UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C.  20549
 
 
 FORM
10-Q
 (Mark
One)
 
 x           QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For the
quarterly period ended  June 30,
2008
 
 OR
 
 o           TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For the
transition period from _____________________ to
________________________
 
 Commission
File Number  000-51078
 
 LINCOLN
PARK BANCORP
 (Exact
name of registrant as specified in its charter)
 
 FEDERAL
              61-1479859(State
      or other jurisdiction of
              (I.R.S.
      Employerincorporation
      or organization)
              Identification
      Number)
 
 31
      Boonton Turnpike, Lincoln Park, New Jersey
              07035(Address
      of principal executive offices)
              (Zip
      Code)
 
 
 Registrant’s
      telephone number, including area code
              (973)
      694-0330
 
 None
 (Former
name, former address and former fiscal year, if changed since last
report)
 
 Indicate
by check Xwhether 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.  YesX    No
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
  Larger
      Accelerated Filer o
              Accelerated
      Filer oNon-Accelerated
      Filer    o
      (Do not check if a smaller reporting company)
              Smaller
      Reporting Company  x
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange
Act.)   Yes____     No__X__
 
 The
number of shares outstanding of each of the issuer’s classes of common stock, as
of the latest practicable date:  1,825,845 shares of common stock, par
value $.01 per share, as of August 14, 2008.
 
 
 
 LINCOLN
PARK BANCORP AND SUBSIDIARY
 
 INDEX
 
 PagePART
      I - FINANCIAL INFORMATION
              NumberItem
      1:
              Financial
      StatementsConsolidated
      Statements of Financial Condition at June 30, 2008 and December 31, 2007
      (Unaudited)
              3Consolidated
      Statements of Income for the Three Months and Six Months Ended June 30,
      2008 and 2007 (Unaudited)
              4Consolidated
      Statements of Changes in Stockholders’ Equity for the Six Months Ended
      June 30, 2008 and 2007 (Unaudited)
              5Consolidated
      Statements of Cash Flows for the Six Months Ended June 30, 2008 and 2007
      (Unaudited)
              6Notes
      to Consolidated Financial Statements (Unaudited)
              7 –
      12Item
      2:
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              13
      –20Item
      3:
              Quantitative
      and Qualitative Disclosure About Market Risk
              21Item
      4:
              Controls
      and Procedures
              21PART
      II - OTHER INFORMATION
              22
      – 24Item
      1:
              Legal
      Proceedings
              22Item
      1A
              Risk
      Factors
              22Item
      2:
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              22Item
      3:
              Defaults
      Upon Senior Securities
              23Item
      4:
              Submission
      of Matters to a Vote of Security Holders
              23Item
      5:
              Other
      Information
              23Item
      6:
              Exhibits
              24SIGNATURES
              25
 
 2
 
 PART I -
FINANCIAL INFORMATION
 ITEM
1.  Financial Statements
 
 LINCOLN
PARK BANCORP AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION
 (Unaudited)
  June
      30,
                
                
                December
      31,ASSETS
                
                2008
                
                
                2007(In
      thousands, except for share andper
      share amounts)Cash
      and amounts due from depository institutions
                
                $
                1,204
                
                
                $
                1,380Interest-bearing
      deposits in other banks
                
                
                1,284
                
                
                
                1,121Total
      cash and cash equivalents
                
                
                2,488
                
                
                
                2,501Term
      deposits
                
                
                199
                
                
                
                295Securities
      available for sale
                
                
                10,685
                
                
                
                1,521Securities
      held to maturity, fair value $30,575 and $21,113,
    respectively
                
                
                30,742
                
                
                
                21,243Loans
      receivable, net of allowance for loan losses of $201,and
      $187, respectively
                
                
                75,294
                
                
                
                73,085Premises
      and equipment
                
                
                1,569
                
                
                
                1,584Federal
      Home Loan Bank of New York stock, at cost
                
                
                1,937
                
                
                
                1,195Interest
      receivable
                
                
                598
                
                
                
                523Other
      assets
                
                
                419
                
                
                
                718Total
      assets
                
                $
                123,931
                
                
                $
                102,665LIABILITIES AND
      STOCKHOLDERS' EQUITYLiabilities:Deposits:Non-interest
      bearing deposits
                
                $
                2,862
                
                
                $
                2,054Interest
      bearing deposits
                
                
                67,150
                
                
                
                62,913Total
      deposits
                
                
                70,012
                
                
                
                64,967Advances
      from Federal Home Loan Bank of New York
                
                
                39,652
                
                
                
                23,552Advance
      payments by borrowers for taxes and insurance
                
                
                451
                
                
                
                399Other
      liabilities
                
                
                604
                
                
                
                601Total
      liabilities
                
                
                110,719
                
                
                
                89,519Stockholders'
      equity:Preferred
      stock; no par value; 1,000,000 shares authorized;none
      issued or outstanding
                
                
                -
                
                
                
                -Common
      stock; $.01 par value; 5,000,000 shares authorized;1,851,500
      issued; 1,825,845 outstanding
                
                
                19
                
                
                
                19Additional
      paid-in capital
                
                
                7,594
                
                
                
                7,558Retained
      earnings
                
                
                6,384
                
                
                
                6,307Unearned
      ESOP shares
                
                
                (318
                )
                
                
                (328
                )Treasury
      stock; 25,655 shares, at cost
                
                
                (200
                )
                
                
                (200
                )Accumulated
      other comprehensive loss
                
                
                (267
                )
                
                
                (210
                )Total
      stockholders' equity
                
                
                13,212
                
                
                
                13,146Total
      liabilities and stockholders' equity
                
                $
                123,931
                
                
                $
                102,665
  See notes
to consolidated financial statements.
 3
 
 LINCOLN
PARK BANCORP AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF
INCOME
 (Unaudited)
 
 Three
      Months Ended
                
                
                Six
      Months EndedJune
      30,
                
                
                June
      30,2008
                
                
                2007
                
                
                2008
                
                
                2007(In
      thousands, except for per share amounts)Interest
      income:Loans
                
                $
                1,036
                
                
                $
                1,032
                
                
                $
                2,082
                
                
                $
                2,006Securities
                
                
                459
                
                
                
                271
                
                
                
                744
                
                
                
                538Other
      interest-earning assets
                
                
                18
                
                
                
                13
                
                
                
                35
                
                
                
                28Total
      interest income
                
                
                1,513
                
                
                
                1,316
                
                
                
                2,861
                
                
                
                2,572Interest
      expense:Deposits
                
                
                472
                
                
                
                534
                
                
                
                1,028
                
                
                
                1,030Advances
      and other borrowed money
                
                
                308
                
                
                
                229
                
                
                
                525
                
                
                
                461Total
      interest expense
                
                
                780
                
                
                
                763
                
                
                
                1,553
                
                
                
                1,491Net
      interest income
                
                
                733
                
                
                
                553
                
                
                
                1,308
                
                
                
                1,081Provision
      for loan losses
                
                
                15
                
                
                
                44
                
                
                
                35
                
                
                
                51Net
      interest income after provision for loan losses
                
                
                718
                
                
                
                509
                
                
                
                1,273
                
                
                
                1,030Non-interest
      income:Fees
      and service charges
                
                
                30
                
                
                
                26
                
                
                
                53
                
                
                
                50Gains
      (losses) on calls of securities held to maturity
                
                
                -
                
                
                
                -
                
                
                
                (1
                )
                
                
                -Gains
      on sale of securities available for sale
                
                
                -
                
                
                
                7
                
                
                
                -
                
                
                
                10Miscellaneous
                
                
                5
                
                
                
                7
                
                
                
                11
                
                
                
                12Total
      non-interest income
                
                
                35
                
                
                
                40
                
                
                
                63
                
                
                
                72Non-interest
      expenses:Salaries
      and employee benefits
                
                
                268
                
                
                
                233
                
                
                
                536
                
                
                
                458Net
      occupancy expense of premises
                
                
                36
                
                
                
                28
                
                
                
                73
                
                
                
                56Equipment
                
                
                78
                
                
                
                61
                
                
                
                154
                
                
                
                127Advertising
                
                
                26
                
                
                
                17
                
                
                
                36
                
                
                
                25Federal
      insurance premium
                
                
                2
                
                
                
                2
                
                
                
                4
                
                
                
                4Miscellaneous
                
                
                205
                
                
                
                185
                
                
                
                399
                
                
                
                360Total
      non-interest expenses
                
                
                615
                
                
                
                526
                
                
                
                1,202
                
                
                
                1,030Income
      before income taxes
                
                
                138
                
                
                
                23
                
                
                
                134
                
                
                
