**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**




**FORM
      10-Q**




**(MARK
      ONE)**






ý
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
                EXCHANGE ACT OF 1934For
                the quarterly period ended September 30, 2007ORo
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
                EXCHANGE ACT OF 1934For
                the transition period from ________________ to
                ________________





Commission
      file number: 000-25219




**LINCOLN
      BANCORP**


(Exact
      name of registrant as specified in its charter)





**Indiana**
            
            **35-2055553**(State
                or other jurisdiction of incorporation or organization)
            
            (I.R.S.
                Employer Identification No.)**905
                Southfield Drive, Plainfield, Indiana**
            
            **46168**(Address
                of principal executive offices)
            
            (Zip
                Code)





**(317)
      839-6539**


(Registrant’s
      telephone number, including area code)





**[None]**


(Former
      name, former address and former fiscal year, if changed since last
      report)






Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.




Yes ý         No o




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




Large
      accelerated filer  o        Accelerated
      filer ý        Non-accelerated
      filer o




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).




Yes o         No ý




The
      number of shares of the Registrant’s common stock, without par value,
      outstanding as of September 30, 2007 was 5,363,821.









**LINCOLN
      BANCORP AND SUBSIDIARY**




**FORM
      10-Q**




**INDEX**





Page
                No.FORWARD-LOOKING
                STATEMENTS
            3PART I.
                FINANCIAL INFORMATION
            4Item
                1. Financial Statements
            4Consolidated
                Condensed Balance Sheets
            4Consolidated
                Condensed Statements of Operations
            5Consolidated
                Condensed Statements of Comprehensive Income
            6Consolidated
                Condensed Statement of Shareholders’ Equity
            7Consolidated
                Condensed Statements of Cash Flows
            8Notes
                to Unaudited Consolidated Condensed Financial Statements
            10Item
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of Operations
            12Item
                3. Quantitative and Qualitative Disclosures about Market
                Risk
            18Item
                4. Controls and Procedures
            19PART
                II. OTHER INFORMATIONItem
                1. Legal Proceedings
            19Item
                1A. Risk Factors
            19Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            19Item
                3. Defaults Upon Senior Securities
            19Item
                4. Submission of Matters to a Vote of Security Holders
            19Item
                5. Other Information
            20Item
                6. Exhibits
            20SIGNATURES
            21EXHIBIT
                INDEX
            21





2


**FORWARD-LOOKING
      STATEMENTS**




This
      Quarterly Report on Form 10-Q (“Form 10-Q”) contains statements that constitute
      forward-looking statements within the meaning of the Private Securities
      Litigation Reform Act of 1995. These statements appear in a number of places
      in
      this Form 10-Q and include statements regarding the intent, belief, outlook,
      estimate or expectations of the Company (as defined in the notes to the
      consolidated condensed financial statements), its directors or its officers
      primarily with respect to future events and the future financial performance
      of
      the Company. Readers of this Form 10-Q are cautioned that any such
      forward-looking statements are made as of the date of this report and are not
      guarantees of future events or performance and involve risks and uncertainties,
      and that actual results may differ materially from those in the forward-looking
      statements as a result of various factors. The accompanying information
      contained in this Form 10-Q identifies important factors that could cause such
      differences. These factors include changes in interest rates; loss of deposits
      and loan demand to other financial institutions; substantial changes in
      financial markets; changes in real estate values and the real estate market;
      or
      regulatory changes. We do not undertake to update any forward-looking statement
      that we may make in this Form 10-Q.


3


**PART
      I FINANCIAL INFORMATION**




**Item
      1.                      Financial
      Statements**




**LINCOLN
      BANCORP AND SUBSIDIARY**


Consolidated
      Condensed Balance Sheets







**September
                 30, 2007**
              **(Unaudited)**
            
            
            **December 31,
                2006****Assets**Cash
                and due from banks
            
            $
            3,202,406
            
            
            $
            4,457,257Interest-bearing
                demand deposits in other banks
            
            
            5,414,588
            
            
            
            13,951,460Cash
                and cash equivalents
            
            
            8,616,994
            
            
            
            18,408,717Investment
                securities available for sale
            
            
            158,071,680
            
            
            
            151,237,001Loans
                held for sale
            
            
            2,602,999
            
            
            
            3,713,010Loans,
                net of allowance for loan losses of $6,281,904 and
                $6,129,069
            
            
            635,690,240
            
            
            
            629,283,375Premises
                and equipment
            
            
            16,270,314
            
            
            
            14,296,685Investments
                in limited partnerships
            
            
            1,216,463
            
            
            
            1,252,091Federal
                Home Loan Bank stock
            
            
            8,808,200
            
            
            
            8,808,200Interest
                receivable
            
            
            5,329,333
            
            
            
            4,785,639Goodwill
            
            
            23,906,877
            
            
            
            23,906,877Core
                deposit intangible
            
            
            2,289,622
            
            
            
            2,690,255Cash
                value of life insurance
            
            
            20,807,539
            
            
            
            20,171,426Other
                assets
            
            
            5,763,130
            
            
            
            4,989,513Total
                assets
            
            $
            889,373,391
            
            
            $
            883,542,789**Liabilities**DepositsNoninterest-bearing
            
            $
            50,058,690
            
            
            $
            51,062,255Interest-bearing
            
            
            628,126,342
            
            
            
            604,601,833Total
                deposits
            
            
            678,185,032
            
            
            
            655,664,088Securities
                sold under repurchase agreements
            
            
            15,493,945
            
            
            
            16,863,656Borrowings
            
            
            87,207,522
            
            
            
            103,608,175Interest
                payable
            
            
            2,532,503
            
            
            
            2,460,498Other
                liabilities
            
            
            7,295,755
            
            
            
            5,646,466Total
                liabilities
            
            
            790,714,757
            
            
            
            784,242,883**Commitments
                and Contingencies****Shareholders’
                Equity**Common
                stock, without par valueAuthorized
                - 20,000,000 sharesIssued
                and outstanding - 5,363,821 and 5,329,687 shares
            
            
            62,482,787
            
            
            
            62,020,927Retained
                earnings
            
            
            40,003,051
            
            
            
            41,035,822Accumulated
                other comprehensive loss
            
            
            (1,255,569
            )
            
            
            (961,453
            )Unearned
                employee stock ownership plan (ESOP) shares
            
            
            (2,571,635
            )
            
            
            (2,795,390
            )Total
                shareholders’ equity
            
            
            98,658,634
            
            
            
            99,299,906Total
                liabilities and shareholders’ equity
            
            $
            889,373,391
            
            
            $
            883,542,789






See
        notes
        to consolidated condensed financial statements.
  4


**LINCOLN
      BANCORP AND SUBSIDIARY**




Consolidated
      Condensed Statements of Operations


(Unaudited)





**Three
                  Months Ended**
                **September
                  30,**
            
            
            **Nine
                  Months Ended**
                **September 30,****Interest
                Income**
            
            **2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Loans
                receivable, including fees
            
            $
            11,083,024
            
            
            $
            10,830,701
            
            
            $
            33,052,347
            
            
            $
            30,933,635Investment
                securities
            
            
            2,372,435
            
            
            
            2,129,479
            
            
            
            6,592,902
            
            
            
            6,188,919Deposits
                with financial institutions
            
            
            46,618
            
            
            
            58,044
            
            
            
            362,849
            
            
            
            401,601Dividend
                income
            
            
            99,092
            
            
            
            93,959
            
            
            
            301,910
            
            
            
            369,811Total
                interest and dividend income
            
            
            13,601,169
            
            
            
            13,112,183
            
            
            
            40,310,008
            
            
            
            37,893,966**Interest
                Expense**Deposits
            
            
            6,953,434
            
            
            
            6,274,287
            
            
            
            20,465,869
            
            
            
            16,988,067Short-term
                borrowings
            
            
            161,272
            
            
            
            152,114
            
            
            
            478,439
            
            
            
            330,675Federal
                Home Loan Bank advances
            
            
            985,701
            
            
            
            1,155,650
            
            
            
            3,167,958
            
            
            
            3,725,357Total
                interest expense
            
            
            8,100,407
            
            
            
            7,582,051
            
            
            
            24,112,266
            
            
            
            21,044,099**Net
                Interest Income**
            
            
            5,500,762
            
            
            
            5,530,132
            
            
            
            16,197,742
            
            
            
            16,849,867Provision
                for loan losses
            
            
            150,000
            
            
            
            119,993
            
            
            
            457,000
            
            
            
            621,744**Net
                Interest Income After Provision for Loan Losses**
            
            
            5,350,762
            
            
            
            5,410,139
            
            
            
            15,740,742
            
            
            
            16,228,123**Other
                Income**Service
                charges on deposit accounts
            
            
            620,574
            
            
            
            558,813
            
            
            
            1,806,786
            
            
            
            1,600,506Net
                realized and unrealized gains (losses) on loans held for
                sale
            
            
            216,800
            
            
            
            179,236
            
            
            
            (956,339
            )
            
            
            301,181Net
                realized gains (losses) on sales of securities
            
            
            13,896
            
            
            
            --
            
            
            
            (39,055
            )
            
            
            3,697Point
                of sale income
            
            
            238,224
            
            
            
            183,439
            
            
            
            665,872
            
            
            
            533,334Loan
                servicing fees
            
            
            97,802
            
            
            
            81,159
            
            
            
            250,218
            
            
            
            257,132Increase
                in cash value of life insurance
            
            
            213,484
            
            
            
            168,558
            
            
            
            636,113
            
            
            
            495,176Gain
                on termination of forward commitment
            
            
            --
            
            
            
            --
            
            
            
            358,750
            
            
            
            --Other
                income
            
            
            176,337
            
            
            
            254,633
            
            
            
            558,331
            
            
            
            738,309Total
                other income
            
            
            1,577,117
            
            
            
            1,425,838
            
            
            
            3,280,676
            
            
            
            3,929,335**Other
                Expenses**Salaries
                and employee benefits
            
            
            3,008,489
            
            
            
            2,947,216
            
            
            
            9,173,911
            
            
            
            8,593,032Net
                occupancy expenses
            
            
            632,397
            
            
            
            491,522
            
            
            
            1,768,928
            
            
            
            1,517,833Equipment
                expenses
            
            
            420,214
            
            
            
