##### 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 June 30, 2010

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 ofIncorporation 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 August 9, 2010: 4,586,363, par value $0.01









---

##### Table of Contents

TABLE OF CONTENTS



|                                                                                                                                                                     |  |           
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------
|                                                                                                                                                                     |  | PageNumber
|PART I  FINANCIAL INFORMATION                                                                                                                                       |  |           
|                                                                                                                                                                     | 
|Item 1. Consolidated Financial Statements  LaPorte Bancorp, Inc.                                                                                                    |  |           
|                                                                                                                                                                     | 
|Consolidated Balance Sheets,June 30, 2010 (Unaudited) and December 31, 2009                                                                                          |  | 3         
|                                                                                                                                                                     | 
|Consolidated Statements of Income and Comprehensive Income,Three Months Ended June 30, 2010 and 2009 (Unaudited)
Six Months Ended June 30, 2010 and 2009 (Unaudited) |  | 4         
|                                                                                                                                                                     | 
|Consolidated Statements of Changes in Shareholders Equity,Six Months Ended June 30, 2010 and 2009 (Unaudited)                                                       |  | 5         
|                                                                                                                                                                     | 
|Consolidated Statements of Cash Flows,Six Months Ended June 30, 2010 and 2009
(Unaudited)                                                                            |  | 6         
|                                                                                                                                                                     | 
|Notes to Consolidated Financial Statements (Unaudited)                                                                                                               |  | 7         
|                                                                                                                                                                     | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                        |  | 24        
|                                                                                                                                                                     | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                                                                                   |  | 38        
|                                                                                                                                                                     | 
|Item 4. Controls and Procedures                                                                                                                                      |  | 38        
|                                                                                                                                                                     | 
|PART II  OTHER INFORMATION                                                                                                                                          |  |           
|                                                                                                                                                                     | 
|Item 1. Legal Proceedings                                                                                                                                            |  | 39        
|                                                                                                                                                                     | 
|Item 1A. Risk Factors                                                                                                                                                |  | 39        
|                                                                                                                                                                     | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                  |  | 40        
|                                                                                                                                                                     | 
|Item 3. Defaults Upon Senior Securities                                                                                                                              |  | 40        
|                                                                                                                                                                     | 
|Item 4. (Removed and Reserved)                                                                                                                                       |  | 40        
|                                                                                                                                                                     | 
|Item 5. Other Information                                                                                                                                            |  | 40        
|                                                                                                                                                                     | 
|Item 6. Exhibits                                                                                                                                                     |  | 41        
|                                                                                                                                                                     | 
|Signatures                                                                                                                                                           |  | 42        