                72Income
      taxes
                
                
                55
                
                
                
                7
                
                
                
                53
                
                
                
                21Net
      income
                
                $
                83
                
                
                $
                16
                
                
                $
                81
                
                
                $
                51Net
      income per common share:Basic
                
                $
                0.05
                
                
                $
                0.01
                
                
                $
                0.05
                
                
                $
                0.03Weighted
      average number of common shares andcommon
      stock equivalents outstanding:Basic
                
                
                1,769
                
                
                
                1,789
                
                
                
                1,768
                
                
                
                1,788Net
      income per common share:Diluted
                
                $
                0.05
                
                
                $
                0.01
                
                
                $
                0.05
                
                
                $
                0.03Weighted
      average number of common shares andcommon
      stock equivalents outstanding:Diluted
                
                
                1,769
                
                
                
                1,789
                
                
                
                1,768
                
                
                
                1,795
 
 See notes
to consolidated financial statements.
 4
  LINCOLN
PARK BANCORP AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS’ EQUITY
 (Unaudited)
  AccumulatedUnearned
                
                
                
                
                
                OtherCommon
                
                
                Paid-in
                
                
                Retained
                
                
                ESOP
                
                
                Treasury
                
                
                ComprehensiveStock
                
                
                Capital
                
                
                Earnings
                
                
                Shares
                
                
                Stock
                
                
                Loss
                
                
                Total(In
      thousands)BALANCE
      -DECEMBER 31, 2006
                
                $
                19
                
                
                $
                7,485
                
                
                $
                6,252
                
                
                $
                (347
                )
                
                $
                -
                
                
                $
                (165
                )
                
                $
                13,244Comprehensive
      income:Net
      Income for the six monthsended
      June 30, 2007
                
                
                
                
                
                
                
                
                
                
                51
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                51Other
      comprehensive income:Unrealized
      holding gain on securitiesavailable
      for sale, net of deferredincome
      taxes of $1
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1
                
                
                
                1Directors'
      reitirement plan, net of deferredtaxes
      of $6
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                9
                
                
                
                9Total
      Comprehensive Income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                61ESOP
      Shares Released
                
                
                
                
                
                
                
                
                
                
                (2
                )
                
                
                10
                
                
                
                
                
                
                
                
                
                
                
                8Restricted
      stock earned
                
                
                
                
                
                
                16
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                16Stock
      options
                
                
                
                
                
                
                18
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                18BALANCE
      -JUNE 30, 2007
                
                $
                19
                
                
                $
                7,519
                
                
                $
                6,301
                
                
                $
                (337
                )
                
                $
                -
                
                
                $
                (155
                )
                
                $
                13,347BALANCE
      -DECEMBER 31, 2007
                
                $
                19
                
                
                $
                7,558
                
                
                $
                6,307
                
                
                $
                (328
                )
                
                $
                (200
                )
                
                $
                (210
                )
                
                $
                13,146Comprehensive
      income:Net
      Income for the six monthsended
      June 30, 2008
                
                
                
                
                
                
                
                
                
                
                81
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                81Other
      comprehensive income:Unrealized
      holding loss on securitiesavailable
      for sale net of deferred taxes $3
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (65
                )
                
                
                (65
                )Directors'
      reitirement plan, net of deferredtaxes
      $5
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                8
                
                
                
                8Total
      Comprehensive Income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                24ESOP
      Shares Released
                
                
                
                
                
                
                
                
                
                
                (4
                )
                
                
                10
                
                
                
                
                
                
                
                
                
                
                
                6Restricted
      stock earned
                
                
                
                
                
                
                18
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                18Stock
      options
                
                
                
                
                
                
                18
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                18BALANCE
      -JUNE 30, 2008
                
                $
                19
                
                
                $
                7,594
                
                
                $
                6,384
                
                
                $
                (318
                )
                
                $
                (200
                )
                
                $
                (267
                )
                
                $
                13,212
 
 See notes
to consolidated financial statements.
 5
 
 LINCOLN
PARK BANCORP AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF
CASH FLOWS
 (unaudited)
  Six
      Months EndedJune
      30,2008
                
                
                2007(In
      Thousands)Cash
      flows from operating activities:Net
      income
                
                $
                81
                
                
                $
                51Adjustments
      to reconcile net income to netcash
      provided by operating activities:Depreciation
      of premises and equipment
                
                
                41
                
                
                
                34Amortization
      and accretion, net
                
                
                26
                
                
                
                10Gain
      on calls and sales of securities available for sale
                
                
                -
                
                
                
                (10
                )Loss
      on calls of securities held to maturity
                
                
                1
                
                
                
                -Provision
      for loan losses
                
                
                35
                
                
                
                51Increase
      in interest receivable
                
                
                (75
                )
                
                
                (50
                )Decrease
      (increase) in other assets
                
                
                350
                
                
                
                (58
                )Deferred
      taxes
                
                
                (53
                )
                
                
                (24
                )Increase
      (decrease) in accrued interest payable
                
                
                28
                
                
                
                (2
                )(Decrease)
      increase in other liabilities
                
                
                (16
                )
                
                
                61ESOP
      shares committed to be released
                
                
                6
                
                
                
                8Restricted
      stock earned
                
                
                18
                
                
                
                16Stock
      options earned
                
                
                18
                
                
                
                18Net
      cash provided by operating activities
                
                
                460
                
                
                
                105Cash
      flows from investing activities:Purchases
      of term deposits
                
                
                -
                
                
                
                (297
                )Proceeds
      from maturities of term deposits
                
                
                99
                
                
                
                99Purchase
      of securities available for sale
                
                
                (10,628
                )
                
                
                (323
                )Principal
      repayments on securities available for sale
                
                
                1,386
                
                
                
                10Proceeds
      from sale of securities available for sale
                
                
                -
                
                
                
                300Purchases
      of securities held to maturity
                
                
                (17,935
                )
                
                
                -Principal
      repayments on securities held to maturity
                
                
                8,435
                
                
                
                206Net
      increase in loans receivable
                
                
                (2,263
                )
                
                
                (5,306
                )Additions
      to premises and equipment
                
                
                (26
                )
                
                
                (3
                )Purchase
      of Federal Home Loan Bank of New York stock
                
                
                (1,140
                )
                
                
                (134
                )Redemption
      of Federal Home Loan Bank of New York stock
                
                
                398
                
                
                
                109Net
      cash used in investing activities
                
                
                (21,674
                )
                
                
                (5,339
                )Cash
      flows from financing activities:Net
      increase in deposits
                
                
                5,049
                
                
                
                4,474Proceeds
      from advances from Federal Home Loan Bank of New York
                
                
                33,350
                
                
                
                29,800Repayments
      of advances from Federal Home Loan Bank of New York
                
                
                (17,250
                )
                
                
                (29,299
                )Net
      increase in payments by borrowers for taxes and insurance
                
                
                52
                
                
                
                63Net
      cash provided by financing activities
                
                
                21,201
                
                
                
                5,038Net
      (decrease) in cash and cash equivalents
                
                
                (13
                )
                
                
                (196
                )Cash
      and cash equivalents - beginning
                
                
                2,501
                
                
                
                2,601Cash
      and cash equivalents - ending
                
                $
                2,488
                
                
                $
                2,405Supplemental
      information:Cash
      paid during the period for:Interest
      on deposits and borrowings
                
                $
                1,525
                
                
                $
                1,492Income
      taxes
                
                $
                11
                
                
                $
                1
   See notes
to consolidated financial statements.
 6
  LINCOLN
PARK BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
 
 
 1.   PRINCIPLES
OF CONSOLIDATION
 
 The
consolidated financial statements include the accounts of Lincoln Park Bancorp
(the “Company”) and its wholly owned subsidiary, Lincoln Park Savings Bank (the
“Bank”), and the Bank’s wholly owned subsidiary LPS Investment
Company.  The Company’s business is conducted principally through the
Bank.  All significant intercompany accounts and transactions have
been eliminated in consolidation.
 
 2.   BASIS OF
PRESENTATION
 
 The
accompanying unaudited consolidated financial statements were prepared in
accordance with U.S. generally accepted accounting principles (“GAAP”) for
interim financial information as well as instructions for Form 10-Q and Rule
10-01 of regulation S-X.  Accordingly, they do not include information
or footnotes necessary for a complete presentation of financial condition,
results of operations, changes in stockholders’ equity and cash flows in
conformity with GAAP.  However, in the opinion of management, all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of the consolidated financial statements have been included. The
results of operations for the three and six months ended June 30, 2008, are not
necessarily indicative of the results which may be expected for the entire
fiscal year.
 