            368,845
            
            
            
            1,265,076
            
            
            
            1,124,654Data
                processing fees
            
            
            697,751
            
            
            
            538,816
            
            
            
            1,904,014
            
            
            
            1,736,984Professional
                fees
            
            
            329,251
            
            
            
            268,122
            
            
            
            650,281
            
            
            
            704,068Director
                and committee fees
            
            
            102,036
            
            
            
            101,863
            
            
            
            315,028
            
            
            
            328,449Advertising
                and business development
            
            
            299,970
            
            
            
            257,632
            
            
            
            878,475
            
            
            
            596,356Core
                deposit intangible amortization
            
            
            126,173
            
            
            
            145,554
            
            
            
            400,633
            
            
            
            469,995Other
                expenses
            
            
            714,759
            
            
            
            609,072
            
            
            
            2,106,250
            
            
            
            1,947,699Total
                other expenses
            
            
            6,331,040
            
            
            
            5,728,642
            
            
            
            18,462,596
            
            
            
            17,019,030**Income
                Before Income Tax**
            
            
            596,839
            
            
            
            1,107,335
            
            
            
            558,822
            
            
            
            3,138,428Income
                tax expense
                (benefit)
            
            
            75,705
            
            
            
            267,057
            
            
            
            (340,414
            )
            
            
            733,272**Net
                Income**
            
            $
            521,134
            
            
            $
            840,278
            
            
            $
            899,236
            
            
            $
            2,405,156**Basic
                Earnings per Share**
            
            $
            0.10
            
            
            $
            0.17
            
            
            $
            0.18
            
            
            $
            0.48**Diluted
                Earnings per Share**
            
            $
            0.10
            
            
            $
            0.16
            
            
            $
            0.17
            
            
            $
            0.47**Dividends
                per Share**
            
            $
            0.14
            
            
            $
            0.14
            
            
            $
            0.42
            
            
            $
            0.42




See
        notes
        to consolidated condensed financial statements.




5








**LINCOLN
      BANCORP AND SUBSIDIARY**


Consolidated
      Condensed Statements of Comprehensive Income


(Unaudited)





**Three
                  Months Ended**
                **September
                  30,**
            
            
            **Nine
                  Months Ended**
                **September
                  30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Net
                Income
            
            $
            521,134
            
            
            $
            840,278
            
            
            $
            899,236
            
            
            $
            2,405,156Other
                comprehensive income (loss), net of taxUnrealized
                gains/(losses) on securities available for saleUnrealized
                holding gains/(losses) arising during the period, net of tax expense/
                (benefit) of  $330,331, $847,718, $(163,404), and
                $(13)
            
            
            519,852
            
            
            
            1,494,721
            
            
            
            (350,937
            )
            
            
            (6,522
            )Less:
                Reclassification adjustment for realized gains (losses) included
                in net
                income, net of tax expense (benefit) of 4,949,  -0- , $620 and
                $1,257
            
            
            8,947
            
            
            
            -0-
            
            
            
            (39,675
            )
            
            
            2,440Reclassification
                adjustment for amortization of additional pension liability recognized
                in
                expense under FAS 158, net of tax benefit of $3,747, -0-, 11,241
                and
                -0-
            
            
            5,715
            
            
            
            -0-
            
            
            
            17,145
            
            
            
            -0-516,620
            
            
            
            1,494,721
            
            
            
            (294,117
            )
            
            
            (8,962
            )Comprehensive
                income
            
            $
            1,037,754
            
            
            
            2,334,999
            
            
            $
            605,119
            
            
            $
            2,396,194




See
        notes
        to consolidated condensed financial statements.
   6
  **LINCOLN
        BANCORP AND SUBSIDIARY**
 Consolidated
        Condensed Statement of Shareholders’ Equity
 For
        the
        Nine Months Ended September 30, 2007
 (Unaudited)
   **Common
                    Stock**
                
                
                
                
                
                **Accumulated
                    Other****Shares
                    Outstanding**
                
                
                **Amount**
                
                
                **Retained
                    Earnings**
                
                
                **Comprehensive
                    Loss**
                
                
                **Unearned**
                    ESOP**Shares**
                
                
                **Total****Balances,
                    January 1, 2007**
                
                
                5,329,687
                
                
                $
                62,020,927
                
                
                $
                41,035,822
                
                
                $
                (961,453
                )
                
                $
                (2,795,390
                )
                
                $
                99,299,906Net
                    income for the period
                
                
                
                
                
                
                
                
                
                
                899,236
                
                
                
                
                
                
                
                
                
                
                
                899,236Unrealized
                    losses on securities, net of reclassification adjustment
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (311,261
                )
                
                
                
                
                
                
                (311,261
                )Purchase
                    of common stock
                
                
                (7,937
                )
                
                
                (148,950
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (148,950
                )Stock
                    options exercised
                
                
                42,071
                
                
                
                525,888
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                525,888Stock
                    option expense
                
                
                
                
                
                
                24,450
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                24,450ESOP
                    shares earned
                
                
                
                
                
                
                
                
                
                
                188,443
                
                
                
                
                
                
                
                223,755
                
                
                
                412,198Amortization
                    of unearned compensation expense
                
                
                
                
                
                
                60,472
                
                
                
                13,285
                
                
                
                
                
                
                
                
                
                
                
                73,757Amortization
                    of additional pension liability recognized under FAS 158
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                17,145
                
                
                
                
                
                
                
                17,145Cash
                    dividends ($.42 per share)
                
                
                
                
                
                
                
                
                
                
                (2,133,735
                )
                
                
                
                
                
                
                
                
                
                
                (2,133,735
                )**Balances,
                    September 30, 2007**
                
                
                5,363,821
                
                
                $
                62,482,787
                
                
                $
                40,003,051
                
                
                $
                (1,255,569
                )
                
                $
                (2,571,635
                )
                
                $
                98,658,634


See
        notes
        to consolidated condensed financial statements.
 
 7
 
 **LINCOLN
        BANCORP AND SUBSIDIARY**
 Consolidated
        Condensed Statements of Cash Flows
 (Unaudited)


**Nine
                    Months Ended****September
                    30,****2007**
                
                
                **2006****Operating
                    Activities**Net
                    income
                
                $
                899,236
                
                
                $
                2,405,156Adjustments
                    to reconcile net income to net cash provided by (used in) operating
                    activitiesProvision
                    for loan losses
                
                
                457,000
                
                
                
                621,744Investment
                    securities accretion, net
                
                
                14,237
                
                
                
                19,987Investment
                    securities (gains) losses
                
                
                39,055
                
                
                
                (3,697
                )Loans
                    originated for sale
                
                
                (49,451,960
                )
                
                
                (30,356,061
                )Proceeds
                    from sale of loans and payments received on loans held for
                    sale
                
                
                52,715,209
                
                
                
                29,166,690Net
                    realized and unrealized (gains) losses on loans held for
                    sale
                
                
                956,339
                
                
                
                (301,181
                )Amortization
                    of net loan origination costs
                
                
                482,814
                
                
                
                449,767Amortization
                    of purchase accounting adjustments
                
                
                246,004
                
                
                
                192,308Depreciation
                    and amortization
                
                
                1,307,238
                
                
                
                1,336,721Amortization
                    of unearned compensation expense
                
                
                73,757
                
                
                
                83,477ESOP
                    shares earned
                
                
                412,198
                
                
                
                414,248Net
                    change in:Interest
                    receivable
                
                
                (543,694
                )
                
                
                (389,527
                )Interest
                    payable
                
                
                72,005
                
                
                
                394,567Other
                    adjustments
                
                
                607,743
                
                
                
                502,078Net
                    cash provided by operating activities
                
                
                8,287,181
                
                
                
                4,536,277**Investing
                    Activities**Purchases
                    of securities available for sale
                
                
                (65,544,811
                )
                
                
                (24,029,192
                )Proceeds
                    from sales of securities available for sale
                
                
                14,892,178
                
                
                
                211,577Proceeds
                    from maturities of securities available for sale
                
                
                13,202,056
                
                
                
                14,427,604Proceeds
                    from sales of securities held for trading
                
                
                66,982,682
                
                
                
                --Proceeds
                    from maturities of securities held for trading
                
                
                402,552
                
                
                
                --Net
                    change in loans
                
                
                (48,227,524
                )
                
                
                (38,271,182
                )Redemption
                    of Federal Home Loan Bank of Indianapolis stock
                
                
                --
                
                
                
                1,194,200Purchases
                    of property and equipment
                
                
                (3,309,014
                )
                
                
                (835,212
                )Proceeds
                    from sales of foreclosed real estate
                
                
                308,951
                
                
                
                997,950Other
                    investing activities
                
                
                2,804
                
                
                
                (1,100
                )Net
                    cash used in investing activities
                
                
                (21,290,126
                )
                
                
                (46,305,355
                )**Financing
                    Activities**Net
                    change inNoninterest-bearing,
                    interest-bearing demand, money market and savings deposits
                
                
                4,492,093
                
                
                
                28,071,033Certificates
                    of deposit
                
                
                18,082,349
                
                
                
                48,321,623Short
                    term borrowings
                
                
                (1,369,711
                )
                
                
                3,569,780Proceeds
                    from FHLB advances
                
                
                271,492,806
                
                
                
                92,550,000Repayment
                    of FHLB advances
                
                
                (287,882,806
                )
                
                
                (129,550,000
                )Dividends
                    paid
                
                
                (2,128,956
                )
                
                
                (2,133,304
                )Purchase
                    of common stock
                
                
                (148,950
                )
                
                
                (379,000
                )Exercise
                    of stock options
                
                
                525,888
                
                
                
                188,355Net
                    change in advances by borrowers for taxes and insurance
                
                
                148,509
                
                
                
                671,404Net
                    cash provided by financing activities
                
                
                3,211,222
                
                
                
                41,309,891
   8







**Net
                Change in Cash and Cash Equivalents**
            
            
            (9,791,723
            )
            
            
            (459,187
            )**Cash
                and Cash Equivalents, Beginning of Period**
            
            
            18,408,717
            
            
            
            16,735,797**Cash
                and Cash Equivalents, End of Period**
            
            $
            8,616,994
            
            
            $
            16,276,610**Additional
                Cash Flows and Supplementary Information**Interest
                paid
            
            $
            24,040,261
            
            
            $
            20,649,532Income
                tax paid
            
            
            --
            
            
            
            780,000Loan
                balances transferred to foreclosed real estate
            
            
            230,175
            
            
            
            1,034,428Transfer
                of loans to held for sale loans - net
            
            
            40,741,148
            
            
            
            --Transfer
                of investment securities available for sale to trading
                securities
            
            
            29,718,011
            
            
            
            --Securitization
                of loans
            
            
            37,297,938
            
            
            
            --




See
        notes
        to consolidated condensed financial statements.