2



---

##### 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)



|                                                                                                                                                                            |  |              |         |   |                  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                            |  | June 30,2010 |         |   | December 31,2009 |  
|ASSETS                                                                                                                                                                      |  |              |         |   |                  |   |         |  
|Cash and due from financial institutions                                                                                                                                    |  | $            | 6,223   |   |                  | $ | 6,000   |  
|Securities available for sale                                                                                                                                               |  |              | 104,240 |   |                  |   | 102,095 |  
|Federal Home Loan Bank (FHLB) stock, at cost (restricted)                                                                                                                   |  |              | 4,206   |   |                  |   | 4,206   |  
|Loans held for sale, at fair value                                                                                                                                          |  |              | 1,112   |   |                  |   | 981     |  
|Loans, net of allowance for loan losses of $4,351 at June 30, 2010, $2,776 at December 31, 2009                                                                             |  |              | 286,877 |   |                  |   | 256,275 |  
|Mortgage servicing rights                                                                                                                                                   |  |              | 408     |   |                  |   | 424     |  
|Other real estate owned                                                                                                                                                     |  |              | 353     |   |                  |   | 554     |  
|Premises and equipment, net                                                                                                                                                 |  |              | 11,066  |   |                  |   | 11,150  |  
|Goodwill                                                                                                                                                                    |  |              | 8,431   |   |                  |   | 8,431   |  
|Other intangible assets                                                                                                                                                     |  |              | 800     |   |                  |   | 939     |  
|Bank owned life insurance                                                                                                                                                   |  |              | 9,787   |   |                  |   | 9,618   |  
|Accrued interest receivable and other assets                                                                                                                                |  |              | 4,952   |   |                  |   | 5,154   |  
|                                                                                                                                                                            |  |              |         |   |                  |   |         |  
|                                                                                                                                                                            |  |             
|Total assets                                                                                                                                                                |  | $            | 438,455 |   |                  | $ | 405,827 |  
|                                                                                                                                                                            |  |              |         |   |                  |   |         |  
|                                                                                                                                                                            |  |             
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                        |  |              |         |   |                  |   |         |  
|Deposits                                                                                                                                                                    |  |              |         |   |                  |   |         |  
|Non-interest bearing                                                                                                                                                        |  | $            | 35,649  |   |                  | $ | 34,066  |  
|Interest bearing                                                                                                                                                            |  |              | 259,156 |   |                  |   | 239,342 |  
|                                                                                                                                                                            |  |              |         |   |                  |   |         |  
|Total deposits                                                                                                                                                              |  |              | 294,805 |   |                  |   | 273,408 |  
|Federal Home Loan Bank advances                                                                                                                                             |  |              | 78,946  |   |                  |   | 52,773  |  
|Subordinated debentures                                                                                                                                                     |  |              | 5,155   |   |                  |   | 5,155   |  
|Federal Deposit Insurance Corporation guaranteed unsecured borrowings                                                                                                       |  |              | 4,884   |   |                  |   | 4,852   |  
|Federal Reserve Bank discount window borrowings                                                                                                                             |  |              |        |   |                  |   | 16,675  |  
|Accrued interest payable and other liabilities                                                                                                                              |  |              | 4,591   |   |                  |   | 3,092   |  
|                                                                                                                                                                            |  |              |         |   |                  |   |         |  
|Total liabilities                                                                                                                                                           |  |              | 388,381 |   |                  |   | 355,955 |  
|                                                                                                                                                                            |  |             
|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 4,586,363 and 4,607,963 shares
outstanding at June 30, 2010 and December 31, 2009 |  |              | 48      |   |                  |   | 48      |  
|Additional paid-in capital                                                                                                                                                  |  |              | 21,170  |   |                  |   | 21,188  |  
|Surplus                                                                                                                                                                     |  |              | 770     |   |                  |   | 770     |  
|Retained earnings                                                                                                                                                           |  |              | 29,858  |   |                  |   | 28,620  |  
|Accumulated other comprehensive income, net of tax of $446 at June 30, 2010 and $936 at December 31,
2009                                                                   |  |              | 864     |   |                  |   | 1,817   |  
|Treasury stock, at cost (2010 - 196,800 shares, 2009  175,200 shares)                                                                                                      |  |              | (1,144  | ) |                  |   | (1,033  | )
|Unearned Employee Stock Ownership Plan (ESOP) shares                                                                                                                        |  |              | (1,492  | ) |                  |   | (1,538  | )
|                                                                                                                                                                            |  |              |         |   |                  |   |         |  
|Total shareholders equity                                                                                                                                                  |  |              | 50,074  |   |                  |   | 49,872  |  
|                                                                                                                                                                            |  |              |         |   |                  |   |         |  
|                                                                                                                                                                            |  |             
|Total liabilities and shareholders equity                                                                                                                                  |  | $            | 438,455 |   |                  | $ | 405,827 |  
|                                                                                                                                                                            |  |              |         |   |                  |   |         |  

See accompanying notes to consolidated financial statements (unaudited)



3



---

##### Table of Contents

PART I  FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS - continued



LAPORTE BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)

(in thousands, except per share data)



