##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q









|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------

For the quarterly period ended March 31, 2009

OR



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

For the transition period from              to





LAPORTE BANCORP, INC.

(Exact name of Registrant as Specified in Its Charter)







|                                                               |  |                          |  |                                        
|-------------------------------------------------------------- |  | ------------------------ |  | ---------------------------------------
|Federal                                                        |  | 001-33733                |  | 26-1231235                             
|(State or Other Jurisdiction of Incorporation or Organization) |  | (Commission File Number) |  | (I.R.S. Employer Identification Number)

710 Indiana Avenue

La Porte, IN 46350

(219) 362-7511

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrants Principal Executive Officers)





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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES   ̈    NO   ̈

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



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | 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

Number of shares of common stock outstanding at May 7, 2009: 4,635,663, par value $0.01









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##### Table of Contents

TABLE OF CONTENTS



|                                                                                              |  |                                                                                                                    |  |           
|--------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------ |  | ----------
|                                                                                              |  |                                                                                                                    |  | PageNumber
|PART I  FINANCIAL INFORMATION                                                                |  |                                                                                                                   
|                                                                                              | 
|Item 1. Consolidated Financial Statements  LaPorte Bancorp, Inc.                             |  |                                                                                                                   
|                                                                                              |  |                                                                                                                   
|                                                                                              |  | Consolidated Balance Sheets, March 31, 2009 (Unaudited) and December 31, 2008                                      |  | 3         
|                                                                                              |  |                                                                                                                   
|                                                                                              |  | Consolidated Statements of Income and Comprehensive Income, Three Months Ended March 31, 2009 and 2008 (Unaudited) |  | 4         
|                                                                                              |  |                                                                                                                   
|                                                                                              |  | Consolidated Statements of Changes in Shareholders Equity, Three Months Ended March 31, 2009 and 2008 (Unaudited) |  | 5         
|                                                                                              |  |                                                                                                                   
|                                                                                              |  | Consolidated Statements of Cash Flows, Three Months Ended March 31, 2009 and 2008 (Unaudited)                      |  | 6         
|                                                                                              |  |                                                                                                                   
|                                                                                              |  | Notes to Consolidated Financial Statements (Unaudited)                                                             |  | 7         
|                                                                                              | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 18                                                                                                                
|                                                                                              | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |  | 29                                                                                                                
|                                                                                              | 
|Item 4. Controls and Procedures                                                               |  | 29                                                                                                                
|                                                                                              | 
|PART II  OTHER INFORMATION                                                                   |  |                                                                                                                   
|                                                                                              | 
|Item 1. Legal Proceedings                                                                     |  | 30                                                                                                                
|                                                                                              | 
|Item 1A. Risk Factors                                                                         |  | 30                                                                                                                
|                                                                                              | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 30                                                                                                                
|                                                                                              | 
|Item 3. Defaults Upon Senior Securities                                                       |  | 31                                                                                                                
|                                                                                              | 
|Item 4. Submission of Matters to a Vote of Security Holders                                   |  | 31                                                                                                                
|                                                                                              | 
|Item 5. Other Information                                                                     |  | 31                                                                                                                
|                                                                                              | 
|Item 6. Exhibits                                                                              |  | 31                                                                                                                
|                                                                                              | 
|Signatures                                                                                    |  | 32                                                                                                                
|                                                                                              | 
|Certifications                                                                                |  | 33                                                                                                                



2



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS
|------- | ---------------------------------

LAPORTE BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)



|                                                                                                                                                                             |  |               |         |   |                  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                             |  | March 31,2009 |         |   | December 31,2008 |  
|                                                                                                                                                                             |  | (Unaudited)   |         |   |                  |  
|ASSETS                                                                                                                                                                       |  |               |         |   |                  |   |         |  
|Cash and due from financial institutions                                                                                                                                     |  | $             | 5,730   |   |                  | $ | 5,628   |  
|Securities available for sale                                                                                                                                                |  |               | 108,509 |   |                  |   | 101,451 |  
|Federal Home Loan Bank (FHLB) stock, at cost (restricted)                                                                                                                    |  |               | 4,206   |   |                  |   | 4,206   |  
|Loans held for sale, at fair value                                                                                                                                           |  |               | 2,179   |   |                  |   | 124     |  
|Loans, net of allowance for loan losses of $2,483 at March 31, 2009 (unaudited), $2,512 at December 31, 2008                                                                 |  |               | 222,186 |   |                  |   | 219,926 |  
|Mortgage servicing rights                                                                                                                                                    |  |               | 339     |   |                  |   | 329     |  
|Other real estate owned                                                                                                                                                      |  |               | 677     |   |                  |   | 921     |  
|Premises and equipment, net                                                                                                                                                  |  |               | 11,552  |   |                  |   | 11,711  |  
|Goodwill                                                                                                                                                                     |  |               | 8,431   |   |                  |   | 8,431   |  
|Other intangible assets                                                                                                                                                      |  |               | 1,179   |   |                  |   | 1,272   |  
|Bank owned life insurance                                                                                                                                                    |  |               | 9,547   |   |                  |   | 9,455   |  
|Accrued interest receivable and other assets                                                                                                                                 |  |               | 5,268   |   |                  |   | 5,104   |  
|                                                                                                                                                                             |  |               |         |   |                  |   |         |  
|                                                                                                                                                                             |  |              
|Total assets                                                                                                                                                                 |  | $             | 379,803 |   |                  | $ | 368,558 |  
|                                                                                                                                                                             |  |               |         |   |                  |   |         |  
|                                                                                                                                                                             |  |              
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                         |  |               |         |   |                  |   |         |  
|Deposits                                                                                                                                                                     |  |               |         |   |                  |   |         |  
|Non-interest bearing                                                                                                                                                         |  | $             | 28,007  |   |                  | $ | 27,584  |  
|Interest bearing                                                                                                                                                             |  |               | 222,452 |   |                  |   | 207,230 |  
|                                                                                                                                                                             |  |               |         |   |                  |   |         |  
|Total deposits                                                                                                                                                               |  |               | 250,459 |   |                  |   | 234,814 |  
|Federal Home Loan Bank advances                                                                                                                                              |  |               | 65,732  |   |                  |   | 78,728  |  
|Subordinated debentures                                                                                                                                                      |  |               | 5,155   |   |                  |   | 5,155   |  
|FDIC guaranteed unsecured borrowings                                                                                                                                         |  |               | 4,804   |   |                  |   |        |  
|Other secured borrowings                                                                                                                                                     |  |               | 3,320   |   |                  |   | 650     |  
|Accrued interest payable and other liabilities                                                                                                                               |  |               | 3,175   |   |                  |   | 3,069   |  
|                                                                                                                                                                             |  |               |         |   |                  |   |         |  
|Total liabilities                                                                                                                                                            |  |               | 332,645 |   |                  |   | 322,416 |  
|                                                                                                                                                                             |  |              
|Shareholders equity                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Preferred stock, no par value; 1,000,000 shares authorized; none issued                                                                                                      |  |               |        |   |                  |   |        |  
|Common stock, $0.01 par value; 19,000,000 shares authorized; 4,783,163 shares issued; and 4,635,663 and 4,658,163 shares outstanding at
March 31, 2009 and December 31, 2008 |  |               | 48      |   |                  |   | 48      |  
|Additional paid-in capital                                                                                                                                                   |  |               | 21,224  |   |                  |   | 21,235  |  
|Surplus                                                                                                                                                                      |  |               | 770     |   |                  |   | 770     |  
|Retained earnings                                                                                                                                                            |  |               | 26,598  |   |                  |   | 26,108  |  
|Accumulated other comprehensive income, net of tax of $530 at March 31, 2009 (unaudited) and $198 at December 31,
2008                                                       |  |               | 1,028   |   |                  |   | 383     |  
|Treasury stock, at cost (2009  147,500 shares, 2008  125,000 shares)                                                                                                       |  |               | (905    | ) |                  |   | (774    | )
|Unearned Employee Stock Ownership Plan (ESOP) shares                                                                                                                         |  |               | (1,605  | ) |                  |   | (1,628  | )
|                                                                                                                                                                             |  |               |         |   |                  |   |         |  
|Total shareholders equity                                                                                                                                                   |  |               | 47,158  |   |                  |   | 46,142  |  
|                                                                                                                                                                             |  |               |         |   |                  |   |         |  
|                                                                                                                                                                             |  |              
|Total liabilities and shareholders equity                                                                                                                                   |  | $             | 379,803 |   |                  | $ | 368,558 |  
|                                                                                                                                                                             |  |               |         |   |                  |   |         |  

See accompanying notes to consolidated financial statements (unaudited)



3



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##### Table of Contents

PART I  FINANCIAL INFORMATION



|ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS
|------- | ---------------------------------

LAPORTE BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)

(in thousands, except per share data)



|                                                         |  |                             |       |   |      |   |       |  
|-------------------------------------------------------- |  | --------------------------- | ----- | - | ---- | - | ----- | -
|                                                         |  | Three MonthsEnded March 31, |      
|                                                         |  | 2009                        |       |   | 2008 |  
|Interest and dividend income                             |  |                             |       |   |      |   |       |  
|Loans, including fees                                    |  | $                           | 3,384 |   |      | $ | 3,763 |  
|Taxable securities                                       |  |                             | 1,139 |   |      |   | 1,102 |  
|Tax exempt securities                                    |  |                             | 71    |   |      |   | 62    |  
|FHLB stock                                               |  |                             | 42    |   |      |   | 50    |  
|Other interest income                                    |  |                             | 1     |   |      |   | 51    |  
|                                                         |  |                             |       |   |      |   |       |  
|Total interest and dividend income                       |  |                             | 4,637 |   |      |   | 5,028 |  
|                                                         |  |                            
|Interest expense                                         |  |                             |       |   |      |   |       |  
|Deposits                                                 |  |                             | 1,267 |   |      |   | 1,716 |  
|Federal Home Loan Bank advances                          |  |                             | 776   |   |      |   | 804   |  
|Subordinated debentures                                  |  |                             | 57    |   |      |   | 99    |  
|FDIC guaranteed unsecured borrowings                     |  |                             | 26    |   |      |   |      |  
|Other secured borrowings                                 |  |                             | 1     |   |      |   |      |  
|                                                         |  |                             |       |   |      |   |       |  
|Total interest expense                                   |  |                             | 2,127 |   |      |   | 2,619 |  
|                                                         |  |                             |       |   |      |   |       |  
|Net interest income                                      |  |                             | 2,510 |   |      |   | 2,409 |  
|Provision for loan losses                                |  |                             | 49    |   |      |   | 16    |  
|                                                         |  |                             |       |   |      |   |       |  
|Net interest income after provision for loan losses      |  |                             | 2,461 |   |      |   | 2,393 |  
|                                                         |  |                            
|Noninterest income                                       |  |                             |       |   |      |   |       |  
|Service charges on deposits                              |  |                             | 200   |   |      |   | 200   |  
|ATM and debit card fees                                  |  |                             | 67    |   |      |   | 68    |  
|Brokerage fees                                           |  |                             | (4    | ) |      |   | 38    |  
|Trust fees                                               |  |                             | 39    |   |      |   | 36    |  
|Earnings on life insurance, net                          |  |                             | 92    |   |      |   | 91    |  
|Net gains on mortgage banking activities                 |  |                             | 300   |   |      |   | 107   |  
|Loan servicing fees, net                                 |  |                             | (2    | ) |      |   | 18    |  
|Net gains on securities                                  |  |                             | 136   |   |      |   | 134   |  
|Other than temporary impairment on investment securities |  |                             |      |   |      |   | (142  | )
|Other income                                             |  |                             | (12   | ) |      |   | 32    |  
|                                                         |  |                             |       |   |      |   |       |  
|Total noninterest income                                 |  |                             | 816   |   |      |   | 582   |  
|                                                         |  |                            
|Noninterest expense                                      |  |                             |       |   |      |   |       |  
|Salaries and employee benefits                           |  |                             | 1,368 |   |      |   | 1,494 |  
|Occupancy and equipment                                  |  |                             | 512   |   |      |   | 504   |  
|Data processing                                          |  |                             | 108   |   |      |   | 95    |  
|Advertising                                              |  |                             | 41    |   |      |   | 44    |  
|Bank examination fees                                    |  |                             | 113   |   |      |   | 148   |  
|Amortization of intangibles                              |  |                             | 93    |   |      |   | 121   |  
|Other expenses                                           |  |                             | 412   |   |      |   | 404   |  
|                                                         |  |                             |       |   |      |   |       |  
|Total noninterest expense                                |  |                             | 2,647 |   |      |   | 2,810 |  
|                                                         |  |                             |       |   |      |   |       |  
|Income before income taxes                               |  |                             | 630   |   |      |   | 165   |  
|Income tax expense                                       |  |                             | 140   |   |      |   | 3     |  
|                                                         |  |                             |       |   |      |   |       |  
|Net income                                               |  | $                           | 490   |   |      | $ | 162   |  
|                                                         |  |                             |       |   |      |   |       |  
|Other comprehensive income, net of tax                   |  |                             |       |   |      |   |       |  
|Unrealized gain on securities available for sale         |  | $                           | 977   |   |      | $ | 1,359 |  
|Income tax effect                                        |  |                             | (332  | ) |      |   | (462  | )
|                                                         |  |                             |       |   |      |   |       |  
|Other comprehensive income                               |  |                             | 645   |   |      |   | 897   |  
|                                                         |  |                             |       |   |      |   |       |  
|Comprehensive income                                     |  | $                           | 1,135 |   |      | $ | 1,059 |  
|                                                         |  |                             |       |   |      |   |       |  
|Basic and diluted earnings per share                     |  | $                           | 0.11  |   |      | $ | 0.04  |  
|                                                         |  |                             |       |   |      |   |       |  