9





**LINCOLN
      BANCORP AND SUBSIDIARY**


Notes
      to
      Unaudited Consolidated Condensed Financial Statements




Note
      1: Basis of Presentation




The
      consolidated financial statements include the accounts of Lincoln Bancorp (the
      “Company”), its wholly owned subsidiary, Lincoln Bank, a state chartered
      commercial bank (“Lincoln” or the “Bank”), and Lincoln’s wholly owned
      subsidiaries, LF Service Corporation (“LF Service”) and Citizens Loan and
      Service Corporation (“CLSC”), both Indiana corporations, and LF Portfolio
      Services, Inc. (“LF Portfolio”), a Delaware corporation. A summary of
      significant accounting policies is set forth in Note 1 of Notes to Financial
      Statements included in the December 31, 2006 Annual Report to Shareholders.
      All
      significant intercompany accounts and transactions have been eliminated in
      consolidation.




The
      interim consolidated financial statements have been prepared in accordance
      with
      instructions to Form 10-Q, and therefore do not include all information and
      footnotes necessary for a fair presentation of financial position, results
      of
      operations and cash flows in conformity with generally accepted accounting
      principles.




The
      interim consolidated financial statements at September 30, 2007 and for the
      three months and nine months ended September 30, 2007 and 2006, have not been
      audited by independent accountants, but reflect, in the opinion of management,
      all adjustments (which include only normal recurring adjustments) necessary
      to
      present fairly the financial position, results of operations and cash flows
      for
      such periods. The results of operations for the three-month and nine-month
      period ended September 30, 2007, are not necessarily indicative of the results
      that may be expected for the entire year. The consolidated condensed balance
      sheet of the Company as of December 31, 2006 has been derived from the audited
      consolidated balance sheet of the Company as of that date.




Reclassifications
      of certain amounts in the 2006 consolidated financial statements have been
      made
      to conform to the 2007 presentation.




Note
      2: Earnings Per Share




Earnings
      per share have been computed based upon the weighted-average common shares
      outstanding. Unearned Employee Stock Ownership Plan shares have been excluded
      from the computation of average common shares outstanding.






**Three
                  Months Ended**
                **September
                  30, 2007**
              
              **Three
                  Months Ended**
                **September
                  30 , 2006****Income**
              
              **Weighted
                  Average Shares**
              
              **Per
                  Share Amount**
              
              **Income**
              
              **Weighted
                  Average Shares**
              
              **Per
                  Share Amount**Basic
                  earnings per shareIncome
                  available to common shareholders
              
              $
              521,134
              
              
              5,063,477
              
              $
              .
                  10
              
              $
              840,278
              
              
              5,044,820
              
              $
              .
                  17Effect
                  of dilutive RRP awards and stock options
              
              
              
              
              
              88,883
              
              
              
              
              
              
              
              
              125,577Diluted
                  earnings  per shareIncome
                  available to common shareholders and assumed conversions
              
              $
              521,134
              
              
              5,152,360
              
              $
              .
                  10
              
              $
              840,278
              
              
              5,170,397
              
              $
              .
                  16
  10


**Nine
                  Months Ended**
                **September
                  30, 2007**
              
              **Nine
                  Months Ended**
                **September
                  30, 2006****Income**
              
              **Weighted
                  Average Shares**
              
              **Per
                  Share Amount**
              
              **Income**
              
              **Weighted
                  Average Shares**
              
              **Per
                  Share Amount**Basic
                  earnings per shareIncome
                  available to common shareholders
              
              $
              899,236
              
              
              5,049,746
              
              $
              .18
              
              $
              2,405,156
              
              
              5,044,712
              
              $
              .
                  48Effect
                  of dilutive RRP awards and stock options
              
              
              
              
              
              123,151
              
              
              
              
              
              
              
              
              122,819Diluted
                  earnings per shareIncome
                  available to common shareholders and assumed conversions
              