|                                                    |  |                             |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|--------------------------------------------------- |  | --------------------------- | ------ | - | ------------------------ | - | ----- | ---- |  | - | ------ | - |  | - | ----- | -
|                                                    |  | Three Months EndedJune 
30, |        |   | Six Months EndedJune 30, |  
|                                                    |  | 2010                        |        |   | 2009                     |   |       | 2010 |  |   | 2009   |  
|Interest and dividend income                        |  |                             |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|Loans, including fees                               |  | $                           | 4,015  |   |                          | $ | 3,464 |      |  | $ | 7,785  |   |  | $ | 6,848 |  
|Taxable securities                                  |  |                             | 673    |   |                          |   | 1,035 |      |  |   | 1,452  |   |  |   | 2,174 |  
|Tax exempt securities                               |  |                             | 278    |   |                          |   | 111   |      |  |   | 528    |   |  |   | 182   |  
|FHLB stock                                          |  |                             | 21     |   |                          |   | 23    |      |  |   | 42     |   |  |   | 65    |  
|Other interest income                               |  |                             | 1      |   |                          |   | 1     |      |  |   | 3      |   |  |   | 2     |  
|                                                    |  |                             |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|Total interest and dividend income                  |  |                             | 4,988  |   |                          |   | 4,634 |      |  |   | 9,810  |   |  |   | 9,271 |  
|                                                    |  |                             |        |  
|Interest expense                                    |  |                             |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|Deposits                                            |  |                             | 1,165  |   |                          |   | 1,248 |      |  |   | 2,321  |   |  |   | 2,515 |  
|Federal Home Loan Bank advances                     |  |                             | 556    |   |                          |   | 743   |      |  |   | 1,135  |   |  |   | 1,519 |  
|Subordinated debentures                             |  |                             | 70     |   |                          |   | 68    |      |  |   | 139    |   |  |   | 125   |  
|FDIC guaranteed unsecured borrowings                |  |                             | 51     |   |                          |   | 50    |      |  |   | 101    |   |  |   | 76    |  
|Federal Reserve Bank discount window borrowings     |  |                             | 7      |   |                          |   | 6     |      |  |   | 10     |   |  |   | 7     |  
|                                                    |  |                             |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|Total interest expense                              |  |                             | 1,849  |   |                          |   | 2,115 |      |  |   | 3,706  |   |  |   | 4,242 |  
|                                                    |  |                             |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|                                                    |  |                             |        |  
|Net interest income                                 |  |                             | 3,139  |   |                          |   | 2,519 |      |  |   | 6,104  |   |  |   | 5,029 |  
|                                                    |  |                             |        |  
|Provision for loan losses                           |  |                             | 755    |   |                          |   | 209   |      |  |   | 1,664  |   |  |   | 258   |  
|                                                    |  |                             |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|                                                    |  |                             |        |  
|Net interest income after provision for loan losses |  |                             | 2,384  |   |                          |   | 2,310 |      |  |   | 4,440  |   |  |   | 4,771 |  
|                                                    |  |                             |        |  
|Noninterest income                                  |  |                             |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|Service charges on deposits                         |  |                             | 199    |   |                          |   | 210   |      |  |   | 376    |   |  |   | 410   |  
|ATM and debit card fees                             |  |                             | 94     |   |                          |   | 75    |      |  |   | 180    |   |  |   | 142   |  
|Brokerage fees                                      |  |                             |       |   |                          |   |      |      |  |   |       |   |  |   | (4    | )
|Trust fees                                          |  |                             |       |   |                          |   | 33    |      |  |   | 6      |   |  |   | 72    |  
|Earnings on life insurance, net                     |  |                             | 96     |   |                          |   | 61    |      |  |   | 188    |   |  |   | 153   |  
|Net gains on mortgage banking activities            |  |                             | 163    |   |                          |   | 339   |      |  |   | 269    |   |  |   | 639   |  
|Loan servicing fees, net                            |  |                             | (2     | ) |                          |   | (4    | )    |  |   | 15     |   |  |   | (6    | )
|Net gains on securities                             |  |                             | 35     |   |                          |   | 495   |      |  |   | 843    |   |  |   | 631   |  
|Warehouse loan fees                                 |  |                             | 193    |   |                          |   | 59    |      |  |   | 315    |   |  |   | 59    |  