See accompanying notes to consolidated financial statements (unaudited)



4



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS - continued
|------- | ---------------------------------------------



LAPORTE BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (Unaudited)

Three months ended March 31, 2009 and 2008

(in thousands, except share
data)



|                                                                                                                    |  |             |    |                          |   |        |         |  |                  |     |                                                       |   |        |               |   |       |                    |  |   |       |   |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------------- |  | ----------- | -- | ------------------------ | - | ------ | ------- |  | ---------------- | --- | ----------------------------------------------------- | - | ------ | ------------- | - | ----- | ------------------ |  | - | ----- | - |  | - | ------ | - |  | - | ------ | -
|                                                                                                                    |  | CommonStock |    | AdditionalPaid-InCapital |   |        | Surplus |  | RetainedEarnings |     | AccumulatedOtherComprehensiveIncome (Loss),Net of Tax |   |        | TreasuryStock |   |       | UnearnedESOPShares |  |   | Total |  
|Balance at January 1, 2008                                                                                          |  | $           | 48 |                          | $ | 21,266 |         |  | $                | 770 |                                                       | $ | 26,563 |               | $ | (224  | )                  |  | $ |      |   |  | $ | (1,718 | ) |  | $ | 46,705 |  
|Comprehensive income:                                                                                               |  |             |    |                          |   |        |         |  |                  |     |                                                       |   |        |               |   |       |                    |  |   |       |   |  |   |        |   |  |   |        |  
|Net income                                                                                                          |  |             |   |                          |   |       |         |  |                  |    |                                                       |   | 162    |               |   |      |                    |  |   |      |   |  |   |       |   |  |   | 162    |  
|Other comprehensive income:                                                                                         |  |             |    |                          |   |        |         |  |                  |     |                                                       |   |        |               |   |       |                    |  |   |       |   |  |   |        |   |  |   |        |  
|Net change in unrealized gain on securities available for sale, net of reclassification adjustments and tax effects |  |             |   |                          |   |       |         |  |                  |    |                                                       |   |       |               |   | 897   |                    |  |   |      |   |  |   |       |   |  |   | 897    |  
|Total comprehensive income                                                                                          |  |             |    |                          |   |        |         |  |                  |     |                                                       |   |        |               |   |       |                    |  |   |       |   |  |   |        |   |  |   | 1,059  |  
|ESOP shares earned, 2,261 shares                                                                                    |  |             |   |                          |   | (6     | )       |  |                  |    |                                                       |   |       |               |   |      |                    |  |   |      |   |  |   | 22     |   |  |   | 16     |  
|                                                                                                                    |  |             |    |                          |   |        |         |  |                  |     |                                                       |   |        |               |   |       |                    |  |   |       |   |  |   |        |   |  |   |        |  
|Balance at March 31, 2008                                                                                           |  | $           | 48 |                          | $ | 21,260 |         |  | $                | 770 |                                                       | $ | 26,725 |               | $ | 673   |                    |  | $ |      |   |  | $ | (1,696 | ) |  | $ | 47,780 |  
|                                                                                                                    |  |             |    |                          |   |        |         |  |                  |     |                                                       |   |        |               |   |       |                    |  |   |       |   |  |   |        |   |  |   |        |  
|                                                                                                                    |  |             |    |                          |   |        |         | 
|Balance at January 1, 2009                                                                                          |  | $           | 48 |                          | $ | 21,235 |         |  | $                | 770 |                                                       | $ | 26,108 |               | $ | 383   |                    |  | $ | (774  | ) |  | $ | (1,628 | ) |  | $ | 46,142 |  
|Comprehensive income:                                                                                               |  |             |    |                          |   |        |         |  |                  |     |                                                       |   |        |               |   |       |                    |  |   |       |   |  |   |        |   |  |   |        |  
|Net income                                                                                                          |  |             |   |                          |   |       |         |  |                  |    |                                                       |   | 490    |               |   |      |                    |  |   |      |   |  |   |       |   |  |   | 490    |  
|Other comprehensive income:                                                                                         |  |             |    |                          |   |        |         |  |                  |     |                                                       |   |        |               |   |       |                    |  |   |       |   |  |   |        |   |  |   |        |  
|Net change in unrealized gain on securities available for sale, net of reclassification adjustments and tax effects |  |             |   |                          |   |       |         |  |                  |    |                                                       |   |       |               |   | 645   |                    |  |   |      |   |  |   |       |   |  |   | 645    |  
|Total comprehensive income                                                                                          |  |             |    |                          |   |        |         |  |                  |     |                                                       |   |        |               |   |       |                    |  |   |       |   |  |   |        |   |  |   | 1,135  |  
|Treasury shares purchased, 22,500 shares                                                                            |  |             |   |                          |   |       |         |  |                  |    |                                                       |   |       |               |   |      |                    |  |   | (131  | ) |  |   |       |   |  |   | (131   | )
|ESOP shares earned, 2,261 shares                                                                                    |  |             |   |                          |   | (11    | )       |  |                  |    |                                                       |   |       |               |   |      |                    |  |   |      |   |  |   | 23     |   |  |   | 12     |  
|                                                                                                                    |  |             |    |                          |   |        |         |  |                  |     |                                                       |   |        |               |   |       |                    |  |   |       |   |  |   |        |   |  |   |        |  
|Balance at March 31, 2009                                                                                           |  | $           | 48 |                          | $ | 21,224 |         |  | $                | 770 |                                                       | $ | 26,598 |               | $ | 1,028 |                    |  | $ | (905  | ) |  | $ | (1,605 | ) |  | $ | 47,158 |  
|                                                                                                                    |  |             |    |                          |   |        |         |  |                  |     |                                                       |   |        |               |   |       |                    |  |   |       |   |  |   |        |   |  |   |        |  

See accompanying notes to consolidated financial statements (unaudited)



5



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS - continued
|------- | ---------------------------------------------



LAPORTE BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)



|                                                                                          |  |                             |         |   |      |   |         |  
|----------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                          |  | Three Months EndedMarch 31, |        
|                                                                                          |  | 2009                        |         |   | 2008 |  
|Cash flows from operating activities                                                      |  |                             |         |   |      |   |         |  
|Net income                                                                                |  | $                           | 490     |   |      | $ | 162     |  
|Adjustments to reconcile net income to net cash from operating activities:                |  |                             |         |   |      |   |         |  
|Depreciation                                                                              |  |                             | 197     |   |      |   | 192     |  
|Provision for loan losses                                                                 |  |                             | 49      |   |      |   | 16      |  
|Net gains on securities                                                                   |  |                             | (136    | ) |      |   | (134    | )
|Other than temporary impairment on investment securities                                  |  |                             |        |   |      |   | 142     |  
|Net gains on sales of loans                                                               |  |                             | (255    | ) |      |   | (74     | )
|Originations of loans held for sale                                                       |  |                             | (13,781 | ) |      |   | (6,151  | )
|Proceeds from sales of loans held for sale                                                |  |                             | 11,981  |   |      |   | 4,722   |  
|Recognition of mortgage servicing rights                                                  |  |                             | (45     | ) |      |   | (15     | )
|Amortization of mortgage servicing rights                                                 |  |                             | 36      |   |      |   | 20      |  
|Net change in loan servicing rights valuation allowance                                   |  |                             | (1      | ) |      |   |        |  
|Net (gains) losses on sales of other real estate owned                                    |  |                             | (7      | ) |      |   | 16      |  
|Write down of other real estate owned                                                     |  |                             | 61      |   |      |   |        |  
|Earnings on life insurance, net                                                           |  |                             | (92     | ) |      |   | (91     | )
|Amortization of intangible assets                                                         |  |                             | 93      |   |      |   | 121     |  
|ESOP compensation expense                                                                 |  |                             | 12      |   |      |   | 16      |  
|Change in assets and liabilities:                                                         |  |                             |         |   |      |   |         |  
|Accrued interest receivable and other assets                                              |  |                             | (496    | ) |      |   | 308     |  
|Accrued interest payable and other liabilities                                            |  |                             | 106     |   |      |   | 214     |  
|                                                                                          |  |                             |         |   |      |   |         |  
|Net cash from operating activities                                                        |  |                             | (1,788  | ) |      |   | (536    | )
|                                                                                          |  |                            
|Cash flows from investing activities                                                      |  |                             |         |   |      |   |         |  
|Net change in loans                                                                       |  |                             | (2,386  | ) |      |   | 3,132   |  
|Proceeds from sales of other real estate owned                                            |  |                             | 267     |   |      |   | 402     |  
|Proceeds from maturities, calls and principal repayments of securities available for sale |  |                             | 5,950   |   |      |   | 8,560   |  
|Proceeds from sales of securities available for sale                                      |  |                             | 4,737   |   |      |   | 12,710  |  
|Purchases of securities available for sale                                                |  |                             | (16,632 | ) |      |   | (27,102 | )
|Premises and equipment expenditures, net                                                  |  |                             | (38     | ) |      |   | (239    | )
|                                                                                          |  |                             |         |   |      |   |         |  
|Net cash from investing activities                                                        |  |                             | (8,102  | ) |      |   | (2,537  | )
|                                                                                          |  |                            
|Cash flows from financing activities                                                      |  |                             |         |   |      |   |         |  
|Net change in deposits                                                                    |  |                             | 15,645  |   |      |   | 4,857   |  
|Proceeds from FHLB advances                                                               |  |                             | 2,500   |   |      |   | 39,755  |  
|Repayment of FHLB advances                                                                |  |                             | (15,496 | ) |      |   | (41,300 | )
|Proceed from issuance of unsecured borrowing, net of issuance costs                       |  |                             | 4,804   |   |      |   |        |  
|Proceeds from other secured borrowings                                                    |  |                             | 38,180  |   |      |   |        |  
|Repayment of other secured borrowings                                                     |  |                             | (35,510 | ) |      |   |        |  
|Purchase of treasury stock                                                                |  |                             | (131    | ) |      |   |        |  
|                                                                                          |  |                             |         |   |      |   |         |  
|Net cash from financing activities                                                        |  |                             | 9,992   |   |      |   | 3,312   |  
|                                                                                          |  |                             |         |   |      |   |         |  
|                                                                                          |  |                            
|Net change in cash and cash equivalents                                                   |  |                             | 102     |   |      |   | 239     |  
|                                                                                          |  |                            
|Cash and cash equivalents at beginning of period                                          |  |                             | 5,628   |   |      |   | 9,937   |  
|                                                                                          |  |                             |         |   |      |   |         |  
|                                                                                          |  |                            
|Cash and cash equivalents at end of period                                                |  | $                           | 5,730   |   |      | $ | 10,176  |  
|                                                                                          |  |                             |         |   |      |   |         |  
|                                                                                          |  |                            
|Supplemental cash flow information:                                                       |  |                             |         |   |      |   |         |  
|Cash paid during the period for:                                                          |  |                             |         |   |      |   |         |  
|Interest paid                                                                             |  | $                           | 2,110   |   |      | $ | 2,707   |  
|Income taxes paid                                                                         |  |                             |        |   |      |   |        |  
|Supplemental noncash disclosures:                                                         |  |                             |         |   |      |   |         |  
|Transfers from loans receivable to other real estate owned                                |  | $                           | 77      |   |      | $ | 472     |  

See accompanying notes to consolidated financial statements (unaudited)



6



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS - continued
|------- | ---------------------------------------------



LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except share and per share data)

NOTE 1  BASIS OF PRESENTATION AND CONSOLIDATION

The unaudited consolidated financial statements included herein include the accounts of LaPorte Bancorp, Inc. (the Bancorp), its wholly
owned subsidiary, The LaPorte Savings Bank (the Bank) and the Banks wholly owned subsidiary, LPSB Investments LTD., Cayman (LPSB Ltd.) together referred to as the Company. The Bancorp was formed on
October 12, 2007. LPSB Ltd. began operations in 2002 when the Bank received approval from the Federal Deposit Insurance Corporation to form the subsidiary in the Cayman Islands. LPSB Ltd. held and managed a portion of the Banks investment
portfolio until July 30, 2008 when the securities were transferred to the Bank as LPSB Ltd. was in the process of being dissolved. LPSB Ltd. was deemed to be dissolved on March 17, 2009. Intercompany transactions and balances are
eliminated in consolidation.