 3.   NET
INCOME PER COMMON SHARE
 
 Basic net
income per common share is computed by dividing net income available to common
shareholders by the weighted average number of shares of common stock
outstanding, adjusted for unearned shares of the ESOP and unvested restricted
stock awards. Diluted net income per common share is calculated by dividing net
income by the weighted average number of shares of common stock and common stock
equivalents outstanding decreased by the number of common shares that are
assumed to be repurchased with the proceeds from the exercise or conversion of
the common stock equivalents, if dilutive, (treasury stock method) along with
the assumed tax benefit from the exercise of non-qualified
options.  Shares issued and reacquired during any period are weighted
for the portion of the period they were outstanding.  During the three
and six months ended June 30, 2008, all 67,020 outstanding stock options and
15,786 non-vested shares of restricted stock were anti-dilutive.
 
 4.   CRITICAL
ACCOUNTING POLICIES
 
 We
consider accounting policies involving significant judgments and assumptions by
management that have, or could have, a material impact on the carrying value of
certain assets or on income to be critical accounting
policies.  Material estimates that are particularly susceptible to
significant changes relate to the determination of the allowance for loan
losses.  Determining the amount of the allowance for loan losses
necessarily involves a high degree of judgment.  Management reviews
the level of the allowance on a quarterly basis, at a minimum, and establishes
the provision for loan losses based on the composition of the loan portfolio,
delinquency levels, loss experience, economic conditions, and other factors
related to the collectability of the loan portfolio.  Since there has
been no material shift in the loan portfolio, the level of the allowance for
loan losses has changed primarily due to changes in the size of the loan
portfolio and the level of nonperforming loans.
 
 We have
allocated the allowance among categories of loan types as well as classification
status at each period-end date.  Assumptions and allocation
percentages based on loan types and classification status have been consistently
applied.  Management regularly evaluates various risk factors related
to the loan portfolio, such as type of loan, underlying collateral and payment
status, and the corresponding allowance allocation percentages.
 
 7
 
 LINCOLN
PARK BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
 
 
 4.   CRITICAL
ACCOUNTING POLICIES (Continued)
 
 Although
we believe that we use the best information available to establish the allowance
for loan losses, future additions to the allowance may be necessary based on
estimates that are susceptible to change as a result of changes in economic
conditions and other factors.  In addition, the regulatory
authorities, as an integral part of their examinations process, periodically
review our allowance for loan losses.  Such agencies may require us to
recognize adjustments to the allowance based on its judgments about information
available to it at the time of their examinations.
 
 5.   FAIR
VALUE DISCLOSURES
 
 Effective
January 1, 2008, the Company adopted the provisions of SFAS No. 157, “Fair Value
Measurements”, for financial assets and financial liabilities.  In
accordance with Financial Accounting Standards Board Staff Position (FSP) No.
157-2, “Effective Date of FASB Statement No. 157,” the Company will delay
application of SFAS 157 for non-financial assets and non-financial liabilities,
until January 1, 2009.  SFAS 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles,
and expands disclosures about fair value measurements.
 
 SFAS 157 defines fair value as the
price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants.  A fair value
measurement assumes that the transaction to sell the asset or transfer the
liability occurs in the principal market for the asset or liability or, in the
absence of a principal market, the most advantageous market for the asset or
liability.  The price in the principal (or most advantageous) market
used to measure the fair value of the asset or liability shall not be adjusted
for transaction costs.  An orderly transaction is a transaction that
assumes exposure to the market for a period prior to the measurement date to
allow for marketing activities that are usual and customary for transactions
involving such assets and liabilities; it is not a forced
transaction.  Market participants are buyers and sellers in the
principal market that are (i) independent, (ii) knowledgeable, (iii) able to
transact, and (iv) willing to transact.
 
 SFAS 157 requires the use of valuation
techniques that are consistent with the market approach, the income approach
and/or the cost approach.  The market approach uses prices and other
relevant information generated by market transactions involving identical or
comparable assets and liabilities.  The income approach uses valuation
techniques to convert future amounts, such as cash flows or earnings, to a
single present amount on a discounted basis.  The cost approach is
based on the amount that currently would be required to replace the service
capacity of an asset (replacement cost).  Valuation techniques should
be consistently applied.  Inputs to valuation techniques refer to the
assumptions that market participants would use in pricing the asset or
liability.  Inputs may be observable, meaning those that reflect the
assumptions market participants would use in pricing the asset or liability
developed based on market data obtained from independent sources, or
unobservable, meaning those that reflect the reporting entity’s own assumptions
about the assumptions market participants would use in pricing the asset or
liability developed based on the best information available in the
circumstances.  In that regard, SFAS 157 establishes a fair value
hierarchy for valuation inputs that gives the highest priority to quoted prices
in active markets for identical assets or liabilities and the lowest priority to
unobservable inputs.  The fair value hierarchy is as
follows:
 
 Level
1 Inputs – Unadjusted quoted prices in active markets for identical assets or
liabilities that the reporting entity has the ability to access at the
measurement date.
 
 Level
2 Inputs – Inputs other than quoted prices included in Level 1 that are
observable for the asset or liability; either directly or
indirectly.  These might include quoted prices for similar assets or
liabilities in active markets, quoted prices for identical or similar assets or
liabilities in markets that are not active, inputs other than quoted prices that
are observable for the assets or liabilities (such as interest rates,
volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived
principally from or corroborated by market data by correction or other
means.
 
 8
  LINCOLN
PARK BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
 
 
 5.   FAIR
VALUE DISCLOSURES (Continued)
 
 Level
3 Inputs – Unobservable inputs for determining the fair values of assets or
liabilities that reflect an entity’s own assumptions about the assumptions that
market participants would use in pricing the assets or liabilities.
 
 A description of the valuation
methodologies used for instruments measured at fair value, as well as the
general classification of such instruments pursuant to the valuation hierarchy,
is set forth below.  These valuation methodologies were applied to all
of the Company’s financial assets and financial liabilities carried at the fair
value effective January 1, 2008.
 
 In general, fair value is based upon
quoted market prices, where available.  If such quoted market prices
are not available, fair value is based upon internally developed models that
primarily use, as inputs, observable market-based
parameters.  Valuation adjustments may be made to ensure that
financial instruments are recorded at fair value.  These adjustments
may include amounts to reflect counter-party credit quality, the Company’s
creditworthiness, among other things, as well as unobservable
parameters.  Any such valuation adjustments are applied consistently
over time.  The Company’s valuation methodologies may produce a fair
value calculation that may not be indicative of net realizable value or
reflective of future fair values.  While management believes the
Company’s valuation methodologies are appropriate and consistent with other
market participants, the use of different methodologies or assumptions to
determine the fair value of certain financial instruments could result in a
different estimate of fair value at the reporting date.
 
 Available for Sale
Securities.  Securities classified as available for sale are
reported at fair value utilizing Level 2 inputs.  For these
securities, the Company obtains fair value measurements from an independent
pricing service.  The fair value measurements consider observable data
that may include dealer quotes, market spreads, cash flows, the U.S. Treasury
yield curve, live trading levels, trade execution data, market consensus
prepayment speeds, credit information, and the bond’s terms and conditions,
among other things.
 
 At June 30, 2008, the following table
represents the fair value measurement on available for sale
securities.
 
 Fair
      Value Measurements at Reporting Date Using(In
      thousands)Description
                
                6/30/2008
                
                
                Quoted
      Prices in Active Markets for Identical Assets
                  (Level
      1)
                
                
                Significant
      Other Observable Inputs (Level 2)
                
                
                Significant
      Unobservable Inputs (Level 3)Available-for-sale
      securities
                
                $
                10,685
                
                
                $
                399
                
                
                $
                10,286
                
                
                $
                -Total:
                
                $
                10,685
                
                
                $
                399
                
                
                $
                10,286
                
                
                $
                -
 
 Certain financial assets and financial
liabilities are measured at fair value on a nonrecurring basis; that is, the
instruments are not measured at fair value on an ongoing basis but are subject
to fair value adjustments in certain circumstances (for example, when there is
evidence of impairment).  Financial assets and financial liabilities
measured at fair value on a nonrecurring basis, such as long-lived assets
measured at fair value for impairment assessment, were not significant at June
30, 2008. As stated above, SFAS 157 will be applicable to these fair value
measurements beginning January 1, 2009.
 