|Gains (Losses) on other assets                      |  |                             | 5      |   |                          |   | (34   | )    |  |   | (35    | ) |  |   | (94   | )
|Other income                                        |  |                             | 117    |   |                          |   | 67    |      |  |   | 214    |   |  |   | 115   |  
|                                                    |  |                             |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|Total noninterest income                            |  |                             | 900    |   |                          |   | 1,301 |      |  |   | 2,371  |   |  |   | 2,117 |  
|                                                    |  |                             |        |  
|Noninterest expense                                 |  |                             |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|Salaries and employee benefits                      |  |                             | 1,398  |   |                          |   | 1,176 |      |  |   | 2,812  |   |  |   | 2,544 |  
|Occupancy and equipment                             |  |                             | 422    |   |                          |   | 447   |      |  |   | 917    |   |  |   | 959   |  
|Data processing                                     |  |                             | 125    |   |                          |   | 116   |      |  |   | 240    |   |  |   | 224   |  
|Advertising                                         |  |                             | 64     |   |                          |   | 70    |      |  |   | 113    |   |  |   | 111   |  
|Bank examination fees                               |  |                             | 145    |   |                          |   | 123   |      |  |   | 250    |   |  |   | 236   |  
|Amortization of intangibles                         |  |                             | 68     |   |                          |   | 85    |      |  |   | 139    |   |  |   | 178   |  
|FDIC insurance                                      |  |                             | 93     |   |                          |   | 286   |      |  |   | 202    |   |  |   | 385   |  
|FHLB advances prepayment penalty                    |  |                             |       |   |                          |   | 427   |      |  |   |       |   |  |   | 427   |  
|Collection and other real estate owned              |  |                             | 40     |   |                          |   | 20    |      |  |   | 73     |   |  |   | 44    |  
|Other expenses                                      |  |                             | 259    |   |                          |   | 300   |      |  |   | 562    |   |  |   | 589   |  
|                                                    |  |                             |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|Total noninterest expense                           |  |                             | 2,614  |   |                          |   | 3,050 |      |  |   | 5,308  |   |  |   | 5,697 |  
|                                                    |  |                             |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|                                                    |  |                             |        |  
|Income before income taxes                          |  |                             | 670    |   |                          |   | 561   |      |  |   | 1,503  |   |  |   | 1,191 |  
|                                                    |  |                             |        |  
|Income tax expense                                  |  |                             | 102    |   |                          |   | 59    |      |  |   | 265    |   |  |   | 199   |  
|                                                    |  |                             |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|                                                    |  |                             |        |  
|Net income                                          |  | $                           | 568    |   |                          | $ | 502   |      |  | $ | 1,238  |   |  | $ | 992   |  
|                                                    |  |                             |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|Other comprehensive income (loss):                  |  |                             |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|Unrealized gain on securities available for sale    |  | $                           | 780    |   |                          | $ | (280  | )    |  | $ | 1,013  |   |  | $ | 833   |  
|Reclassification for gain on security sales         |  |                             | (35    | ) |                          |   | (495  | )    |  |   | (843   | ) |  |   | (631  | )
|Unrealized gain (loss) on derivative instrument     |  |                             | (1,197 | ) |                          |   | 88    |      |  |   | (1,613 | ) |  |   | 88    |  
|Income tax effect                                   |  |                             | 153    |   |                          |   | 234   |      |  |   | 490    |   |  |   | (98   | )
|                                                    |  |                             |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|Other comprehensive income (loss)                   |  |                             | (299   | ) |                          |   | (453  | )    |  |   | (953   | ) |  |   | 192   |  
|                                                    |  |                             |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|Comprehensive income                                |  | $                           | 269    |   |                          | $ | 49    |      |  | $ | 285    |   |  | $ | 1,184 |  
|                                                    |  |                             |        |   |                          |   |       |      |  |   |        |   |  |   |       |  
|                                                    |  |                             |        |  
|Basic and diluted earnings per share                |  | $                           | 0.13   |   |                          | $ | 0.11  |      |  | $ | 0.28   |   |  | $ | 0.22  |  
|                                                    |  |                             |        |   |                          |   |       |      |  |   |        |   |  |   |       |  

