                    (397
                    )Proceeds
      from maturities and calls of term deposits
                    
                    
                    299
                    
                    
                    
                    297Purchases
      of securities available for sale
                    
                    
                    (10,628
                    )
                    
                    
                    (417
                    )Principal
      repayments on securities available for sale
                    
                    
                    1,689
                    
                    
                    
                    1,022Proceeds
      from sales of securities available for sale
                    
                    
                    46
                    
                    
                    
                    412Purchases
      of securities held to maturity
                    
                    
                    (36,091
                    )
                    
                    
                    (4,158
                    )Principal
      repayments on securities held to maturity
                    
                    
                    13,602
                    
                    
                    
                    1,173Net
      increase in loans receivable
                    
                    
                    (1,573
                    )
                    
                    
                    (5,721
                    )Additions
      to premises and equipment
                    
                    
                    (36
                    )
                    
                    
                    (807
                    )Purchase
      of Federal Home Loan Bank of New York (“FHLB”) stock
                    
                    
                    (2,007
                    )
                    
                    
                    (378
                    )Redemption
      of FHLB stock
                    
                    
                    799
                    
                    
                    
                    304Net
      Cash Used in Investing Activities
                    
                    
                    (33,900
                    )
                    
                    
                    (8,670
                    )Cash
      Flows from Financing ActivitiesNet
      increase in deposits
                    
                    
                    8,028
                    
                    
                    
                    7,120(Decrease)
      increase in short-term advances from the FHLB
                    
                    
                    (4,000
                    )
                    
                    
                    500Proceeds
      of long-term FHLB advances
                    
                    
                    42,850
                    
                    
                    
                    5,000Repayments
      of long-term advances from the FHLB
                    
                    
                    (12,406
                    )
                    
                    
                    (3,927
                    )Increase
      in advance payments by borrowers for taxes and insurance
                    
                    
                    22
                    
                    
                    
                    39Purchase
      of treasury stock
                    
                    
                    (138
                    )
                    
                    
                    (200
                    )Net
      Cash Provided by Financing Activities
                    
                    
                    34,356
                    
                    
                    
                    8,532Net
      Increase (Decrease) in Cash and Cash Equivalents
                    
                    
                    1,591
                    
                    
                    
                    (99
                    )Cash
      and Cash Equivalents – Beginning
                    
                    
                    2,502
                    
                    
                    
                    2,601Cash
      and Cash Equivalents – Ending
                    
                    $
                    4,093
                    
                    
                    $
                    2,502Supplementary
      Cash Flows InformationIncome
      taxes paid
                    
                    $
                    101
                    
                    
                    $
                    53Interest
      paid
                    
                    $
                    3,302
                    
                    
                    $
                    3,121
  See notes to
consolidated financial statements.
 22
  Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
1 - Summary of Significant Accounting Policies
  BusinessThe
      primary business of Lincoln Park Bancorp (the “Company”) is the ownership
      and operation of Lincoln Park Savings Bank (the “Bank”). The Bank was
      founded in 1923 and is a New Jersey chartered institution primarily
      serving the counties of Morris and Passaic. The Bank’s business consists
      principally of obtaining deposits from the general public in our market
      area and using those funds to originate loans, primarily residential
      mortgage loans, and purchase securities.Basis
      of Consolidated Financial Statement PresentationThe
      consolidated financial statements include the accounts of the Company and
      its wholly owned subsidiary, the Bank and the Bank’s wholly owned
      subsidiary LPS Investment Company (the “Investment Company”). The
      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. The Company’s business is conducted principally
      through the Bank. All significant inter-company accounts and transactions
      have been eliminated in consolidation.The
      consolidated financial statements of the Company have been prepared in
      conformity with accounting principles generally accepted in the United
      States of America (“GAAP”). In preparing the consolidated financial
      statements, management is required to make estimates and assumptions that
      affect the reported amounts of assets and liabilities as of the dates of
      the statements of financial condition and revenues and expenses for the
      periods then ended. Actual results could differ significantly from those
      estimates. Material estimates that are particularly susceptible to
      significant change relate to the determination of the allowance for loan
      losses, the valuation of deferred income tax assets and the determination
      of other-than-temporary impairment on securities.In
      addition, various regulatory agencies, as an integral part of their
      examination process, periodically review the Bank’s allowance for loan
      losses. Such agencies may require the Bank to recognize additions to the
      allowance based on their judgments about information available to them at
      the time of their examination.Cash
      and Cash EquivalentsCash
      and cash equivalents include cash and amounts due from depository
      institutions and interest-bearing deposits having original maturities of
      three months or less.Securities
      Available for Sale and Held to MaturityInvestments
      in debt securities over which there exists a positive intent and ability
      to hold to maturity are classified as held-to-maturity securities and
      reported at amortized cost. Debt and equity securities that are bought and
      held principally for the purpose of selling them in the near term are
      classified as trading securities and reported at fair value, with
      unrealized holding gains and losses included in earnings. The Company
      holds no trading securities.Debt
      and equity securities not classified as trading securities nor as
      held-to-maturity securities are classified as available for sale
      securities and reported at fair value, with unrealized holding gains or
      losses, net of applicable deferred income taxes, reported in the
      accumulated other comprehensive income (loss) component of stockholders’
      equity.
  23
  Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
1 - Summary of Significant Accounting Policies (Continued)
  Securities
Available for Sale and Held to Maturity (Continued)
  On
      a quarterly basis, the Company makes an assessment to determine whether
      there have been any events or economic circumstances to indicate that a
      security on which there is an unrealized loss is impaired on an
      other-than-temporary basis. The Company considers many factors including
      the severity and duration of the impairment; the intent and ability of the
      Company to hold the security for a period of time sufficient for a
      recovery in value; recent events specific to the issuer or industry; and
      for debt securities, external credit ratings and recent downgrades.
      Securities on which there is an unrealized loss that is deemed to be
      other-than-temporary are written down to fair value with the write-down
      recorded as a realized loss.Premiums
      and discounts on all securities are amortized/accreted to maturity using
      the interest method. Interest and dividend income on securities, which
      includes amortization of premiums and accretion of discounts, is
      recognized in the financial statements when earned. Gains or losses on
      sales are recognized based on the specific identification
      method.Loans
      ReceivableLoans
      receivable are carried at unpaid principal balances plus net deferred loan
      origination costs, less the allowance for loan losses. Interest with
      respect to loans other than nonaccrual loans is accrued on the principal
      amount outstanding and credited to interest income as earned using the
      interest method. Loan origination fees and certain direct loan origination
      costs are deferred and amortized to interest income as an adjustment of
      yield over the contractual lives of the related loans. Recognition of
      interest by the accrual method is generally discontinued when interest or
      principal payments are ninety days or more in arrears on a contractual
      basis, or when other factors indicate that the collection of such amounts
      is doubtful. At the time a loan is placed on nonaccrual status, an
      allowance for uncollected interest is recorded in the current period for
      previously accrued and uncollected interest. Interest on such loans, if
      appropriate, is recognized as income when payments are received. A loan is
      returned to accrual status when interest or principal payments are no
      longer ninety days or more in arrears on a contractual basis and factors
      indicating doubtful collectibility no longer exist.Allowance
      for Loan LossesAn
      allowance for loan losses is maintained at a level considered necessary to
      absorb loan losses inherent in the loan portfolio. The allowance is
      decreased by loan charge-offs, increased by subsequent recoveries of loans
      previously charged off, and then adjusted, via either a charge or credit
      to operations, to an amount determined by management to be necessary.
      Loans, or portions thereof, are charged off when, after collection efforts
      are exhausted, they are determined to be uncollectible. Management of the
      Bank, in determining the allowance for loan losses, considers the losses
      inherent in its loan portfolio and changes in the nature and volume of its
      loan activities, along with the general economic and real estate market
      conditions. The Bank utilizes 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 its loan portfolio. The Bank maintains a loan review system
      which allows for a periodic review of its loan portfolio and the early
      identification of potential impaired loans. Such system takes into
      consideration, among other things, delinquency status, size of loans,
      types of collateral and financial condition of the
    borrowers.Specific
      loan loss allowances are established for identified loans based on a
      review of such information and/or appraisals of the underlying collateral.
      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.
      Although management believes that necessary specific and
      general
  24
  Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
1 - Summary of Significant Accounting Policies (Continued)
  Allowance
for Loan Losses (Continued)
  allowances
      for loan losses are established, actual losses are dependent upon future
      events and, as such, further additions to the level of specific and
      general loan loss allowances may be necessary.Impaired
      loans are 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. A loan evaluated for
      impairment is deemed to be impaired when, based on current information and
      events, it is probable that the Bank 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. The Bank does not
      aggregate such loans for evaluation purposes. Payments received on
      impaired loans are applied to principal. The Bank had three loans deemed
      to be impaired at December 31, 2008, and no loans deemed to be impaired at
      December 31, 2007.GoodwillGoodwill
      at December 31, 2008 and 2007, totaled $52,500 and consisted of goodwill
      acquired in the branch acquisition completed by the Company in July 2007.
      The Company tests goodwill during the fourth quarter of each year for
      impairment, or more frequently if certain indicators are present or
      chances in circumstances suggest that impairment may exist. The Company
      utilizes a two-step approach. The first step requires a comparison of the
      carrying value of the reporting unit to the fair value of the unit. The
      Company estimates the fair value of the reporting unit through internal
      analyses and/or external valuation, which utilizes an income approach
      based on the present value of future cash flows. If the carrying value of
      the reporting unit exceeds its fair value, the Company performs the second
      step of the goodwill impairment test to measure the amount of impairment
      loss, if any. The second step of the goodwill impairment test compares the
      implied fair value of a reporting unit’s goodwill with its carrying value.
      The implied fair value of goodwill is determined in the same manner that
      the amount of goodwill recognized in a business combination is determined.
      The Company allocates the fair value of the reporting unit to all of the
      assets and liabilities of that unit, including intangible assets, as if
      the reporting unit had been acquired in a business combination. Any excess
      of the value of a reporting unit over the amounts assigned to its assets
      and liabilities is the implied fair value of goodwill.Concentration
      of RiskThe
      Bank’s lending activity is concentrated in loans secured by real estate
      located in the State of New Jersey.Transfers
      of Financial AssetsTransfers
      of financial assets, including loan and loan participation sales, are
      accounted for as sales when control over the assets has been surrendered.
      Control over transferred assets is deemed to be surrendered when (1) the
      assets have been isolated from the Bank, (2) the transferee obtains the
      right (free of conditions that constrain it from taking advantage of that
      right) to pledge or exchange the transferred assets, and (3) the Bank does
      not maintain effective control over the transferred assets through an
      agreement to repurchase them before their maturity.Federal
      Home Loan Bank of New York StockFederal
      law requires a member institution of the Federal Home Loan Bank (“FHLB”)
      system to hold restricted stock of its district FHLB according to a
      predetermined formula. The restricted stock is carried at cost. The FHLB
      of New York has recently notified member banks that it is reducing
      dividend rates and taking steps to improve liquidity. Management has
      evaluated the restricted stock for impairment and believes no impairment
      charge was necessary at December 31,
2008.
  25
  Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
1 - Summary of Significant Accounting Policies (Continued)
  Premises
and Equipment
  Land
      is carried at cost. Building, building improvements and furniture,
      fixtures and equipment are carried at cost, less accumulated depreciation.
      Depreciation charges are computed on the straight-line method over the
      following estimated useful
lives:
  YearsBuilding
                          