The unaudited consolidated financial statements included herein have been prepared by management in accordance with
accounting principles generally accepted in the United States of America for interim financial statements and Article 10 of Regulation S-X of the Securities and Exchange Commission. In the opinion of management, the unaudited consolidated financial
statements contain all material adjustments (consisting of normal recurring accruals) and disclosures which are necessary in the opinion of management to make the financial statements not misleading and for a fair presentation of the financial
position and results of operations for the interim periods presented herein.

Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, the interim consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2008 included in the Form 10-K Annual Report of LaPorte
Bancorp, Inc. for the fiscal year ended December 31, 2008.

With operating results being so closely related to and responsive to changes in economic
conditions, the results for the three-month period ended March 31, 2009 may not necessarily indicate the results to be expected for the full year ending December 31, 2009.



7



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS - continued
|------- | ---------------------------------------------



LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except
share and per share data)



NOTE 2  RECENT ACCOUNTING PRONOUNCEMENTS

Adoption of New Accounting Standards:

FSP EITF 03-06-01

In June 2009, the FASB issued FSP No. EITF 03-06-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities. This
FASB staff position concluded that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends participate in undistributed earnings with common shareholders and therefore are considered participating
securities for purposes of computing earnings per share. Entities that have participating securities that are not convertible into common stock are required to use the two-class method of computing earnings per share. The two-class
method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. This FASB
staff position is effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. This FASB staff position became effective for the Company on January 1, 2009. The impact of adoption was not
material to the Companys earnings per share data.

FASB Statement No. 160

In December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements  an amendment of ARB No. 51. SFAS No. 160 requires the ownership interest
in subsidiaries held by parties other than the parent be clearly identified, labeled and presented in the consolidated balance sheet within equity, but separate from the parents equity. It also requires the amount of consolidated net income
attributable to the parent and the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of income. This standard became effective for the Company on January 1, 2009. The impact of adoption was
not material to the Companys consolidated financial condition or results of operation.

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. SFAS No. 161 requires enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related items are accounted for under SFAS No. 133 and how derivative instruments and
related hedged items affect an entitys financial position, financial performance and cash flows. This standard became effective for the Company on January 1, 2009. The impact of adoption was not material to the Companys consolidated
financial condition or results of operation.

FASB Statement No. 141(R)

In December 2007, the FASB issued Statement No. 141(R), Business Combinations. This statement replaces FASB Statement No. 141, Business Combinations. SFAS No. 141(R) establishes principles
and requirements for how an acquiring company (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquire, (2) recognizes and measures the
goodwill acquired in the business combination or a gain from a bargain purchase, and (3) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business
combination. The new standard became effective for the Company on January 1, 2009. The impact of adoption was not material to the Companys consolidated financial condition or results of operation.

FSP FASB Statement No. 157-2

In February 2008, the FASB issued
FASB Staff Position No. 157-2. The staff position delays the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements
on a recurring basis. The expiration of this delay on January 1, 2009, did not have a material impact to the Companys consolidated financial condition or results of operation.



8



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS - continued
|------- | ---------------------------------------------



LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except
share and per share data)



NOTE 2  RECENT ACCOUNTING PRONOUNCEMENTS - continued



Effect of Newly Issued But Not Yet Effective Accounting Standards:

FSP FASB Statement No. 132(R)-1

In December 2008, the FASB
issued FASB Staff Position No. 132(R)-1, Employers Disclosures about Postretirement Benefit Plan Assets. This FASB staff position amends FASB Statement No. 132 to provide guidance on an employers disclosures about plan
assets of a defined benefit pension or other postretirement plan. FSP FAS 132(R)-1 requires disclosure of the fair value of each major category of plan assets for pension plans and other postretirement benefit plans. This FASB staff position becomes
effective for the Company on January 1, 2010. The Company is currently evaluating the impact of adopting FSP FAS 132(R)-1 on the consolidated financial statements, but it is not expected to have a material impact to the Companys
consolidated financial statements.

FSP FASB Statement No. 157-4

In April 2009, the FASB issued FASB Staff Position No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly. This FASB staff position provides additional guidance on determining fair value when the volume and level of activity for the asset or liability have significantly decreased when compared with normal market activity for the
asset or liability. A significant decrease in the volume or level of activity for the asset or liability is an indication that transactions or quoted prices may not be determinative of fair value because transactions may not be orderly. In that
circumstance, further analysis of transactions or quoted prices is needed, and an adjustment to the transactions or quoted prices may be necessary to estimate fair value. This FASB staff position becomes effective for interim reporting periods
ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The adoption of this FASB staff position is not expected to have a material impact on the Companys consolidated financial position or
results of operations.

FSP FASB Statement No. 115-2 & 124-2

In April 2009, the FASB issued FASB Staff Position No. 115-2 and 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. This FASB staff position amends the other-than-temporary impairment
guidance in U.S. generally accepted accounting principles for debt securities. If an entity determines that it has an other-than-temporary impairment on a security, it must recognize the credit loss on the security in the income statement. The
credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. The staff position expands disclosures about other-than-temporary impairment and requires that the annual
disclosures in FASB Statement No. 115 and FSP FAS 115-1 and FAS 124-1 be made for interim reporting periods. This FASB staff position becomes effective for interim reporting periods ending after June 15, 2009, with early adoption permitted
for periods ending after March 15, 2009. The adoption of this FASB staff position is not expected to have a material impact on the Companys consolidated financial position or results of operations.

FSP FASB Statement No. 107-1 and APB 28-1

In April 2009, the
FASB issued FASB Staff Position FAS No. 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. This FASB staff position amends FASB Statement No. 107 to require disclosures about fair values of financial
instruments for interim reporting periods as well as in annual financial statements. The staff position also amends APB Opinion No. 28 to require those disclosures in summarized financial information at interim reporting periods. This FASB
staff position becomes effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The adoption of this FASB staff position is not expected to have a material
impact on the Companys consolidated financial position or results of operations.



9



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS - continued
|------- | ---------------------------------------------



LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except
share and per share data)



NOTE 3  EARNINGS PER SHARE

Basic earnings per common share is determined by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding for the period. ESOP shares are considered
outstanding for this calculation unless unearned. Diluted earnings per common share is determined by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding for the period, adjusted for the
dilutive effect of common share equivalents (-0- for the three months ended March 31, 2009 and 2008). Diluted earnings per common share is equal to basic earnings per common share for the periods ended March 31, 2009 and 2008, as there
were no potentially dilutive common shares for the three months ended March 31, 2009 and 2008. The factors used in the earnings per common share computation follow:



|                                           |  |                    |           |   |                    |   |           |  
|------------------------------------------ |  | ------------------ | --------- | - | ------------------ | - | --------- | -
|                                           |  | Three Months Ended |           |   | Three Months Ended |  
|                                           |  | March 31, 2009     |           |   | March 31, 2008     |  
|Basic                                      |  |                    |           |   |                    |   |           |  
|Net income                                 |  | $                  | 490       |   |                    | $ | 162       |  
|                                           |  |                    |           |   |                    |   |           |  
|                                           |  |                   
|Weighted average common shares outstanding |  |                    | 4,641,246 |   |                    |   | 4,783,163 |  
|Less: Average unallocated ESOP shares      |  |                    | (161,674  | ) |                    |   | (170,719  | )
|                                           |  |                    |           |   |                    |   |           |  
|Average shares                             |  |                    | 4,479,572 |   |                    |   | 4,612,444 |  
|                                           |  |                    |           |   |                    |   |           |  
|                                           |  |                   
|Basic earnings per common share            |  | $                  | 0.11      |   |                    | $ | 0.04      |  
|                                           |  |                    |           |   |                    |   |           |  

NOTE 4  SECURITIES AVAILABLE FOR SALE

The fair value of available for sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income were as follows:

March 31, 2009 (Unaudited)



|                                                                |  |           |         |                 |   |                  |  |   |      |  
|--------------------------------------------------------------- |  | --------- | ------- | --------------- | - | ---------------- |  | - | ---- | -
|                                                                |  | FairValue |         | UnrealizedGains |   | UnrealizedLosses | 
|U.S. Treasury and federal agency                                |  | $         | 11,141  |                 | $ | 49               |  | $ | (20  | )
|State and municipal                                             |  |           | 8,726   |                 |   | 99               |  |   | (94  | )
|Mortgage-backed securities                                      |  |           | 54,293  |                 |   | 1,728            |  |   | (1   | )
|Government agency sponsored collateralized mortgage obligations |  |           | 20,551  |                 |   | 242              |  |   | (27  | )
|Privately held collateralized mortgage obligations              |  |           | 7,971   |                 |   | 407              |  |   | (105 | )
|Corporate debt securities                                       |  |           | 5,817   |                 |   |                 |  |   | (720 | )
|                                                                |  |           |         |                 |   |                  |  |   |      |  
|Total debt securities                                           |  |           | 108,499 |                 |   | 2,525            |  |   | (967 | )
|Equity securities                                               |  |           | 10      |                 |   |                 |  |   |     |  
|                                                                |  |           |         |                 |   |                  |  |   |      |  
|                                                                |  |           |        
|Total                                                           |  | $         | 108,509 |                 | $ | 2,525            |  | $ | (967 | )
|                                                                |  |           |         |                 |   |                  |  |   |      |  



10



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS - continued
|------- | ---------------------------------------------



LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except
share and per share data)



NOTE 4  SECURITIES AVAILABLE FOR SALE - continued



December 31, 2008



|                                                                |  |            |         |                 |   |                  |  |   |      |  
|--------------------------------------------------------------- |  | ---------- | ------- | --------------- | - | ---------------- |  | - | ---- | -
|                                                                |  | Fair Value |         | UnrealizedGains |   | UnrealizedLosses | 
|U.S. Treasury and federal agency                                |  | $          | 11,035  |                 | $ | 180              |  | $ |     |  
|State and municipal                                             |  |            | 6,200   |                 |   | 28               |  |   | (121 | )
|Mortgage-backed securities                                      |  |            | 52,958  |                 |   | 1,112            |  |   | (82  | )
|Government agency sponsored collateralized mortgage obligations |  |            | 17,711  |                 |   | 109              |  |   | (116 | )
|Privately held collateralized mortgage obligations              |  |            | 7,888   |                 |   | 45               |  |   | (181 | )
|Corporate debt securities                                       |  |            | 5,649   |                 |   | 13               |  |   | (406 | )
|                                                                |  |            |         |                 |   |                  |  |   |      |  
|Total debt securities                                           |  |            | 101,441 |                 |   | 1,487            |  |   | (906 | )
|Equity securities                                               |  |            | 10      |                 |   |                 |  |   |     |  
|                                                                |  |            |         |                 |   |                  |  |   |      |  
|                                                                |  |            |        
|Total                                                           |  | $          | 101,451 |                 | $ | 1,487            |  | $ | (906 | )
|                                                                |  |            |         |                 |   |                  |  |   |      |  

At March 31, 2009, we did not believe any individual unrealized loss represented other-than-temporary
impairment. The unrealized losses were primarily attributable to changes in interest rates and the widening of pricing spreads on corporate debt securities compared to the government and agency markets. This contributed to the increased unrealized
loss on corporate debt securities at March 31, 2009. We have both the intent and ability to hold these securities for a time necessary to recover the amortized cost of our securities.