See accompanying notes to consolidated financial statements (unaudited)



4



---

##### Table of Contents

PART I  FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS - continued



LAPORTE BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (Unaudited)

Six months ended June 30, 2010 and 2009

(in thousands, except share data)



|                                                                                                                           |  |             |    |                          |   |        |         |  |                  |     |                                                |   |        |               |   |        |                    |  |   |        |   |  |   |        |   |  |   |        |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ----------- | -- | ------------------------ | - | ------ | ------- |  | ---------------- | --- | ---------------------------------------------- | - | ------ | ------------- | - | ------ | ------------------ |  | - | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                                                                                                           |  | CommonStock |    | AdditionalPaid-InCapital |   |        | Surplus |  | RetainedEarnings |     | AccumulatedOtherComprehensiveIncome,Net of Tax |   |        | TreasuryStock |   |        | UnearnedESOPShares |  |   | Total  |  
|                                                                                                                           |  |             |    |                          |   |        |         | 
|Balance at January 1, 2009                                                                                                 |  | $           | 48 |                          | $ | 21,235 |         |  | $                | 770 |                                                | $ | 26,108 |               | $ | 383    |                    |  | $ | (774   | ) |  | $ | (1,628 | ) |  | $ | 46,142 |  
|Comprehensive income:                                                                                                      |  |             |    |                          |   |        |         |  |                  |     |                                                |   |        |               |   |        |                    |  |   |        |   |  |   |        |   |  |   |        |  
|Net income                                                                                                                 |  |             |   |                          |   |       |         |  |                  |    |                                                |   | 992    |               |   |       |                    |  |   |       |   |  |   |       |   |  |   | 992    |  
|Other comprehensive income:                                                                                                |  |             |    |                          |   |        |         |  |                  |     |                                                |   |        |               |   |        |                    |  |   |        |   |  |   |        |   |  |   |        |  
|Net change in unrealized gain on securities available for sale, net of reclassification adjustments and tax
effects        |  |             |   |                          |   |       |         |  |                  |    |                                                |   |       |               |   | 134    |                    |  |   |       |   |  |   |       |   |  |   | 134    |  
|Net change in unrealized gain on derivative instrument, net of tax effect                                                  |  |             |   |                          |   |       |         |  |                  |    |                                                |   |       |               |   | 58     |                    |  |   |       |   |  |   |       |   |  |   | 58     |  
|Total comprehensive income                                                                                                 |  |             |    |                          |   |        |         |  |                  |     |                                                |   |        |               |   |        |                    |  |   |        |   |  |   |        |   |  |   | 1,184  |  
|Treasury shares purchased, 22,500 shares                                                                                   |  |             |   |                          |   |       |         |  |                  |    |                                                |   |       |               |   |       |                    |  |   | (131   | ) |  |   |       |   |  |   | (131   | )
|ESOP shares earned, 4,522 shares                                                                                           |  |             |   |                          |   | (23    | )       |  |                  |    |                                                |   |       |               |   |       |                    |  |   |       |   |  |   | 45     |   |  |   | 22     |  
|                                                                                                                           |  |             |    |                          |   |        |         |  |                  |     |                                                |   |        |               |   |        |                    |  |   |        |   |  |   |        |   |  |   |        |  
|Balance at June 30, 2009                                                                                                   |  | $           | 48 |                          | $ | 21,212 |         |  | $                | 770 |                                                | $ | 27,100 |               | $ | 575    |                    |  | $ | (905   | ) |  | $ | (1,583 | ) |  | $ | 47,217 |  
|                                                                                                                           |  |             |    |                          |   |        |         |  |                  |     |                                                |   |        |               |   |        |                    |  |   |        |   |  |   |        |   |  |   |        |  
|                                                                                                                           |  |             |    |                          |   |        |         | 
|Balance at January 1, 2010                                                                                                 |  | $           | 48 |                          | $ | 21,188 |         |  | $                | 770 |                                                | $ | 28,620 |               | $ | 1,817  |                    |  | $ | (1,033 | ) |  | $ | (1,538 | ) |  | $ | 49,872 |  
|Comprehensive income:                                                                                                      |  |             |    |                          |   |        |         |  |                  |     |                                                |   |        |               |   |        |                    |  |   |        |   |  |   |        |   |  |   |        |  
|Net income                                                                                                                 |  |             |   |                          |   |       |         |  |                  |    |                                                |   | 1,238  |               |   |       |                    |  |   |       |   |  |   |       |   |  |   | 1,238  |  
|Other comprehensive income (loss):                                                                                         |  |             |    |                          |   |        |         |  |                  |     |                                                |   |        |               |   |        |                    |  |   |        |   |  |   |        |   |  |   |        |  
|Net change in unrealized gain (loss) on securities available for sale, net of reclassification adjustments and tax
effects |  |             |   |                          |   |       |         |  |                  |    |                                                |   |       |               |   | 112    |                    |  |   |       |   |  |   |       |   |  |   | 112    |  
|Net change in unrealized gain (loss) on derivative instruments, net of tax effect                                          |  |             |   |                          |   |       |         |  |                  |    |                                                |   |       |               |   | (1,065 | )                  |  |   |       |   |  |   |       |   |  |   | (1,065 | )
|Total comprehensive income                                                                                                 |  |             |    |                          |   |        |         |  |                  |     |                                                |   |        |               |   |        |                    |  |   |        |   |  |   |        |   |  |   | 285    |  
|Treasury shares purchased, 21,600 shares                                                                                   |  |             |   |                          |   |       |         |  |                  |    |                                                |   |       |               |   |       |                    |  |   | (111   | ) |  |   |       |   |  |   | (111   | )
|ESOP shares earned, 4,522 shares                                                                                           |  |             |   |                          |   | (18    | )       |  |                  |    |                                                |   |       |               |   |       |                    |  |   |       |   |  |   | 46     |   |  |   | 28     |  
|                                                                                                                           |  |             |    |                          |   |        |         |  |                  |     |                                                |   |        |               |   |        |                    |  |   |        |   |  |   |        |   |  |   |        |  
|Balance at June 30, 2010                                                                                                   |  | $           | 48 |                          | $ | 21,170 |         |  | $                | 770 |                                                | $ | 29,858 |               | $ | 864    |                    |  | $ | (1,144 | ) |  | $ | (1,492 | ) |  | $ | 50,074 |  
|                                                                                                                           |  |             |    |                          |   |        |         |  |                  |     |                                                |   |        |               |   |        |                    |  |   |        |   |  |   |        |   |  |   |        |  