                          30
      - 50Building
      improvements
                          
                          5 -
      25Furniture,
      fixtures and equipment
                          
                          3 -
      7
  Significant
      renovations and additions are charged to the property and equipment
      account. Maintenance and repairs are charged to expense in the period
      incurred.Interest-Rate
      RiskThe
      Bank is principally engaged in the business of attracting deposits from
      the general public and using these deposits, together with other funds, to
      make loans secured by real estate and to purchase
    securities.The
      potential for interest-rate risk exists as a result of the generally
      shorter duration of the Bank’s interest-sensitive liabilities compared to
      the generally longer duration of its interest-sensitive assets. In a
      rising rate environment, liabilities will reprice faster than assets,
      thereby reducing net interest income. For this reason, management
      regularly monitors the maturity structure of the Bank’s interest-earning
      assets and interest-bearing liabilities in order to measure its level of
      interest-rate risk and to plan for future volatility.Advertising
      CostsThe
      Company follows the policy of charging the costs of advertising to expense
      as incurred.Income
      TaxesThe
      Company, the Bank and the Investment Company file a consolidated federal
      income tax return. Income taxes are allocated based on the contribution of
      income to the consolidated income tax return. Separate state income tax
      returns are filed.Federal
      and state income taxes have been provided on the basis of reported income.
      The amounts reflected on the tax returns differ from these provisions due
      principally to temporary differences in the reporting of certain items for
      financial reporting and income tax reporting purposes. The tax effect of
      these temporary differences is accounted for as deferred taxes applicable
      to future periods. Deferred income tax expense or benefit is determined by
      recognizing deferred tax assets and liabilities for the estimated future
      tax consequences attributable to differences between the financial
      statement carrying amounts of existing assets and liabilities and their
      respective tax bases. Deferred tax assets and liabilities are measured
      using enacted tax rates expected to apply to taxable income in the years
      in which those temporary differences are expected to be recovered or
      settled. The effect on deferred tax assets and liabilities of a change in
      tax rates is recognized in earnings in the period that includes the
      enactment date. The realization of deferred tax assets is assessed and a
      valuation allowance provided, when necessary, for that portion of the
      asset which is not likely to be
realized.
  26
  Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
1 - Summary of Significant Accounting Policies (Continued)
  Stock-Based
Compensation Plans
  The
      Company has two stock-related compensation plans, including stock option
      and restricted stock plans. Through December 31, 2005, the Company
      accounted for its stock option plans using the intrinsic value method set
      forth in Accounting Principles Board Opinion No. 25, “Accounting for Stock
      Issued to Employees,” (“APB No. 25”) and related interpretations for these
      plans. Under APB No. 25, generally, when the exercise price of the
      Company’s stock options equaled the market price of the underlying stock
      on the date of the grant, no compensation expense was recognized. The
      Company adopted Financial Accounting Standards Board (“FASB”) Statement of
      Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment”
      using the modified-prospective transition method, beginning on January 1,
      2006 and, therefore, began to expense the fair value of all options over
      their remaining vesting periods to the extent the options were not fully
      vested as of the adoption date and began to expense the fair value of all
      share-based compensation granted subsequent to December 31, 2005, over its
      requisite service periods.SFAS
      No. 123(R) also requires the benefits of realized tax deductions in excess
      of previously recognized tax benefits on compensation expense to be
      reported as a financing cash flow rather than an operating cash flow, as
      previously required. In accordance with Staff Accounting Bulletin (“SAB”)
      No. 107, the Company classified share-based compensation for employees to
      correspond with the same line item as the cash compensation paid to
      employees, and share based compensation to directors to correspond with
      miscellaneous non-interest expenses.Options
      vest over a five year period for directors and a seven year period for
      officers. Compensation expense recognized for all options is recognized
      over the awards’ respective requisite service periods. The fair values
      relating to all options granted were estimated using the Black-Scholes
      option pricing model. Expected volatilities are based on historical
      volatility of our stock and other factors, such as implied market
      volatility. We used historical exercise data based on the age at grant of
      the option holder to estimate the options’ expected term, which represents
      the period of time that the options granted are expected to be
      outstanding. We anticipated the future option holding periods to be
      similar to the historical option holding periods. The risk-free rate for
      periods within the contractual life of the option is based on the U.S.
      Treasury yield curve in effect at the time of grant. We recognize
      compensation expense for the fair values of these awards, which have
      graded vesting, on a straight-line basis over the requisite service period
      of the awards.Restricted
      shares vest over a five year period for directors and a seven year period
      for officers. The fair value of restricted shares under the Company’s
      restricted stock plans is determined by the product of the number of
      shares granted and the grant date market price of the Company’s common
      stock. The fair value of restricted shares is expensed on a straight-line
      basis over the requisite service period of the
  awards.
  27
  Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
1 - Summary of Significant Accounting Policies (Continued)
  Other
Comprehensive Income
  The
      Company records in accumulated comprehensive income (loss), net of related
      deferred income taxes, unrealized gains and losses on available for sale
      securities and the prior service cost and actuarial gains and losses of
      the Directors Retirement Plan (“DRP”) that have not yet been recognized in
      expense. Realized gains and losses, if any, are reclassified to
      non-interest income upon the sale of the related securities or upon the
      recognition of a security impairment loss. A portion of the prior service
      cost of the DRP is recorded in expense annually.Off-Balance
      Sheet Financial InstrumentsIn
      the ordinary course of business, the Company has entered into
      off-balance-sheet financial instruments consisting of commitments to
      extend credit. Such financial instruments are recorded in the consolidated
      statement of financial condition when they are funded.Net
      (loss) Income per Common ShareBasic
      net (loss) income per share is computed by dividing net (loss) income
      available to common shareholders by the weighted average number of shares
      of common stock outstanding during the year, adjusted for unearned shares
      of the ESOP. Diluted net (loss) income per share is
      calculated by dividing net (loss) income by the weighted average number of
      shares of common stock and common stock equivalents outstanding decreased
      by the number of common shares that are assumed to be repurchased with the
      proceeds from the exercise of the common stock equivalents (treasury stock
      method) along with the assumed tax benefit from the exercise of
      non-qualified options. These purchases were assumed to have been made at
      the average market price of the common stock during each period. The
      following table shows the calculation of both basic and diluted net (loss)
      income per share.
 
 Years
      Ended December 31,2008
                                                                              
                                                                              
                                                                              2007(In
      thousands, except for per share amounts)Net
      (Loss) Income
                                                                              
                                                                              $
                                                                              (33
                                                                              )
                                                                              
                                                                              $
                                                                              60Basic
      weighted average shares outstanding
                                                                              
                                                                              
                                                                              1,763
                                                                              
                                                                              
                                                                              
                                                                              1,784Plus:
      Common stock equivalents
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              
                                                                              1Diluted
      weighted average number of shares outstanding
                                                                              
                                                                              
                                                                              1,763
                                                                              
                                                                              
                                                                              
                                                                              1,785Net
      (loss) income per share:Basic
                                                                              
                                                                              $
                                                                              (0.02
                                                                              )
                                                                              
                                                                              $
                                                                              0.03Diluted
                                                                              
                                                                              $
                                                                              (0.02
                                                                              )
                                                                              
                                                                              $
                                                                              0.03
  Reclassification
  Certain
      amounts for prior periods have been reclassified to conform to the current
      year’s presentation. Such reclassifications had no effect on net
      income.
  28
  Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
2 – Branch Acquisition
  On
      July 16, 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.
  29
  Lincoln
      Park Bancorp and Subsidiary
  Notes
toConsolidatedFinancialStatements
  Note
3 - Securities Available for Sale
 December 31,
      2008AmortizedCost
                                                
                                                
                                                GrossUnrealizedGains
                                                
                                                
                                                GrossUnrealizedLosses
                                                
                                                
                                                CarryingValue(In
      thousands)Collateralized
      Mortgage Obligations:Due
      after ten years
                                                
                                                $
                                                9,939
                                                
                                                
                                                $
                                                25
                                                
                                                
                                                $
                                                10
                                                
                                                
                                                $
                                                9,954Equity
      securities
                                                
                                                
                                                198
                                                
                                                
                                                
                                                —
                                                
                                                
                                                
                                                28
                                                
                                                
                                                
                                                170Mortgage-backed
      securities:Due
      after ten years
                                                
                                                
                                                52
                                                
                                                
                                                
                                                —
                                                
                                                
                                                
                                                1
                                                
                                                
                                                
                                                51$
                                                10,189
                                                
                                                
                                                $
                                                25
                                                
                                                
                                                $
                                                39
                                                
                                                
                                                $
                                                10,175
  December 31,
      2007Amortized
                                                          Cost
                                                        
                                                        
                                                        Gross
                                                          Unrealized
                                                          Gains
                                                        
                                                        
                                                        Gross
                                                          Unrealized
                                                          Losses
                                                        
                                                        
                                                        Carrying
                                                          Value(In
      thousands)U.S.
      Government Agencies:Due
      after five through ten years
                                                        
                                                        $
                                                        500
                                                        
                                                        
                                                        $
                                                        —
                                                        
                                                        
                                                        $
                                                        —
                                                        
                                                        
                                                        $
                                                        500Due
      after ten years
                                                        
                                                        
                                                        500
                                                        
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        5001,000
                                                        
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        1,000Equity
      securities
                                                        
                                                        
                                                        521
                                                        
                                                        
                                                        
                                                        22
                                                        
                                                        
                                                        
                                                        84
                                                        
                                                        
                                                        
                                                        459Mortgage-backed
      securities:Due
      after ten years
                                                        
                                                        
                                                        61
                                                        
                                                        
                                                        
                                                        1
                                                        
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        
                                                        62$
                                                        1,582
                                                        
                                                        
                                                        $
                                                        23
                                                        
                                                        
                                                        $
                                                        84
                                                        
                                                        
                                                        $
                                                        1,521
  At
December 31, 2008 and 2007, all mortgage-backed securities held in the
available for sale portfolio were issued by the Government National Mortgage
Association (“GNMA”). At December 31, 2008, all Collateralized Mortgage
Obligations held in the available for sale portfolio were issued by Federal Home
Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association
(“FNMA”), or GNMA.
  As of
December 31, 2008, the estimated fair value of securities available for sale was
$10.175 million, while the amortized cost was $10.189 million, reflecting an
unrealized loss of $14,000, or less than 1.0% of the the portfolio, after taking
the impairment charges described below.
  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 losses were the result of writing down two common equity securities
for $20,000 and seven closed end mutual funds for $242,000.
  30
  Lincoln
      Park Bancorp and Subsidiary
  Notes
toConsolidatedFinancialStatements
  Note
3 - Securities Available for Sale (Continued)
  The age
of unrealized losses and the fair value of related securities available for sale
are as follows:
  Less
      than 12 Months
                    
                    
                    More
      than 12 Months
                    
                    
                    TotalFair
                      Value
                    
                    
                    Unrealized
                      Losses
                    
                    
                    Fair
                      Value
                    
                    
                    Unrealized
                      Losses
                    
                    
                    Fair
                      Value
                    
                    
                    Unrealized
                      Losses(In
      thousands)December
      31, 2008:Collateralized
      Mortgage Obligations
                    
                    $
                    3,952
                    
                    
                    $
                    10
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    3,952
                    
                    
                    $
                    10Equity
      securities
                    
                    
                    35
                    
                    
                    
                    28
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    35
                    
                    
                    
                    28Mortgage-backed
      Securities
                    
                    
                    41
                    
                    
                    
                    1
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    41
                    
                    
                    
                    1$
                    4,028
                    
                    
                    $
                    39
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    4,028
                    
                    
                    $
                    39December
      31, 2007:Equity
      securities
                    
                    $
                    335
                    
                    
                    $
                    84
                    
                    
                    $
                    5
                    
                    
                    $
                    —
                    
                    
                    $
                    340
                    
                    
                    $
                    84$
                    335
                    
                    
                    $
                    84
                    
                    
                    $
                    5
                    
                    
                    $
                    —
                    
                    
                    $
                    340
                    
                    
                    $
                    84
  Management
does not believe that any individual unrealized loss at December 31, 2008
and 2007, represents an other-than-temporary impairment. The unrealized losses
at December 31, 2008 are related to eight Collateralized Mortgage
Obligations, four mortgage-backed securities, and six equity securities, and are
due to changes in market conditions. Management has the intent and the Company
has the ability to hold the securities reflected in the above table for a time
necessary to recover amortized cost.
  During
the year ended December 31, 2008, sales of securities available for sale
amounted to $46,000. The gross realized loss on securities available for sale
was $16,000. During the year ended December 31, 2007, sales of securities
available for sale amounted to $412,000. The gross realized gain on securities
available for sale was $15,000.
  At
December 31, 2008, securities in the available for sale portfolio with a
carrying value of $6.7 million were pledged to secure advances at the Federal
Home Loan Bank of New York.
  31
  Lincoln
      Park Bancorp and Subsidiary
  Notes
toConsolidatedFinancialStatements
  Note
4 - Securities Held to Maturity
 December 31,
      2008Carrying
                        Value
                      
                      
                      Gross
                        Unrealized
                        Gains
                      
                      
                      Gross
                        Unrealized
                        Losses
                      
                      
                      Estimated
                        Fair
      Value(In
      thousands)U.S.
      Government Agencies:Due
      after five years through ten years
                      
                      $
                      1,850
                      
                      
                      $
                      1
                      
                      
                      $
                      —
                      
                      
                      $
                      1,851Due
      after ten years
                      
                      
                      5,998
                      
                      
                      
                      16
                      
                      
                      
                      21
                      
                      
                      
                      5,9937,848
                      
                      
                      
                      17
                      
                      
                      
                      21
                      
                      
                      