 9
  LINCOLN
PARK BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
 
 
 5.   FAIR
VALUE DISCLOSURES (Continued)
 
 Effective
January 1, 2008, the Company adopted the provisions of SFAS No. 159, “The Fair
Value Option for Financial Assets and Financial Liabilities – Including an
amendment of FASB Statement No. 115”.  SFAS 159 permits the Company to
choose to measure eligible items at fair value at specified election
dates.  Unrealized gains and losses on items for which the fair value
measurement option has been elected are reported in earnings at each subsequent
reporting date.  The fair value option (i) may be applied instrument
by instrument, with certain exceptions, thus the Company may record identical
financial assets and liabilities at fair value or by another measurement basis
permitted under generally accepted accounting principles, (ii) is irrevocable
(unless a new election date occurs), and (iii) is applied only to entire
instruments and not to portions of instruments.  Adoption of SFAS 159
on January 1, 2008 did not have any material impact on the Company’s financial
statements.
 
 6.   DIRECTORS’
RETIREMENT PLAN
 
 Periodic
expenses for the Company’s Directors’ retirement plan were as
follows:
 Three
      Months
                  Ended
      June 30,
                  2008
                
                
                Three
      Months
                  Ended
      June 30,
                  2007
                
                
                Six
      Months
                  Ended
      June 30,
                  2008
                
                
                Six
      Months
                  Ended
      June 30,
                  2007(In
      thousands)Service
      Cost
                
                $
                4
                
                
                $
                3
                
                
                $
                8
                
                
                $
                5Interest
      Cost
                
                
                6
                
                
                
                6
                
                
                
                12
                
                
                
                10Past
      Service Liability
                
                
                7
                
                
                
                7
                
                
                
                14
                
                
                
                14Total:
                
                $
                17
                
                
                $
                16
                
                
                $
                34
                
                
                $
                29
 
 7.   STOCK
OPTIONS AND AWARDS
 
 Under the
Company’s Stock-Based Incentive Plan, stock options and restricted stock awards
may be granted to outside directors and employees.  At June 30, 2008
and December 31, 2007, options to purchase 67,020 shares of Company common stock
were outstanding.  Such options have an exercise price range of $7.00
to $9.00, a weighted average exercise price of $8.83, and at June 30, 2008, no
intrinsic value and an average remaining life of 7.7 years.  No
options were granted, cancelled, forfeited, or exercise during the six month
periods ended June 30, 2008 and 2007.
 
 At June
30, 2008 and December 31, 2007, there were 15,786 shares of restricted stock
that had been granted, but were not yet vested.  Theses shares had a
weighted average grant date fair value of $8.62.  During the six month
periods ended June 30, 2008 and 2007, there were no grants of restricted shares
nor did any prior grants vest.  At June 30, 2008, unrecognized future
compensation costs related to restricted stock awards aggregated approximately
$125,000 and are expected to be expensed over the next 5.4 years.
 
 10
 
 LINCOLN
PARK BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
 
 
 8.   RECENT
ACCOUNTING PRONOUNCEMENTS
 
 FAS
-157-2
 
 In
February 2008, the FASB issued FASB Staff Position (FSP) 157-2, “Effective Date
of FASB Statement No. 157,” that permits a one-year deferral in applying the
measurement provisions of Statement No. 157 to non-financial assets and
non-financial liabilities (non-financial items) that are not recognized or
disclosed at fair value in an entity’s financial statements on a recurring basis
(at least annually).  Therefore, if the change in fair value of a
non-financial item is not required to be recognized or disclosed in the
financial statements on an annual basis or more frequently, the effective date
of application of Statement 157 to that item is deferred until fiscal years
beginning after November 15, 2008 and interim periods within those fiscal
years.   This deferral does not apply, however, to an entity that
applied Statement 157 in interim or annual financial statements prior to the
issuance of FSP-157-2.  The Company is currently evaluating the
impact, if any, that the adoption of FSP 157-2 will have on the Company’s
consolidated financial statements.
 
 SAB
109
 
 Staff
Accounting Bulletin No. 109 (SAB 109), “Written Loan Commitments Recorded at
Fair Value Through Earnings” expresses the views of the staff regarding written
loan commitments that are accounted for at fair value through earnings under
generally accepted accounting principles.  To make the staff’s views
consistent with current authoritative accounting guidance, the SAB revises and
rescinds portions of SAB No. 105, “Application of Accounting Principles to Loan
Commitments.”  Specifically, the SAB revises the SEC staff’s views on
incorporating expected net future cash flows related to loan servicing
activities in the fair value measurement of a written loan
commitment.  The SAB retains the staff’s views on incorporating
expected net future cash flows related to internally-developed intangible assets
in the fair value measurement of a written loan commitment.  The staff
expects registrants to apply the views in Question 1 of SAB 109 on a prospective
basis to derivative loan commitments issued or modified in fiscal quarters
beginning after December 15, 2007.  The Company does not expect SAB
109 to have a material impact on its consolidated financial
statements.
 
 SAB
110
 
 Staff
Accounting Bulletin No. 110 (SAB 110) amends and replaces Question 6 of Section
D.2 of Topic 14, “Share-Based Payment,” of the Staff Accounting Bulletin
series.  Question 6 of Section D.2 of Topic 14 expresses the views of
the staff regarding the use of the “simplified” method in developing an estimate
of expected term of “plain vanilla” share options and allows usage of the
“simplified” method for share option grants prior to December 31,
2007.  SAB 110 allows public companies which do not have historically
sufficient experience to provide a reasonable estimate to continue use of the
“simplified” method for estimating the expected term of “plain vanilla” share
option grants after December 31, 2007.  SAB 110 is effective January
1, 2008.  The Company does not expect SAB 110 to have a material
impact on its consolidated financial statements.
 
 FASB
Statement No. 141 (R)
 
 FASB
Statement No. 141 (R) “Business Combinations” was issued in December of
2007.  This Statement establishes principles and requirements for how
the acquirer of a business recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed, and any
non-controlling interest in the acquiree.  The Statement also provides
guidance for recognizing and measuring the goodwill acquired in the business
combination and determines what information to disclose to enable users of the
financial statements to evaluate the nature and financial effects of the
business combination.  The guidance will become effective as of the
beginning of a company’s fiscal year beginning after December
15, 2008.  This new pronouncement will impact the Company’s accounting
for business combinations completed beginning January 1, 2009.
 
 11
 LINCOLN
PARK BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
   8.   RECENT
ACCOUNTING PRONOUNCEMENTS (Continued)
 
 FASB
Statement No. 161
 
 In March
2008, the FASB issued Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an amendment of FASB Statement No. 133”
(Statement 161).  Statement 161 requires entities that utilize
derivative instruments to provide qualitative disclosures about their objectives
and strategies for using such instruments, as well as any details of
credit-risk-related contingent features contained within
derivatives.  Statement 161 also requires entities to disclose
additional information about the amounts and location of derivatives located
within the financial statements, how the provisions of SFAS 133 has been
applied, and the impact that hedges have on an entity’s financial position,
financial performance, and cash flows.  Statement 161 is effective for
fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged.  The Company is currently evaluating the
potential impact the new pronouncement will have on its consolidated financial
statements.
 
 FASB
Statement No. 162
 
 In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.”  This Statement identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements. This Statement is effective 60 days
following the SEC’s approval of the Public Company Accounting Oversight Board
amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles.”  The Company is currently
evaluating the potential impact the new pronouncement will have on its
consolidated financial statements.
 
 EITF
06-11
 
 In June
2007, the Emerging Issues Task Force (EITF) reached a consensus on Issue No.
06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment
Awards” (“EITF 06-11”).  EITF 06-11 states that an entity should
recognize a realized tax benefit associated with dividends on non-vested equity
shares, non-vested equity share units and outstanding equity share options
charged to retained earnings as an increase in additional paid in
capital.  The amount recognized in additional paid in capital should
be included in the pool of excess tax benefits available to absorb potential
future tax deficiencies on share-based payment awards.  EITF 06-11
should be applied prospectively to income tax benefits of dividends on
equity-classified share-based payment awards that are declared in fiscal years
beginning after December 15, 2007.  The Company expects that EITF
06-11 will not have an impact on its consolidated financial
statements.
 
 FSP
EITF 03-6-1
 
 In June
2008, the FASB issued FASB Staff Position (FSP) EITF 03-6-1, “Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities.”  This FSP clarifies that all outstanding
unvested share-based payment awards that contain rights to non-forfeitable
dividends participate in undistributed earnings with common
shareholders.  Awards of this nature are considered participating
securities and the two-class method of computing basic and diluted earnings per
share must be applied.  This FSP is effective for fiscal years
beginning after December 15, 2008.  The Company is currently
evaluating the potential impact the new pronouncement will have on its
consolidated financial statements.
 
 12
 
 LINCOLN
PARK BANCORP AND SUBSIDIARY
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 
 ITEM
2.
 