See accompanying notes to consolidated financial statements (unaudited)



5



---

##### Table of Contents

PART I  FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS - continued



LAPORTE BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)



|                                                                                          |  |                          |         |   |      |   |         |  
|----------------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                          |  | Six Months EndedJune 30, |        
|                                                                                          |  | 2010                     |         |   | 2009 |  
|Cash flows from operating activities                                                      |  |                          |         |   |      |   |         |  
|Net income                                                                                |  | $                        | 1,238   |   |      | $ | 992     |  
|Adjustments to reconcile net income to net cash from operating activities:                |  |                          |         |   |      |   |         |  
|Depreciation                                                                              |  |                          | 354     |   |      |   | 395     |  
|Provision for loan losses                                                                 |  |                          | 1,664   |   |      |   | 258     |  
|Net gains on securities                                                                   |  |                          | (843    | ) |      |   | (631    | )
|Net gains on sales of loans                                                               |  |                          | (221    | ) |      |   | (502    | )
|Originations of loans held for sale                                                       |  |                          | (14,534 | ) |      |   | (34,526 | )
|Proceeds from sales of loans held for sale                                                |  |                          | 14,624  |   |      |   | 31,524  |  
|Recognition of mortgage servicing rights                                                  |  |                          | (48     | ) |      |   | (137    | )
|Amortization of mortgage servicing rights                                                 |  |                          | 36      |   |      |   | 82      |  
|Net change in loan servicing rights valuation allowance                                   |  |                          | 28      |   |      |   | (7      | )
|Net gains on sales of other real estate owned                                             |  |                          | (8      | ) |      |   | (23     | )
|Write down of other real estate owned                                                     |  |                          | 37      |   |      |   | 94      |  
|Earnings on life insurance, net                                                           |  |                          | (174    | ) |      |   | (153    | )
|Amortization of intangible assets                                                         |  |                          | 139     |   |      |   | 178     |  
|ESOP compensation expense                                                                 |  |                          | 28      |   |      |   | 22      |  
|Amortization of issuance costs of unsecured borrowings                                    |  |                          | 32      |   |      |   | 23      |  
|Change in assets and liabilities:                                                         |  |                          |         |   |      |   |         |  
|Accrued interest receivable and other assets                                              |  |                          | 604     |   |      |   | 233     |  
|Accrued interest payable and other liabilities                                            |  |                          | (26     | ) |      |   | 482     |  
|                                                                                          |  |                          |         |   |      |   |         |  
|Net cash from operating activities                                                        |  |                          | 2,930   |   |      |   | (1,696  | )
|                                                                                          |  |                         
|Cash flows from investing activities                                                      |  |                          |         |   |      |   |         |  
|Net change in loans                                                                       |  |                          | (32,643 | ) |      |   | (28,245 | )
|Proceeds from sales of other real estate owned                                            |  |                          | 549     |   |      |   | 449     |  
|Proceeds from maturities, calls and principal repayments of securities available for sale |  |                          | 17,350  |   |      |   | 15,801  |  
|Proceeds from sales of securities available for sale                                      |  |                          | 31,718  |   |      |   | 23,611  |  
|Purchases of securities available for sale                                                |  |                          | (50,200 | ) |      |   | (29,612 | )
|Premises and equipment expenditures, net                                                  |  |                          | (270    | ) |      |   | (164    | )
|Bank owned life insurance death benefits                                                  |  |                          | 5       |   |      |   |        |  