                      7,844Corporate
      bonds:Due
      after one year through five years
                      
                      
                      252
                      
                      
                      
                      —
                      
                      
                      
                      58
                      
                      
                      
                      194Due
      after five years through ten years
                      
                      
                      250
                      
                      
                      
                      —
                      
                      
                      
                      10
                      
                      
                      
                      240502
                      
                      
                      
                      —
                      
                      
                      
                      68
                      
                      
                      
                      434Mortgage-backed
      securities:Due
      after five through ten years
                      
                      
                      11
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      11Due
      after ten years
                      
                      
                      669
                      
                      
                      
                      8
                      
                      
                      
                      1
                      
                      
                      
                      676680
                      
                      
                      
                      8
                      
                      
                      
                      1
                      
                      
                      
                      687Municipal
      bonds:Due
      after five through ten years
                      
                      
                      335
                      
                      
                      
                      5
                      
                      
                      
                      —
                      
                      
                      
                      340Due
      after ten years
                      
                      
                      230
                      
                      
                      
                      1
                      
                      
                      
                      3
                      
                      
                      
                      228565
                      
                      
                      
                      6
                      
                      
                      
                      3
                      
                      
                      
                      568Collateralized
      Mortgage ObligationsDue
      after ten years
                      
                      
                      33,929
                      
                      
                      
                      240
                      
                      
                      
                      501
                      
                      
                      
                      33,66833,929
                      
                      
                      
                      240
                      
                      
                      
                      501
                      
                      
                      
                      33,668$
                      43,524
                      
                      
                      $
                      271
                      
                      
                      $
                      594
                      
                      
                      $
                      43,201
  32
  Lincoln
      Park Bancorp and Subsidiary
  Notes
toConsolidatedFinancialStatements
  Note
4 - Securities Held to Maturity (Continued)
  December 31,
      2007Carrying
                      Value
                    
                    
                    Gross
                      Unrealized
                      Gains
                    
                    
                    Gross
                      Unrealized
                      Losses
                    
                    
                    Estimated
                      Fair
      Value(In
      thousands)U.S.
      Government Agencies:Due
      after one year through five years
                    
                    $
                    1,500
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    1,500Due
      after five years through ten years
                    
                    
                    4,265
                    
                    
                    
                    2
                    
                    
                    
                    3
                    
                    
                    
                    4,264Due
      after ten years
                    
                    
                    8,984
                    
                    
                    
                    19
                    
                    
                    
                    8
                    
                    
                    
                    8,99514,749
                    
                    
                    
                    21
                    
                    
                    
                    11
                    
                    
                    
                    14,759Corporate
      bonds:Due
      within one year
                    
                    
                    100
                    
                    
                    
                    1
                    
                    
                    
                    —
                    
                    
                    
                    101Due
      after one year through five years
                    
                    
                    254
                    
                    
                    
                    —
                    
                    
                    
                    24
                    
                    
                    
                    230Due
      after five years through ten years
                    
                    
                    450
                    
                    
                    
                    1
                    
                    
                    
                    —
                    
                    
                    
                    451Due
      after ten years
                    
                    
                    250
                    
                    
                    
                    —
                    
                    
                    
                    2
                    
                    
                    
                    2481,054
                    
                    
                    
                    2
                    
                    
                    
                    26
                    
                    
                    
                    1,030Mortgage-backed
      securities:Due
      after five years through ten years
                    
                    
                    12
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    12Due
      after ten years
                    
                    
                    784
                    
                    
                    
                    6
                    
                    
                    
                    14
                    
                    
                    
                    776796
                    
                    
                    
                    6
                    
                    
                    
                    14
                    
                    
                    
                    788Municipal
      bonds:Due
      after five through ten years
                    
                    
                    185
                    
                    
                    
                    4
                    
                    
                    
                    —
                    
                    
                    
                    189Due
      after ten years
                    
                    
                    381
                    
                    
                    
                    3
                    
                    
                    
                    2
                    
                    
                    
                    382566
                    
                    
                    
                    7
                    
                    
                    
                    2
                    
                    
                    
                    571Collateralized
      Mortgage ObligationsDue
      after ten years
                    
                    
                    4,077
                    
                    
                    
                    5
                    
                    
                    
                    117
                    
                    
                    
                    39654,077
                    
                    
                    
                    5
                    
                    
                    
                    117
                    
                    
                    
                    3965$
                    21,242
                    
                    
                    $
                    41
                    
                    
                    $
                    170
                    
                    
                    $
                    21,113
  At
December 31, 2008 and 2007, all mortgage-backed securities in the held to
maturity portfolio were issued by GNMA, FNMA or FHLMC.
  During
2008, the Company recorded an other-than-temporary impairment charge of $198,000
related to one corporate bond.
  33




Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
4 - Securities Held to Maturity (Continued)
  The age
of unrealized losses and the fair value of related securities held to maturity
are as follows:
  Less
      than 12 Months
                    
                    
                    More
      than 12 Months
                    
                    
                    TotalFair
                      Value
                    
                    
                    Unrealized
                      Losses
                    
                    
                    Fair
                      Value
                    
                    
                    Unrealized
                      Losses
                    
                    
                    Fair
                      Value
                    
                    
                    Unrealized
                      Losses(In
      thousands)December
      31, 2008:U.S.
      Government Agencies
                    
                    $
                    977
                    
                    
                    $
                    21
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    977
                    
                    
                    $
                    21Corporate
      bonds
                    
                    
                    142
                    
                    
                    
                    59
                    
                    
                    
                    241
                    
                    
                    
                    9
                    
                    
                    
                    383
                    
                    
                    
                    68Mortgage-backed
      Securities
                    
                    
                    103
                    
                    
                    
                    1
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    103
                    
                    
                    
                    1Municipal
      bonds
                    
                    
                    97
                    
                    
                    
                    3
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    97
                    
                    
                    
                    3Collateralized
      Mortgage Obligations
                    
                    
                    10,421
                    
                    
                    
                    203
                    
                    
                    
                    789
                    
                    
                    
                    298
                    
                    
                    
                    11,210
                    
                    
                    
                    501$
                    11,740
                    
                    
                    $
                    287
                    
                    
                    $
                    1,030
                    
                    
                    $
                    307
                    
                    
                    $
                    12,770
                    
                    
                    $
                    594December
      31, 2007:U.S.
      Government Agencies
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    3,495
                    
                    
                    $
                    11
                    
                    
                    $
                    3,495
                    
                    
                    $
                    11Corporate
      bonds
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    478
                    
                    
                    
                    26
                    
                    
                    
                    478
                    
                    
                    
                    26Mortgage-backed
      Securities
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    299
                    
                    
                    
                    14
                    
                    
                    
                    299
                    
                    
                    
                    14Municipal
      bonds
                    
                    
                    99
                    
                    
                    
                    1
                    
                    
                    
                    99
                    
                    
                    
                    1
                    
                    
                    
                    198
                    
                    
                    
                    2Collateralized
      Mortgage Obligations
                    
                    
                    2,444
                    
                    
                    
                    117
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    2,444
                    
                    
                    
                    117$
                    2,543
                    
                    
                    $
                    118
                    
                    
                    $
                    4,371
                    
                    
                    $
                    52
                    
                    
                    $
                    6,914
                    
                    
                    $
                    170
  Management
does not believe that any individual unrealized loss at December 31, 2008 and
2007, represents an other-than-temporary impairment. At December 31, 2008, the
unrealized losses on securities other than corporate bonds are related to one
security issued by U.S. government agency, one security issued by a municipal
government, six mortgage-backed securities, and thirty-five collateralized
mortgage obligations. The unrealized losses on corporate bonds at December 31,
2008 relate to two investment grade securities having a weighted average coupon
rate of 5.7% and a weighted average maturity of approximately eight years.
Management believes that all unrealized losses are due to changes in interest
rates and market conditions. Management has the intent and the Company has the
ability to hold the securities reflected in the above table for a time necessary
to recover amortized cost. There were no sales of securities held to maturity
during the year ended December 31, 2008 and 2007. Securities held to maturity
with a carrying value of $38,000 and 39,000 at December 31, 2008 and 2007,
respectively, were pledged to secure public funds on deposits.
  At
December 31, 2008, securities held to maturity with a carrying value of $14.2
million were pledged to secure advances at the Federal Home Loan Bank of New
York.
  34
  Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
5 - Loans Receivable
  December
      31,2008
                            
                            
                            2007(In
      thousands)Real
      estate mortgage:One-to-four
      family
                            
                            $
                            45,876
                            
                            
                            $
                            46,584Multi-family
                            
                            
                            776
                            
                            
                            
                            841Commercial
                            
                            
                            2,465
                            
                            
                            
                            1,721Land
                            
                            
                            70
                            
                            
                            
                            38849,187
                            
                            
                            
                            49,534Commercial
      business
                            
                            
                            717
                            
                            
                            
                            666Consumer:Passbook
      or certificate
                            
                            
                            38
                            
                            
                            
                            51Home
      equity line of credit
                            
                            
                            6,475
                            
                            
                            
                            4,749Home
      equity
                            
                            
                            17,819
                            
                            
                            
                            17,642Automobile
                            
                            
                            168
                            
                            
                            
                            155Personal
      secured
                            
                            
                            123
                            
                            
                            
                            123Personal
      unsecured
                            
                            
                            84
                            
                            
                            
                            175Overdraft
      line of credit
                            
                            
                            29
                            
                            
                            
                            2424,736
                            
                            
                            
                            22,919Total
      Loans
                            
                            
                            74,640
                            
                            
                            
                            73,119Deferred
      loan costs, net
                            
                            
                            143
                            
                            
                            
                            153Allowance
      for loan losses
                            
                            
                            (301
                            )
                            
                            
                            (187
                            )(158
                            )
                            
                            
                            (34
                            )$
                            74,482
                            
                            
                            $
                            73,085
  Nonaccrual
loans totaled approximately $409,000 and $431,000 at December 31, 2008 and 2007,
respectively. Interest income recognized on these loans for the years ended
December 31, 2008 and 2007, was approximately $1,000 and $10,000, respectively.
Had these loans been performing in accordance with their original terms,
interest income for the years ended December 31, 2008 and 2007, would have been
approximately $28,000 and $24,000, respectively. The Bank is not committed to
lend additional funds to the borrowers whose loans have been placed on
nonaccrual status. In addition, at December 31, 2008 and 2007, the Bank had
$272,000 and $21,000, respectively, in loans which were ninety days or more
delinquent and still accruing interest.
  At
December 31, 2008, the Bank had three impaired loans totaling $409,000, all of
which were subject to specific loan loss allowances aggregating $147,000. For
the year ended December 31, 2008, the average recorded investment in impaired
loans totaled approximately $246,000. Interest income recognized on impaired
loans during 2008 was not significant. At and during the year ended December 31,
2007, the Bank had no impaired loans.
  35
  Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
5 - Loans Receivable (Continued)
  The Bank
grants loans to its officers and directors and to their associates. Related
party loans are made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
unrelated persons and do not involve more than normal risk of collectibility.
The activity, with respect to loans to directors, officers and associates of
such persons, is as follows:
 Years
      Ended December 31,2008
                                                                  
                                                                  
                                                                  2007(In
      Thousands)Balance
      - beginning
                                                                  
                                                                  $
                                                                  3,260
                                                                  
                                                                  
                                                                  $
                                                                  2,877Loans
      originated
                                                                  
                                                                  
                                                                  160
                                                                  
                                                                  
                                                                  
                                                                  1,054Collections
      of principal
                                                                  
                                                                  
                                                                  (325
                                                                  )
                                                                  
                                                                  
                                                                  (671
                                                                  )Balance
      - ending
                                                                  
                                                                  $
                                                                  3,095
                                                                  
                                                                  
                                                                  $
                                                                  3,260
 The
following is an analysis of the allowance for loan losses:
  Years
      Ended December 31,2008
                                                                  
                                                                  
                                                                  2007(In
      thousands)Balance
      - beginning
                                                                  
                                                                  $
                                                                  187
                                                                  
                                                                  
                                                                  $
                                                                  136Provision
      charged to operations
                                                                  
                                                                  
                                                                  135
                                                                  
                                                                  
                                                                  
                                                                  51Loans
      charged off
                                                                  
                                                                  
                                                                  (21
                                                                  )
                                                                  
                                                                  
                                                                  —Balance
      - ending
                                                                  
                                                                  $
                                                                  301
                                                                  
                                                                  
                                                                  $
                                                                  187
  Note
6 - Premises and Equipment
 December
      31,2008
                                                              