 Forward-Looking
Statements
 
 This Form
10-Q may include certain forward-looking statements based on current management
expectations.  The actual results of the Company could differ
materially from those management expectations.  Factors that could
cause future results to vary from current management expectations include, but
are not limited to, general economic conditions, legislative and regulatory
changes, monetary and fiscal policies of the federal government, changes in tax
policies, rates and regulations of federal, state and local tax authorities,
changes in interest rates, deposit flows, the cost of funds, demand for loan
products, demand for financial services, competition, changes in the quality or
composition of loan and investment portfolios of the Bank, changes in accounting
principles, policies or guidelines, and other economic, competitive,
governmental and technological factors affecting the Company’s operations,
markets, products, services and prices.
 
 Comparison
of Financial Condition at June 30, 2008 and December 31, 2007
 
 Our total
assets increased by $21.3 million, or 20.7%, to $123.9 million at June 30, 2008,
from $102.7 million at December 31, 2007.  At June 30, 2008, the level
of cash and cash equivalents decreased $13,000 or 0.5% to $2.5
million.  Term deposits decreased $96,000 to $199,000 at June 30, 2008
as compared to $295,000 at December 31, 2007.   The decrease in
term deposits was due to the maturity of a certificate of
deposit.
 
 Securities
available for sale increased by $9.2 million or 602.5% to $10.7 million at June
30, 2008, from $1.5 million at December 31, 2007.  The increase was
due to purchases of Collateralized Mortgage Obligations (CMOs) of $10.6 million,
offset by maturities of $1.0 million of U.S. Government Agency step-up bonds and
principal repayments of $386,000.  Securities held to maturity
increased by $9.5 million or 44.7% to $30.7 million at June 30, 2008 when
compared to $21.2 million at December 31, 2007.  During the six months
ended June 30, 2008, purchases of Collateralized Mortgage Obligations amounted
to $17.9 million, maturities and calls on securities held to maturity amounted
to $7.8 million and repayments on securities held to maturity amounted to
$655,000.  The increased securities balances were funded by increased
deposits and advances from the FHLB.
 
 CMOs are
debt securities issued by a special-purpose entity that aggregate pools of
mortgages and mortgage-backed securities and create different classes of
securities with varying maturities and amortization schedules, as well as a
residual interest, with each class possessing different risk
characteristics.  The cash flows from the underlying collateral are
generally divided into “tranches” or classes that have descending priorities
with respect to the distribution of principal and interest cash flows, while
cash flows on pass-through mortgage-backed securities are distributed pro rata
to all security holders.  All of the CMOs in our investment portfolio
are rated “AAA” by at least one of the major investment securities rating
services.
 
 Our
securities portfolio may be impacted by fluctuations in market value,
potentially reducing accumulated other comprehensive income and/or
earnings.  Fluctuations in market value may be caused by decreases in
interest rates, lower market prices for securities and lower investor
demand.  Our securities portfolio is evaluated for
other-than-temporary impairment on at least a quarterly basis.  If
this evaluation shows an impairment to cash flow connected with one or more
securities, a potential loss to earnings may occur.
 
 Loans receivable
amountedto $75.3million and $73.1million at June 30,
2008and December 31,
2007, respectively, representing
an increase of $2.2million or3.0%.  The
increase in loans resulted primarily from increases of $1.5 million in home
equity loans and $849,000 in home equity lines of credit.  The
increase in loans receivable was funded by increases in
deposits.
 13
 
 LINCOLN
PARK BANCORP AND SUBSIDIARY
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 
 Comparison
of Financial Condition at June 30, 2008 and December 31, 2007
(Cont’d.)
 
 Federal
Home Loan Bank of New York (“FHLB”) stock increased $742,000 to $1.9 million at
June 30, 2008, from $1.2 million at December 31, 2007.  Purchase of
FHLB stock amounted to $1.1 million and redemption of FHLB stock amounted to
$398,000.  The increased level of FHLB stock owned is due to the
increased level of FHLB advances outstanding.
 
 Other
assets decreased $299,000 or 41.6% to $419,000 at June 30, 2008 from $718,000 at
December 31, 2007.
 The
decrease was mainly due to the closing of a loan in the amount of $270,000, that
was originated and disbursed to an attorney in December of 2007, but closed in
January of 2008.
 
 Total
deposits increased $5.0 million or 7.8% to $70.0 million at June 30, 2008 from
$65.0 million at December 31, 2007.  The increase in deposits was due
to a management decision to be more competitive with deposit rates.
 
 Advances
from FHLB increased $16.1 million or 68.4% to $39.7 million at June 30, 2008
when compared with $23.6 million at December 31, 2007. The proceeds from new
advances wereprimarily used to fund the purchase of securities.
 
 Stockholders’ equity
increased by $66,000 or 0.5% to $13.2 million at June 30, 2008 from $13.1
million at December 31, 2007, reflecting net income of $81,000 for the six
months ended June 30, 2008, and the amortization of $42,000 for the ESOP, the
restricted stock, and stock options, for the six months ended June 30,
2008.  Partially offsetting these increases was an other comprehensive
loss of $57,000, which primarily represented unrealized losses on available for
sale securities.
 
 Our
financial results may be adversely affected by changes in prevailing economic
conditions, including decreases in real estate values, changes in interest rates
which may cause a decrease in interest rate spreads, adverse employment
conditions, the monetary and fiscal policies of the federal government and other
significant external events.  Decreases in real estate values could
potentially adversely affect the value of property used as collateral for our
mortgage loans.  In the event that we are required to foreclose on a
property securing a mortgage loan, there can be no assurance that we will
recover funds in an amount equal to any remaining loan balance as a result of
prevailing general economic conditions, real estate values and other factors
associated with the ownership of real property.  As a result, the
market value of the real estate underlying the loans may not, at any given time,
be sufficient to satisfy the outstanding principal amount of the
loans.  Consequently, we could sustain loan losses and potentially
incur a higher provision for loan loss expense.  Adverse changes in
the economy may also have a negative effect of the ability of borrowers to make
timely repayments of their loans, which could have an adverse impact on
earnings.
 
 Comparison
of Operating Results for the Three Months Ended June 30, 2008 and
2007
  General.Net income increased
by $67,000, or 418.8%, to $83,000 for the three months ended June 30, 2008, from
$16,000 for the three months ended June 30, 2007.  The increase in net
income reflects an increase in total interest income and a decrease in the
provision for loan losses, partially offset by increases in total interest
expense, non-interest expenses, and income taxes.
 
 14
 
 LINCOLN
PARK BANCORP AND SUBSIDIARY
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 
 
 Comparison
of Operating Results for the Three Months Ended June 30, 2008 and 2007
(Cont’d.)
  Interest Income.Interest
income increased $197,000, or 15.0%, to $1.5 million for the three months ended
June 30, 2008, from $1.3 million for the three months ended June 30,
2007.  Interest income from loans increased by $4,000, or 0.4%, for
the three months ended June 30, 2008.  The increase was due to a $3.0
million, or 4.2%, increase in the average balance of loans to $73.8 million
during the three months ended June 30, 2008 from $70.9 million for the three
months ended June 30, 2007, offset by a decrease in the average yield to 5.61%
from 5.83%.  Interest income from securities, including available for
sale and held to maturity, increased $188,000, or 69.4%, to $459,000 for the
three months ended June 30, 2008, from $271,000 for the three months ended June
30, 2007.  The average yield on these securities increased to 5.44 %
for the three months ended June 30, 2008 as compared to 4.94% for the three
months ended June 30, 2007.The average
balance of securities was $33.8 million during the three months ended June 30,
2008 as compared to $22.0 million for the three months ended June 30,
2007.  Interest income from other interest-earning assets increased
$5,000, or 38.5%, to $18,000 for the three months ended June 30, 2008, from
$13,000 for the three months ended June 30, 2007 due to an increase in the
average balance to $3.6 million in 2008 from $1.3 million in 2007, offset by a
decrease in the average yield to 2.0 % in 2008 from 4.0% in 2007.
  Interest
Expense.Total
interest expense increased $17,000, or 2.2%, to $780,000 for the three months
ended June 30, 2008, from $763,000 for the three months ended June 30,
2007.  The interest expense on interest-bearing deposits decreased by
$62,000 or 11.6% to $472,000 for the quarter ended June 30, 2008, when compared
with $534,000 in the comparable 2007 period.  The decrease in interest
expense on interest bearing deposits resulted from a decrease in the average
cost to 2.9% for the three months ended June 30, 2008 from 3.6% for the 2007
comparable period.  The average balance of interest bearing deposits
increased by $4.5 million to $64.4 million for the quarter ended June 30, 2008,
from $59.9 million for the quarter ended June 30, 2007.
  The
interest expense on borrowed money increased by $79,000, or 34.5%, to $308,000
in the 2008 period from $229,000 in the comparable 2007 period.  The
increase was due to an increase of $12.6 million in the average balance of
borrowed money to $34.0 million in 2008 from $21.4 million in 2007, offset by a
decrease in the cost of borrowed money to 3.62% in 2008 from 4.27% in
2007.
  Net Interest Income.Net
interest income increased $180,000, or 32.6%, to $733,000 for the three months
ended June 30, 2008 from $553,000 for the three months ended June 30,
2007.  Our interest rate spread increased to 2.27% in 2008 from 1.85%
in 2007, reflecting a 58 basis points decrease in the cost of our interest
bearing liabilities that exceeded a 16 basis points decrease in the yield on our
interest-earning assets.  Our net interest margin increased to 2.63%
from 2.35%.
 