              $
              899,236
              
              
              5,172,897
              
              $
              .17
              
              $
              2,405,156
              
              
              5,167,531
              
              $
              .
                  47
  Options
        to purchase 131,000 shares of common stock at exercise prices of $17.58 to
        $19.15 per share were outstanding at September 30, 2007, but were not included
        in the computation of diluted earnings per share because the options were
        anti-dilutive.
  Optionstopurchase126,500sharesof common stock at
        exercise prices of
        $17.69 to $18.75 per share were outstanding atSeptember 30, 2006,
        but were not included in the
        computation of diluted earnings per share because the options were
        anti-dilutive.
   Note
        3: Recent Accounting Pronouncements
  In
        March
        2006, the Financial Accounting Standards Board (FASB) issued Statement No.
        156,
*Accounting for Servicing of Financial Assets-an amendment of FASB Statement
        No. 140*. This Statement provides the following: 1) revised guidance on when
        a servicing asset and servicing liability should be recognized; 2) requires
        all
        separately recognized servicing assets and servicing liabilities to be initially
        measured at fair value, if practicable; 3) permits an entity to elect to
        measure
        servicing assets and servicing liabilities at fair value each reporting date
        and
        report changes in fair value in earnings in the period in which the changes
        occur; 4) upon initial adoption, permits a one-time reclassification of
        available-for-sale securities to trading securities for securities which
        are
        identified as offsetting the entity's exposure to changes in the fair value
        of
        servicing assets or liabilities that a servicer elects to subsequently measure
        at fair value; and 5) requires separate presentation of servicing assets
        and
        servicing liabilities subsequently measured at fair value in the statement
        of
        financial position and additional footnote disclosures. This standard is
        effective as of the beginning of an entity's first fiscal year that begins
        after
        September 15, 2006 with the effects of initial adoption being reported as
        a
        cumulative-effect adjustment to retained earnings. Management did not elect
        to
        carry servicing rights at fair value but instead is amortizing those servicing
        rights over the period of estimated net servicing income and assessing the
        servicing assets for impairment.
  The
        Company or one of its subsidiaries files income tax returns in the U.S. federal
        and Indiana jurisdictions. With few exceptions, the Company is no longer
        subject
        to U.S. federal, state and local examinations by tax authorities for years
        before 2003.
  The
        Company adopted the provisions of the Financial Accounting Standards Board
        (FASB) Interpretation No. 48 (FIN 48), *Accounting for Uncertainty in Income
        Taxes - an interpretation of FASB Statement No. 109*, on January 1, 2007.
        FIN 48 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. FIN 48 also provides guidance on
        derecognition, classification, interest and penalties, accounting in interim
        periods, disclosure and transition. As a result of the implementation of
        FIN 48,
        the Company did not identify any uncertain tax positions that it believes
        should
        be recognized in the financial statements.
  11
  In
        September 2006, the FASB issued Statement No. 157, *Fair Value
        Measurements*. This Statement defines fair value, establishes a framework
        for measuring fair value and expands disclosures about fair value measurements.
        This Statement establishes a fair value hierarchy about the assumptions used
        to
        measure fair value and clarifies assumptions about risk and the effect of
        a
        restriction on the sale or use of an asset. The standard is effective for
        fiscal
        years beginning after November 15, 2007. The Company is currently evaluating
        and
        has not yet determined the impact the new standard is expected to have on
        its
        financial position and results of operations.
  In
        September 2006, the FASB Emerging Issues Task Force (EITF) finalized Issue
        No.
        06−5, *Accounting for Purchases of Life Insurance - Determining the Amount
        That Could Be Realized in Accordance with FASB Technical Bulletin No. 85−4*
        (Accounting for Purchases of Life Insurance). This issue requires that a
        policyholder consider contractual terms of a life insurance policy in
        determining the amount that could be realized under the insurance contract.
        It
        also requires that if the contract provides for a greater surrender value
        if all
        individual policies in a group are surrendered at the same time, that the
        surrender value be determined based on the assumption that policies will
        be
        surrendered on an individual basis. Lastly, the issue discusses whether the
        cash
        surrender value should be discounted when the policyholder is contractually
        limited in its ability to surrender a policy. This issue is effective for
        fiscal
        years beginning after December 15, 2006. The adoption of EITF No. 06-5 did
        not
        have a material impact on financial condition or results of
        operations.
  On
        February 15, 2007, the FASB issued its Statement No. 159, *The Fair Value
        Option for Financial Assets and Financial Liabilities—Including an Amendment of
        FASB Statement No. 115*. FAS 159 permits entities to elect to report most
        financial assets and liabilities at their fair value with changes in fair
        value
        included in net income. The fair value option may be applied on an
        instrument-by-instrument or instrument class-by-class basis. The option is
        not
        available for deposits withdrawable on demand, pension plan assets and
        obligations, leases, instruments classified as stockholders’ equity, investments
        in consolidated subsidiaries and variable interest entities and certain
        insurance policies. The new standard is effective at the beginning of the
        Company’s fiscal year beginning January 1, 2008, and early application may be
        elected in certain circumstances. The Company expects to first apply the
        new
        standard at the beginning of its 2008 fiscal year. The Company is currently
        evaluating and has not yet determined the impact the new standard is expected
        to
        have on its financial position and results of operations.
  **Item
        2: Management’s Discussion and Analysis of Financial Condition and Results of
        Operations**
  **General**
  The
        Company was organized in September 1998. On December 30, 1998, it acquired
        the
        common stock of Lincoln upon the conversion of Lincoln from a federal mutual
        savings bank to a federal stock savings bank. The Bank converted from a federal
        thrift charter to a state commercial bank charter on November 1,
        2006.
  Lincoln
        Bank was originally organized in 1884 as Ladoga Federal Savings and Loan
        Association, located in Ladoga, Indiana. In 1979 Ladoga Federal merged with
        Plainfield First Federal Savings and Loan Association, a federal savings
        and
        loan association located in Plainfield, Indiana, which was originally organized
        in 1896. Following the merger, the Bank changed its name to Lincoln Federal
        Savings and Loan Association and, in 1984, adopted the name, Lincoln Federal
        Savings Bank. On September 1, 2003, the Bank adopted the name Lincoln Bank.
        On
        August 2, 2004, the Company acquired First Shares Bancorp, Inc., the holding
        company of First Bank, an Indiana commercial Bank. First Shares was merged
        with
        and into the Company and immediately thereafter, First Bank was merged into
        Lincoln Bank. As noted above, the Bank converted from a federal thrift charter
        to a state commercial bank charter on November 1, 2006, and provides full
        banking services in a single significant business segment. As a state chartered
        bank, the Bank is subject to regulation by the Department of Financial
        Institutions, State of Indiana and the Federal Deposit Insurance
        Corporation.
  12
  Lincoln
        currently conducts its business from 17 full-service offices located in
        Hendricks, Johnson, Morgan, Clinton, Montgomery, and Brown Counties, Indiana,
        with its main office located in Plainfield. The Bank also has 2 loan production
        offices located in Carmel and Greenwood, Indiana. Lincoln offers a variety
        of
        lending, deposit and other financial services to its retail and commercial
        customers. The Bank’s principal business consists of attracting deposits from
        the general public and originating fixed-rate and adjustable-rate loans secured
        by commercial real estate, inventory, accounts receivable as well as first
        mortgage liens on one- to four-family residential real estate. Lincoln’s deposit
        accounts are insured up to applicable limits by the Deposit Insurance Fund
        of
        the Federal Deposit Insurance Corporation. Lincoln offers a number of financial
        services, which includes: (i) one-to four-family residential real estate
        loans;
        (ii) commercial real estate loans; (iii) real estate construction loans;
        (iv)
        land loans; (v) multi-family residential loans; (vi) consumer loans, including
        home equity loans and automobile loans; (vii) commercial loans; (viii) money
        market demand accounts; (ix) savings accounts; (x) checking accounts; (xi)
        NOW
        accounts; (xii) certificates of deposit; and (xiii) financial
        planning.
  Lincoln
        currently owns three subsidiaries. First, LF Service, whose assets consist
        of an
        investment in Bloomington Housing Associates, L.P. (“BHA”). BHA is an Indiana
        limited partnership that was organized to construct, own and operate a 130-unit
        apartment complex in Bloomington, Indiana (the “BHA Project”). Development of
        the BHA Project was completed in 1993 and the project is performing as planned.
        Second, Citizens Loan and Service Corporation (“CLSC”), which primarily engages
        in the purchase and development of tracts of undeveloped land. Because CLSC
        engages in activities that are not permissible for a national bank, FDIC
        regulations prohibit Lincoln from including its investment in CLSC in its
        calculation of regulatory capital. CLSC purchases undeveloped land, constructs
        improvements and infrastructure on the land, and then sells lots for residential
        home construction. Third, LF Portfolio, which is located in Nevada, holds
        and
        manages a significant portion of Lincoln’s investment portfolio. As noted above,
        effective November 1, 2006, the Bank changed its charter from a federal savings
        bank charter to an Indiana commercial bank charter. Unlike federal savings
        banks, commercial banks are not permitted to participate in real estate
        development joint ventures. Under terms of the approval granted by the Federal
        Reserve Bank of Chicago the Company agreed to cause Lincoln Bank to conform
        the
        existing direct and indirect nonbanking activities and investments conducted
        by
        CLSC, including by divestiture if necessary, to the requirements of the Bank
        Holding Company Act within two years of the consummation of the charter
        conversion.
  Lincoln’s
        results of operations depend primarily upon the level of net interest income,
        which is the difference between the interest income earned on interest-earning
        assets, such as loans and investments, and costs incurred with respect to
        interest-bearing liabilities, primarily deposits and borrowings. We have
        experienced a decline in our net interest margin and net interest spread
        as
        discussed more fully below in our comparison of operating results. The “flat”,
        to at some points, “inverted” interest rate yield curve has put stress on our
        net interest margin as shorter term interest bearing deposits have generally
        repriced at a faster pace than our interest earning assets. Although we do
        not
        expect this stress to abate in the near term, we are working to grow our
        higher
        yielding loan portfolio and, as funding needs demand, use proceeds from lower
        yielding securities maturities and repayments. We are also reemphasizing
        our
        focus on the entire customer relationship, which we anticipate will include
        a
        component of lower cost demand deposits. Results of operations also depend
        upon
        the level of Lincoln’s non-interest income, including fee income and service
        charges and the level of its non-interest expenses, including general and
        administrative expenses.
  **Critical
        Accounting Policies**
  Note
        1 to
        the consolidated financial statements contains a summary of the Company’s
        significant accounting policies presented on pages 32 and 33 of the Annual
        Report to Shareholders for the year ended December 31, 2006, which was filed
        on
        Form 10-K with the Securities and Exchange Commission on March 16, 2007.
        Certain
        of these policies are important to the portrayal of the Company’s financial
        condition, since they require management to make difficult, complex or
        subjective judgments, some of which may relate to matters that are inherently
        uncertain. Management believes that its critical accounting policies include
        determining the allowance for loan losses, the valuation of mortgage servicing
        rights, and the valuation of intangible assets.
  Allowance
        for loan losses
  The
        allowance for loan losses represents management’s estimate of probable losses
        inherent in the Company’s loan portfolios. In determining the appropriate amount
        of the allowance for loan losses, management makes numerous assumptions,
        estimates and assessments.
  13
  The
        Company’s strategy for credit risk management includes conservative, centralized
        credit policies, and uniform underwriting criteria for all loans as well
        as an
        overall credit limit for each customer below legal lending limits. The strategy
        also emphasizes diversification on a geographic, industry and customer level,
        regular credit quality reviews and quarterly management reviews of large
        credit
        exposures and loans experiencing deterioration of credit quality. A standard
        credit scoring system is used to assess credit risks during the loan approval
        process of all consumer loans while commercial loans are individually reviewed
        by a credit analyst with formal presentations to the Bank’s Loan
        Committee.
  The
        Company’s allowance consists of three components. The Company estimates probable
        losses from individual reviews of specific loans and probable losses from
        historical loss rates. Also, factors affecting probable losses resulting
        from
        economic or environmental factors that may not be captured in the first two
        components of the allowance are considered.
  Larger
        commercial loans that exhibit probable or observed credit weaknesses are
        subject
        to individual review. Where appropriate, reserves are allocated to individual
        loans based on management’s estimate of the borrower’s ability to repay the loan
        given the availability of collateral, other sources of cash flow and legal
        options available to the Company. Included in the review of individual loans
        are
        those that are impaired as provided in SFAS No. 114, *Accounting by Creditors
        for Impairment of a Loan*. Any allowances for impaired loans are measured
        based on the present value of expected future cash flows discounted at the
        loan’s effective interest rate or fair value of the underlying
        collateral.
  The
        Company evaluates the collectibility of both principal and interest when
        assessing the need for a loss accrual. Estimated loss rates are applied to
        other
        commercial loans not subject to specific reserve allocations.
  Homogenous
        loans, such as consumer installment and residential mortgage loans are not
        individually risk graded. Rather, standard credit scoring systems are used
        to
        assess credit risks. Loss rates are based on the average net charge-off
        estimated by loan category. Allowances on individual loans and historical
        loss
        rates are reviewed quarterly and adjusted as necessary based on changing
        borrower and/or collateral conditions.
  The
        Company’s primary market area for lending is central Indiana. When evaluating
        the adequacy of the allowance, consideration is given to this regional
        geographic concentration and the closely associated effect changing economic
        conditions have on the Company’s customers. The Company has not substantively
        changed any aspect to its overall approach in the determination of the allowance
        for loan losses. There have been no material changes in assumptions or
        estimation techniques as compared to prior periods that impacted the
        determination of the current period allowance.
  Mortgage
        servicing rights
  The
        Company recognizes the rights to service sold mortgage loans as separate
        assets
        in the consolidated balance sheet. The total cost of loans when sold is
        allocated between loans and mortgage servicing rights based on the relative
        fair
        values of each. Mortgage servicing rights are subsequently carried at the
        lower
        of the initial carrying value, adjusted for amortization, or fair value.
        Mortgage servicing rights are evaluated for impairment based on the fair
        value
        of those rights.
  Factors
        included in the calculation of fair value of the mortgage servicing rights
        include, estimating the present value of future net cash flows, market loan
        prepayment speeds for similar loans, discount rates, servicing costs, and
        other
        economic factors. Servicing rights are amortized over the estimated period
        of
        net servicing revenue. It is likely that these economic factors will change
        over
        the life of the mortgage servicing rights, resulting in different valuations
        of
        the mortgage servicing rights. The differing valuations will affect the carrying
        value of the mortgage servicing rights on the consolidated balance sheet
        as well
        as the amounts recorded in the consolidated income statement. See Note 3
        for a
        discussion of (SFAS) No. 156, *Accounting for Servicing of Financial
        Assets-an amendment of FASB Statement No. 140**.*
  14
  Intangible
        assets
  Management
        periodically assesses the impairment of its goodwill and the recoverability
        of
        its core deposit intangible. Impairment is the condition that exists when
        the
        carrying amount of goodwill exceeds its implied fair value. If actual external
        conditions and future operating results differ from management’s judgments,
        impairment and/or increased amortization charges may be necessary to reduce
        the
        carrying value of these assets to the appropriate value.
  **Financial
        Condition**
  Assets
        totaled $889.4 million at September 30, 2007, an increase from December 31,
        2006
        of $5.8 million.  Substantial growth, totaling $63.0 million, in
        commercial and commercial real estate loans was offset by a reduction in
        mortgage loans of $49.8 million.  The reduction in mortgage loans is
        the result of the second quarter balance sheet restructuring as well as normal
        repayments.  As part of the restructuring, we securitized $37.3
        million of residential mortgages and sold the resulting
        securities.  The majority of this cash was used to purchase securities
        for our investment portfolio at yields greater than the loans in the
        restructuring.  A portion of the cash was used to fund commercial loan
        growth.  Cash flow from these securities will be used to fund future
        commercial loan growth. Generally, the Bank continues to sell the majority
        of our residential mortgage loan production in the secondary
        market.   Consumer loans, excluding mortgages, declined by $5.2
        million from December 31, 2007.
  Restructuring
        Strategy:  Lincoln Bank continued its transformation from a traditional
        savings and loan to a commercial bank. As previously announced, the Bank
        converted its charter from a thrift to a state-chartered commercial
        bank  November 1, 2006. In late March, 2007, management approved a
        strategic restructuring of a portion of the Bank’s balance sheet effective March
        31, 2007, including the sale of certain securities as well as a portion of
        the
        Bank’s fixed rate mortgage loan portfolio. The restructuring was completed
        during the second quarter.
  Repositioning
        the Balance Sheet: The sale of mortgage loans continued the process of
        transforming the balance sheet from a traditional thrift asset and liability
        mix
        to a commercial bank structure. In addition, the reinvestment into securities
        allowed the Bank to structure expected cash flows that will support its planned
        increase in commercial and commercial real estate lending. Both the mortgages
        and the securities sold were generally those of lower yield in our portfolio
        of
        assets. The Company expects to realize immediate benefit in current earnings
        as
        a result of reinvesting in the new securities and additional benefit as cash
        flows from the new securities are received over the next several years,
        providing funding for our expected commercial growth. Lastly, the sale of
        mortgages and the reinvestment into securities should have a risk based capital
        benefit, helping offset some of the capital pressures caused by our current
        commercial growth.
  Restructuring
        Securities: As a part of the planned restructuring, the Bank transferred
        securities with a market value at March 31, 2007 of $29.7 million from available
        for sale securities into trading securities and recognized a pretax loss
        of
        $419,000. As a result of movements in interest rates the actual loss incurred
        when these securities were sold totaled only $356,000. The average yield
        for
        this group of securities was approximately 4.64%. The reinvestment of the
        proceeds yielded 5.48% for investments purchased and approximately 7.50%
        for
        proceeds used to fund commercial loan originations. Approximately $22.7 million
        of the sale proceeds were reinvested in securities and the remainder was
        used to
        fund current commercial growth. The transaction is expected to improve net
        interest margin through redeployment of the proceeds into higher yielding
        assets.
  Restructuring
        Loans:The securitization and sale of approximately $44.2 million of
        residential mortgage loans with an average yield of approximately 5.01% was
        also
        approved as part of the restructuring. The loans were transferred from our
        held
        for investment portion of our loan portfolio to held for sale at the lower
        of
        cost or market. We recognized a pretax loss of $1,327,000 in the quarter
        ending
        March 31, 2007 when we marked the loans to market value. An additional market
        value loss of $753,000 was recognized in the quarter ending June 30, 2007.
        Ultimately, held for sale loans totaling $3.65 million were transferred back
        into loans held for investment at their fair market value of $3.50
        million.  The securitized loans had an original maturity of 10 and 15
        years and were seasoned an average of nearly 3 years. Total proceeds from
        the
        sale of the securitized loans were approximately $37.3 million.  Of
        these proceeds, approximately $33.8 million was reinvested into
        available-for-sale securities with a weighted average yield of approximately
        5.60%.  The remainder of the proceeds were used to fund commercial loan
        growth. A gain on sale totaling $303,000, net of costs, was recognized when
        the
        securitized loans were sold.
  15
  Estimated
        EPS Increase from Restructuring: We continue to believe that the result of
        this restructuring will positively impact annual earnings per share in the
        range
        of $.06 to $.09.
  Interest
        rate increases in the external market following our March 31, 2007 valuation
        affected the sales price of the assets sold in the
        restructuring.  Generally, this market movement would have resulted in
        a greater restructuring loss overall than the loss that was recognized at
        March
        31, 2007.  However, as a part of the restructuring, management entered
        into a forward sale contract early in the second quarter to deliver certain
        securities at a certain interest rate.  The intent of this transaction
        was to partially protect against interest rate movements during the time
        it took
        to complete the securitization of the mortgage loans and the ultimate sale
        of
        the resulting securities. In addition, the Bank retained the servicing rights
        on
        the mortgages securitized and sold which resulted in the creation of mortgage
        servicing rights.  The gain on these servicing rights totaled $296,000
        and is also included as part of the restructuring transaction.
  The
        following table summarizes by quarter the final results of the restructuring
        transaction and the financial statement income line affected.  No
        further transactions affected third quarter 2007 results.
  **Restructuring
                    item**
              **Included
                    in income**
                  **statement
                    line**
              