                                                              
                                                              2007(In
      thousands)Land
                                                              
                                                              $
                                                              745
                                                              
                                                              
                                                              $
                                                              745Buildings
      and improvements
                                                              
                                                              
                                                              1,446
                                                              
                                                              
                                                              
                                                              1,441Accumulated
      depreciation
                                                              
                                                              
                                                              (760
                                                              )
                                                              
                                                              
                                                              (726
                                                              )686
                                                              
                                                              
                                                              
                                                              715Furniture,
      fixtures and equipment
                                                              
                                                              
                                                              865
                                                              
                                                              
                                                              
                                                              834Accumulated
      depreciation
                                                              
                                                              
                                                              (756
                                                              )
                                                              
                                                              
                                                              (710
                                                              )109
                                                              
                                                              
                                                              
                                                              124$
                                                              1,540
                                                              
                                                              
                                                              $
                                                              1,584
 36
  Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
7 - Interest Receivable
 December
      31,2008
                                                    
                                                    
                                                    2007(In
      thousands)Loans,
      net of allowance for uncollectible interest 2008 $50, 2007
    $22
                                                    
                                                    $
                                                    329
                                                    
                                                    
                                                    $
                                                    323Securities
                                                    
                                                    
                                                    352
                                                    
                                                    
                                                    
                                                    200$
                                                    681
                                                    
                                                    
                                                    $
                                                    523
  Note
8 - Deposits
 December
      31,2008
                      
                      
                      2007Weighted
                        Average
                        Rate
                      
                      
                      Amount
                      
                      
                      Weighted
                        Average
                        Rate
                      
                      
                      Amount(Dollars
      In thousands)Demand:Non-interest
      bearing
                      
                      
                      0.00
                      %
                      
                      $
                      3,069
                      
                      
                      
                      0.00
                      %
                      
                      $
                      2,054NOW
      and money market
                      
                      
                      1.98
                      
                      
                      
                      14,468
                      
                      
                      
                      2.24
                      
                      
                      
                      12,1141.63
                      
                      
                      
                      17,537
                      
                      
                      
                      1.76
                      
                      
                      
                      14,168Savings
      and club
                      
                      
                      1.00
                      
                      
                      
                      11,235
                      
                      
                      
                      1.01
                      
                      
                      
                      11,616Certificates
      of deposit
                      
                      
                      3.38
                      
                      
                      
                      44,217
                      
                      
                      
                      4.69
                      
                      
                      
                      39,1832.59
                      %
                      
                      $
                      72,989
                      
                      
                      
                      3.50
                      %
                      
                      $
                      64,967
  At
December 31, 2008 and 2007, certificates of deposit of $100,000 or more totaled
approximately $13.4 million and $10.0 million, respectively. Individual deposits
in excess of $250,000 may not be insured by the Federal Deposit Insurance
Corporation.
  The
scheduled maturities of certificates of deposit were as follows:
 December
      31,2008
                                                    
                                                    
                                                    2007(In
      thousands)One
      year or less
                                                    
                                                    $
                                                    38,967
                                                    
                                                    
                                                    $
                                                    36,124After
      one year to three years
                                                    
                                                    
                                                    4,495
                                                    
                                                    
                                                    
                                                    2,807After
      three years
                                                    
                                                    
                                                    755
                                                    
                                                    
                                                    
                                                    252$
                                                    44,217
                                                    
                                                    
                                                    $
                                                    39,183
  37
  Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
9 - Advances From Federal Home Loan Bank of New York (“FHLB”)
  Long-term
advances were as follows:
  December
      31,2008
                        
                        
                        2007Maturing
      in
                        
                        Weighted
                          Average
                          Rate
                        
                        
                        Amount
                        
                        
                        Weighted
                          Average
                          Rate
                        
                        
                        Amount(Dollars
      In thousands)2008
                        
                        
                        —
                        %
                        
                        $
                        —
                        
                        
                        
                        4.08
                        %
                        
                        $
                        8,1202009
                        
                        
                        3.23
                        
                        
                        
                        3,909
                        
                        
                        
                        3.69
                        
                        
                        
                        2,8232010
                        
                        
                        3.92
                        
                        
                        
                        4,225
                        
                        
                        
                        4.19
                        
                        
                        
                        4002011
                        
                        
                        4.25
                        
                        
                        
                        904
                        
                        
                        
                        4.24
                        
                        
                        
                        1,2162012
                        
                        
                        4.57
                        
                        
                        
                        3,691
                        
                        
                        
                        4.59
                        
                        
                        
                        4,2912013
                        
                        
                        3.74
                        
                        
                        
                        16,807
                        
                        
                        
                        4.03
                        
                        
                        
                        7812015
                        
                        
                        3.80
                        
                        
                        
                        1,389
                        
                        
                        
                        —
                        
                        
                        
                        —2018
                        
                        
                        3.48
                        
                        
                        
                        17,200
                        
                        
                        
                        —
                        
                        
                        
                        —2021
                        
                        
                        5.31
                        
                        
                        
                        871
                        
                        
                        
                        5.31
                        
                        
                        
                        9203.72
                        %
                        
                        $
                        48,996
                        
                        
                        
                        4.18
                        %
                        
                        $
                        18,552
  At
December 31 2008, $20.2 million of the above advances were subject to early call
or redemption features and at December 31, 2007, none of the above advances were
subject to early call or redemption features. In addition to the long-term
advances detailed above, the Bank utilized short-term FHLB advances. At December
31, 2008, short-term advances totaled $1,000,000, had an average interest rate
of 0.48% and mature within one month. At December 31, 2007, short-term advances
totaled $5,000,000, had an average interest rate of 4.53% and mature within one
month.
  At
December 31, 2008 and 2007, the advances were secured by a pledge of the Bank’s
investment in the capital stock of the FHLB and a blanket assignment of the
Bank’s unpledged qualifying mortgage loans in the amount of $34.8 million and
$37.8 million, respectively. In addition, at December 31, 2008, $20.1 million in
securities were pledged to secure the advances. No securities were pledged to
secure advances at December 31, 2007. At December 31, 2008, $6.6 million in
additional borrowings are still available from the FHLB.
  Note
10 - Regulatory Capital
  The Bank
is subject to various regulatory capital requirements administered by the
various banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary, actions by
regulators that, if undertaken, could have a direct material effect on the Bank.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that involve
quantitative measures of the Bank’s assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
Bank’s capital amounts and classifications are also subject to qualitative
judgments by the regulators about components, risk weightings and other
factors.
  38




LincolnParkBancorpandSubsidiary
  Notes
to Consolidated Financial Statements
  Note
10 - Regulatory Capital (Continued)
  Quantitative
measures established by regulation to ensure capital adequacy require the Bank
to maintain minimum amounts and ratios of Total risk-based capital and Tier 1
capital (as defined in the regulations) to risk-weighted assets (as defined),
and of Tier 1 capital to average total assets (as defined). The following tables
present a reconciliation of capital per GAAP and regulatory capital and
information as to the Bank’s capital levels.
  December
      31,2008
                              
                              
                              2007(In
      Thousands)GAAP
      capital
                              
                              $
                              11,416
                              
                              
                              $
                              9,499Unrealized
      gain on securities available for sale
                              
                              
                              (9
                              )
                              
                              
                              —Other
      comprehensive loss - DRP
                              
                              
                              137
                              
                              
                              
                              149Goodwill
                              
                              
                              (52
                              )
                              
                              
                              (52
                              )Unrealized
      loss on equity securities
                              
                              
                              —
                              
                              
                              
                              (16
                              )Core
      and tangible capital
                              
                              
                              11,492
                              
                              
                              
                              9,580General
      valuation allowance
                              
                              
                              301
                              
                              
                              
                              187Total
      Regulatory Capital
                              
                              $
                              11,793
                              
                              
                              $
                              9,767
 
 Actual
                                      
                                      
                                      For
      Capital Adequacy
                                        Purposes
                                      
                                      
                                      To
      be Well Capitalized
                                        under
      Prompt
                                        Corrective
      Action
                                        ProvisionsAmount
                                      
                                      
                                      Ratio
                                      
                                      
                                      Amount
                                      
                                      
                                      Ratio
                                      
                                      
                                      Amount
                                      
                                      
                                      Ratio(Dollars
      in Thousands)As
      of December 31, 2008Total
      risk-based capital (to risk-weighted assets)
                                      
                                      $
                                      11,793
                                      
                                      
                                      18.47
                                      %
                                      
                                      $
                                      35,107
                                      
                                      
                                      38.0
                                      %
                                      
                                      $
                                      36,384
                                      
                                      
                                      310.0
                                      %Tier
      1 capital (to risk-weighted assets)
                                      
                                      
                                      11,492
                                      
                                      
                                      18.00
                                      
                                      
                                      
                                      32,553
                                      
                                      
                                      34.0
                                      
                                      
                                      
                                      33,830
                                      
                                      
                                      3 6.0Tier
      1 capital (to average total assets)
                                      
                                      
                                      11,492
                                      
                                      
                                      8.29
                                      
                                      
                                      
                                      35,542
                                      
                                      
                                      34.0
                                      
                                      
                                      
                                      36,928
                                      
                                      
                                      3 5.0As
      of December 31, 2007Total
      risk-based capital (to risk-weighted assets)
                                      
                                      $
                                      9,767
                                      
                                      
                                      17.55
                                      %
                                      
                                      $
                                      34,451
                                      
                                      
                                      38.0
                                      %
                                      
                                      $
                                      35,564
                                      
                                      
                                      310.0
                                      %Tier
      1 capital (to risk-weighted assets)
                                      
                                      
                                      9,580
                                      
                                      
                                      17.22
                                      
                                      
                                      
                                      32,226
                                      
                                      
                                      34.0
                                      
                                      
                                      
                                      33,338
                                      
                                      
                                      3
    6.0Tier
      1 capital (to average total assets)
                                      
                                      
                                      9,580
                                      
                                      
                                      9.60
                                      
                                      
                                      
                                      33,994
                                      
                                      
                                      34.0
                                      
                                      
                                      
                                      34,992
                                      
                                      
                                      3
    5.0
  As of the
most recent notification from its regulators, the Bank was categorized as
well-capitalized under the regulatory framework for prompt corrective action.
There are no conditions existing or events which have occurred since
notification that management believes have changed the institution’s
category.
  39
 
 LincolnParkBancorpandSubsidiary
  Notes
to Consolidated Financial Statements
  Note
11 - Income Taxes
  The Bank
qualifies as a thrift institution under the provisions of the Internal Revenue
Code and, therefore, must calculate its bad debt deduction using either the
experience or the specific charge off method. Retained earnings at December 31,
2008 and 2007, includes approximately $730,000 of such bad debt, for which
income taxes have not been provided. If such amount is used for purposes other
than for bad debt losses, including distributions in liquidation, it will be
subject to income tax at the then current rate.
  Effective
January 1, 2007, the Company adopted the provisions of FASB Interpretation No.
48, “Accounting for Uncertainty in Income Taxes.” The Interpretation provides
clarification on accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with FASB No. 109, “Accounting
for Income Taxes.” The Interpretation prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return, and also provides
guidance on de-recognition, classification, interest and penalties, accounting
in interim periods, disclosure and transition. As a result of the Company’s
evaluation of the implementation of FIN 48, no significant income tax
uncertainties were identified. Therefore, the Company recognized no adjustment
for unrecognized income tax benefits for the years ended December 31, 2008 and
2007. Our policy is to recognize interest and penalties on unrecognized tax
benefits in income taxes expense in the Consolidated Statement of Operations.
The Company recorded less than $1,000 in interest and penalties during each of
the years ended December 31, 2008 and 2007. The tax years subject to examination
by the taxing authorities are the years ended December 31, 2007, 2006, 2005, and
2004.
  The
components of income taxes are summarized as follows:
  Years
      Ended December 31,2008
                              
                              
                              2007(In
      thousands)Current
      income tax expense:Federal
                              
                              $
                              279
                              
                              
                              $
                              34State
                              
                              
                              73
                              
                              
                              
                              7352
                              
                              
                              
                              41Deferred
      income tax (benefit):Federal
                              
                              
                              (257
                              )
                              
                              
                              (30
                              )State
                              
                              
                              (75
                              )
                              
                              
                              (9
                              )(332
                              )
                              
                              
                              (39
                              )Change
      in deferred tax asset valuation allowance
                              
                              
                              112
                              
                              
                              
                              —$
                              132
                              
                              
                              $
                              2
  40
 
 Lincoln Park
      Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
11 - Income Taxes (Continued)
  The tax
effects of existing temporary differences that give rise to significant portions
of the deferred income tax assets and deferred income tax liabilities are as
follows:
  December
      31,2008
                            