 Provision for Loan Losses. We
establish provisions for loan losses, which are charged to operations, at a
level necessary to absorb known and inherent losses that are both probable and
reasonably estimable at the date of the financial statements. In evaluating the
level of the allowance for loan losses, management considers historical loss
experience, the types of loans and the amount of loans in the loan portfolio,
adverse situations that may affect the borrower's ability to repay, the
estimated value of any underlying collateral, and prevailing economic
conditions. This evaluation is inherently subjective as it requires estimates
that are susceptible to significant revision as more information becomes
available or as future events change.
 
 15
 
 LINCOLN
PARK BANCORP AND SUBSIDIARY
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
  
 Comparison
of Operating Results for the Three Months Ended June 30, 2008 and 2007
(Cont’d.)
 
 Based on
our evaluation of these factors, a provision of $15,000 for loan losses was
required for the three months ended June 30, 2008, compared to $44,000 for the
three months ended June 30, 2007.  We had $21,000 in charge-offs
during the three month period ended June 30, 2008, and no charge-offs during the
three months ended June 30, 2007.  We used the same methodology and
generally similar assumptions in assessing the allowance for both
periods.  The allowance for loan losses was $201,000 or 0.27% of gross
loans outstanding at June 30, 2008, as compared with $207,000, or 0.28% of gross
loans outstanding as of March 31, 2008, and $187,000, or 0.26% of gross loans
outstanding at June 30, 2007.  The level of the allowance is based on
estimates and the ultimate losses may vary from the estimates.
 
 Non-interest Income.Non-interest income decreased by $5,000, or 12.5%, to $35,000 for the
three months ended June 30, 2008 as compared to $40,000 for the three months
ended June 30, 2007.  This decrease was primarily due to a gain of
$7,000 in available for sale securities for the three months ending June 30,
2007, with no gains on sale of securities for the three month period ending June
30, 2008.
  Non-interest Expenses.Non-interest expenses were $615,000 and $526,000 for the three months
ended June 30, 2008 and 2007, respectively, representing an increase of $89,000
or 16.9%. The increase in non-interest expenses was primarily due to increases
of $35,000 in salary and employee benefit expenses, $8,000 in occupancy
expenses, $17,000 in premises and equipment expenses, $9,000 in advertising
expenses, and $20,000 in miscellaneous expenses.
  Salary
and employee benefits increased by $35,000, or 15.0%, to $268,000 for the three
months ended June 30, 2008, from $233,000 in the 2007 comparable
period.  The increase was due to an addition of full time personnel in
general and also to staff the Montville branch, which opened in July
2007.
  Equipment
expense increased by $17,000, or 27.9%, primarily due to purchases, upgrading,
and maintenance of equipment.  Miscellaneous expense increased by
$20,000, or 10.8%, to $205,000 for the three months ended June 30, 2008, from
$185,000 in the 2007 comparable period.  The increase was mainly due
to increases in accounting and auditing fees, legal fees, and consulting
fees.
  Income Tax Expense.The
provision for income taxes increased to $55,000 for the three months ended June
30, 2008 from $7,000 for the three months ended June 30, 2007. The increase in
the provision for income taxes was primarily due to an increase of $115,000 in
income before income taxes to $138,000 for the three months ended June 30, 2008,
as compared to $23,000 for the three months ended June 30, 2007.
 
 Comparison
of Operating Results for the Six Months Ended June 30, 2008 and
2007
  General.Net income increased
$30,000, or 58.8%, to $81,000 for the six months ended June 30, 2008, compared
to $51,000 for the same 2007 period.  The increase in net income
during the 2008 period resulted primarily from an increase in total interest
income and a decrease in the provision for loan losses, partially offset by
increases in total interest expense, non-interest expense and income
taxes.
  Interest Income.Interest
income increased $289,000, or 11.2%, to $2.9 million for the six months ended
June 30, 2008, from $2.6 million for the six months ended June 30,
2007.  The increase in interest income was primarily due to increases
of $206,000 in interest income from securities and $76,000 in interest income
from loans.
  16
  LINCOLN
PARK BANCORP AND SUBSIDIARY
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
   Comparison
of Operating Results for the Six Months Ended June 30, 2008 and 2007
(Cont’d)
  Interest
income from loans increased by $76,000, or 3.8%, to $2.1 million for the six
months ended June 30, 2008, from $2.0 million for the same 2007
period.  The increase was due to a $3.6 million, or 5.2%, increase in
the average balance of loans to $73.5 million in 2008 from $69.9 million in
2007.  The average yield on loans decreased to 5.67% in 2008 from
5.74% in 2007.  Interest income from securities, including available
for sale and held to maturity, increased $206,000, or 38.3%, to $744,000 for the
six months ended June 30, 2008, from $538,000 for the six months ended June 30,
2007.  The average balance of securities increased to $28.0 million in
2008 when compared to $22.0 million in 2007.  The  average
yield on securities increased by 43 basis points  to 5.32% for the six
months ended June 30, 2008, when compared to 4.89% for the same period in
2007.  Interest income from other interest-earning assets increased
$7,000, or 25.0%, to $35,000 for the six months ended June 30, 2008 when
compared to $28,000 for the six months ended June 30, 2007.  The
average balance of other interest earning assets increased to $3.2 million
during the six months ended June 30, 2008, when compared to $1.4 million during
the six months ended in June of 2007, partially offset by a decrease in the
average yield. The average yield on other interest earning assets was 2.2% for
the six months ended June 30, 2008 when compared to 4.0% for the same period in
2007.
  Interest Expense.Total
interest expense increased by $62,000, or 4.2%, to $1.6 million for the six
months ended June 30, 2008, from $1.5 million for the six months ended June 30,
2007.  The interest expense on interest-bearing deposits decreased by
$2,000, or 0.2%, in 2008.  The decrease in the average cost of
interest-bearing deposits was due to a decrease in the average cost of
interest-bearing deposits to 3.23% from 3.49%, reflecting a decrease in market
interest rates between the comparable periods.  The decrease in the
average cost of interest-bearing deposits was partially offset by an increase in
the average balance of interest-bearing deposits to $63.6 million in 2008 from
$59.1 million in 2007.  The interest expense on borrowed money
increased by $64,000, or 13.9%, to $525,000 in the 2008 period from $461,000 in
the comparable 2007 period.  The increase in interest expense on
borrowed money was due to an increase of $6.2 million in the average balance of
borrowed money to $27.9 million in 2008 from $21.7 million in 2007, partially
offset by a decrease of 49 basis points in the cost of borrowed money to 3.76%
in 2008 from 4.25% in 2007.
  Net
Interest Income.Net interest income increased $227,000, or 21.0%, to $1.3 million for the
six months ended June 30, 2008 from $1.1 million for the six months ended June
30, 2007.  Our interest rate spread increased to 2.08% in 2008 from
1.82% in 2007, reflecting a decrease of 30 basis points in the cost of our
interest-bearing liabilities that exceeded a decrease of 4 basis points in the
yield on interest-earning assets.  Our net interest margin increased
to 2.50% from 2.32%.
  Provision for Loan
Losses.Based on our evaluation, we recorded provision for
loan losses of $35,000 for the six months ended June 30, 2008, and $51,000 for
the six months ended June 30, 2007.  We had $21,000 charge-offs during
the six months ended June 30, 2008 and no charge-offs during the six months
ended June 30, 2007.  We used the same methodology and generally
similar assumptions in assessing the allowance for both periods.  The
allowance for loan losses was $201,000 or 0.27% of gross loans outstanding at
June 30, 2008, as compared with $187,000, or 0.26% of gross loans outstanding at
December 31, 2007, and $187,000, or 0.26% of gross loans outstanding at June 30,
2007.  The level of the allowance is based on estimates, and the
ultimate losses may vary from the estimates.
 