NOTE 5  LOANS

Loans at March 31, 2009 (Unaudited) and
December 31, 2008 were as follows:



|                                     |  |               |         |   |                  |   |         |  
|------------------------------------ |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                     |  | March 31,2009 |         |   | December 31,2008 |  
|                                     |  | (Unaudited)   |         |   |                  |  
|Commercial                           |  | $             | 20,570  |   |                  | $ | 19,390  |  
|Real Estate:                         |  |               |         |   |                  |   |         |  
|Residential                          |  |               | 81,237  |   |                  |   | 85,462  |  
|Commercial                           |  |               | 84,626  |   |                  |   | 80,538  |  
|Construction                         |  |               | 9,416   |   |                  |   | 7,736   |  
|Consumer                             |  |               | 28,694  |   |                  |   | 29,201  |  
|                                     |  |               |         |   |                  |   |         |  
|Subtotal                             |  |               | 224,543 |   |                  |   | 222,327 |  
|Less: Net deferred loan (fees) costs |  |               | 126     |   |                  |   | 111     |  
|Allowance for loan losses            |  |               | (2,483  | ) |                  |   | (2,512  | )
|                                     |  |               |         |   |                  |   |         |  
|                                     |  |              
|Loans, net                           |  | $             | 222,186 |   |                  | $ | 219,926 |  
|                                     |  |               |         |   |                  |   |         |  



11



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS - continued
|------- | ---------------------------------------------



LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except
share and per share data)



NOTE 5  LOANS - continued



Activity in the allowance for loan losses was as follows:



|                          |  |                             |       |   |      |   |       |  
|------------------------- |  | --------------------------- | ----- | - | ---- | - | ----- | -
|                          |  | Three Months EndedMarch 31, |      
|                          |  | 2009                        |       |   | 2008 |  
|                          |  | (Unaudited)                 |      
|Beginning balance         |  | $                           | 2,512 |   |      | $ | 1,797 |  
|Provision for loan losses |  |                             | 49    |   |      |   | 16    |  
|Loans charged-off         |  |                             | (98   | ) |      |   | (114  | )
|Recoveries                |  |                             | 20    |   |      |   | 18    |  
|                          |  |                             |       |   |      |   |       |  
|                          |  |                            
|Ending balance            |  | $                           | 2,483 |   |      | $ | 1,717 |  
|                          |  |                             |       |   |      |   |       |  

Purchased Loans Subject to SOP 03-3

The Company purchased loans during 2007, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments
would not be collected. The carrying amount of those loans is as follows:



|                                        |  |               |       |                  |   |      
|--------------------------------------- |  | ------------- | ----- | ---------------- | - | -----
|                                        |  | March 31,2009 |       | December 31,2008
|                                        |  | (Unaudited)   |       |                 
|Commercial                              |  | $             | 118   |                  | $ | 125  
|Commercial real estate                  |  |               | 1,112 |                  |   | 1,323
|Consumer                                |  |               | 20    |                  |   | 21   
|Residential real estate                 |  |               | 182   |                  |   | 186  
|                                        |  |               |       |                  |   |      
|                                        |  |              
|Outstanding balance                     |  | $             | 1,432 |                  | $ | 1,655
|                                        |  |               |       |                  |   |      
|                                        |  |              
|Carrying amount, net of allowance of $0 |  | $             | 900   |                  | $ | 986  
|                                        |  |               |       |                  |   |      

Accretable yield, or income expected to be collected, is as follows:



|                                           |  |                             |     |   |      |   |     |  
|------------------------------------------ |  | --------------------------- | --- | - | ---- | - | --- | -
|                                           |  | Three Months EndedMarch 31, |    
|                                           |  | 2009                        |     |   | 2008 |  
|                                           |  | (Unaudited)                 |    
|Beginning balance                          |  | $                           | 78  |   |      | $ | 126 |  
|Reclassification from non-accretable yield |  |                             | 46  |   |      |   | 36  |  
|Accretion of income                        |  |                             | (62 | ) |      |   | (41 | )
|                                           |  |                             |     |   |      |   |     |  
|                                           |  |                            
|Ending balance                             |  | $                           | 62  |   |      | $ | 121 |  
|                                           |  |                             |     |   |      |   |     |  

For the purchased loans disclosed above, the Company did not increase the allowance for loan losses during 2009 or
2008. No allowance for loan losses were reversed during 2009 or 2008.



12



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS - continued
|------- | ---------------------------------------------



LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except
share and per share data)

NOTE 6  FAIR VALUE

Effective January 1, 2008, the Company adopted SFAS No. 157, which provides a framework for measuring fair value under GAAP.

The Company also
adopted SFAS No. 159, on January 1, 2008. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. This statement also
establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. The Company elected the fair value option for its
loans held for sale on a prospective basis effective January 1, 2008, in order to achieve operational simplification. Effective January 1, 2008, the Company adopted SAB No. 109 and, accordingly, began to recognize residential mortgage loan
commitment derivatives at fair value on a prospective basis. Additionally, the Company valued securities available for sale at fair value prior to the adoption of SFAS No. 157 and SFAS No. 159; therefore, there is no transition adjustment resulting
from the adoption of SFAS No. 157 and SFAS No. 159.

SFAS No. 157 defines fair value as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS No. 157 establishes a fair value hierarchy which
requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement
date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level
3: Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely
used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities relationship to other benchmark quoted securities (Level 2 inputs).

The fair value of loans held for sale and residential mortgage loan commitment derivatives are determined by obtaining quoted prices for similar loans and commitments
with similar interest rates and maturities from major secondary markets (Level 2 inputs).

The fair value of impaired loans with specific allocations of
the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach (Level 2 inputs).
Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant for determining fair value (Level 3 inputs).



13



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS - continued
|------- | ---------------------------------------------



LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except
share and per share data)

NOTE 6  FAIR VALUE  continued

The fair value of servicing rights is based on a valuation model that calculates the present value of estimated net servicing income. The valuation model incorporates assumptions that market participants would use in
estimating future net servicing income (Level 3 inputs).

Assets Measured on a Recurring Basis

Assets measured at fair value on a recurring basis are summarized below:



|                                                 |  |                  |         |                                                             |   |                                            |  |                                        |         |  |  
|------------------------------------------------ |  | ---------------- | ------- | ----------------------------------------------------------- | - | ------------------------------------------ |  | -------------------------------------- | ------- |  | -
|                                                 |  |                  |         | Fair Value Measurements atMarch 31, 2009                   
|                                                 |  | March 31,2009    |         | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   | SignificantOtherObservable Inputs(Level 2) |  | SignificantUnobservableInputs(Level 3)
|Assets:                                          |  |                  |         |                                                             |   |                                            |  |                                        |         |  |  
|Securities available for sale                    |  | $                | 108,509 |                                                             | $ | 10                                         |  | $                                      | 108,499 |  | 
|Loans held for sale                              |  |                  | 2,179   |                                                             |   |                                           |  |                                        | 2,179   |  | 
|Residential mortgage loan commitment derivatives |  |                  | 86      |                                                             |   |                                           |  |                                        | 86      |  | 
|                                                 |  |                 
|                                                 |  |                  |         | December 31, 2008                                          
|                                                 |  | December 31,2008 |         | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   | SignificantOtherObservable Inputs(Level 2) |  | SignificantUnobservableInputs(Level 3)
|Assets:                                          |  |                  |         |                                                             |   |                                            |  |                                        |         |  |  
|Securities available for sale                    |  | $                | 101,451 |                                                             | $ | 10                                         |  | $                                      | 101,441 |  | 
|Loans held for sale                              |  |                  | 124     |                                                             |   |                                           |  |                                        | 124     |  | 
|Residential mortgage loan commitment derivatives |  |                  | 31      |                                                             |   |                                           |  |                                        | 31      |  | 



14



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS - continued
|------- | ---------------------------------------------



LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except
share and per share data)

NOTE 6  FAIR VALUE  continued

The difference between the aggregate fair value and the aggregate remaining contractual principal balance outstanding for loans held for sale and residential mortgage loan commitment derivatives for which the fair
value option has been elected was:



|                                                 |  |                     |       |            |   |                      |  |   |      
|------------------------------------------------ |  | ------------------- | ----- | ---------- | - | -------------------- |  | - | -----
|                                                 |  | March 31, 2009     
|                                                 |  | AggregateFair Value |       | Difference |   | ContractualPrincipal
|Loans held for sale                              |  | $                   | 2,179 |            | $ | 29                   |  | $ | 2,150
|Residential mortgage loan commitment derivatives |  |                     | 6,290 |            |   | 86                   |  |   | 6,204
|                                                 | 
|                                                 |  | December 31, 2008  
|                                                 |  | AggregateFair Value |       | Difference |   | ContractualPrincipal
|Loans held for sale                              |  | $                   | 124   |            | $ | 4                    |  | $ | 120  
|Residential mortgage loan commitment derivatives |  |                     | 1,816 |            |   | 31                   |  |   | 1,785

For items for which the fair value option has been elected, interest income is recorded within the consolidated
statements of income and comprehensive income based on the contractual amount of interest income earned on financial assets (none were in nonaccrual status).

The following table presents the amount of gains and losses from fair value changes included in income before income taxes for financial assets carried at fair value for the three months ended March 31, 2009 and 2008:



|                                                 |  |                                                                                                                                                              |    |                 |   |                 |  |                                                              |   |  |   |   
|------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | -- | --------------- | - | --------------- |  | ------------------------------------------------------------ | - |  | - | --
|                                                 |  | Changes in Fair Values for the three months ended March 31, 2009 and 2008,for the Items Measured at Fair Value Pursuant to Election of the Fair Value Option
|                                                 |  | Other Gains andLosses                                                                                                                                        |    | Interest Income |   | InterestExpense |  | Total Changesin Fair ValuesIncluded inCurrent PeriodEarnings
|Three Months Ended March 31, 2009                |  |                                                                                                                                                              |    |                 |   |                 |  |                                                              |   |  |   |   
|Assets:                                          |  |                                                                                                                                                              |    |                 |   |                 |  |                                                              |   |  |   |   
|Loans held for sale                              |  | $                                                                                                                                                            | 29 |                 | $ | 4               |  | $                                                            |  |  | $ | 33
|Residential mortgage loan commitment derivatives |  |                                                                                                                                                              | 86 |                 |   |                |  |                                                              |  |  |   | 86
|                                                 |  |                                                                                                                                                              |    |                
|Three Months Ended March 31, 2008                |  |                                                                                                                                                              |    |                 |   |                 |  |                                                              |   |  |   |   
|Assets:                                          |  |                                                                                                                                                              |    |                 |   |                 |  |                                                              |   |  |   |   
|Loans held for sale                              |  | $                                                                                                                                                            | 15 |                 | $ | 2               |  | $                                                            |  |  | $ | 17
|Residential mortgage loan commitment derivatives |  |                                                                                                                                                              | 17 |                 |   |                |  |                                                              |  |  |   | 17



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS - continued
|------- | ---------------------------------------------



LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except
share and per share data)

NOTE 6  FAIR VALUE - continued

Assets Measured on a Non-Recurring Basis

Assets measured at fair value on a non-recurring basis are summarized
below:



|                                              |  |                  |       |                                        |   |      
|--------------------------------------------- |  | ---------------- | ----- | -------------------------------------- | - | -----
|                                              |  |                  |       | Fair ValueMeasurementsat March 31,2009
|                                              |  | March 31,2009    |       | SignificantUnobservableInputs(Level 3)
|Assets:                                       |  |                  |       |                                        |   |      
|Impaired loans with specific loss allocations |  |                  |       |                                        |   |      
| collateral dependent                        |  | $                | 1,356 |                                        | $ | 1,356
|Other real estate owned                       |  |                  | 349   |                                        |   | 349  
|                                              |  |                 
|                                              |  |                  |       | December 31,2008                      
|                                              |  | December 31,2008 |       | SignificantUnobservableInputs(Level 3)
|Assets:                                       |  |                  |       |                                        |   |      
|Impaired loans with specific loss allocations |  |                  |       |                                        |   |      
| collateral dependent                        |  | $                | 970   |                                        | $ | 970  
|Mortgage servicing rights                     |  |                  | 329   |                                        |   | 329  

The following represent impairment charges recognized during the three months ended March 31, 2009 and
December 31, 2008 for assets measured at fair value:

Impaired loans, which are measured for impairment using the fair value of the collateral for
collateral dependent loans, had an estimated fair value of $1,356 and $970, with a valuation allowance of $491 and $730 at March 31, 2009 and December 31, 2008, respectively, resulting in an additional provision for loan losses of $63 and
$730 for the three months ended March 31, 2009 and the year ended December 31, 2008.