                            
                            2007(In
      thousands)Deferred
      income tax assets:Allowance
      for loan losses
                            
                            $
                            121
                            
                            
                            $
                            71Deferred
      loan fees and costs
                            
                            
                            1
                            
                            
                            
                            1Benefit
      plans
                            
                            
                            88
                            
                            
                            
                            38Stock
      compensation plans
                            
                            
                            39
                            
                            
                            
                            28DRP
      – accumulated other comprehensive loss
                            
                            
                            91
                            
                            
                            
                            99Reserve
      for uncollected interest
                            
                            
                            20
                            
                            
                            
                            —Losses
      on equity securities
                            
                            
                            112
                            
                            
                            
                            —Losses
      on debt securities
                            
                            
                            79
                            
                            
                            
                            —Other
                            
                            
                            2
                            
                            
                            
                            —553
                            
                            
                            
                            237Less:
      Valuation allowance
                            
                            
                            (112
                            )
                            
                            
                            —441
                            
                            
                            
                            237Deferred
      income tax liabilities:Depreciation
                            
                            
                            57
                            
                            
                            
                            67Capitalized
      interest
                            
                            
                            8
                            
                            
                            
                            7Unrealized
      gain on securities available for sale
                            
                            
                            5
                            
                            
                            
                            —Goodwill
                            
                            
                            2
                            
                            
                            
                            172
                            
                            
                            
                            75Net
      Deferred Tax Assets Included in Other Assets
                            
                            $
                            369
                            
                            
                            $
                            162
  41
 
 Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
11 - Income Taxes (Continued)
  The
following table presents a reconciliation between the reported income taxes and
the income taxes which would be computed by applying the normal federal income
tax rate of 34% to income before income taxes:
  Years
      Ended December 31,2008
                              
                              
                              2007(In
      thousands)Federal
      income tax expense
                              
                              $
                              33
                              
                              
                              $
                              21Increases
      (reductions) in income taxes resulting from:New
      Jersey corporate business tax, net of federal income tax
      effect
                              
                              
                              (1
                              )
                              
                              
                              (2
                              )Tax
      exempt income
                              
                              
                              (9
                              )
                              
                              
                              (7
                              )Surtax
      exemption
                              
                              
                              —
                              
                              
                              
                              (12
                              )Deferred
      tax valuation allowance
                              
                              
                              112
                              
                              
                              
                              —Other
      items, net
                              
                              
                              (3
                              )
                              
                              
                              2Effective
      Income Tax
                              
                              $
                              132
                              
                              
                              $
                              2Effective
      income tax rate
                              
                              
                              133.3
                              %
                              
                              
                              3.2
                              %
  Note
12 - Benefit Plans
  ESOP
  Effective
      upon the consummation of the Bank’s reorganization, an ESOP was
      established for all eligible employees who had completed a twelve-month
      period of employment with the Bank and at least 1,000 hours of service and
      had attained the age of 21. The ESOP used $387,193 in proceeds from a term
      loan obtained from the Company to purchase 34,068 shares of Company common
      stock. The term loan principal is payable over twenty equal annual
      installments through December 31, 2024. Interest on the term loan is at a
      rate per annum equal to prime. Each year, the Bank intends to make
      discretionary contributions to the ESOP which will be equal to principal
      and interest payments required on the term loan. The loan is further paid
      down by the amount of dividends paid, if any, on the common stock owned by
      the ESOP.Shares
      purchased with the loan proceeds are initially pledged as collateral for
      the term loan and are held in a suspense account for future allocation
      among participants. Contributions to the ESOP and shares released from the
      suspense account will be allocated among the participants on the basis of
      compensation, as described by the Plan, in the year of
      allocation.
  42
 
 Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
12 - Benefit Plans (Continued)
  ESOP
(Continued)
  The
      ESOP is accounted for in accordance with Statement of Position 93-6
      “Accounting for Employee Stock Ownership Plans,” which was issued by the
      American Institute of Certified Public Accountants. Accordingly, the ESOP
      shares pledged as collateral are reported as unearned ESOP shares in the
      consolidated statements of financial condition. As shares are committed to
      be released from collateral, the Savings Bank reports compensation expense
      equal to the current market price of the shares, and the shares become
      outstanding for basic net income per common share computations. ESOP
      compensation expense was $10,000 and $14,000 for the years ended December
      31, 2008 and 2007, respectively.The
      ESOP shares were as
follows:
  December
      31,2008
                                      
                                      
                                      2007(In
      thousands)Shares
      committed to be released
                                      
                                      
                                      7
                                      
                                      
                                      
                                      5Unreleased
      shares
                                      
                                      
                                      27
                                      
                                      
                                      
                                      29Total
      ESOP Shares
                                      
                                      
                                      34
                                      
                                      
                                      
                                      34Fair
      value of unreleased shares
                                      
                                      $
                                      81
                                      
                                      
                                      $
                                      173
  Stock-Based
      Incentive PlanThe
      Company’s shareholders approved the Stock-Based Incentive Plan at a
      special shareholders meeting held on December 22, 2005. The types of
      awards that may be granted under the Plan are Stock Options and Restricted
      Stock Awards.Restricted
      Stock AwardsRestricted
      Stock Awards under the Stock-Based Incentive Plan are granted in the form
      of whole shares of Company common stock, and vest in five annual
      installments (20% annually from date of grant) to outside directors, and
      seven annual installments (14.3% annually from date of grant) to officers.
      The Restricted Stock awards become fully vested upon the death or
      disability of the holder.The
      following is a summary of the status of the Company’s restricted shares
      for the years ended December 31, 2008 and
2007.
 Directors
                              
                              
                              EmployeesRestricted
      shares
                              
                              
                              Weighted
      Average
                                Grant
      Date Fair Value
                              
                              
                              Restricted
      shares
                              
                              
                              Weighted
      Average
                                Grant
      Date Fair Value
                              
                              
                              Total
                                Restricted
      SharesNon-vested
      as of December 31, 2006
                              
                              
                              10,880
                              
                              
                              $
                              8.90
                              
                              
                              
                              6,010
                              
                              
                              $
                              9.00
                              
                              
                              
                              16,890Granted
      during 2007
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              3,000
                              
                              
                              
                              7.00
                              
                              
                              
                              3,000Forfeited
      during 2007
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —Vested
      during 2007
                              
                              
                              (2,720
                              )
                              
                              
                              8.90
                              
                              
                              
                              (1,384
                              )
                              
                              
                              8.37
                              
                              
                              
                              (4,104
                              )Non-vested
      as of December 31, 2007
                              
                              
                              8,160
                              
                              
                              
                              8.90
                              
                              
                              
                              7,626
                              
                              
                              
                              8.33
                              
                              
                              
                              15,786Granted
      during 2008
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —Forfeited
      during 2008
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —Vested
      during 2008
                              
                              
                              (2,720
                              )
                              
                              
                              8.90
                              
                              
                              
                              (1,372
                              )
                              
                              
                              8.37
                              
                              
                              
                              (4,092
                              )Non-vested
      as of December 31, 2008
                              
                              
                              5,440
                              
                              
                              $
                              8.90
                              
                              
                              
                              6,254
                              
                              
                              $
                              8.33
                              
                              
                              
                              11,694
  43
  Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
12 - Benefit Plans (Continued)
  Restricted
Stock Awards (Continued)
  During
      each of the years ended December 31, 2008 and 2007, the Company recorded
      $36,000 in expense for restricted stock awards. At December 31, 2008,
      expected future compensation to be amortized from restricted stock awards
      was $107,000, and will be expensed over the next four
    years.
  Stock
Options
  Stock
      Options granted under the Stock-Based Incentive Plan may be either options
      that qualify as incentive stock options as defined in Section 422 of the
      Internal Revenue Code of 1986, as amended, or non-statutory options.
      Options granted to outside directors and officers will be exercisable on a
      cumulative basis in equal installments over 5 years for outside directors
      and 7 years for officers commencing one year after the grant date. All
      options granted become fully vested upon the death or disability of the
      holder. All options expire ten years from the grant
  date.A
      summary of stock option activity and related information is as
      follows:
 
 Number
      of
                              Option
                              Shares
                            
                            
                            Range
      of
                              Exercise
                              Price
                            
                            
                            Weighted
                              Average
                              Exercise
                              PriceDecember
      31, 2006
                            
                            
                            64,020
                            
                            
                            $8.90
      – $9.00
                            
                            
                            $
                            8.91Options
      granted
                            
                            
                            3,000
                            
                            
                            7.00
                            
                            
                            
                            7.00Options
      exercised
                            
                            
                            —
                            
                            
                            —
                            
                            
                            
                            —Options
      cancelled
                            
                            
                            —
                            
                            
                            —
                            
                            
                            
                            —December
      31, 2007
                            
                            
                            67,020
                            
                            
                            7.00
      – 9.00
                            
                            
                            
                            8.83Options
      granted
                            
                            
                            —
                            
                            
                            —
                            
                            
                            
                            —Options
      exercised
                            
                            
                            —
                            
                            
                            —
                            
                            
                            
                            —Options
      cancelled
                            
                            
                            —
                            
                            
                            —
                            
                            
                            
                            —December
      31, 2008
                            
                            
                            67,020
                            
                            
                            $7.00
      – $9.00
                            
                            
                            $
                            8.83
 
 During
      each of the years ended December 31, 2008 and 2007, the Company recorded
      $37,000 of stock option
expense.
  44
  Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
12 - Benefit Plans (Continued)
  Stock
Options (Continued)
  There
      were no stock options granted during the year ended December 31, 2008. The
      weighted average grant date fair value of the options granted during the
      year ended December 31, 2007 was $2.49, calculated using the following
      underlying assumptions.
 
 Weighted
      average grant-date fair value per share
                            
                            $
                            2.49Expected
      common stock dividend yield
                            
                            
                            —
                            %Expected
      volatility
                            
                            
                            24.62
                            %Expected
      option life
                            
                            7.0
      yearsRisk-free
      interest rate
                            
                            
                            3.67
                            %
  The
      expected volatility was based on historical volatility. The risk-free
      interest rates for periods within the contractual life of the awards were
      based on the U.S. Treasury yield curve in effect at the time of the grant.
      The expected life was estimated as the mid-point between the full vesting
      period and the option life. The dividend yield assumption was based on the
      Bank’s expectation of dividend payouts.Expected
      future compensation expense relating to the 34,394 non-vested options
      outstanding at December 31, 2008 is $110,000, and is expected to be
      expensed over a weighted average period of approximately 4 years. The
      total fair value of shares vested during the year ended December 31, 2008
      was $35,000.The
      following table summarizes information about stock options outstanding and
      exercisable at December 31, 2008 and
2007.
 