 Non-interest
Income.Non-interest income decreased by $9,000, or 12.5%, to
$63,000 for the six months ended June 30, 2008, as compared to $72,000 for the
six months ended June 30, 2007.  The decrease in non-interest income
was primarily due to a decrease of $10,000 in income from gains on sale of
securities available for sale.  There was no income from sales of
securities available for sale for the six months ended June 30, 2008, as
compared to $10,000 for the same period in 2007.
  Non-interest Expenses.Non-interest expenses were $1.2 million and $1.0 million for the six
months ended June 30, 2008 and 2007, respectively, representing an increase of
$172,000, or 16.7%. The increase in non-interest expenses was due to increases
of $78,000 in salary and employee benefits, $27,000 in equipment expense,
$17,000 in occupancy expense, $11,000 in advertising expense and $ 39,000 in
miscellaneous expense.
  17
  LINCOLN
PARK BANCORP AND SUBSIDIARY
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 
  Comparison
of Operating Results for the Six Months Ended June 30, 2008 and 2007
(Cont’d.)
  Salaries
and employee benefits increased by $78,000, or 17.0%, to $536,000 in 2008 from
$458,000 in 2007.  The increase was due to an addition of full time
personnel in general and also to staff the Montville branch, which opened in
July 2007.  Equipment expenses increased by $27,000, or 21.3%, to
$154,000 for the six months ended June 30, 2008, from $127,000 in the 2007
comparable period, primarily due to purchases of new equipment, upgrading and
maintenance of software and other equipment.   Occupancy expense
increased by $17,000, or 30.4%, to $73,000 for the six months ended June 30,
2008, from $56,000 for the 2007 comparable period.  Such increase was
mainly due to the additional expense of the Montville
branch.  Advertising expenses increased $11,000, or 44.0%, to $36,000
in 2008 from $25,000 in 2007 due to an effort to advertise more in our local
community.  Miscellaneous expenses increased by $39,000, or 10.8%, to
$399,000 for the six months ended June 30, 2008, when compared to $360,000
during the same 2007 period. This increase was primarily due to increases of
$11,000 in consulting and other services, $20,000 in director fees, and $6,000
in legal fees.
  Income Tax Expense.The
provision for income taxes increased to $53,000 for the six months ended June
30, 2008 from $21,000 for the six months ended June 30, 2007.  The
increase in the provision for income taxes was primarily due to an increase in
income before income taxes of $62,000 to $134,000 for the six months ended June
30, 2008, as compared to $72,000 for the six months ended June 30,
2007.
 
 Management
of Market Risk
 
 General.  The
majority of our assets and liabilities are monetary in
nature.  Consequently, our most significant form of market risk is
interest rate risk.  Our assets, consisting primarily of mortgage
loans, have longer maturities than our liabilities, consisting primarily of
deposits.  As a result, a principal part of our business strategy is
to manage interest rate risk and reduce the exposure of our net interest income
to changes in market interest rates.  Our full board of directors is
responsible for evaluating the interest rate risk inherent in our assets and
liabilities, for determining the level of risk that is appropriate, given our
business strategy, operating environment, capital, liquidity and performance
objectives, and for managing this risk consistent with the guidelines approved
by the board of directors.  Senior management monitors the level of
interest rate risk and reports to the board of directors on a regular basis with
respect to our asset/liability policies and interest rate risk
position.
 
 We have emphasized the origination of
fixed-rate mortgage loans for retention in our portfolio in order to maximize
our net interest income.  We accept increased exposure to interest
rate fluctuations as a result of our investment in such loans.  In a
period of rising interest rates, our net interest rate spread and net interest
income may be negatively affected.  In addition, we have sought to
manage and mitigate our exposure to interest rate risks in the following
ways:
 
 ●
              We
      maintain moderate levels of short-term liquid assets.  At June
      30, 2008, our short-term liquid assets totaled $2.5
    million;●
              We
      originate for portfolio adjustable-rate mortgage loans and adjustable home
      equity lines of credit.  At June 30, 2008, our adjustable-rate
      mortgage loans totaled $12.1 million and our adjustable home equity lines
      of credit totaled $5.6 million;●
              We
      attempt to increase the maturity of our liabilities as market conditions
      allow.  In particular, since 2004, we have emphasized
      intermediate- to long-term FHLB advances as a source of
      funds.  At June 30, 2008, we had $23.9 million of FHLB advances
      with terms to maturity of greater than three to thirteen years;
      and●
              We
      invest in securities with step-up rate features providing for increased
      interest rates prior to maturity according to a pre-determined schedule
      and formula.  However, these step-up rates may not keep pace
      with rising interest rates in the event of a rapidly rising rate
      environment.  In addition, these investments may be called at
      the option of the issuer.
 
 18
 
 LINCOLN
PARK BANCORP AND SUBSIDIARY
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
   Management
of Market Risk (Cont’d.)
  Net Portfolio
Value.  The Company utilizes an outside vendor to prepare the
computation of accounts by which the net present value of the Bank’s cash flow
from assets, liabilities and off-balance sheet items (the Bank’s net portfolio
value or “NPV”) would change in the event of a range of assumed changes in
market interest rates.  The vendor provides the Company with an
interest rate sensitivity report of net portfolio value by utilizing a
simulation model that uses a discounted cash flow analysis and an option-based
pricing approach to measuring the interest rate sensitivity of net portfolio
value.  The model estimates the economic value of each type of asset,
liability and off-balance sheet contract under the assumption that the yield
curve increases or decreases instantaneously by 100 and 200 basis
points.  A basis point equals one-hundredth of one percent, and 100
basis points equals one percent.  An increase in interest rates from
3% to 5% would mean, for example, a 200 basis point increase in the change of
interest rates.
 The
following table sets forth the Bank’s NPV as of March 31, 2008, the most recent
date the Bank’s NPV was calculated.
 
 Change
      in
                Interest
      Rates
                (basis
      points)
              
              
              Net Portfolio Value
              
              
              Net
      Portfolio Value as a Percentage
                  of Present Value of
      AssetsEstimated
                NPV
              
              
              Amount
      of
                Change
              
              
              Percent
      of
                  Change
              
              
              NPV
                Ratio
              
              
              
              Change
      in Basis
                  Points(Dollars in
Thousands)+200
              
              
              $
              13,250
              
              
              $
              (3,455
              )
              
              
              (20.7
              )%
              
              
              13.22
              %
              
              
              (239)
      basis points0
              
              
              
              16,705
              
              
              
              —
              
              
              
              —
              
              
              
              18.02
              
              
              
              —  basis points-200
              
              
              
              18,976
              
              
              
              2,271
              
              
              
              13.6
              
              
              
              16.75
              
              
              
              114  basis points
 
 The table above indicates that at March
31, 2008 in the event of a 200 basis point decrease in interest rates, we would
experience a 13.6% increase in net portfolio value.  In the event of a
200 basis point increase in interest rates, we would experience a 20.7% decrease
in net portfolio value.
 
 Certain shortcomings are inherent in
the methodology used in the above interest rate risk
measurement.  Modeling changes in net portfolio value require making
certain assumptions that may or may not reflect the manner in which actual
yields and costs respond to changes in market interest rates.  In this
regard, the net portfolio value table presented assumes that the composition of
our interest-sensitive assets and liabilities existing at the beginning of a
period remains constant over the period being measured and assumes that a
particular change in interest rates is reflected uniformly across the yield
curve regardless of the duration or repricing of specific assets and
liabilities.  Accordingly, although the net portfolio value table
provides an indication of our interest rate risk exposure at a particular point
in time, such measurements are not intended to and do not provide a precise
forecast of the effect of changes in market interest rates on its net interest
income and will differ from actual results.
 
 Liquidity
and Capital Resources
 
 The Bank
is required to maintain levels of liquid assets sufficient to ensure the Bank’s
safe and sound operation.  Liquidity is the ability to meet current
and future financial obligations of a short-term nature.  The Bank
adjusts its liquidity levels in order to meet funding needs for deposit
outflows, payment of real estate taxes from escrow accounts on mortgage loans,
repayment of borrowings, when applicable, and loan funding commitments. The Bank
also adjusts its liquidity level as appropriate to meet its asset/liability
objectives.
 
 The
Bank’s primary sources of funds are deposits, amortization and prepayments of
loans and mortgage-backed securities principal, FHLB advances, maturities of
investment securities and funds provided from operations.  While
scheduled loan and mortgage-backed securities amortization and maturing
investment securities are a relatively predictable source of funds, deposit flow
and loan and mortgage-backed securities prepayments are greatly influenced by
market interest rates, economic conditions and competition.
  19
  LINCOLN
PARK BANCORP AND SUBSIDIARY
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 
 
 Liquidity
and Capital Resources (Cont’d.)
 