|                                                                                          |  |                          |         |   |      |   |         |  
|Net cash from investing activities                                                        |  |                          | (33,491 | ) |      |   | (18,160 | )
|                                                                                          |  |                         
|Cash flows from financing activities                                                      |  |                          |         |   |      |   |         |  
|Net change in deposits                                                                    |  |                          | 21,397  |   |      |   | 22,531  |  
|Net change in FHLB advances                                                               |  |                          | 26,173  |   |      |   | (20,563 | )
|Proceeds from issuance of unsecured borrowing, net of issuance costs                      |  |                          |        |   |      |   | 4,797   |  
|Net change in Federal Reserve Bank discount window borrowings                             |  |                          | (16,675 | ) |      |   | 14,342  |  
|Purchase of treasury stock                                                                |  |                          | (111    | ) |      |   | (131    | )
|                                                                                          |  |                          |         |   |      |   |         |  
|Net cash from financing activities                                                        |  |                          | 30,784  |   |      |   | 20,976  |  
|                                                                                          |  |                          |         |   |      |   |         |  
|                                                                                          |  |                         
|Net change in cash and cash equivalents                                                   |  |                          | 223     |   |      |   | 1,120   |  
|                                                                                          |  |                         
|Cash and cash equivalents at beginning of period                                          |  |                          | 6,000   |   |      |   | 5,628   |  
|                                                                                          |  |                          |         |   |      |   |         |  
|                                                                                          |  |                         
|Cash and cash equivalents at end of period                                                |  | $                        | 6,223   |   |      | $ | 6,748   |  
|                                                                                          |  |                          |         |   |      |   |         |  
|                                                                                          |  |                         
|Supplemental cash flow information:                                                       |  |                          |         |   |      |   |         |  
|Cash paid during the period for:                                                          |  |                          |         |   |      |   |         |  
|Interest paid                                                                             |  | $                        | 3,739   |   |      | $ | 4,224   |  
|Income taxes paid                                                                         |  |                          | 440     |   |      |   | 45      |  
|Supplemental noncash disclosures:                                                         |  |                          |         |   |      |   |         |  
|Transfers from loans receivable to other real estate owned                                |  | $                        | 377     |   |      | $ | 77      |  

See accompanying notes
to consolidated financial statements (unaudited)



6



---

##### 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 former 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 8 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 United States generally accepted accounting principles 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, 2009 included in the Form 10-K Annual Report of LaPorte
Bancorp, Inc. for the fiscal year ended December 31, 2009.

The results for the six-month period ended June 30, 2010 may not
indicate the results to be expected for the full year ending December 31, 2010.

Reclassifications: Some items in the prior year
financial statements were reclassified to conform to the current presentation.

NOTE 2  RECENT ACCOUNTING PRONOUNCEMENTS

Adoption of New Accounting Standards:

FASB ASC 310

In April 2010, the FASB
issued an update (ASU No. 2010-18, Effect of a Loan Modification When the Loan Is Part of a Pool That is Accounted for as a Single Asset) impacting FASB ASC 310-30, Receivables  Loans and Debt Securities Acquired with Deteriorated Credit
Quality. Under the amendments, modifications of loans that are accounted for within a pool do not result in the removal of those loans from the pool even if the modification of those loans would otherwise be considered a troubled debt restructuring.
An entity will continue to be required to consider whether the pool of assets in which the loan is included is impaired if expected cash flows for the pool change. This update was effective for the Company for the interim reporting period beginning
after June 15, 2010. The adoption of this update did not have a material impact on the Companys consolidated financial condition or results of operations.