 Options
      Outstanding
                            
                            Options
      ExercisableYear
                            
                            Number
                              Outstanding
                            
                            Range
      of
                              Exercise
                              Price
                            
                            Weighted
                              Average
                              Remaining
                              Contractual
                              Life
      in Years
                            
                            Weighted
                              Average
                              Exercise
                              Price
                            
                            Number
                              Exercisable
                            
                            Weighted
                              Average
                              Exercise
                              Price
                            
                            Weighted
                              Average
                              Remaining
                              Contractual
                              Life
      in Years2007
                            
                            67,020
                            
                            $
                            7.00-$9.00
                            
                            8.2
                            
                            $
                            8.83
                            
                            21,108
                            
                            $
                            8.91
                            
                            8.22008
                            
                            67,020
                            
                            $
                            7.00-$9.00
                            
                            7.2
                            
                            $
                            8.83
                            
                            32,626
                            
                            $
                            8.86
                            
                            7.2
 
 At
      December 31, 2008, the intrinsic value of stock options outstanding and
      stock options exercisable amounted to $0 and $0, respectively. At and for
      the year ended December 31, 2008, all stock options outstanding would have
      an anti-dilutive effect on outstanding shares if
  exercised.
  45
 
 Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated
Financial
Statements
  Note
12 – Benefit
Plans
(Continued)
  Director
Retirement Plan (“DRP”)
  Effective
      March 1, 2006, the Bank implemented the DRP. This plan is a
      non-contributory defined benefit pension plan covering all the directors
      meeting eligibility requirements as specified in the plan document. The
      DRP is accounted for under SFAS 132 and SFAS 158. The following table sets
      forth the funded status of the DRP at December 31, 2008 and December 31,
      2007, and components of net periodic expense for the year then
      ended:
 
 December
      31,2008
                                
                                
                                2007(Dollars
      in thousands)Benefit
      Obligation - beginning
                                
                                $
                                361
                                
                                
                                $
                                319Service
      cost
                                
                                
                                15
                                
                                
                                
                                10Interest
      cost
                                
                                
                                24
                                
                                
                                
                                19Actuarial
      loss
                                
                                
                                9
                                
                                
                                
                                13Benefit
      Obligation - ending
                                
                                $
                                409
                                
                                
                                $
                                361Funded
      Status – Accrued liability included in other liabilities
                                
                                $
                                409
                                
                                
                                $
                                361Discount
      Rate
                                
                                
                                5.875
                                %
                                
                                
                                6.500
                                %Net
      period pension expense:Service
      Cost
                                
                                $
                                15
                                
                                
                                $
                                10Interest
      Cost
                                
                                
                                24
                                
                                
                                
                                19Amortization
      of unrecognized prior service liability
                                
                                
                                29
                                
                                
                                
                                29Total
      pension expense included in Other Non-Interest Expenses
                                
                                $
                                68
                                
                                
                                $
                                58Discount
      Rate
                                
                                
                                6.500
                                %
                                
                                
                                6.125
                                %
 
 At
      December 31, 2008 and 2007, $228,000 and $248,000, respectively, in prior
      service cost and actuarial losses are included in accrued liability and
      have been recorded in Accumulated Other Comprehensive Loss. Approximately
      $29,000 of that amount is expected to be included in pension expense in
      2009.Benefit
      payments, which reflect expected future service as appropriate, are
      expected to be paid for the years ended December 31, as follows (In
      thousands):
 
 2009
                              
                              $
                              42010
                              
                              
                              72011
                              
                              
                              92012
                              
                              
                              132013
                              
                              
                              162014
      – 2018
                              
                              
                              202$
                              251
  46
 
 Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
13 - Other Non-Interest Expenses
  Years
      Ended December 31,2008
                                        
                                        
                                        2007(In
      thousands)Directors’
      compensation
                                        
                                        $
                                        290
                                        
                                        
                                        $
                                        223Consulting
      fees
                                        
                                        
                                        65
                                        
                                        
                                        
                                        41Insurance,
      Surety & Bond Premium
                                        
                                        
                                        41
                                        
                                        
                                        
                                        40Stationery
      and printing
                                        
                                        
                                        54
                                        
                                        
                                        
                                        46Other
                                        
                                        
                                        212
                                        
                                        
                                        
                                        202$
                                        662
                                        
                                        
                                        $
                                        552
  Note
14 - Commitments and Contingencies
  The Bank
is a party to financial instruments with off-balance-sheet risk in the normal
course of business to meet the financing needs of its customers. These financial
instruments primarily include commitments to extend credit. The Bank’s exposure
to credit loss in the event of nonperformance by the other party to the
financial instrument for commitments to extend credit is represented by the
contractual amount of those instruments. The Bank uses the same credit policies
in making commitments and conditional obligations as it does for
on-balance-sheet instruments.
  The
Bank’s outstanding commitments were as follows:
  December 31,2008
                                  
                                  
                                  2007(In
      Thousands)To
      originate loans:Construction
                                  
                                  $
                                  —
                                  
                                  
                                  $
                                  350Fixed
      rate mortgage
                                  
                                  
                                  418
                                  
                                  
                                  
                                  —Adjustable
      rate mortgage
                                  
                                  
                                  215
                                  
                                  
                                  
                                  515Home
      equity line
                                  
                                  
                                  —
                                  
                                  
                                  
                                  158Consumer
                                  
                                  
                                  —
                                  
                                  
                                  
                                  3To
      fund lines of credit:Home
      equity
                                  
                                  
                                  7,900
                                  
                                  
                                  
                                  8,835Overdraft
                                  
                                  
                                  84
                                  
                                  
                                  
                                  84To
      fund letters of credit
                                  
                                  
                                  49
                                  
                                  
                                  
                                  49
  At
December 31, 2008, fixed rate mortgage commitments were at interest rates
of 5.74% to 6.125%; adjustable rate mortgage commitments were at interest rates
of 6.00% to 7.00%; and lines of credit commitments had initial rates ranging
from 5.99% to prime minus 1.0%.
  47
  Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
14 - Commitments and Contingencies (Continued)
  Undisbursed
funds from approved lines of credit, unless they are specifically cancelled by
notice to or from the Bank, represent firm commitments available to the
respective borrowers on demand. The interest rates charged on funds disbursed
under the homeowners’ equity lending program range from the prime rate minus
1.25% to 2.00% above the prime rate. Funds drawn on the unsecured credit reserve
program are assessed interest at a rate of 16%.
  Commitments
to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses and may require payment
of a fee. Since many of the commitments are expected to expire without being
drawn upon, total commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer’s creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary by
the Bank upon extension of credit, is based on management’s credit evaluation of
the counterparty. Collateral held varies but primarily includes residential real
estate properties.
  At
December 31, 2008, the Bank had issued two standby letters of credit to
Montville Township in the amounts of $22,600 and $26,000. The letters were
issued as a guarantee against possible future improvements required by the
municipality with regard to the site plan waiver granted to the Bank for its
Montville branch.
  The Bank
also has, in the normal course of business, commitments for services and
supplies. Management does not anticipate losses on any of these
transactions.
  The
Company and the Bank, from time to time, may be party to litigation which arises
primarily in the ordinary course of business. In the opinion of management, the
ultimate disposition of such litigation should not have a material effect on the
consolidated financial statements.
  48
  Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
15 - Fair Value Disclosures
  Effective
January 1, 2008, the Company adopted the provisions of SFAS No. 157, “Fair Value
Measurements”, for financial assets and financial liabilities. In accordance
with Financial Accounting Standards Board Staff Position (FSP) No. 157-2,
“Effective Date of FASB Statement No. 157,” the Company will delay application
of SFAS 157 for non-financial assets and non-financial liabilities, until
January 1, 2009. SFAS 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements.
  SFAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants. A
fair value measurement assumes that the transaction to sell the asset or
transfer the liability occurs in the principal market for the asset or liability
or, in the absence of a principal market, the most advantageous market for the
asset or liability. The price in the principal (or most advantageous) market
used to measure the fair value of the asset or liability shall not be adjusted
for transaction costs. An orderly transaction is a transaction that assumes
exposure to the market for a period prior to the measurement date to allow for
marketing activities that are usual and customary for transactions involving
such assets and liabilities; it is not a forced transaction. Market participants
are buyers and sellers in the principal market that are (i) independent, (ii)
knowledgeable, (iii) able to transact, and (iv) willing to
transact.
  SFAS 157
requires the use of valuation techniques that are consistent with the market
approach, the income approach and/or the cost approach. The market approach uses
prices and other relevant information generated by market transactions involving
identical or comparable assets and liabilities. The income approach uses
valuation techniques to convert future amounts, such as cash flows or earnings,
to a single present amount on a discounted basis. The cost approach is based on
the amount that currently would be required to replace the service capacity of
an asset (replacement cost). Valuation techniques should be consistently
applied. Inputs to valuation techniques refer to the assumptions that market
participants would use in pricing the asset or liability. Inputs may be
observable, meaning those that reflect the assumptions market participants would
use in pricing the asset or liability developed based on market data obtained
from independent sources, or unobservable, meaning those that reflect the
reporting entity’s own assumptions about the assumptions market participants
would use in pricing the asset or liability developed based on the best
information available in the circumstances. In that regard, SFAS 157 establishes
a fair value hierarchy for valuation inputs that gives the highest priority to
quoted prices in active markets for identical assets or liabilities and the
lowest priority to unobservable inputs. The fair value hierarchy is as
follows:
  Level
      1 Inputs – Unadjusted quoted prices in active markets for identical assets
      or liabilities that the reporting entity has the ability to access at the
      measurement date.Level
      2 Inputs – Inputs other than quoted prices included in Level 1 that are
      observable for the asset or liability; either directly or indirectly.
      These might include quoted prices for similar assets or liabilities in
      active markets, quoted prices for identical or similar assets or
      liabilities in markets that are not active, inputs other than quoted
      prices that are observable for the assets or liabilities (such as interest
      rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that
      are derived principally from or corroborated by market data by correction
      or other means.Level
      3 Inputs – Unobservable inputs for determining the fair values of assets
      or liabilities that reflect an entity’s own assumptions about the
      assumptions that market participants would use in pricing the assets or
      liabilities.
  49
  Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
15 - Fair Value Disclosures (Continued)
  A
description of the valuation methodologies used for instruments measured at fair
value, as well as the general classification of such instruments pursuant to the
valuation hierarchy, is set forth below. These valuation methodologies were
applied to all of the Company’s financial assets and financial liabilities
carried at the fair value effective January 1, 2008.
  In
general, fair value is based upon quoted market prices, where available. If such
quoted market prices are not available, fair value is based upon internally
developed models that primarily use, as inputs, observable market-based
parameters. Valuation adjustments may be made to ensure that financial
instruments are recorded at fair value. These adjustments may include amounts to
reflect counter-party credit quality, the Company’s creditworthiness, among
other things, as well as unobservable parameters. Any such valuation adjustments
are applied consistently over time. The Company’s valuation methodologies may
produce a fair value calculation that may not be indicative of net realizable
value or reflective of future fair values. While management believes the
Company’s valuation methodologies are appropriate and consistent with other
market participants, the use of different methodologies or assumptions to
determine the fair value of certain financial instruments could result in a
different estimate of fair value at the reporting date.
  Available for Sale
Securities. Securities classified as available for sale are reported at
fair value utilizing Level 2 inputs. For these securities, the Company obtains
fair value measurements from an independent pricing service. The fair value
measurements consider observable data that may include dealer quotes, market
spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade
execution data, market consensus prepayment speeds, credit information, and the
bond’s terms and conditions, among other things.
  Impaired loans.Loans
included in the following table are those accounted for under SFAS 114, “Accounting by Creditors for
Impairment of a Loan,”in which the Company has measured impairment
generally based on the fair value of the loan’s collateral. Fair value is
generally determined based upon independent third party appraisals of the
properties, or discounted cash flows based on the expected proceeds. These
assets are included as Level 3 fair values, based upon the lowest level of input
that is significant to the fair value measurements. The fair value consists of
the loan balances less valuation allowance as determined under SFAS
114.
  Certain
financial assets and financial liabilities are measured at fair value on a
nonrecurring basis; that is, the instruments are not measured at fair value on
an ongoing basis but are subject to fair value adjustments in certain
circumstances (for example, when there is evidence of impairment). Financial
assets measured by the Bank at fair value on a nonrecurring basis, consist of
impaired loans.
  50
  Lincoln
      Park Bancorp and Subsidiary
  ConsolidatedNotes toFinancialStatements
  Note
15 - Fair Value Disclosures (Continued)
  At
December 31, 2008, the following table represents the fair value measurement on
available for sale securities and impaired loans.
  Fair
      Value Measurements at Reporting Date Using(In
      thousands)Description
                              
                              12/31/2008
                              
                              Quoted
      Prices in Active
                                Markets
      for Identical
                                Assets
      (Level 1)
                              
                              Significant
      Other
                                Observable
      Inputs
                                (Level
      2)
                              
                              Significant
                                UnobservableInputs
                                (Level
      3)Available-for-sale
      securities
                              
                              
                              $
                              10,175
                              
                              
                              $
                              170
                              
                              
                              $
                              10,005
                              
                              
                              $
                              —Impaired
      Loans
                              
                              
                              
                              262
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              262Total
                              
                              
                              $
                              10,437
                              
                              
                              $
                              170
                              
                              
                              $
                              10,005
                              
                              
                              $
                              262
  The
following summarizes activity related to impaired loans measured at fair value
for year ended December 31, 2008.
  Impaired
      LoansYear
      Ended
                                December
      31, 2008(In
      thousands)Beginning
      balance
                              