 The
Bank’s liquidity, represented by cash and cash equivalents, is a product of its
operating, investing and financing activities.
 
 The
primary sources of investing activity are lending and the purchase of
securities.  Net loans amounted to $75.3 million and $73.1 million at
June 30, 2008 and December 31, 2007, respectively.  Securities
available for sale totaled $10.7 million at June 30, 2008 and $1.5 million
December 31, 2007, respectively. Securities held to maturity totaled $30.7
million and $21.2 million at June 30, 2008 and December 31, 2007,
respectively.  In addition to funding new loan production and
securities purchases through operating and financing activities, such activities
were funded by principal repayments on existing loans, mortgage-backed
securities, and borrowings from FHLB.
 
 Liquidity
management is both a daily and long-term function of business
management.  Excess liquidity is generally invested in short-term
investments, such as federal funds and interest-bearing deposits.  If
the Bank requires funds beyond its ability to generate them internally,
borrowing agreements exist with the FHLB which provide an additional source of
funds.  At June 30, 2008, advances from the FHLB amounted to $39.7
million, and approximately $5.1 million borrowings are still available at the
FHLB.
 
 The Bank
anticipates that it will have sufficient funds available to meet its current
loan commitments.  At June 30, 2008, the Bank had outstanding
commitments to originate loans of $755,000, standby letters of credit of
$49,000, and unused lines of credit of $8.3
million.   Certificates of deposit scheduled to mature in one
year or less at June 30, 2008, totaled $38.3 million.  Management
believes that, based upon its experience and the Bank’s deposit flow history, a
significant portion of such deposits will remain with the Bank.
 
 The
following table sets forth the Bank’s capital position at June 30, 2008, as
compared to the minimum regulatory capital requirements:
  To
      Be WellCapitalizedUnder
      PromptMinimum
      Capital
                
                
                CorrectiveActual
                
                
                Requirements
                
                
                Actions
      ProvisionsAmount
                
                
                Ratio
                
                
                Amount
                
                
                Ratio
                
                
                Amount
                
                
                Ratio(Dollars
      in thousands)Total
      Risk Based Capital(to
      risk-weighted assets)
                
                $
                11,444
                
                
                
                18.55
                %
                
                $
                4,936
                
                
                
                8.00
                %
                
                $
                6,170
                
                
                
                10.00
                %Tier
      1 Capital(to
      risk-weighted assets)
                
                
                11,243
                
                
                
                18.22
                %
                
                
                2,468
                
                
                
                4.00
                %
                
                
                3,702
                
                
                
                6.00
                %Core
      (Tier 1) Capital(to
      average total assets)
                
                
                11,243
                
                
                
                9.93
                %
                
                
                4,528
                
                
                
                4.00
                %
                
                
                5,660
                
                
                
                5.00
                %Tangible
      Capital(to
      average total assets)
                
                
                11,243
                
                
                
                9.93
                %
                
                
                1,698
                
                
                
                1.50
                %
                
                
                -
                
                
                
                -
  20
  LINCOLN
PARK BANCORP AND SUBSIDIARY
 CONTROLS
AND PROCEDURES
 
 
 ITEM
3.   Quantitative and Qualitative Disclosure about Market
Risk
 
 Not
applicable.  See “Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Management of Market Risk”
herein.
 
 ITEM
4.  Controls and Procedures
 
 Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we evaluated the effectiveness of
the design and operation of our   disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934) as of the end of the period covered by this report. Based
upon that evaluation, the Chief Executive Officer and the Chief Financial
Officer has concluded that, as of the end of the period covered by this report,
our disclosure controls and procedures are effective to ensure that information
required to be disclosed in the reports that the Company files or submits under
the Securities Exchange Act of 1934, is recorded, processed, summarized and
reported within the applicable time periods specified by the SEC’s rules and
forms.
 
 There has
been no change in the Company’s internal control over financial reporting during
the Company’s most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.
 
 21
 
 LINCOLN
PARK BANCORP AND SUBSIDIARY
 
 PART II –
OTHER INFORMATION
 
 ITEM
      1.
              Legal
      ProceedingsLincoln
      Park Savings has, on September 13, 2007, been served with a Summons and
      Complaint in the matter of Donald Hom v.
      Lincoln Park Savings Bank and The Board of Directors of Lincoln Park
      Savings Bank, Superior Court of New Jersey, Law Division, Morris
      County, Docket No., MRS-L-1548-07.  The complaint by Donald Hom,
      former President and CEO of Lincoln Park Savings, alleges an employment
      related claim pursuant to the New Jersey Conscientious Employee Protection
      Act (N.J.S. 34:19-1 et
      seq.)  The complaint has been referred to special counsel for
      Lincoln Park Savings for defense.Except
      as noted above, neither the Company nor the Bank is involved in any
      pending legal proceedings other then routine legal proceedings occurring
      in the ordinary course of business, which involve amounts in the aggregate
      believed by management to be immaterial to the financial condition of the
      Company and the Bank.ITEM
      1A.
              Risk
      FactorsNot
      applicable.ITEM
      2.
              Unregistered Sales of
      Equity Securities and Use of Proceedsa)
              Not
      applicableb)
              Not
      applicablec)
              Information
      regarding the Company’s purchases of its equity securities (common stock)
      during the three months ended June 30, 2008 is summarized
      below:
 
 
 Total
      Number
                of
      Shares
                Purchased
              
              
              Average
      Price
                Paid
      For
                Shares
              
              
              Total
      Number of
                Shares
      Purchased
                Under
      a Publicly
                Announced
                Repurchase
      Plan
              
              
              Maximum
                Number
      of Shares
                That
      May Yet Be
                Purchased
      Under
                Repurchase
      PlanApril
      1-April 30
              
              
              -
              
              
              -
              
              
              25,655
              
              
              16,125May
      1- May 31
              
              
              -
              
              
              -
              
              
              25,655
              
              
              57,905June
      1- June 30
              
              
              -
              
              
              -
              
              
              25,655
              
              
              57,905
 
 On August
27, 2007, the Company announced that its Board of Directors authorized a stock
repurchase program to repurchase up to 41,780 shares.  On May 30,
2008, the Company announced that its Board of Directors authorized an increase
in the repurchase program by 41,780 shares.  As of June 30, 2008, an
additional 57,905 shares remains to be purchased under the program as
revised.
 
 22
 
 LINCOLN
PARK BANCORP AND SUBSIDIARY
 
 PART II –
OTHER INFORMATION
 
 ITEM
      3.
              Defaults Upon Senior
      SecuritiesNot
      applicable.ITEM
      4.
              Submission of Matters
      to a Vote of Security HoldersThe
      annual meeting of stockholders of the registrant was held on May 1,
      2008.  At the meeting, the stockholders elected Stanford Stoller
      to a three year term and Henry Fitschen to a two year term as directors of
      the Company.  Also at the meeting, Beard Miller Company LLP was
      ratified as the Company’s independent auditors.  The results of
      the voting for each matter considered were as follows:a)
              The
      election as director to serve for a term of three years until a successor
      has been elected and qualified.
 
 For
              
              WithheldStanford
      Stoller
              1,583,005
              
              136,911
 
 b)
              The
      election as director to serve for a term of two years until a successor
      has been elected and qualified.
 
 For
              
              WithheldHenry
      Fitschen
              1,601,255
              
              118,661
 
 
 c)
              The
      appointment of Beard Miller Company LLP as auditors of the Company for the
      fiscal year ending December 31,
2008.
 
 For
              
              Against
              
              Abstain1,636,101
              
              41,263
              
              42,552
 
 In
      addition, the following directors, in addition to those elected, continue
      to serve as directors after the annual meeting of
  stockholders:David
      G. BakerJohn
      F. FeeneyEdith
      M. PerrottiITEM
      5.
              Other
      InformationNot
      applicable.
 
 23
  LINCOLN
PARK BANCORP AND SUBSIDIARY
 
 
 PART II –
OTHER INFORMATION (Cont’d)
  ITEM
      6.
              ExhibitsThe
      following Exhibits are filed as part of this report.31.1
              Certification
      of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.31.2
              Certification
      of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.32
              Certification
      of Chief Executive Officer and Chief Financial Officer Pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002.
 
 24
  SIGNATURES
 
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
 
 
 LINCOLN
      PARK BANCORPDate:
              August 14, 2008
              
              /s/ David G. BakerDavid
      G. BakerPresident
      and Chief Executive OfficerDate:
              August 14, 2008
              
              /s/ Nandini MallyaNandini
      MallyaVice
      President and Treasurer(Chief
      Financial Officer)






25