Other real estate owned, which is measured for impairment
using the fair value of the underlying collateral, had an estimated fair value of $349, with a valuation allowance of $61 at March 31, 2009, resulting in an additional write-down of $61 for the three months ended March 31, 2009 which were
included in other income in the consolidated income statements.

Mortgage servicing rights, which are carried at the lower of cost or fair value, were
written down to fair value of $329 at December 31, 2008, resulting in a valuation allowance of $42 and additional provision expense of $42 for the year ended December 31, 2008. This additional provision was included in loan servicing fees,
net in the consolidated income statements for the year ended December 31, 2008. There were no additional write-downs of mortgage servicing rights during the first quarter of 2009.



16



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS - continued
|------- | ---------------------------------------------



LAPORTE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except
share and per share data)

NOTE 7  BORROWINGS

On February 11, 2009, the Bank issued a $5,000 note due on February 15, 2012 under the FDIC Temporary Debt Guarantee Program. The note bears an interest rate of 2.74% in addition to the 100 basis point FDIC guarantee fee paid by
the Bank. The Banks FDIC debt guarantee limit is $6,269. Interest payments are required to be made semiannually in arrears on February 15 and August 15 in each year commencing on August 15, 2009, and on the maturity date. All
legal and placement fees associated with this transaction were capitalized as debt issuance costs and will be amortized to interest expense over the repayment period on a straight-line basis. At March 31, 2009, the unamortized debt issuance
costs totaled $196. The Bank is required to report, by the thirtieth calendar day following the end of a month, the total amount of all FDIC-guaranteed debt (and any interest accrued and unpaid on that debt) as of the preceding months end.



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

FORWARD-LOOKING STATEMENTS

This document (including information incorporated by reference)
contains, and future oral and written statements of the Company and its management may contain, forward-looking statements, as such term is defined in the Private Securities Litigation Reform Act of 1995, with respect to the financial condition,
results of operations, plans, objectives, future performance and business of the Company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Companys management and on information currently
available to management, are generally identifiable by the use of words such as believe, expect, anticipate, plan, intend, estimate, may, will,
would, could, should or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no
obligation to update any statement in light of new information or future events.

The Companys ability to predict results or the actual effect of
future plans or strategies is inherently uncertain. The factors which could have a material adverse effect on the operations and future prospects of the Company and certain subsidiaries are detailed in Item 1A  Risk Factors in our
Annual Report on Form 10-K for the year ended December 31, 2008. In addition to these risk factors, there are other factors that may impact any public company, including ours, which could have a material adverse effect on the operations and
future prospects of the Company and its subsidiaries. These additional factors include, but are not limited to, the following:



| |  |  | changes in prevailing real estate values and loan demand both nationally and within our current and future market area;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | increased competitive pressures among financial services companies;
| | - |  | -------------------------------------------------------------------



| |  |  | changes in consumer spending, borrowing and savings habits;
| | - |  | -----------------------------------------------------------



| |  |  | the amount of premium we are required to pay for FDIC deposit insurance;
| | - |  | ------------------------------------------------------------------------



| |  |  | legislative or regulatory changes that adversely affect our business;
| | - |  | ---------------------------------------------------------------------



| |  |  | our ability to successfully manage our plan to increase our commercial lending;
| | - |  | -------------------------------------------------------------------------------



| |  |  | the financial health of certain entities, including government sponsored enterprises, the securities of which are owned or acquired by the Company;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | adverse changes in the securities market;
| | - |  | -----------------------------------------



| |  |  | the costs, effects and outcomes of existing or future litigation;
| | - |  | -----------------------------------------------------------------



| |  |  | the economic impact of past and any future terrorist attacks, acts of war or threats thereof and the response of the United States to any such threats and attacks;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the ability of the Company to manage the risks associated with the foregoing factors as well as anticipated risk factors.
| | - |  | -------------------------------------------------------------------------------------------------------------------------

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.



18



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
|------- | -------------------------------------------------------------------------------------------------



Comparison of Financial Condition at March 31, 2009 and December 31, 2008

General:Total assets increased $11.2 million, or 3.1%, to $379.8 million at March 31, 2009 from $368.6 million at December 31, 2008. The
increase was primarily due to an increase in securities available for sale of $7.1 million, as well as an increase in loans held for sale of $2.1 million and an increase of $2.3 million in net loans. The increase in assets was funded through an
increase in total deposits of $15.6 million and an increase in FDIC guaranteed unsecured borrowings and other secured borrowings of $4.8 million and $2.6 million, respectively, offset by a decrease in FHLB of Indianapolis advances of $13.0 million.

Investment Securities:Total securities available for sale increased $7.1 million, or 7.0%, to $108.5 million at March 31,
2009 from $101.5 million at December 31, 2008, as the excess liquidity provided by increased deposits was invested into securities in accordance with the Companys investment strategies. There were no other-than-temporary impairment
charges recorded in the first quarter of 2009. The Company held $5.8 million in corporate debt securities which have an unrealized loss of $(720) at March 31, 2009. These investments are considered investment grade securities and the Company
has been, and expects to continue to be paid as agreed.

Loans Held for Sale:Loans held for sale increased $2.1 million to $2.2
million at March 31, 2009 from $124,000 at December 31, 2008, attributable to the increase in refinance activity in one-to-four-family residential mortgages that are sold to the secondary market. The increased refinance activity began near
the end of 2008 and into the first quarter of 2009. The Company expects the increased level of refinance activity to continue during the second quarter of 2009, but does not anticipate this level of refinance activity to continue for the entire
year.

Net Loans:Net loans increased $2.3 million, or 1.0%, to $222.2 million at March 31, 2009 compared to $219.9 million at
December 31, 2008. This increase is primarily attributable to an increase in commercial and commercial real estate loans. The Bank has continued to experience demand for new commercial real estate loans and will continue to focus on growing its
commercial loan portfolio within the Banks underwriting guidelines. We continue to see a decrease in one-to fourfamily residential real estate loans due to the refinance activity in the current interest rate environment and a majority of
the new loans being sold to the secondary market.

Commercial and commercial real estate loans increased $5.3 million to $105.2 million at March 31,
2009 compared to $99.9 million at December 31, 2008, primarily attributable to an increase in commercial real estate loans of $4.1 million. Commercial loans increased $1.2 million due to a $1.8 million increase in loans to states and political
subdivisions, which are primarily short-term tax anticipation warrants issued by local schools and cities. This increase was partially offset by a decrease in commercial and industrial loans of $868,000.

Total construction loans increased $1.7 million, or 21.7%, to $9.4 million at March 31, 2009 compared to $7.7 million at December 31, 2008, due to an increase
in commercial construction loans of $1.9 million offset partially by a decrease in residential construction loans of $201,000. The increase in commercial construction is primarily attributable to increases in draws on existing construction lines in
order to complete the projects. Management estimates that approximately $3.0 million in commercial construction loans will convert to permanent financing over the next 90 days. The largest commercial construction loan was $1.8 million at
March 31, 2009 for the construction of an apartment complex in Michigan City, Indiana. In addition to the increase in the existing construction loans there was a new construction loan in the amount of $442,000 for the purchase and renovation of
an existing commercial building, which will be leased to a national restaurant chain.

One-to four-family residential loans decreased $4.2 million, or
4.9%, to $81.2 million at March 31, 2009 compared to $85.5 million at December 31, 2008, primarily attributable to the increase in refinance activity in the first quarter of 2009. The Bank has continued to sell the majority of its fixed
rate one-to four-family residential real estate loans originated into the secondary market, which along with the repayment and refinance activity has accounted for the decrease.



19



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
|------- | -------------------------------------------------------------------------------------------------



Nonperforming Assets:The table below sets forth the amounts and categories of our
nonperforming assets at the dates indicated.



|                                                          |  |                        |       |   |                  |   |       |  
|--------------------------------------------------------- |  | ---------------------- | ----- | - | ---------------- | - | ----- | -
|                                                          |  | March 31,2009          |       |   | December 31,2008 |  
|                                                          |  | (Dollars in thousands) |      
|Nonaccrual loans:                                         |  |                        |       |   |                  |   |       |  
|Real estate:                                              |  |                        |       |   |                  |   |       |  
|One- to four- family (1)                                  |  | $                      | 442   |   |                  | $ | 449   |  
|Five or more family                                       |  |                        |      |   |                  |   |      |  
|Commercial (2)                                            |  |                        | 2,355 |   |                  |   | 3,036 |  
|Construction                                              |  |                        | 1,578 |   |                  |   | 1,588 |  
|Land                                                      |  |                        |      |   |                  |   |      |  
|                                                          |  |                        |       |   |                  |   |       |  
|Total real estate                                         |  | $                      | 4,375 |   |                  | $ | 5,073 |  
|Consumer and other loans:                                 |  |                        |       |   |                  |   |       |  
|Home equity (3)                                           |  |                        | 74    |   |                  |   | 121   |  
|Commercial                                                |  |                        | 1,237 |   |                  |   | 1,535 |  
|Indirect automobile and other                             |  |                        | 54    |   |                  |   | 21    |  
|                                                          |  |                        |       |   |                  |   |       |  
|Total consumer and other loans                            |  |                        | 1,365 |   |                  |   | 1,677 |  
|                                                          |  |                        |       |   |                  |   |       |  
|Total nonaccrual loans                                    |  | $                      | 5,740 |   |                  | $ | 6,750 |  
|                                                          |  |                        |       |   |                  |   |       |  
|                                                          |  |                       
|Troubled debt restructured                                |  |                        |       |   |                  |   |       |  
|Commercial real estate                                    |  | $                      |      |   |                  | $ |      |  
|                                                          |  |                        |       |   |                  |   |       |  
|Total troubled debt restructured                          |  | $                      |      |   |                  | $ |      |  
|                                                          |  |                       
|Loans greater than 90 days delinquent and still accruing: |  |                        |       |   |                  |   |       |  
|Real estate:                                              |  |                        |       |   |                  |   |       |  
|One- to four- family                                      |  | $                      |      |   |                  | $ |      |  
|Five or more family                                       |  |                        |      |   |                  |   |      |  
|Commercial                                                |  |                        |      |   |                  |   |      |  
|Construction                                              |  |                        |      |   |                  |   |      |  
|Land                                                      |  |                        |      |   |                  |   |      |  
|                                                          |  |                        |       |   |                  |   |       |  
|Total real estate                                         |  | $                      |      |   |                  | $ |      |  
|                                                          |  |                        |       |   |                  |   |       |  
|Consumer and other loans:                                 |  |                        |       |   |                  |   |       |  
|Home equity                                               |  |                        |      |   |                  |   |      |  
|Commercial                                                |  |                        |      |   |                  |   |      |  
|Indirect automobile and other                             |  |                        |      |   |                  |   |      |  
|                                                          |  |                        |       |   |                  |   |       |  
|Total consumer and other loans                            |  | $                      |      |   |                  | $ |      |  
|                                                          |  |                        |       |   |                  |   |       |  
|                                                          |  |                       
|Total nonperforming loans                                 |  | $                      | 5,740 |   |                  | $ | 6,750 |  
|                                                          |  |                        |       |   |                  |   |       |  
|                                                          |  |                       
|Foreclosed assets:                                        |  |                        |       |   |                  |   |       |  
|One- to four- family                                      |  | $                      | 673   |   |                  | $ | 917   |  
|Five or more family                                       |  |                        |      |   |                  |   |      |  
|Commerical                                                |  |                        |      |   |                  |   |      |  
|Construction                                              |  |                        |      |   |                  |   |      |  
|Land                                                      |  |                        | 4     |   |                  |   | 4     |  
|Consumer                                                  |  |                        |      |   |                  |   |      |  
|Business assets                                           |  |                        |      |   |                  |   |      |  
|                                                          |  |                        |       |   |                  |   |       |  
|Total foreclosed assets                                   |  | $                      | 677   |   |                  | $ | 921   |  
|                                                          |  |                        |       |   |                  |   |       |  
|                                                          |  |                       
|Total nonperforming assets                                |  | $                      | 6,417 |   |                  | $ | 7,671 |  
|                                                          |  |                        |       |   |                  |   |       |  
|                                                          |  |                       
|Ratios:                                                   |  |                        |       |   |                  |   |       |  
|Nonperforming loans to total loans                        |  |                        | 2.56  | % |                  |   | 3.04  | %
|Nonperforming assets to total assets                      |  |                        | 1.69  | % |                  |   | 2.08  | %



|(1) | $134 and $135 of the nonaccrual one- to four- family loans at March 31, 2009 and December 31, 2008 were included for treatment under SOP 03-3 after the acquisition of City
Savings Bank.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | $0 and $191 of the nonaccrual commercial real estate loans at March 31, 2009 and December 31, 2008 were included for treatment under SOP 03-3 after the acquisition of City
Savings Bank.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | $20 and $21 of the nonaccrual home equity loans at March 31, 2009 and December 31, 2008 were included for treatment under SOP 03-3 after the acquisition of City Savings
Bank.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



20



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
|------- | -------------------------------------------------------------------------------------------------



There was no material change in total consumer and home equity loans, including indirect automobile loans at
March 31, 2009 compared to December 31, 2008, although the Bank has continued to experience a decrease in the indirect automobile loans. At March 31, 2009 indirect automobile loans decreased $484,000, or 8.0%, to $5.6 million compared
to $6.0 million at December 31, 2008, attributable to managements decision to decrease its exposure in this type of lending. The demand for consumer and home equity loans remains low due to the general economic conditions in the market.