              **Quarter
                    ending June 30, 2007**
              
              
              **Quarter
                    ending March 31, 2007**
              
              
              **Year-to-date
                    September 30, 2007**Loans–
                  loss on mark-to market and reclassification to securities
              Net
                  gains (losses) on loans held for sale
              
              $
              (752,776
              )
              
              $
              (1,327,359
              )
              
              $
              (2,080,135
              )Loans
                  securitized and sold – establish mortgage servicing right
              Net
                  gains (losses) on loans held for sale
              
              
              296,352
              
              
              
              -0-
              
              
              
              296,352**Subtotal**
              Net
                  gains (losses) on  loans held for sale
              
              
              (456,424
              )
              
              
              (1,327,359
              )
              
              
              (1,783,783
              )Sale
                  of securitized mortgage loan security
              Net
                  realized gains (losses) on sales of securities
              
              
              303,100
              
              
              
              -0-
              
              
              
              303,100Gains
                  (losses) on trading securities
              Net
                  realized gains (losses) on sales of securities
              
              
              62,670
              
              
              
              (418,723
              )
              
              
              (356,053
              )Income
                  related to forward sale contract termination
              Gain
                  on termination of forward commitment
              
              
              358,750
              
              
              
              -0-
              
              
              
              358,750Subtotal
                  of restructuring effect on pre-tax net income
              
              
              
              268,096
              
              
              
              (1,746,082
              )
              
              
              (1,477,986
              )Tax
                  effect on above transactions
              
              
              
              103,276
              
              
              
              (671,944
              )
              
              
              (568,668
              )Net
                  income effect of restructuring
              
              
              $
              164,820
              
              
              $
              (1,074,138
              )
              