                              $
                              —Additions
                              
                              
                              410Payments
      and other credits
                              
                              
                              (1
                              )Reserve
      for loss
                              
                              
                              (147
                              )Ending
      Balance
                              
                              $
                              262
  Effective
January 1, 2008, the Company adopted the provisions of SFAS No. 159, “The Fair
Value Option for Financial Assets and Financial Liabilities – Including an
amendment of FASB Statement No. 115”. SFAS 159 permits the Company to choose to
measure eligible items at fair value at specified election dates. Unrealized
gains and losses on items for which the fair value measurement option has been
elected are reported in earnings at each subsequent reporting date. The fair
value option (i) may be applied instrument by instrument, with certain
exceptions, thus the Company may record identical financial assets and
liabilities at fair value or by another measurement basis permitted under
generally accepted accounting principles, (ii) is irrevocable (unless a new
election date occurs), and (iii) is applied only to entire instruments and not
to portions of instruments. Adoption of SFAS 159 on January 1, 2008 did not have
any material impact on the Company’s financial statements as the Company did not
elect the fair value measurement option for any eligible items.
  51
  Lincoln
      Park Bancorp and Subsidiary
  ConsolidatedNotes toFinancialStatements
  Note
15 - Fair Value Disclosures (Continued)
  The fair
value of a financial instrument is defined as the amount at which the instrument
could be exchanged in a current transaction between willing parties, other than
a forced or liquidation sale. Significant estimations were used for the purposes
of this disclosure. Estimated fair values have been determined using the best
available data and estimation methodology suitable for each category of
financial instruments. Fair value estimates, methods and assumptions are set
forth below for the financial instruments.
  Cash
      and Cash Equivalents and Interest ReceivableThe
      carrying amounts for cash and cash equivalents and interest receivable
      approximate fair value because they mature in three months or
      less.Loans
      ReceivableFair
      value is estimated by discounting future cash flows, using the current
      rates at which similar loans would be made to borrowers with similar
      credit ratings and for the same remaining maturities, of such
      loans.Restricted
      Equity SecuritiesFederal
      law requires a member institution of the Federal Home Loan Bank system to
      hold restricted FHLB stock according to a predetermined formula. The
      restricted stock is carried at cost.DepositsThe
      fair value of demand deposit, passbook and club accounts is equal to the
      amount payable on demand at the reporting date. The fair value of
      certificates of deposit is estimated using rates currently offered for
      deposits of similar remaining maturities. The fair value estimates do not
      include the benefit that results from the low-cost funding provided by
      deposit liabilities compared to the cost of borrowing funds in the
      market.Term
      Deposits and Advances from Federal Home Loan Bank of New
    YorkFair
      value is estimated using rates currently offered for assets and
      liabilities of similar remaining maturities, or when available, quoted
      market prices.Commitments
      to Extend CreditThe
      fair value of commitments is estimated using the fees currently charged to
      enter into similar agreements, taking into account the remaining terms of
      the agreements and the present creditworthiness of the counterparties. For
      fixed-rate loan commitments, fair value also considers the difference
      between current levels of interest rates and the committed
      rates.As
      of December 31, 2008 and 2007, the fair value of the commitments to
      extend credit were not considered to be
  material.
  52
  Lincoln
      Park Bancorp and Subsidiary
  Notes
toConsolidatedFinancialStatements
  Note
15 - Fair Value Disclosures (Continued)
  The
carrying values and estimated fair values of financial instruments were as
follows:
  December
      31,2008
                      
                      
                      2007Carrying
                        Value
                      
                      
                      Fair
                        Value
                      
                      
                      Carrying
                        Value
                      
                      
                      Fair
                        Value(In
      Thousands)Financial
      assets:Cash
      and cash equivalents
                      
                      $
                      4,093
                      
                      
                      $
                      4,093
                      
                      
                      $
                      2,502
                      
                      
                      $
                      2,502Term
      deposits
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      295
                      
                      
                      
                      295Securities
      available for sale
                      
                      
                      10,175
                      
                      
                      
                      10,175
                      
                      
                      
                      1,521
                      
                      
                      
                      1,521Securities
      held to maturity
                      
                      
                      43,524
                      
                      
                      
                      43,201
                      
                      
                      
                      21,242
                      
                      
                      
                      21,113Loans
      receivable, net
                      
                      
                      74,482
                      
                      
                      
                      69,897
                      
                      
                      
                      73,085
                      
                      
                      
                      74,307Federal
      Home Loan Bank of New York stock
                      
                      
                      2,403
                      
                      
                      
                      2,403
                      
                      
                      
                      1,195
                      
                      
                      
                      1,195Interest
      receivable
                      
                      
                      681
                      
                      
                      
                      681
                      
                      
                      
                      523
                      
                      
                      
                      523Financial
      liabilities:Deposits
                      
                      
                      72,989
                      
                      
                      
                      73,914
                      
                      
                      
                      64,967
                      
                      
                      
                      60,936Advances
      from the Federal Home Loan Bank of New York
                      
                      
                      49,996
                      
                      
                      
                      51,728
                      
                      
                      
                      23,552
                      
                      
                      
                      23,772
  The fair
value estimates are made at a discrete point in time based on relevant market
information and information about the financial instruments. Because no market
exists for a significant portion of the financial instruments, fair value
estimates are based on judgments regarding future expected loss experience,
current economic conditions, risk characteristics of various financial
instruments, and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and, therefore, cannot
be determined with precision. Changes in assumptions could significantly affect
the estimates.
  In
addition, fair value estimates are based on existing on-and-off balance sheet
financial instruments, without attempting to estimate the value of anticipated
future business, and exclude the value of assets and liabilities that are not
considered financial instruments. Other significant assets and liabilities that
are not considered financial assets and liabilities include premises and
equipment. In addition, the tax ramifications related to the realization of the
unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in any of the estimates.
  Finally,
reasonable comparability between financial institutions may not be likely due to
the wide range of permitted valuation techniques and numerous estimates which
must be made given the absence of active secondary markets for many of the
financial instruments. This lack of uniform valuation methodologies introduces a
greater degree of subjectivity to these estimated fair values.
  53
 
 Lincoln
      Park Bancorp and
Subsidiary
  Notes
toConsolidatedFinancialStatements
  Note
16- Accumulated Other Comprehensive Loss
  The
components of accumulated other comprehensive loss included in stockholders’
equity are as follows:
  Years
      Ended December 31,2008
                          
                          
                          2007(In
      Thousands)Net
      unrealized loss on securities available for sale
                          
                          $
                          (14
                          )
                          
                          $
                          (61
                          )Tax
      effect
                          
                          
                          (5
                          )
                          
                          
                          —Net
      of tax amount
                          
                          
                          (19
                          )
                          
                          
                          (61
                          )Pension
      amounts under SFAS No. 158
                          
                          
                          (228
                          )
                          
                          
                          (248
                          )Tax
      effect
                          
                          
                          91
                          
                          
                          
                          99Net
      of tax amount
                          
                          
                          (137
                          )
                          
                          
                          (149
                          )Accumulated
      other comprehensive loss
                          
                          $
                          (156
                          )
                          
                          $
                          (210
                          )
  The
components of other comprehensive income (loss) and their related tax effects
are presented in the Consolidated Statement of Changes in Stockholders’
Equity.
  54
  Lincoln
      Park Bancorp and Subsidiary
  Notes
toConsolidatedFinancialStatements
  Note
17- Parent Only Financial Information
  The
following are the condensed financial statements for Lincoln Park Bancorp
(Parent company only):
  STATEMENTS
OF FINANCIAL CONDITION
  December
      31,2008
                        
                        
                        2007(In
      thousands)AssetsCash
      and due from banks
                        
                        $
                        342
                        
                        
                        $
                        445Term
      deposits
                        
                        
                        —
                        
                        
                        
                        99Securities
      available for sale
                        
                        
                        170
                        
                        
                        
                        376Securities
      held to maturity
                        
                        
                        847
                        
                        
                        
                        2,384Loan
      receivable from the Bank
                        
                        
                        345
                        
                        
                        
                        357Interest
      receivable
                        
                        
                        2
                        
                        
                        
                        33Investment
      in subsidiary
                        
                        
                        11,416
                        
                        
                        
                        9,499Other
      assets
                        
                        
                        28
                        
                        
                        
                        —Total
      Assets
                        
                        $
                        13,150
                        
                        
                        $
                        13,193Liabilities
      and Stockholders’ EquityOther
      liabilities
                        
                        $
                        38
                        
                        
                        $
                        47Stockholders’
      equity
                        
                        
                        13,112
                        
                        
                        
                        13,146Total
      Liabilities and Stockholders’ Equity
                        
                        $
                        13,150
                        
                        
                        $
                        13,193
  55




LincolnParkBancorp andSubsidiary
  Notes
to Consolidated Financial Statements
  Note
17 - Parent Only Financial Information (Continued)
  STATEMENTS
OF OPERATIONS
  Years
      Ended December 31,2008
                        
                        
                        2007(In
      thousands)Interest
      income
                        
                        $
                        136
                        
                        
                        $
                        192Gain
      (loss) on sales of securities available for sale
                        
                        
                        (16
                        )
                        
                        
                        18Impairment
      loss on securities available for sale
                        
                        
                        (262
                        )
                        
                        
                        —Total
      income (loss)
                        
                        
                        (142
                        )
                        
                        
                        210Non-interest
      expenses
                        
                        
                        215
                        
                        
                        
                        138Income
      (loss) before Income Tax and Equity in Undistributed Earnings of
      Subsidiary
                        
                        
                        (357
                        )
                        
                        
                        72Income
      tax (benefit) expense
                        
                        
                        (44
                        )
                        
                        
                        14Income
      (loss) before Equity in Undistributed Earnings of
    Subsidiary
                        
                        
                        (313
                        )
                        
                        
                        58Equity
      in undistributed earnings of subsidiary
                        
                        
                        280
                        
                        
                        
                        2Net
      Income (loss)
                        
                        $
                        (33
                        )
                        
                        $
                        60
  56
  LincolnParkBancorp andSubsidiary
  Notes
to Consolidated Financial Statements
  Note
17 - Parent Only Financial Information (Continued)
  STATEMENTS
OF CASH FLOWS
 Years
      Ended December 31,2008
                        
                        
                        2007(In
      thousands)Cash
      Flows from Operating ActivitiesNet
      income (loss)
                        
                        $
                        (33
                        )
                        
                        $
                        60Adjustments
      to reconcile net income (loss) to net cash provided by (used in) operating
      activities:Decrease
      in interest receivable
                        
                        
                        15
                        
                        
                        
                        1(Decrease)
      increase in other liabilities
                        
                        
                        (9
                        )
                        
                        
                        14Impairment
      loss on securities available for sale
                        
                        
                        262
                        
                        
                        
                        —Loss
      (gain) on sale of securities available for sale
                        
                        
                        16
                        
                        
                        
                        (18
                        )(Increase)
      decrease in other assets
                        
                        
                        (28
                        )
                        
                        
                        19Equity
      in undistributed earnings in subsidiary
                        
                        
                        (280
                        )
                        
                        
                        (2
                        )Net
      Cash (Used In) Provided by Operating Activities
                        
                        
                        (57
                        )
                        
                        
                        74Cash
      Flows from Investing ActivitiesPurchases
      of term deposits
                        
                        
                        —
                        
                        
                        
                        (297
                        )Proceeds
      from maturities of term deposits
                        
                        
                        99
                        
                        
                        
                        297Purchases
      of securities available for sale
                        
                        
                        (101
                        )
                        
                        
                        (317
                        )Proceeds
      from sales of securities available for sale
                        
                        
                        46
                        
                        
                        
                        65Principal
      repayments on securities held to maturity
                        
                        
                        37
                        
                        
                        
                        61Decrease
      in loan receivable from Savings Bank
                        
                        
                        11
                        
                        
                        
                        10Net
      Cash Provided by (Used In) Investing Activities
                        
                        
                        92
                        
                        
                        
                        (181
                        )Cash
      Flows from Financing ActivitiesPurchase
      of treasury stock
                        
                        
                        (138
                        )
                        
                        
                        (200
                        )Net
      Cash Used in Financing Activities
                        
                        
                        (138
                        )
                        
                        
                        (200
                        )Net
      Decrease in Cash and Cash Equivalents
                        
                        
                        (103
                        )
                        
                        
                        (307
                        )Cash
      and Cash Equivalents - Beginning
                        
                        
                        445
                        
                        
                        
                        752Cash
      and Cash Equivalents - Ending
                        
                        $
                        342
                        
                        
                        $
                        445
  57
  LincolnParkBancorp andSubsidiary
  Notes
to Consolidated Financial Statements
  Note
18- Quarterly Financial Data (Unaudited)
  Quarter
      EndedMarch
      31,
                            2008
                          
                          
                          June
      30,
                            2008
                          
                          
                          September
      30,
                            2008
                          
                          
                          December
      31,
                            2008(In
      Thousands, Except for Per Share Amounts)Interest
      income
                          
                          $
                          1,348
                          
                          
                          $
                          1,513
                          
                          
                          $
                          1,743
                          
                          
                          $
                          1,901Interest
      expense
                          
                          
                          773
                          
                          
                          
                          780
                          
                          
                          
                          853
                          
                          
                          
                          973Net
      Interest Income
                          
                          
                          575
                          
                          
                          
                          733
                          
                          
                          