There was no significant change in the allowance for loan losses balance of $2.5 million at March 31, 2009 and December 31, 2008. The allowance
for loan losses to total loans ratio was 1.11% at March 31, 2009 compared to 1.13% at December 31, 2008. Total nonperforming loans to total loans ratio was 2.56% at March 31, 2009 compared to 3.04% at December 31, 2008. Total
nonperforming assets to total assets also decreased to 1.69% at March 31, 2009 compared to 2.08% at December 31, 2008. This is primarily attributable to one commercial loan relationship totaling $848,000 consisting of two commercial real
estate loans and one commercial and industrial loan, which were paid in full during the first quarter 2009 through the sale of the business.

Other Real Estate Owned:Other real estate owned decreased $244,000, to $677,000, at March 31, 2009 compared to $921,000 at December 31, 2008, primarily due to the sale of several properties.

Goodwill and Other Intangible Assets:The Companys goodwill totaled $8.4 million at March 31, 2009 and December 31, 2008.
Statement of Financial Accounting Standards No. 142 (SFAS No. 142), Goodwill and Other Intangible Assets, requires goodwill to be tested for impairment on an annual basis, or more frequently if circumstances indicate
that an asset might be impaired, by comparing the fair value of such goodwill to its recorded or carrying amount. If the carrying amount of the goodwill exceeds the fair value, an impairment charge must be recorded in an amount equal to the excess.
The first annual impairment review of the $8.4 million of goodwill previously recorded was performed in the fourth quarter of 2008 and based on the opinion of an independent third party specialist; no goodwill impairment was recognized by the
Company.

As the Companys stock price per common share is currently less than its book value per common share, management updated the fair value
assessment as of March 31, 2009 utilizing the same independent third party specialist that performed the annual testing. The assessment of the fair value of the goodwill as of March 31, 2009 was prepared by updating the discounted cash
flow analysis used in the preparation of the year-end assessment. The updated discounted cash flow analysis incorporates the March 31, 2009 financial data adjusted for the completion of a second step conversion. Based on the opinion of the
independent third party specialist, the value pursuant to the discounted cash flow approach as of March 31, 2009 was above the value reached in the year-end assessment and therefore no goodwill impairment was recognized by the Company. As the
Companys stock price per common share is currently less than its book value per common share, it is reasonably possible that management may conclude that goodwill, totaling $8.4 million at March 31, 2009, is impaired as a result of a
future assessment. If our goodwill is determined to be impaired, the related charge to earnings could be material.

Deposits:Total
deposits increased $15.6 million, or 6.7%, to $250.5 million at March 31, 2009 compared to $234.8 million at December 31, 2008, attributable to increases in all deposit categories. The competitive interest rate environment for deposits has
eased slightly in the first quarter of 2009, which resulted in an increase in certificate of deposit and individual retirement accounts of $12.9 million. The Company also increased balances in savings, NOW and money market accounts $1.3 million and
increased interest bearing demand deposits $1.1 million. Non-interest bearing demand deposits also increased $423,000 at March 31, 2009 compared to December 31, 2008. The opening of the retail office in Westville, Indiana also has
contributed to the growth in deposits overall.



21



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
|------- | -------------------------------------------------------------------------------------------------



Borrowed Funds:Federal Home Loan Bank of Indianapolis, or FHLBI, borrowings decreased $13.0
million, or 16.5%, at March 31, 2009 compared to December 31, 2008. This decrease was primarily attributable to the increase in deposits. Also contributing to the decrease in FHLBI borrowings was the increase in FDIC guaranteed unsecured
debt of $4.8 million at March 31, 2009. During February 2009, the Bank issued a $5 million note due February 15, 2012 under the FDIC Temporary Debt Guarantee Program. The note bears an interest rate of 2.74% in addition to the 100 basis
point FDIC guarantee fee paid by the Bank. All legal and placement fees associated with this transaction were capitalized as debt issuance costs and will be amortized to interest expense over the repayment period. The Company also increased its
borrowings at the Federal Reserve discount window by $2.7 million at March 31, 2009 compared to December 31, 2008.

Total
Shareholders Equity:Total shareholders equity increased $1.0 million, or 2.2%, to $47.2 million at March 31, 2009 compared to $46.1 million at December 31, 2008. The increase was primarily attributable to net income of
$490,000 and an increase in other comprehensive income of $645,000, partially offset by stock repurchases of $131,000 during the first quarter of 2009. The increase in other comprehensive income was primarily due to the continued decrease in
interest rates during the first quarter of 2009 and its positive impact on the market values on securities held in the Companys available-for-sale investment portfolio at March 31, 2009.

Comparison of Operating Results for Three Month Period Ended March 31, 2009 and March 31, 2008

Net Income:Net income increased $328,000, or 202.5%, to $490,000 for the three months ended March 31, 2009 compared to $162,000 for the three
months ended March 31, 2008. This increase was due to an increase in net interest income of $101,000, an increase in non-interest income of $234,000 and a decrease in noninterest expense of $163,000, offset by an increase in income tax expense
of $137,000. These changes are explained in the following discussion.

Net Interest Income:Net interest income increased $101,000,
or 4.2%, to $2.5 million for the three months ended March 31, 2009 compared to $2.4 million for the three months ended March 31, 2008. The increase is primarily due to an increase in the annualized net interest spread of 16 basis points,
to 2.74%, for the first quarter of 2009 compared to 2.58% for the same prior year period. The primary reason for the increase in the net interest spread is the continued decline in interest rates and the impact this has had on the interest rates
paid on deposits, as well as the decrease in the average cost of Federal Home Loan Bank of Indianapolis advances and the subordinated debentures.



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
|------- | -------------------------------------------------------------------------------------------------



The following table sets forth the average balance sheet, average annualized yield and cost and
certain other information for the three months ended March 31, 2009 and March 31, 2008. No tax-equivalent yield adjustments were made. All average balances are daily average balances. Nonaccrual loans were included in the computation of
average balances, but have been reflected in the table as loans carrying a zero yield. The annualized yields set forth below include the effect of deferred fees, and discounts and premiums that are amortized or accreted to interest income or
expense.



|                                                       |  |                                      |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|------------------------------------------------------ |  | ------------------------------------ | ------- | -------- | ---- | -------------------- |  | ---- | ------------------------- |  | -------- | ------- | -------------------- | - | ----- |  | ---- | -
|                                                       |  | For the Three Months Ended March 31, |        
|                                                       |  | 2009                                 |         |          | 2008 |                     
|                                                       |  | (Dollars in thousands)               |        
|                                                       |  | AverageOutstandingBalance            |         | Interest |      | AnnualizedYield/Cost |  |      | AverageOutstandingBalance |  | Interest |         | AnnualizedYield/Cost |  
|Loans                                                  |  | $                                    | 223,066 |          | $    | 3,384                |  | 6.07 | %                         |  | $        | 219,699 |                      | $ | 3,763 |  | 6.85 | %
|Taxable securities                                     |  |                                      | 93,798  |          |      | 1,139                |  | 4.86 | %                         |  |          | 88,509  |                      |   | 1,102 |  | 4.98 | %
|Tax exempt securities                                  |  |                                      | 6,969   |          |      | 71                   |  | 4.08 | %                         |  |          | 7,125   |                      |   | 62    |  | 3.48 | %
|Federal Home Loan Bank of Indianpolis stock            |  |                                      | 4,206   |          |      | 42                   |  | 3.99 | %                         |  |          | 4,187   |                      |   | 50    |  | 4.78 | %
|Federal funds sold and other interest-bearing deposits |  |                                      | 2,130   |          |      | 1                    |  | 0.19 | %                         |  |          | 6,792   |                      |   | 51    |  | 3.00 | %
|                                                       |  |                                      |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Total interest earning assets                          |  |                                      | 330,169 |          |      | 4,637                |  | 5.62 | %                         |  |          | 326,312 |                      |   | 5,028 |  | 6.16 | %
|Non-interest earning assets                            |  |                                      | 43,265  |          |      |                      |  |      |                           |  |          | 42,594  |                      |   |       |  |      |  
|                                                       |  |                                      |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Total assets                                           |  | $                                    | 373,434 |          |      |                      |  |      |                           |  | $        | 368,906 |                      |   |       |  |      |  
|                                                       |  |                                      |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|                                                       |  |                                      |         |          |      |                     
|Savings deposits                                       |  | $                                    | 42,850  |          |      | 16                   |  | 0.15 | %                         |  | $        | 43,071  |                      |   | 38    |  | 0.35 | %
|Money market and NOW accounts                          |  |                                      | 37,814  |          |      | 77                   |  | 0.81 | %                         |  |          | 38,861  |                      |   | 162   |  | 1.67 | %
|CDs and IRAs                                           |  |                                      | 136,503 |          |      | 1,174                |  | 3.44 | %                         |  |          | 139,249 |                      |   | 1,516 |  | 4.35 | %
|                                                       |  |                                      |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Total interest-bearing deposits                        |  |                                      | 217,167 |          |      | 1,267                |  | 2.33 | %                         |  |          | 221,181 |                      |   | 1,716 |  | 3.10 | %
|FHLB advances                                          |  |                                      | 69,645  |          |      | 776                  |  | 4.46 | %                         |  |          | 66,453  |                      |   | 804   |  | 4.84 | %
|Subordinated debentures                                |  |                                      | 5,155   |          |      | 57                   |  | 4.42 | %                         |  |          | 5,155   |                      |   | 99    |  | 7.68 | %
|FDIC guaranteed unsecured borrowing                    |  |                                      | 2,639   |          |      | 26                   |  | 3.94 | %                         |  |          |        |                      |   |      |  |     |  
|Other secured borrowings                               |  |                                      | 1,090   |          |      | 1                    |  | 0.37 | %                         |  |          |        |                      |   |      |  |     |  
|                                                       |  |                                      |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Total interest-bearing liabilities                     |  |                                      | 295,696 |          |      | 2,127                |  | 2.88 | %                         |  |          | 292,789 |                      |   | 2,619 |  | 3.58 | %
|                                                       |  |                                      |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Non-interest bearing deposits                          |  |                                      | 28,060  |          |      |                      |  |      |                           |  |          | 26,055  |                      |   |       |  |      |  
|Other liabilities                                      |  |                                      | 3,071   |          |      |                      |  |      |                           |  |          | 2,824   |                      |   |       |  |      |  
|                                                       |  |                                      |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Total liabilities                                      |  |                                      | 326,827 |          |      |                      |  |      |                           |  |          | 321,668 |                      |   |       |  |      |  
|Shareholders equity                                   |  |                                      | 46,607  |          |      |                      |  |      |                           |  |          | 47,238  |                      |   |       |  |      |  
|                                                       |  |                                      |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Total liabilities & shareholders equity               |  | $                                    | 373,434 |          |      |                      |  |      |                           |  | $        | 368,906 |                      |   |       |  |      |  
|                                                       |  |                                      |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|                                                       |  |                                      |         |          |      |                     
|Net interest income                                    |  |                                      |         |          | $    | 2,510                |  |      |                           |  |          |         |                      | $ | 2,409 |  |      |  
|                                                       |  |                                      |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Net interest rate spread                               |  |                                      |         |          |      |                      |  | 2.74 | %                         |  |          |         |                      |   |       |  | 2.58 | %
|Net interest margin                                    |  |                                      |         |          |      |                      |  | 3.04 | %                         |  |          |         |                      |   |       |  | 2.95 | %



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PART I  FINANCIAL INFORMATION

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
|------- | -------------------------------------------------------------------------------------------------



Interest and Dividend Income:Interest and dividend income decreased $391,000, or 7.8%, to
$4.6 million for the three months ended March 31, 2009 compared to $5.0 million for the same prior year period. This decrease is primarily due to the continued decline in interest rates and the impact this has had on the yield on average
interest-earning assets. This decrease was partially offset by an increase in the average interest-earning assets of $3.9 million for the three months ended March 31, 2009 compared to the same prior year period.