              $
              (909,318
              )
   Total
        deposits were $678.2 million at September 30, 2007, an increase of $22.5
        million
        since December 31, 2006.  Growth occurred primarily in certificates of
        deposit, up $18.0 million. We also experienced growth of $3.7 million in
        our
        interest bearing demand category where we introduced new products in combination
        with a direct mail and premium campaign.  Generally, this program has
        worked well in creating new relationships with the Bank. Our money market
        products grew $14.3 million while our savings products declined by $12.4
        million. The money market growth occurred primarily as customers shifted
        funds
        from savings into our higher competitively priced money market
        accounts.  Securities sold under agreement to repurchase were $15.5
        million and borrowings were $87.2 million at September 30, 2007. Both declined
        by $1.4 million and $16.4 million, respectively, from year end 2006. The
        decline
        in borrowings was the result of repayment of short-term Federal Home Loan
        Bank
        advances from cash as a result of increased deposit balances.
  16
  Shareholders’
        equity declined slightly from $99.3 million at December 31, 2006 to $98.7
        million at September 30, 2007. The majority of the decline was the result
        of
        dividends paid out in excess of earnings resulting from the restructuring
        losses
        absorbed in the first quarter. In addition, net unrealized losses on
        available-for-sale securities, net of net realized losses, increased $311,000
        from December 31, 2006 to September 30, 2007.  Management’s review of
        available-for-sale securities in a loss position determined that the impairments
        were not other-than-temporary impairment because the fluctuation in values
        was
        primarily the result of changes in interest rates.  As of September 30,
        2007 management has both the ability and the intent to hold these securities
        until recovery.  Management does classify these securities as
“available-for-sale” under the definition of Statement of Financial Accounting
        Standards No. 115, *Accounting for Certain Investments in Debt and Equity
        Securities* so certain circumstances, such as changes in market interest
        rates and related changes in the security's prepayment risk, needs for liquidity
        (for example, due to the withdrawal of deposits, increased demand for loans),
        changes in the availability of and the yield on alternative investments or
        changes in funding sources and terms could change management’s assessment of its
        ability and intent to hold these securities. As noted above, the Company
        began a
        major restructuring of its balance sheet during the first quarter of 2007.
        As a
        part of this process management identified certain securities for which its
        intent to hold until recovery changed. As a result of this change in intent
        these securities were immediately moved to the Company’s trading portfolio and
        appropriate losses were recognized through the income statement as of March
        31,
        2007. Also as noted above management sold these securities during the second
        quarter of 2007 and reinvested the proceeds. Subsequent changes in value
        and/or
        additional gains or losses were recognized through the income statement at
        that
        time.
  **Comparison
        of Operating Results for the Three Months Ended September 30, 2007 and
        2006**
  Net
        income for the quarter ended September 30, 2007 was $521,000, or $.10 for
        both
        basic diluted earnings per share. This compared to net income for the comparable
        period in 2006 of $840,000, or $.17 for basic and $.16 for diluted earnings
        per
        share.
  Net
        interest income for the third quarter of 2007 was $5,501,000  compared
        to $5,530,000 for the same period in 2006. Net interest margin fell to 2.69%
        for
        the three-month period ended September 30, 2007 compared to 2.70% for the
        same
        period in 2006. The average yield on earning assets increased 27 basis points
        for the third quarter of 2007 compared to the same period in 2006 while the
        average cost of interest-bearing liabilities increased 27 basis points in
        2007
        compared to 2006.  Interest rate spread remained nearly identical for
        the two periods at 2.22% for the quarter ending September 30, 2007 and 2.23%
        for
        the like quarter in 2006. Competitive pressures in the current flat yield
        curve
        environment combined with the customers’ perceived lack of benefit in longer
        maturity certificates of deposit over the last year has resulted in a more
        liability sensitive position for the Bank. Consequently our shorter-term
        liabilities have been repricing at a faster rate than our earning assets
        in what
        was a rising interest rate environment.  The restructuring described
        above, combined with fewer maturing certificates repricing up at substantially
        higher rates, have combined for the leveling off of our decline in net interest
        spread experienced in previous quarters.
  The
        Bank’s provision for loan losses for the third quarter of 2007 was $150,000
        compared to $120,000 for the same period in 2006. Non-performing loans to
        total
        loans at September 30, 2007 were .43% compared to .38% at December 31, 2006,
        while non-performing assets to total assets were .33% at September 30, 2007
        compared to .31% at December 31, 2006. The allowance for loan losses as a
        percent of loans was .97% at September 30, 2007 and .96% at December 31,
        2006.
        During the third quarter of 2007, the Bank incurred $114,000 in net charged
        off
        loans compared to net charged off loans in the same quarter of 2006 totaling
        $17,000.
  Other
        income for the three months ended September 30, 2007 was $1,577,000 compared
        to
        income of $1,426,000 for the same quarter of 2006 or an increase of
        $151,000.  Service charges on deposit accounts and point of sale
        income totaled $621,000 and $238,000, respectively. This resulted in increases
        of $62,000 and $55,000 respectively, when compared to the same period last
        year.
        As noted above, a new consumer marketing program was instituted in early
        2007
        resulting in additional transaction accounts that have increased these income
        sources.  Cash value of life insurance income was $213,000 for the
        third quarter of 2007. This was an increase of $45,000 from 2006 to 2007
        as a
        result of additional insurance being purchased in the fourth quarter of 2006
        as
        well as increased yields on the variable rate policies. The increased loss
        recognized in connection with our investment in a low income housing partnership
        was responsible for much of the decline in other miscellaneous
        income.
  17
  Other
        expenses were $6,331,000 for the three months ended September 30, 2007, a
        $602,000 increase compared to $5,729,000 for the same three months of 2006.
        Data  processing fees totaled $698,000 for the third quarter of 2007
        or $159,000 more than the same quarter in 2006 as a result of new services
        as
        well as additional activity relating to new deposit accounts opened. Net
        occupancy expenses were $632,000 for the third quarter of 2007, an increase
        of  $141,000 over the same three month period in 2006. Substantial
        increases in our real estate taxes have caused over half of this
        increase.  Much of the remainder is due to the cost of additional
        facilities added in the first quarter of 2007. Other expense increased $106,000
        across various categories and totaled $715,000 for the three months ended
        September 30, 2007 compared to the same period in 2006. A reduction in gain
        on
        sale of other real estate was one of the larger increases in other expenses.
        Salaries and employee benefits totaled $3,008,000 for the third quarter of
        2007
        compared to $2,947,000 during the same quarter of 2006. The primary reason
        for
        the increase was an increase in higher compensated commissioned sales
        staff.  Full-time equivalent employees averaged 228 for the third
        quarter of 2007 compared to 231 for the same quarter in 2006.
  Income
        tax expense for the three months ended September 30, 2007 was $76,000 or
        12.7%
        of income before income tax expense. This compares to $267,000 or 24.1% of
        income before income tax expense for the period ended September 30, 2006.
        The
        difference between the actual rate recorded and the statutory rates was
        primarily due to permanent, non-taxable income recorded such as qualifying
        municipal interest and increases in cash value of life insurance and the
        benefit
        of a low income housing tax credit.
  **Comparison
        of Operating Results for the Nine Months Ended September 30, 2007 and
        2006**
  Net
        income for the nine month period ended September 30, 2007 was $899,000, or
        $.18
        for basic and $.17 for diluted earnings per share. This compared to net income
        for the comparable period in 2006 of $2,405,000 or $.48 for basic and $.47
        for
        diluted earnings per share.  As noted above, during the first quarter
        of 2007, the Bank began a strategy to restructure its balance sheet and,
        as a
        result, incurred a first quarter after-tax loss.  The restructuring
        was completed during the second quarter of 2007. The total year-to-date effect
        of the restructuring was an after tax net loss of $909,000, or $.18 for both
        basic and diluted earnings per share.
  Net
        interest income year-to-date through September 30, 2007 declined by $652,000
        from $16.8 million year-to-date 2006 to $16.2 million year-to-date in 2007.
        The
        Bank continues to be challenged by a combination of factors including its
        liability sensitive balance sheet position as well as the relatively flat
        interest rate curve.  Over the last eighteen to twenty-four months the
        Bank has experienced a substantial volume of lower rate, longer term
        certificates of deposit that have matured and then renewed into a substantially
        higher rate and generally shorter term maturity.  While the Bank did
        have new assets and assets re-pricing during this period there were not as
        many
        assets re-pricing nor was the increase in yield on those assets as great
        as the
        increase in rate on the certificates of deposit.   Net interest
        margin fell to 2.62% for the nine-month period ended September 30, 2007 compared
        to 2.77% for the same period in 2006. The average yield on earning assets
        increased 29 basis points for the nine month period ending September 30,
        2007
        compared to the same period in 2006 while the average cost of interest-bearing
        liabilities increased 47 basis points in 2007 compared to 2006. This decreased
        interest rate spread from 2.33% for the 2006 period to 2.15% for the 2007
        period, or 18 basis points.
  The
        Bank’s provision for loan losses year-to-date through September 30, 2007 was
        $457,000 compared to $622,000 for the same period in 2006. Through September
        30,
        2007, the Bank incurred $304,000 of net charged-off loans compared to $330,000
        for the same period of 2006.
  18
  Other
        income year-to-date through September 30, 2007 was $3,281,000 compared to
        income
        of $3,929,000 for the same year-to-date period of 2006.  Other income
        for the period ended September 30, 2007 included a net $1,478,000 of
        expense related to the balance sheet restructuring discussed
        above.  This is illustrated in the table presented in the Financial
        Condition section.   Excluding the balance sheet restructuring
        charges other income would have increased $830,000 to
        $4,759,000.  Much of this increase was due to selling substantially
        all of our mortgage loan production in 2007.  Through most of the
        first and second quarters of 2006 we retained a substantial portion of our
        mortgage loan production.  Excluding the expenses related to the
        balance sheet repositioning, net gains on sales of loans would have increased
        $526,000 from year-to-date September 30, 2006. We have also started to see
        the
        benefit of the increased account openings resulting from our consumer checking
        account campaign. Service charges on deposit accounts have increased from
        $1,601,000 year-to-date through September 30, 2006 to $1,807,000 year-to-date
        through September 30, 2007 or $206,000.  Also, with the new accounts
        we added our point of sale income has also increased, from $533,000 year-to-date
        through September 30, 2006 to $666,000 year-to-date through September 30,
        2007.  Loan servicing fees did decline slightly as mortgages were sold
        with servicing released and normal payments and payoff’s reduced the average
        outstanding serviced loans balance.  The restructuring described above
        should reverse this trend since servicing was retained on the loans that
        were
        securitized. The increase of $141,000 in cash value of life insurance
        income to a total of $636,000 through September 30, 2007, was the result
        of
        additional insurance being purchased in the fourth quarter of 2006 as well
        as
        increased yields on the variable rate policies. Other income, within the
“Other
        income” section, decreased by $180,000 to $558,000 for the first nine months of
        2007. Year-to-date loss recorded on our low income housing tax partnership
        is
        responsible for the majority of this variance.
  Other
        expenses for the nine month period ended September 30, 2007 were $18,463,000,
        an
        increase of $1,444,000 over the same period in 2006.  Most of the
        increase was in salaries and employee benefit costs, up $581,000 over the
        same
        period in 2006 for essentially the same reasons mentioned for the quarter
        and
        described above. Advertising and business development increased $282,000 to
        $878,000 to support expanded marketing for our new checking products and
        our
        efforts to increase core deposit relationships through direct marketing.
        Net
        occupancy expenses and data processing fees expense increased $251,000 and
        $167,000, respectively over the same nine month period in 2006 to total
        $1,769,000 and $1,904,000, respectively.  The reasons for these
        increases are essentially the same as discussed in the quarter-to-date results
        presented above.
  Income
        tax benefit for the nine months ended September 30, 2007 was $340,000 on
        $559,000 of pre-tax income. This compares to income tax expense of $733,000
        on
        $3,138,000 of income before income tax for the nine month period ended September
        30, 2006. The difference between the actual rate recorded and the statutory
        rates was primarily due to permanent, non-taxable income recorded such as
        qualifying municipal interest and increases in cash value of life insurance
        as
        well as the benefit of a low income housing tax credit.
  **Asset
        Quality**
  The
        Company currently classifies loans as special mention, substandard, doubtful
        and
        loss to assist management in addressing collection risks and pursuant to
        regulatory requirements. Special mention loans represent credits that have
        potential weaknesses that deserve management’s close attention. If left
        uncorrected, these potential weaknesses may result in deterioration of the
        repayment prospects or Lincoln’s credit position at some future date.
        Substandard loans represent credits characterized by the distinct possibility
        that some loss will be sustained if deficiencies on the loans are not corrected.
        Doubtful loans possess the characteristics of substandard loans, but collection
        or liquidation in full is doubtful based upon existing facts, conditions
        and
        values. A loan classified as a loss is considered uncollectible. Lincoln
        had
        $16.9 million and $7.4 million of loans classified as special mention as
        of
        September 30, 2007 and December 31, 2006, respectively. The increase in special
        mention loans was primarily due to three unrelated credits. In addition,
        Lincoln
        had $5.3 million and $5.6 million of loans classified as substandard at
        September 30, 2007 and December 31, 2006, respectively. Loans classified
        as
        doubtful totaled $.4 million at September 30, 2007 and also at December 31,
        2006. At September 30, 2007 and December 31, 2006 there were no loans classified
        as loss. At September 30, 2007, and December 31, 2006, non-accrual loans
        were
        $2.5 million. At September 30, 2007 and December 31, 2006, respectively,
        accruing loans delinquent 90 days or more totaled $254,000 and $1,000. At
        September 30, 2007 and December 31, 2006, the allowance for loan losses was
        $6.3
        million and $6.1 million, respectively or .97% of loans at September 30,
        2007
        and .96% at December 31, 2006.
  19
  **Liquidity
        and Capital Resources**
  The
        Company’s primary sources of funds are deposits, borrowings and the proceeds
        from principal and interest payments on loans. In addition, securities
        maturities and amortization of mortgage-backed securities are structured
        to
        provide a source of liquidity. Sales of loans and available for sale securities
        can also provide liquidity should the need arise. While maturities and scheduled
        amortization of loans and mortgage-backed securities are a predictable source
        of
        funds, deposit flows and mortgage and mortgage-backed securities prepayments
        are
        greatly influenced by general interest rates, economic conditions and
        competition. Liquidity management is both a daily and long-term function
        of the
        Company’s management strategy. In the event that the Company should require
        funds beyond its ability to generate them internally, additional funds are
        available through the use of FHLB advances, brokered deposits and federal
        funds
        purchased.
  Quantitative
        measures established by regulation to ensure capital adequacy require the
        Company and the subsidiary bank to maintain minimum amounts and ratios (set
        forth in the table below) of total and Tier I capital (as defined in the
        regulations) to risk-weighted assets (as defined), and of Tier I capital
        (as
        defined) to average assets (as defined).
  Management
        believes, as of September 30, 2007, that the Company and the Bank meet all
        capital adequacy requirements to which they are subject. The Company and
        Bank’s
        actual capital amounts and ratios under the state charter are presented in
        the
        following table.
   **Actual**
              