                          890
                          
                          
                          
                          928Provision
      for loan losses
                          
                          
                          20
                          
                          
                          
                          15
                          
                          
                          
                          95
                          
                          
                          
                          5Net
      Interest Income after Provision for Loan Losses
                          
                          
                          555
                          
                          
                          
                          718
                          
                          
                          
                          795
                          
                          
                          
                          923Security
      impairment losses
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          (460
                          )Non-interest
      income, excluding security impairment losses
                          
                          
                          28
                          
                          
                          
                          35
                          
                          
                          
                          38
                          
                          
                          
                          20Non-interest
      expenses
                          
                          
                          587
                          
                          
                          
                          615
                          
                          
                          
                          655
                          
                          
                          
                          696Income
      (loss) before Income Taxes
                          
                          
                          (4
                          )
                          
                          
                          138
                          
                          
                          
                          178
                          
                          
                          
                          (213
                          )Income
      taxes (benefit)
                          
                          
                          (2
                          )
                          
                          
                          55
                          
                          
                          
                          58
                          
                          
                          
                          21Net
      Income (loss)
                          
                          $
                          (2
                          )
                          
                          $
                          83
                          
                          
                          $
                          120
                          
                          
                          $
                          (234
                          )Net
      income (loss) per common share - basic and diluted
                          
                          $
                          —
                          
                          
                          $
                          0.05
                          
                          
                          $
                          0.07
                          
                          
                          $
                          (0.13
                          )Weighted
      average number of common shares outstanding - basic and
      diluted
                          
                          
                          1,768
                          
                          
                          
                          1,769
                          
                          
                          
                          1,762
                          
                          
                          
                          1,753
  58
  Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
18- Quarterly Financial Data (Unaudited) (Continued)
  Quarter
      EndedMarch
      31,
                          2007
                        
                        
                        June
      30,
                          2007
                        
                        
                        September
      30,
                          2007
                        
                        
                        December
      31,
                          2007(In
      Thousands, Except for Per Share Amounts)Interest
      income
                        
                        $
                        1,256
                        
                        
                        $
                        1,316
                        
                        
                        $
                        1,361
                        
                        
                        $
                        1,394Interest
      expense
                        
                        
                        728
                        
                        
                        
                        763
                        
                        
                        
                        806
                        
                        
                        
                        827Net
      Interest Income
                        
                        
                        528
                        
                        
                        
                        553
                        
                        
                        
                        555
                        
                        
                        
                        567Provision
      for loan losses
                        
                        
                        7
                        
                        
                        
                        44
                        
                        
                        
                        —
                        
                        
                        
                        —Net
      Interest Income after Provision for Loan Losses
                        
                        
                        521
                        
                        
                        
                        509
                        
                        
                        
                        555
                        
                        
                        
                        567Non-interest
      income
                        
                        
                        32
                        
                        
                        
                        39
                        
                        
                        
                        42
                        
                        
                        
                        32Non-interest
      expenses
                        
                        
                        504
                        
                        
                        
                        525
                        
                        
                        
                        596
                        
                        
                        
                        609Income
      (loss) before Income Taxes
                        
                        
                        49
                        
                        
                        
                        23
                        
                        
                        
                        1
                        
                        
                        
                        (10
                        )Income
      taxes (benefit)
                        
                        
                        14
                        
                        
                        
                        7
                        
                        
                        
                        (12
                        )
                        
                        
                        (6
                        )Net
      Income (loss)
                        
                        $
                        35
                        
                        
                        $
                        16
                        
                        
                        $
                        13
                        
                        
                        $
                        (4
                        )Net
      income (loss) per common share-basic and diluted
                        
                        $
                        0.02
                        
                        
                        $
                        0.01
                        
                        
                        $
                        0.01
                        
                        
                        $
                        (0.01
                        )Weighted
      average number of common shares outstanding - basic and
      diluted
                        
                        
                        1,788
                        
                        
                        
                        1,789
                        
                        
                        
                        1,788
                        
                        
                        
                        1,773
  59
  Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
19 - Recent Accounting Pronouncements
  FASB
Statement No. 141 (R)
  FASB
Statement No. 141 (R) “Business Combinations” was issued in December of 2007.
This Statement establishes principles and requirements for how the acquirer of a
business recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any non-controlling interest in
the acquiree. The Statement also provides guidance for recognizing and measuring
the goodwill acquired in the business combination and determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. The guidance will
become effective as of the beginning of a company’s fiscal year beginning after
December 15, 2008. This new pronouncement will impact the Company’s accounting
for business combinations completed beginning January 1, 2009.
  FASB
Statement No. 161
  In March
2008, the FASB issued Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an amendment of FASB Statement No. 133”
(Statement 161). Statement 161 requires entities that utilize derivative
instruments to provide qualitative disclosures about their objectives and
strategies for using such instruments, as well as any details of
credit-risk-related contingent features contained within derivatives. Statement
161 also requires entities to disclose additional information about the amounts
and location of derivatives located within the financial statements, how the
provisions of SFAS 133 has been applied, and the impact that hedges have on an
equity’s financial position, financial performance, and cash flows. Statement
161 is effective for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The Company is currently evaluating
the potential impact the new pronouncement will have on its consolidated
financial statements.
  FSP
EITF 03-6-1
  In June
2008, the FASB issued FASB Staff Position (FSP) EITF 03-6-1, “Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities.” This FSP clarifies that all outstanding unvested
share-based payment awards that contain rights to non-forfeitable dividends
participate in undistributed earnings with common shareholders. Awards of this
nature are considered participating securities and the two-class method of
computing basic and diluted earnings per share must be applied. This FSP is
effective for fiscal years beginning after December 15, 2008. The Company is
currently evaluating the potential impact the new pronouncement will have on its
consolidated financial statements.
  60
  Lincoln
      Park Bancorp and Subsidiary
  Notes
to Consolidated Financial Statements
  Note
19 - Recent Accounting Pronouncements (Continued)
  FSP
FAS 140-4 and FIN 46(R)-8
  In
December 2008, the FASB issued FSP SFAS 140-4 and FASB Interpretation (FIN)
46(R)-8, “Disclosures by Public Entities (Enterprises) about Transfers of
Financial Assets and Interest in Variable Interest Entities” (FSP SFAS 140-4 and
FIN 46 (R)-8). FSP SFAS 140-4 and FIN 46(R)-8 amends FASB SFAS 140 “Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities,” to require public entities to provide additional disclosures about
transfers of financial assets. It also amends FIN 46(R), “Consolidation of
Variable Interest Entities,” to require public enterprises, including sponsors
that have a variable interest in a variable interest entity, to provide
additional disclosures about their involvement with variable interest entities.
Additionally, this FSP requires certain disclosures to be provided by a public
enterprise that is (a) a sponsor of a qualifying special purpose entity (SPE)
that holds a variable interest in the qualifying SPE but was not the transferor
of financial assets to the qualifying SPE and (b) a servicer of a qualifying SPE
that holds a significant variable interest in the qualifying SPE but was not the
transferor of financial assets to qualifying SPE. The disclosures required by
FSP SFAS 140-4 and FIN 46(R)-8 are intended to provide greater transparency to
financial statement users about a transferor’s continuing involvement with
transferred financial assets and an enterprise’s involvement with variable
interest entities and qualifying SPE’s. FSP SFAS 140-4 and FIN 46(R) is
effective for reporting periods (annual or interim) ending December 15, 2008.
The implementation of this standard did not have a material impact on the
Company’s consolidated financial position or operations.
  FSP
EITF 99-20-1
  In
January 2009, the FASB issued FSP EITF 99-20-1, “Amendments to the Impairment of
Guidance of EITF Issue No. 99-20” (FSP EITF 99-20-1). FSP EITF 99-20-1 amends
the impairment guidance in EITF Issue No. 99-20, “Recognition of Interest Income
and Impairment on Purchased Beneficial Interest and Beneficial Interest That
Continue to Be Held by a Transferor in Securitized Financial Assets,” to achieve
more consistent determination of whether an other-than-temporary impairment has
occurred. FSP EITF 99-20-1 also retains and emphasizes the objective of an
other-than-temporary impairment assessment and the related disclosure
requirements in SFAS No. 115, “Accounting for Certain Investments in Debt and
Equity Securities,” and other related guidance. FSP EITF 99-20-1 is effective
for interim and annual reporting ending after December 15, 2008, and shall be
applied prospectively. Retrospective application to a prior interim or annual
reporting period is not permitted. The implementation of this standard did not
have a material impact on the Company’s consolidated financial position or
operations.
  61
  Lincoln
      Park Bancorp and Subsidiary
  DIRECTORS
AND EXECUTIVE OFFICERS
  DirectorsStanford
      StollerChairman
      of the BoardServices
      Sales Leader – Middleware Services – IBM CorporationEdith
      M. PerrottiVice
      Chairperson of the BoardRetired,
      former Senior Vice President of Lincoln Park SavingsDavid
      G. BakerPresident
      & CEO, Lincoln Park Savings BankPart
      owner of Lincoln Park HardwareJohn
      F. FeeneyAttorney
      at Law, Feeney & Dixon, L.L.P.Henry
      FitschenPublic
      AccountantAdvisory
      DirectorWilliam
      H. WeisbrodExecutive
      OfficersDavid
      G. BakerPresident
      and Chief Executive OfficerNandini
      S. MallyaVice
      President, Treasurer, and Chief Financial OfficerNancy
      M. ShawVice
      President and Corporate
Secretary
  62
  Lincoln
      Park Bancorp and Subsidiary
  STOCKHOLDER
INFORMATION
  Annual
Meeting
 The
Annual Meeting of Stockholders will be held at the Lincoln Park Community
Center,
 34 Chapel
Hill Road, Lincoln Park, New Jersey on May 14, 2008 at 10:00 A.M.
  Stock
Listing
 Over-the-Counter
Bulletin Board under the symbol “LPBC”
  Counsel
 Feeney
& Dixon, L.L.P.
 512
Newark Pompton Turnpike
 Pompton
Plains, New Jersey 07444
  Special
Counsel
 Luse
Gorman Pomerenk & Schick, P.C.
 5335
Wisconsin Avenue, NW
 Suite
400
 Washington,
DC 20015
  Independent Registered
Public Accounting Firm
 Beard
Miller Company LLP
 100
Walnut Avenue, Suite 200
 Clark,
New Jersey 07066
  Transfer Agent and
Registrar
 Registrar
and Transfer Company
 10
Commerce Drive
 Cranford,
New Jersey 07016
 (800)
368-5948
  Please
contact our transfer agent directly for assistance in changing your address,
elimination of duplicate mailing, transferring stock, or replacing lost, stolen
or destroyed stock certificates.
  Annual Report on Form
10-K
 A copy of
the Company’s Form 10-K for the fiscal year ended December 31, 2008, as filed
with the Securities and Exchange Commission, is available without charge to
stockholders by written request to the Company. It may also be accessed on our
website at: www.lincolnparksavings.com
  63
  Lincoln
      Park Bancorp and Subsidiary
  MARKET
INFORMATION
  The
Company’s Common Stock is traded on the Over-the-Counter Bulletin Board under
the symbol “LPBC”.
  The
following table sets forth the range of the high and low prices of the Company’s
Common Stock for each quarterly period during the last two fiscal years. Prices
are inter-dealer prices, without retail mark-up, mark-down or commission and may
not necessarily represent actual transactions.
  Quarter
      Ended
                      
                      High
                      
                      
                      Low
                      
                      
                      DividendsMarch
      31, 2007
                      
                      $
                      10.00
                      
                      
                      $
                      8.65
                      
                      
                      
                      —June
      30, 2007
                      
                      $
                      9.00
                      
                      
                      $
                      8.36
                      
                      
                      
                      —September
      30, 2007
                      
                      $
                      8.50
                      
                      
                      $
                      7.30
                      
                      
                      
                      —December
      31, 2007
                      
                      $
                      8.00
                      
                      
                      $
                      6.00
                      
                      
                      
                      —March
      31, 2008
                      
                      $
                      6.25
                      
                      
                      $
                      5.10
                      
                      
                      
                      —June
      30, 2008
                      
                      $
                      7.00
                      
                      
                      $
                      5.00
                      
                      
                      
                      —September
      30, 2008
                      
                      $
                      7.00
                      
                      
                      $
                      5.75
                      
                      
                      
                      —December
      31, 2008
                      
                      $
                      6.45
                      
                      
                      $
                      3.00
                      
                      
                      
                      —
  As of
December 31, 2008, there were 1,803,245 shares of Lincoln Park Bancorp common
stock outstanding.