Interest income on loans, including fees, decreased $379,000, or 10.1%, to $3.4 million for the three months ended March 31, 2009 compared to $3.8 million for the
same prior year period. This decrease is primarily attributable to a decrease in the annualized average loan yield of 78 basis points, from 6.85% to 6.07%, primarily due to a decrease in prime rate and its impact on variable rate loans as well as
the pricing on new and renewed loans. A significant portion of the variable commercial real estate and variable commercial business loans include an interest rate floor of 5.00%, which has helped to prevent an even further decline in the average
yield on loans. Partially offsetting the decrease in interest income is an increase in the average balance of loans of $3.4 million for the three months ended March 31, 2009 compared to the same prior year period.

Interest income from taxable securities increased $37,000, or 3.4%, to $1.1 million for the three months ended March 31, 2009 compared to $1.1 million for the same
prior year period. This is due to an increase in the average balance of taxable securities of $5.3 million, or 6.0%, for the first quarter of 2009 compared to the same prior year period. The increase was attributable to a decrease in the average
federal funds sold and other interest-bearing deposits over the same prior year period. Partially offsetting the increase is the 12 basis point decrease in the annualized average yield on taxable securities for the first quarter of 2009 compared to
the same prior year period.

Dividend income from Federal Home Loan Bank of Indianapolis (FHLBI) stock decreased $8,000, or 16.0%, for the three months
ended March 31, 2009 compared to the prior year period, primarily attributable to the decrease in the annualized average yield from 4.78% to 3.99%. The FHLBI deferred the declaration of the fourth quarter 2008 dividend, normally paid in January
2009. The dividend was deferred because of the need to finalize the review of the FHLBIs private label mortgage backed securities for other-than-temporary impairment. On February 20, 2009 the FHLBI did announce the declaration of the
fourth quarter 2008 dividend. The dividend declared on the stock was 4.00%, a decrease from 4.75% for the previous quarter. In the February 20, 2009 letter to its members, the FHLBI indicated that they determined that none of its private-label
mortgage backed securities were other-than-temporarily impaired as of December 31, 2008. The first quarter 2009 dividend, normally paid in April, has not yet been announced by the FHLBI. Should the decision be made to suspend dividend payments
on the FHLBI stock at some point in the future, it would have a negative impact on the Companys earnings. Interest income from federal funds sold and other interest-bearing deposits decreased $51,000, or 100.0%, for the three months ended
March 31, 2009 compared to the same prior year period. The decrease is due to the funds being invested into longer-term taxable securities.



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PART I  FINANCIAL INFORMATION

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
|------- | -------------------------------------------------------------------------------------------------



Interest Expense:Interest expense decreased $492,000, or 18.8%, to $2.1 million for the three
months ended March 31, 2009 compared to $2.6 million for the same prior year period. This decrease is primarily attributable to a decrease in the annualized average cost of average interest-bearing liabilities of 70 basis points to 2.88% for
the three months ended March 31, 2009 from 3.58% for the same prior year period. The decrease is due to the decrease in the interest rates offered on all interest-bearing deposits in addition to a decrease in the interest rates paid on FHLBI
advances and the subordinated debentures for the first quarter of 2009 compared to the same prior year period.

The annualized average cost of savings
deposits decreased 20 basis points, to 0.15%, for the three months ended March 31, 2009 compared to 0.35% for the same prior year period, primarily due to managements decision to decrease interest rates offered. The Company also
experienced an 86 basis points decrease in the annualized average cost of money market and NOW accounts over the same time periods, attributable to a decrease in money market rates. The average annualized cost of certificates of deposits and IRA
time deposits decreased 91 basis points to 3.44% for the first quarter of 2009 from 4.35% for the same prior year period, primarily due to the overall decrease in interest rates offered for new or renewed deposits during the first quarter of 2009
compared to the interest rates on maturing deposits. Management does not expect this significant decrease of the cost of certificates of deposits and IRAs to continue in the future.

Interest expense on FHLBI advances decreased 38 basis points in the first quarter of 2009 compared to 2008, primarily due to the lower cost of funding on new or renewed
advances compared to the cost on maturing advances. Interest expense on the subordinated debt decreased $42,000, or 42.4%, in the first quarter of 2009 compared to the same prior year period, primarily attributable to the decrease in interest rates
tied to the floating rate debt. The interest rate adjusts quarterly at the rate of the three month LIBOR plus 3.10%. The average cost of the subordinated debentures was 4.42% for the three months ended March 31, 2009 compared to 7.68% for the
same prior year period. On April 15, 2009 the Company executed an interest rate swap against the $5.0 million floating rate debentures for five years at an effective fixed rate of 5.54%. Management took this action in order to hedge against a
potential interest rate increase over the next five years. The Company was required to pledge $100,000 as collateral to the counter party, Vining Sparks, for the next five years. Interest expense on the FDIC guaranteed unsecured borrowing originated
in February 2009 was $26,000.

Provision for Loan Losses:The Bank recognizes a provision for loan losses, which is charged to
earnings, 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
loan loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect borrowers ability to repay, the estimated value of any underlying collateral, peer group information and prevailing
economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events occur. After an evaluation of these factors, management
recognized a provision for loan losses of $49,000 for the first quarter of 2009 compared to $16,000 for the same prior year period. Net charge-offs for the same periods were $78,000 and $96,000 respectively. The increase in the provision for loan
losses was primarily due to an increase in classified loans compared to the same period last year, continued growth in commercial loans, as well as the national and local economic concerns.

The allowance for loan losses to total loans ratio was 1.11% at March 31, 2009 compared to 1.13% at December 31, 2008. Over the same time period, nonperforming
loans to total loans decreased to 2.56% from 3.04%. Included in the allowance for loan losses at December 31, 2008 was a $250,000 specific reserve for a commercial and industrial loan acquired through the City Savings Financial acquisition,
which was deemed appropriate due to the risk of loss as a result of concerns with the documentation supporting an SBA guarantee. Management pursued collection of the loan by requesting the SBA to honor their guarantee and in April of 2009 the
guarantee was honored and the payment was received. As a result, a specific reserve was not required for this loan as of March 31, 2009, which was a primary factor for the 2 basis point decline in the allowance for loan losses to total loans
ratio although there were certain negative trends during the quarter as previously discussed.



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
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Noninterest Income:Noninterest income increased $234,000, or 40.2%, to $816,000 for the three
months ended March 31, 2009 compared to $582,000 for the three months ended March 31, 2008. This increase was primarily attributable to a $193,000 increase in net gains on mortgage banking activities in the first quarter of 2009 compared
to the same prior year period, as a result of the continued decrease in one-to four-family residential mortgage interest rates and the refinance activity associated with it. There also was a decrease in other-than-temporary impairment charges of
$142,000 in the first quarter of 2009 compared to the same prior year period. During the first quarter of 2008, the Company recorded an other-than-temporary impairment charge of $142,000 related to Freddie Mac preferred stock. There were no
impairment charges recorded in the first quarter of 2009.

Partially offsetting these increases in noninterest income in the first quarter of 2009 as
compared to the same prior year period was a decrease in brokerage fee income of $42,000, or 110.5%. In the first quarter of 2009, management made the decision to terminate the Banks retail brokerage relationship it had established with Invest
Financial Corporation primarily due to the lack of profitability the division has contributed to the Company since its inception. Other income also declined due to a decrease in net gains on sales of other real estate owned (OREO) of $23,000 in the
first quarter of 2009 compared to the same prior period and write downs of OREO of $61,000 during the first quarter of 2009.

Noninterest Expense:Noninterest expense decreased $163,000, or 5.8%, to $2.6 million for the first quarter of 2009 compared to $2.8 million for the same prior year period, primarily attributable to a decrease in salaries and
employee benefits of $126,000. The decrease in salaries and benefits is primarily attributable to an increase in deferred loan origination costs of $73,000 from the prior year period due to the increase in refinance activity. There was also a
decrease in payroll and related expenses due to a decrease of 6 full-time equivalent employees from the prior year period. Also contributing to the decrease in noninterest expense is a decrease in bank examination expense of $35,000, or 23.7%,
primarily attributable to additional costs attributed to our first external audit and annual SEC reporting as a public company in the first quarter of 2008. Amortization of intangibles decreased $28,000 in the first quarter of 2009 when compared to
the prior year period. The core deposit intangible asset is amortized into expense on an accelerated basis, which is the reason for the decrease.

Other
expenses increased $8,000 in the first quarter of 2009, primarily due to an increase in FDIC insurance expense of $82,000, or 471.4%, to $99,000 for the first quarter of 2009 compared to $17,000 for the same prior year period. The increase is
attributable to the substantial increase in premium rates set by the FDIC for 2009 along with the special credits the Bank received during the first quarter of 2008 which lowered the FDIC assessment during the prior year period. In addition to the
increase in premium rates, the FDIC announced a special assessment of 10 basis points for June 30, 2009, to be collected September 30, 2009. Management estimates that the special assessment would result in an additional expense of $245,000
during the second quarter of 2009. Partially offsetting this increase was a decrease in collection and OREO related expenses of $25,000, due to real estate taxes the Bank paid on properties which were in the foreclosure process during the first
quarter of 2008. We also had a decrease in postage of $11,000 due to the implementation of Check 21 during the third quarter of 2008. Insurance expense also decreased $8,000, primarily due to credits received in the first quarter of 2009 as a result
of a workers compensation audit.

Occupancy expense increased $8,000, or 1.6%, in the first quarter of 2009, primarily attributable to the new
Westville branch that opened in June of 2008. Data processing expense increased $13,000, or 13.7%, in the same time period primarily due to increased maintenance costs associated with the implementation of Check 21 in addition to the increase in the
annual maintenance renewal of our core operating system.

Income Taxes:Income tax expense increased $137,000 for the first three
months of 2009 compared to the same prior year period, primarily due to the increase in income before taxes of $465,000. The effective tax rate was 22.2% for the first quarter of 2009 and 1.8% for the same prior year period. The effective tax rate
was significantly lower in the prior year quarter due to a higher ratio of total income before tax representing tax exempt securities and life insurance income, which resulted in an overall lower level of income before income taxes.



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##### Table of Contents

PART I  FINANCIAL INFORMATION

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
|------- | -------------------------------------------------------------------------------------------------



Liquidity and Capital Resources

Maintenance of adequate liquidity requires that sufficient resources be available at all times to meet cash flow requirements of the Company. Liquidity in a banking institution is required primarily to provide for
deposit withdrawals and the credit needs of customers and to take advantage of investment opportunities as they arise. A bank may achieve desired liquidity from both assets and liabilities. Cash and deposits held in other financial institutions,
Federal funds sold, other short term investments in interest-bearing time deposits in other financial institutions and securities available-for-sale, maturing loans and investments, payments of principal and interest on loans and investments, and
potential loan sales are sources of asset liquidity. Deposit growth and access to credit lines established with correspondent banks, the Federal Home Loan Bank and market sources of funds are sources of liability liquidity. The Company reviews its
liquidity position on a regular basis based upon its current position and expected trends of loans and deposits. The policy of the Board of Directors is to maintain sufficient capital at not less than the well-capitalized thresholds
established by banking regulators. Management believes that the Company maintains adequate sources of liquidity to meet its liquidity needs.

The
Companys liquid assets, defined as cash and due from financial institutions and the market value of unpledged securities available-for-sale totaled $70.8 million at March 31, 2009 and constituted 18.6% of total assets at that date
compared to $62.8 million, or 17.0%, of total assets at December 31, 2008.