              
              **For
                    Capital Adequacy Purposes**
              
              
              **To
                    Be Well Capitalized Under Prompt Corrective Action
                    Provisions****Amount**
              
              
              **Ratio**
              
              
              **Amount**
              
              
              **Ratio**
              
              
              **Amount**
              
              
              **Ratio**As
                  of June 30, 2007Total
                  Capital (to Risk-Weighted Assets)Consolidated
              
              $
              79,344
              
              
              
              11.2
              %
              
              $
              56,643
              
              
              
              8.0
              %
              
              
              
              
              N/ABank
              
              
              77,696
              
              
              
              11.0
              
              
              
              56,532
              
              
              
              8.0
              
              
              $
              70,665
              
              
              
              10.0
              %Tier
                  I Capital (to Risk-Weighted Assets)Consolidated
              
              
              73,061
              
              
              
              10.3
              
              
              
              28,322
              
              
              
              4.0
              
              
              
              
              
              
              N/ABank
              
              
              71,414
              
              
              
              10.1
              
              
              
              28,266
              
              
              
              4.0
              
              
              
              42,399
              
              
              
              6.0Tier
                  I Capital (to Average Assets)Consolidated
              
              
              73,061
              
              
              
              8.5
              
              
              
              34,426
              
              
              
              4.0
              
              
              
              
              
              
              N/ABank
              
              
              71,414
              
              
              
              8.3
              
              
              
              34,363
              
              
              
              4.0
              
              
              
              42,954
              
              
              
              5.0
  **Other**
  The
          Securities and Exchange Commission maintains a Web site that contains reports,
          proxy information statements, and other information regarding registrants
          that
          file electronically with the Commission, including the Company. The address
          is
          http://www.sec.gov.
  **Item
          3.                      Quantitative
          and Qualitative Disclosures About Market Risk**
  An
          important component of Lincoln Bank’s asset/liability management policy includes
          examining the interest rate sensitivity of its assets and liabilities and
          monitoring the expected effects of interest rate changes on the economic
          value
          of its assets. An asset or liability is interest rate sensitive within
          a
          specific time period if it will mature or reprice within that time period.
          If
          Lincoln Bank’s assets mature or reprice more quickly or to a greater extent than
          its liabilities, economic value and net interest income would tend to increase
          during periods of rising interest rates, but decrease during periods of
          falling
          interest rates. Conversely, if Lincoln Bank’s assets mature or reprice more
          slowly or to a lesser extent than its liabilities, economic value and net
          interest income would tend to decrease during periods of rising interest
          rates
          but increase during periods of falling interest rates.
  20
  The
          Bank’s board of directors has delegated responsibility for the day-to-day
          management of interest rate risk to the Asset/Liability (“ALCO”) Committee. The
          ALCO Committee meets monthly to manage and review Lincoln Bank’s assets and
          liabilities. The ALCO Committee reviews interest rates for deposits and
          loan
          product pricing. The committee considers the bank’s interest rate risk position,
          liquidity needs and competitive pricing.
  Presented
          below, as of September 30, 2007 is an analysis showing the present value
          impact
          of changes in interest rates, assuming a comprehensive mark-to-market
          environment. Noninterest sensitive assets and liabilities such as cash,
          accounts
          receivable, fixed assets, and other liabilities are excluded from the
          analysis.
   **Economic
                    Value****Present
                    Value at September 30, 2007**
                  **Change
                    in Interest Rates of:****-2%**
                
                **-1%**
                
                **Current**
                
                **+1%**
                
                **+2%**(In
                    Thousands)**Interest
                    Sensitive Assets**Investments
                
                $
                171,211
                
                $
                169,866
                
                $
                166,467
                
                $
                160,542
                
                $
                154,059Loans
                
                
                654,792
                
                
                645,532
                
                
                635,624
                
                
                626,757
                
                
                619,029Total
                    interest sensitive assets
                
                
                826,003
                
                
                815,398
                
                
                802,091
                
                
                787,299
                
                
                773,088**Interest
                    Sensitive Liabilities**Deposits
                
                
                (683,932
                )
                
                (677,411
                )
                
                (670,235
                )
                
                (662,462
                )
                
                (655,238
                )Borrowings
                    and repurchase agreements
                
                
                (106,580
                )
                
                (104,558
                )
                
                (103,189
                )
                
                (102,111
                )
                
                (101,483
                )Total
                    interest sensitive liabilities
                
                
                (789,512
                )
                
                (781,969
                )
                
                (773,424
                )
                
                (764,573
                )
                
                (756,721
                )Net
                    market value as of June 30, 2007
                
                $
                36,491
                
                $
                33,429
                
                $
                28,667
                
                $
                22,726
                
                $
                16,367Change
                    from current
                
                $
                7,824
                
                $
                4,762
                
                $
                ---
                
                $
                (5,941
                )
                $
                (12,300
                )




The
        same
        information as of December 31, 2006 is presented below.
 
 **Economic
                  Value****Present
                  Value at December 31, 2006**
                **Change
                  in Interest Rates of:******
              **-2**
              **%**
              
              ****
              **-1**
              **%**
              
              **Current**
              
              
              ****
              **+1**
              **%**
              
              ****
              **+2**
              **%**(In
                  Thousands)**Interest
                  Sensitive Assets**Investments
              
              $
              164,398
              
              
              $
              162,623
              
              
              $
              160,045
              
              
              $
              154,521
              
              
              $
              148,496Loans
              
              
              645,847
              
              
              
              637,404
              
              
              
              624,753
              
              
              
              608,960
              
              
              
              592,438Total
                  interest sensitive assets
              
              
              810,245
              
              
              
              800,027
              
              
              
              784,798
              
              
              
              763,481
              
              
              
              740,934**Interest
                  Sensitive Liabilities**Deposits
              
              
              (640,002
              )
              
              
              (629,328
              )
              
              
              (619,314
              )
              
              
              (609,910
              )
              
              
              (601,070
              )Borrowings
                  and repurchase agreements
              
              
              (127,439
              )
              
              
              (123,547
              )
              
              
              (120,660
              )
              
              
              (118,874
              )
              
              
              (118,014
              )Total
                  interest sensitive liabilities
              
              
              (767,441
              )
              
              
              (752,875
              )
              
              
              (739,974
              )
              
              
              (728,784
              )
              
              
              (719,084
              )Net
                  market value as of December 31, 2006
              
              $
              42,804
              
              
              $
              47,152
              
              
              $
              44,824
              
              
              $
              34,697
              
              
              $
              21,850Change
                  from current
              
              $
              (2,020
              )
              
              $
              2,328
              
              
              $
              ---
              
              
              $
              (10,127
              )
              
              $
              (22,974
              )


21
 
  **Item
        4.                      Controls
        and Procedures**
  (a)             Evaluation
        of disclosure controls and procedures. The Company’s chief executive officer
        and chief financial officer, after evaluating the effectiveness of the Company’s
        disclosure controls and procedures (as defined in Sections 13a-15(e) and
        15d-15(e) of the regulations promulgated under the Securities Exchange Act
        of
        1934, as amended (the “Exchange Act”)) as of the end of the most recent fiscal
        quarter covered by this quarterly report (the “Evaluation Date”), have concluded
        that as of the Evaluation Date, the Company’s disclosure controls and procedures
        are effective in ensuring that information required to be disclosed by the
        Company in reports that it files or submits under the Exchange Act is recorded,
        processed, summarized and reported within the time periods specified in the
        Securities and Exchange Commission’s rules and forms and are designed to ensure
        that information required to be disclosed in those reports is accumulated
        and
        communicated to management as appropriate to allow timely decisions regarding
        required disclosure.
  (b)             Changes
        in internal control over financial reporting. There were no changes in the
        Company’s internal control over financial reporting identified in connection
        with the Company’s evaluation of controls that occurred during the Company’s
        last fiscal quarter that have materially affected, or are reasonably likely
        to
        materially affect, the Company’s internal control over financial
        reporting.
  **PART
        II. OTHER INFORMATION**
 ********
 **Item
                      1.**
                  **Legal
                      Proceedings**Although
                      the Company and its subsidiaries are involved, from time to
                      time, in
                      various legal proceedings arising in the ordinary course of
                      business,
                      there are no material legal proceedings to which they are a
                      party or to
                      which their property is subject.**Item
                      1A.**
                  **Risk
                      Factors**There
                      have been no material changes with respect to the risk factors
                      disclosed
                      in the Company’s Annual Report on Form 10-K for the year ended December
                      31, 2006.**Item
                      2.**
                  **Unregistered
                      Sales of Equity Securities and Use of Proceeds****Not
                      applicable****Item
                      3.**
                  **Defaults
                      Upon Senior Securities.**None**Item
                      4.**
                  **Submission
                      of Matters to Vote of Security Holders.****Not applicable****Item
                      5.**
                  **Other
                      Information.**None**Item
                      6.**
                  **Exhibits**  10(1)
                    Unfunded
                        Deferred Compensation Plan for the Directors of Lincoln Bank
                        (as amended
                        and restated effective January 1, 2005)10(2)
                    Lincoln
                        Bank Deferred Director Supplemental Retirement Plan (as amended
                        and
                        restated effective January 1, 2005)10(3)
                    Amended
                        and Restated Employment Agreement (Jerry R. Engle)10(4)
                    Amended
                        and Restated Employment Agreement (John B. Ditmars)10(5)
                    Amended
                        and Restated Employment Agreement (Jonathan D.
                        Slaughter)10(6)
                    Amended
                        and Restated Employment Agreement (John M. Baer)10(7)
                    Amended
                        and Restated Employment Agreement (Bryan Mills)10(8)
                    Amended
                        and Restated Change in Control Agreement (J. Douglas
                        Bennett)
  22
 **SIGNATURES**
  Pursuant
          to the requirements of the Securities Exchange Act of 1934, as amended,
          the
          Registrant has duly caused this report to be signed on its behalf by the
          undersigned thereunto duly authorized.
  **LINCOLN
                    BANCORP**Date:  November
                    9, 2007
                By:
                /s/
                    Jerry R. EngleJerry
                    R. EnglePresident
                    and Chief Executive OfficerDate:  November
                    9, 2007
                By:
                /s/
                    John M. BaerJohn
                    M. BaerSecretary
                    and Treasurer
 