The Company also maintains lines of credit with the Federal Home Loan
Bank. The total of these lines of credit were $83.0 million at March 31, 2009, of which $65.7 million in Federal Home Loan Bank advances were outstanding. The Company has additional securities available to pledge as collateral in order to
increase our lines of credit with the Federal Home Loan Bank. At March 31, 2009, we had $65.1 million in unpledged securities available for sale. The Company actively utilizes its borrowing capacity with the Federal Home Loan Bank to manage
liquidity and to provide a funding alternative to time deposits, if the Federal Home Loan Banks rates and terms are more favorable. The advances from the Federal Home Loan Bank can have maturities from overnight to multiple years. At
March 31, 2009, $10.7 million of these advances were due within one year and $55.0 million had maturities greater than a year.

Federal regulations
establish guidelines for calculating risk-adjusted capital ratios and minimum ratio requirements. Under these regulations, banks are required to maintain a total risk-based capital ratio of 8.0% of risk-weighted assets and a Tier 1
risk-based capital ratio (primarily total shareholders equity less intangible assets) of at least 4.0% of risk-weighted assets. The Bank had total and Tier 1 risk-based capital ratios of 16.47% and 15.45% at March 31, 2009, and was
well-capitalized under the regulatory guidelines.

In addition, regulators have adopted a minimum leverage ratio standard for Tier 1 capital to
average assets. The minimum ratio for top-rated institutions may be as low as 3%. However, regulatory agencies have stated that most institutions should maintain ratios at least 1 to 2 percentage points above the 3% minimum. As of March 31,
2009, the Banks leverage ratio was 10.43%. Capital levels for the Bank remain above the established regulatory capital requirements.



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PART I  FINANCIAL INFORMATION

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
|------- | -------------------------------------------------------------------------------------------------



Recent Regulatory Updates

On October 3, 2008, Congress passed the Emergency Economic Stabilization Act of 2008 (EESA), which provides the United States Secretary of the Treasury with broad authority to implement certain actions to help restore stability and
liquidity to U.S. markets. One of the provisions resulting from the Act is the Treasury Capital Purchase Program (CPP), which provides direct equity investment of perpetual preferred stock by the Treasury in qualified financial institutions. The
program is voluntary and requires an institution to comply with a number of restrictions and provisions, including limits on executive compensation, stock redemptions and declaration of dividends. The CPP provides for a minimum investment of 1
percent of Total Risk-Weighted Assets, with a maximum investment equal to the lesser of 3 percent of Total Risk-Weighted Assets or $25 billion. The perpetual preferred stock investment has a dividend rate of 5% per year, until the fifth
anniversary of the Treasury investment, and a dividend of 9%, thereafter. The CPP also requires the Treasury to receive warrants for common stock equal to 15% of the capital invested by the Treasury.

LaPorte Bancorp and LaPorte Savings Bank, MHC submitted a nonbinding application to receive an investment of up to $4 million. By filing the application before the
deadline, the board preserved the option to participate and was able to carefully consider the pros and cons of participating in the program. Since the application was filed, the board of directors has determined that the additional CPP funds will
not be needed based on our current capital and anticipated capital needs. On March 24, 2009, the board of directors directed that the application be withdrawn, and on March 26, 2009, the CPP application was withdrawn.

On October 14, 2008, the Federal Deposit Insurance Corporation (FDIC) announced the creation of the Temporary Liquidity Guarantee Program (TLGP) as part of a larger
government effort to strengthen confidence and encourage liquidity in the nations banking system. All eligible institutions are automatically enrolled in the program for the first 30 days at no cost. Organizations that did not wish to
participate in the TLGP were required to opt out by December 5, 2008. After that time, participating entities will be charged fees. This program has two components. One guarantees newly issued senior unsecured debt of the participating
organizations, within a certain limit, issued between October 14, 2008 and June 30, 2009. For such debts maturing beyond June 30, 2009, the guarantee will remain in effect until June 30, 2012. An annualized fee of 75 basis points
multiplied by the amount of debt issued from October 14, 2008 (and still outstanding on December 6, 2008), through June 30, 2009 will be charged. The other component provides full FDIC insurance coverage for non-interest bearing
transaction deposit accounts, regardless of dollar amount until December 31, 2009. An annualized 10 basis point assessment on balances in noninterest-bearing transaction accounts that exceed the existing deposit insurance limit of $250,000 will
be assessed on a quarterly basis to insured depository institutions that have not opted out of the TLGP. The Company has decided to participate in the TLGP.

On February 10, 2009, Treasury announced its Capital Assistance Program (CAP) under which Treasury will make capital available to financial institutions through Treasurys purchase of cumulative mandatorily convertible
preferred stock. The preferred shares will mandatorily convert to common stock after seven years. Prior to that time, the preferred shares are convertible in whole or in part at the option of the institution, subject to the approval of the
institutions primary federal regulator. The minimum investment is an amount equal to 1% of risk-weighted assets and the maximum is an amount equal to 2% of risk-weighted assets. Institutions may receive additional capital to the extent such
funds are used to redeem preferred shares issued in the CPP, effectively exchanging the CAP convertible preferred stock for the preferred stock sold under the CPP. LaPorte Bancorp currently does not intend to apply for a CAP investment.

Impact of Inflation

The primary impact of inflation on the
Bank is its effect on interest rates. The Banks primary source of income is net interest income, which is affected by changes in interest rates. The Bank attempts to limit the impact of inflation on its net interest margin through management
of interest rate-sensitive assets and liabilities and analyses of interest rate sensitivity. The effect of inflation on premises and equipment as well as on noninterest expenses has not been significant for the periods presented.



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##### Table of Contents

PART I  FINANCIAL INFORMATION



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

Proper
management of the interest rate sensitivity and maturities of our assets and liabilities is required to protect and enhance our net interest margin and asset values, subject to market conditions. Interest rate sensitivity spread management is an
important tool for achieving this objective and for developing ways in which to improve profitability.

The Company constantly monitors earning asset and
deposit levels, developments and trends in interest rates, liquidity, capital adequacy and marketplace opportunities. Management responds to all of these to protect and possibly enhance net interest income while managing risks within acceptable
levels as set forth in the Companys policies. In addition, alternative business plans and transactions are contemplated for their potential impact. This process is known as asset/liability management and is carried out by changing the
maturities and relative proportions of the various types of loans, investments, deposits and borrowings in the ways described above.

A commonly used tool
to manage and analyze the interest rate sensitivity of a bank is a computer simulation model. To quantify the extent of risks in both the Companys current position and in transactions it might make in the future, the Company uses a model to
simulate the impact of different interest rate scenarios on net interest income. The hypothetical impact of a 12 month nonparallel ramp (generally, a nonparallel change in interest rates of +/- 2.00%) and smaller incremental interest rate changes
are modeled at least quarterly, representing the primary means the Company uses for interest rate risk management decisions.

At March 31, 2009, given
a +2.00% or 2.00% shock in interest rates, our model results in the Companys net interest income for the next twelve months changing by $135,000, or 1.26%, and $(490,000), or (4.57)%, respectively.

The Company measures its economic value of equity at risk on a quarterly basis. Economic value of equity at risk measures the Companys exposure to changes in its
economic value of equity due to changes in a forecast interest rate environment. At March 31, 2009, given a +2.00% or -2.00% shock in interest rates, our model results in the Companys economic value of equity at risk for the next twelve
months changing by (4.97)%, and (12.57)%, respectively.

When preparing its modeling, the Company makes significant assumptions about the lag in the rate
of change in various asset and liability categories. The Company bases its assumptions on past experience and comparisons with other banks, and tests the validity of its assumptions by reviewing actual results with projected expectations.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

The Company has adopted disclosure
controls and procedures designed to facilitate financial reporting. The Companys disclosure controls currently consist of communications among the Companys Chief Executive Officer, the Companys Chief Financial Officer and each
department head to identify any transactions, events, trends, risks or contingencies which may be material to its operations. These disclosure controls also contain certain elements of the Companys internal controls adopted in connection with
applicable accounting and regulatory guidelines. In addition, the Companys Chief Executive Officer, Chief Financial Officer, Audit Committee and independent registered public accounting firm also meet on a quarterly basis to discuss disclosure
matters. The Companys Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Companys disclosure controls and procedures as of the end of the period covered by this report and found them to be
effective.

The Company maintains internal control over financial reporting. There have not been any significant changes in such internal control over
financial reporting in the last quarter that has materially affected, or is likely to materially affect, our internal control over financial reporting.



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PART II  OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

As of March 31, 2009, there
are no material pending legal proceedings to which the Company or its subsidiaries is a party other than ordinary routine litigation incidental to their respective businesses.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

As of March 31, 2009, there were
no material changes to the Risk Factors disclosed in the Companys Annual Report for the year ended December 31, 2008 on Form 10-K filed on March 31, 2009, except as set forth below:

Our Expenses Will Increase As A Result Of Increases In FDIC Insurance Premiums

The FDIC imposes an assessment on all depository institutions for deposit insurance. This assessment is based on the risk category of the institution and,
prior to 2009, ranged from five to 43 basis points of the institutions deposits. On December 22, 2008, the FDIC published a final rule that raises the current deposit insurance assessment rates uniformly for all institutions by 7 basis
points (to a range from 12 to 50 basis points) effective for the first quarter of 2009. On February 27, 2009, the FDIC issued a final rule that revises the way the FDIC calculates federal deposit insurance assessment rates beginning in the
second quarter of 2009 and thereafter. Under the new rule, the FDIC will first establish an institutions initial base assessment rate. This initial base assessment rate will range, depending on the risk category of the institution, from 12 to
45 basis points. The FDIC will then adjust the initial base assessment (higher or lower) based upon an institutions levels of unsecured debt, secured liabilities, and brokered deposits. The total base assessment rate will range from 7 to 77.5
basis points of the institutions deposits.

Additionally, the FDIC issued an interim rule that will impose a special 20 basis points
assessment on June 30, 2009, which will be collected on September 30, 2009. Since the FDIC issued this rule, FDIC Chairman Sheila Bair has announced the FDICs intention to cut this special assessment in half from twenty to ten basis
points provided that Congress expands the FDICs line of credit with the Treasury.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

The following table presents a summary of the Companys share repurchases during the quarter ended December 31, 2008.



|                       |  |                               |  |                          |      |                                                                              |        |                                                                             |  
|---------------------- |  | ----------------------------- |  | ------------------------ | ---- | ---------------------------------------------------------------------------- | ------ | --------------------------------------------------------------------------- | -
|Period                 |  | Totalnumberof sharespurchased |  | Averagepricepaidpershare |      | Totalnumber ofsharespurchasedas part ofpubliclyannouncedplans
orprograms (1) |        | Maximumnumber ofshares thatmay yet bepurchasedunder theplans
orprograms (1)
|January 1-January 31   |  | 22,500                        |  | $                        | 5.82 |                                                                              | 22,500 |                                                                             | 
|February 1-February 28 |  |                              |  |                          |     |                                                                              |       |                                                                             | 
|March 1-March 31       |  |                              |  |                          |     |                                                                              |       |                                                                             | 
|                       |  |                               |  |                          |      |                                                                              |        |                                                                             |  
|Total                  |  | 22,500                        |  | $                        | 5.82 |                                                                              | 22,500 |                                                                             |  
|                       |  |                               |  |                          |      |                                                                              |        |                                                                             |  



|(1) | On December 23, 2008, the Board of Directors authorized a stock repurchase program pursuant to which the Company would repurchase, in the open market and in privately
negotiated transactions, up to 55,000 of its common shares. On February 26, 2009, the Board of Directors terminated this program after 37,500 shares had been repurchased at a weighted average cost of $5.41 per share.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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PART II  OTHER INFORMATION



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

None



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

None



|ITEM 5. | OTHER INFORMATION
|------- | -----------------

None



|ITEM 6. | EXHIBITS
|------- | --------



|              |  |                                                                                                                                                                                     
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                         
|31.01         |  | Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                              
|              | 
|31.02         |  | Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                              
|              | 
|32.01         |  | Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002



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##### Table of Contents

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.



|            |  |                                                     
|----------- |  | ----------------------------------------------------
|            |  | LaPorte Bancorp, Inc.                               
|            | 
|May 8, 2009 |  | /s/ Lee A. Brady                                    
|Date        |  | Lee A. Brady,                                       
|            |  | President and Chief Executive Officer               
|            | 
|May 8, 2009 |  | /s/ Michele M. Thompson                             
|Date        |  | Michele M. Thompson,                                
|            |  | Executive Vice President and Chief Financial Officer



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