  23
   **EXHIBIT
          INDEX**
 **No.**
                  
                  **Description**
                  
                  **Location**10(1)
                  
                  Unfunded
                      Deferred Compensation Plan for the Directors of Lincoln Bank
                      (as amended
                      and restated effective January 1, 2005)
                  
                  Incorporated
                      by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on
                      September 20, 200710(2)
                  
                  Lincoln
                      Bank Deferred Director Supplemental Retirement Plan (as amended
                      and
                      restated effective January 1, 2005)
                  
                  Incorporated
                      by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on
                      September 20, 200710(3)
                  
                  Amended
                      and Restated Employment Agreement (Jerry R. Engle)
                  
                  Incorporated
                      by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on October
                      4, 200710(4)
                  
                  Amended
                      and Restated Employment Agreement (John B. Ditmars)
                  
                  Incorporated
                      by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on October
                      4, 200710(5)
                  
                  Amended
                      and Restated Employment Agreement (Jonathan D. Slaughter)
                  
                  Incorporated
                      by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed on October
                      4, 200710(6)
                  
                  Amended
                      and Restated Employment Agreement (John M. Baer)
                  
                  Incorporated
                      by reference to Exhibit 10.4 to the Registrant’s Form 8-K filed on October
                      4, 200710(7)
                  
                  Amended
                      and Restated Employment Agreement (Bryan Mills)
                  
                  Incorporated
                      by reference to Exhibit 10.5 to the Registrant’s Form 8-K filed on October
                      4, 200710(8)
                  
                  Amended
                      and Restated Change in Control Agreement (J. Douglas
                      Bennett)
                  
                  Incorporated
                      by reference to Exhibit 10.6 to the Registrant’s Form 8-K filed on October
                      4, 200731(1)
                  
                  CEO
                      Certification required by 17 C.F.R. Section 240.13a-14(a)
                  
                  Attached31(2)
                  
                  CFO
                      Certification required by 17 C.F.R. Section 240.13a-14(a)
                  
                  Attached32
                  
                  Certification
                      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                      Section 906 of
                      the Sarbanes-Oxley Act of 2002
                  
                  Attached






24
  **EXHIBIT
        31(1)**
  **CERTIFICATION**
  I,
        Jerry
        R. Engle, certify that:
  1.
              I
                  have reviewed this quarterly report on Form 10-Q of Lincoln
                  Bancorp;
  2.
              Based
                  on my knowledge, this quarterly report does not contain any untrue
                  statement of a material fact or omit to state a material fact necessary
                  to
                  make the statements made, in light of the circumstances under which
                  such
                  statements were made, not misleading with respect to the period
                  covered by
                  this quarterly report; and
  3.
              Based
                  on my knowledge, the financial statements, and other financial
                  information
                  included in this quarterly report, fairly present in all material
                  respects
                  the financial condition, results of operations and cash flows of
                  the
                  registrant as of, and for, the periods presented in this quarterly
                  report.
  4.
              The
                  registrant’s other certifying officer and I are responsible for
                  establishing and maintaining disclosure controls and procedures
                  (as
                  defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
                  control over financial reporting (as defined in Exchange Act Rules
                  13a-15(f) and 15d-14(f)) for the registrant and
                  have:
  a.
              designed
                  such disclosure controls and procedures, or caused such disclosure
                  controls and procedures to be designed under our supervision, to
                  ensure
                  that material information relating to the registrant, including
                  its
                  consolidated subsidiaries, is made known to us by others within
                  those
                  entities, particularly during the period in which this quarterly
                  report is
                  being prepared;
  b.
              designed
                  such internal control over financial reporting , or caused such
                  internal
                  control over financial reporting to be designed under our supervision,
                  to
                  provide reasonable assurance regarding the reliability of financial
                  reporting and the preparation of the financial statements for external
                  purposes in accordance with generally accepted accounting principles;
                  and
  c.
              evaluated
                  the effectiveness of the registrant’s disclosure controls and procedures
                  and presented in this quarterly report our conclusions about the
                  effectiveness of the disclosure controls and procedures, as of
                  the end of
                  the period covered by this report based on such evaluation;
                  and
  d.
              disclosed
                  in this quarterly report any change in the registrant’s internal control
                  over financial reporting that occurred during the registrant’s most recent
                  fiscal quarter that has materially affected, or is reasonably likely
                  to
                  materially affect, the registrant’s internal control over financial
                  reporting; and
  5.
              The
                  registrant’s other certifying officer and I have disclosed, based on our
                  most recent evaluation of internal control over financial reporting,
                  to
                  the registrant’s auditors and the audit committee of the registrant’s
                  board of directors (or persons performing the equivalent
                  functions):
  a.
              all
                  significant deficiencies and material weaknesses in the design
                  or
                  operation of internal control over financial reporting which are
                  reasonably likely to adversely affect the registrant’s ability to record,
                  process, summarize and report financial information;
                  and
  b.
              any
                  fraud, whether or not material, that involves management or other
                  employees who have a significant role in the registrant’s internal control
                  over financial reporting.
 
 Date:
                  November 9, 2007
              By:
              /s/
                  Jerry R. EngleJerry
                  R. EnglePresident
                  and Chief Executive Officer
 
  
  **EXHIBIT
        31(2)**
  **CERTIFICATION**
  I,
        John
        M. Baer, certify that:
   1.
              I
                  have reviewed this quarterly report on Form 10-Q of Lincoln
                  Bancorp;
  2.
              Based
                  on my knowledge, this quarterly report does not contain any untrue
                  statement of a material fact or omit to state a material fact necessary
                  to
                  make the statements made, in light of the circumstances under which
                  such
                  statements were made, not misleading with respect to the period
                  covered by
                  this quarterly report; and
  3.
              Based
                  on my knowledge, the financial statements, and other financial
                  information
                  included in this quarterly report, fairly present in all material
                  respects
                  the financial condition, results of operations and cash flows of
                  the
                  registrant as of, and for, the periods presented in this quarterly
                  report.
  4.
              The
                  registrant’s other certifying officer and I are responsible for
                  establishing and maintaining disclosure controls and procedures
                  (as
                  defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
                  control over financial reporting (as defined in Exchange Act Rules
                  13a-15(f) and 15d-14(f)) for the registrant and
                  have:
  a.
              designed
                  such disclosure controls and procedures, or caused such disclosure
                  controls and procedures to be designed under our supervision, to
                  ensure
                  that material information relating to the registrant, including
                  its
                  consolidated subsidiaries, is made known to us by others within
                  those
                  entities, particularly during the period in which this quarterly
                  report is
                  being prepared;
  b.
              designed
                  such internal control over financial reporting , or caused such
                  internal
                  control over financial reporting to be designed under our supervision,
                  to
                  provide reasonable assurance regarding the reliability of financial
                  reporting and the preparation of the financial statements for external
                  purposes in accordance with generally accepted accounting principles;
                  and
  c.
              evaluated
                  the effectiveness of the registrant’s disclosure controls and procedures
                  and presented in this quarterly report our conclusions about the
                  effectiveness of the disclosure controls and procedures, as of
                  the end of
                  the period covered by this report based on such evaluation;
                  and
  d.
              disclosed
                  in this quarterly report any change in the registrant’s internal control
                  over financial reporting that occurred during the registrant’s most recent
                  fiscal quarter that has materially affected, or is reasonably likely
                  to
                  materially affect, the registrant’s internal control over financial
                  reporting; and
  5.
              The
                  registrant’s other certifying officer and I have disclosed, based on our
                  most recent evaluation of internal control over financial reporting,
                  to
                  the registrant’s auditors and the audit committee of the registrant’s
                  board of directors (or persons performing the equivalent
                  functions):
  a.
              all
                  significant deficiencies and material weaknesses in the design
                  or
                  operation of internal control over financial reporting which are
                  reasonably likely to adversely affect the registrant’s ability to record,
                  process, summarize and report financial information;
                  and
  b.
              any
                  fraud, whether or not material, that involves management or other
                  employees who have a significant role in the registrant’s internal
                  controls over financial reporting.
 
 Date:
                  November 9, 2007
              By:
              /s/
                  John M. BaerJohn
                  M. BaerSecretary
                  and Treasurer
  
  **EXHIBIT
        32**
  **CERTIFICATION**
  By
        signing below, each of the undersigned officers hereby certifies pursuant
        to 18
        U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
        2002, that, to his or her knowledge, (i) this report fully complies with
        the
        requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
        1934
        and (ii) the information contained in this report fairly presents, in all
        material respects, the financial condition and results of operations of Lincoln
        Bancorp.
  Signed
        this 9th day of November, 2007.
  CHIEF
                  FINANCIAL OFFICER:
              
              CHIEF
                  EXECUTIVE OFFICER:By:
              /s/
                  John M. Baer
              
              By:
              /s/
                  Jerry R. EngleJohn
                  M. Baer
              
              
              Jerry
                  R. EngleSecretary
                  and Treasurer
              
              
              President
                  and Chief Executive Officer
  
  
  A
        signed
        original of this written statement required by Section 906, or other document
        authenticating, acknowledging, or otherwise adopting the signature that appears
        in typed form within the electronic version of this written statement required
        by Section 906, has been provided to Lincoln Bancorp and will be retained
        by
        Lincoln Bancorp and furnished to the Securities and Exchange Commission or
        its
        staff upon request.