7



---

##### 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



FASB ASC 820-10

In July 2010, the FASB issued an update (ASU No. 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit
Losses). This update requires companies to provide more information in their disclosures about the credit quality of their financing receivables and the credit reserves held against them. The amendments that require disclosures as of the end of
a reporting period are effective for the periods ending on or after December 15, 2010. The amendments that require disclosures about activity that occurs during a reporting period are effective for the periods beginning on or after December 15,
2010. The Company is currently evaluating the impact of adopting this new guidance on the consolidated financial statements.

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 and six months ended June 30, 2010 and 2009). Diluted earnings per common share is equal to basic
earnings per common share for the periods ended June 30, 2010 and 2009, as there were no potentially dilutive common shares for the three and six months ended June 30, 2010 and 2009. The factors used in the earnings per common share computation
follow:



|                                           |  |                            |           |   |                          |   |           |      |  |   |           |   |  |   |           |  
|------------------------------------------ |  | -------------------------- | --------- | - | ------------------------ | - | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                           |  | Three Months EndedJune 30, |           |   | Six Months
EndedJune 30, |  
|                                           |  | 2010                       |           |   | 2009                     |   |           | 2010 |  |   | 2009      |  
|Basic                                      |  |                            |           |   |                          |   |           |      |  |   |           |   |  |   |           |  
|Net income                                 |  | $                          | 568       |   |                          | $ | 502       |      |  | $ | 1,238     |   |  | $ | 992       |  
|                                           |  |                            |           |   |                          |   |           |      |  |   |           |   |  |   |           |  
|                                           |  |                            |           |  
|Weighted average common shares outstanding |  |                            | 4,587,570 |   |                          |   | 4,635,663 |      |  |   | 4,589,374 |   |  |   | 4,638,439 |  
|Less: Average unallocated ESOP shares      |  |                            | (150,368  | ) |                          |   | (159,413  | )    |  |   | (151,498  | ) |  |   | (160,543  | )
|                                           |  |                            |           |   |                          |   |           |      |  |   |           |   |  |   |           |  
|Average shares                             |  |                            | 4,437,202 |   |                          |   | 4,476,250 |      |  |   | 4,437,876 |   |  |   | 4,477,896 |  
|                                           |  |                            |           |   |                          |   |           |      |  |   |           |   |  |   |           |  
|                                           |  |                            |           |  
|Basic earnings per common share            |  | $                          | 0.13      |   |                          | $ | 0.11      |      |  | $ | 0.28      |   |  | $ | 0.22      |  
|                                           |  |                            |           |   |                          |   |           |      |  |   |           |   |  |   |           |  



8



---

##### 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

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:

June 30, 2010



|                                                                |  |               |         |                 |   |                  |  |   |            |   |  |   |        
|--------------------------------------------------------------- |  | ------------- | ------- | --------------- | - | ---------------- |  | - | ---------- | - |  | - | -------
|                                                                |  | AmortizedCost |         | UnrealizedGains |   | UnrealizedLosses |  |   | Fair Value
|                                                                |  |               |         |                
|U.S. federal agency                                             |  | $             | 28,959  |                 | $ | 372              |  | $ |           |   |  | $ | 29,331 
|State and municipal                                             |  |               | 31,902  |                 |   | 898              |  |   | (93        | ) |  |   | 32,707 
|Mortgage-backed securities - residential                        |  |               | 21,181  |                 |   | 1,034            |  |   | (14        | ) |  |   | 22,201 
|Government agency sponsored collateralized mortgage obligations |  |               | 13,971  |                 |   | 366              |  |   |           |   |  |   | 14,337 
|Privately held collateralized mortgage obligations              |  |               | 5,392   |                 |   | 272              |  |   |           |   |  |   | 5,664  
|                                                                |  |               |         |                 |   |                  |  |   |            |   |  |   |        
|Total                                                           |  | $             | 101,405 |                 | $ | 2,942            |  | $ | (107       | ) |  | $ | 104,240
|                                                                |  |               |         |                 |   |                  |  |   |            |   |  |   |        

December 31, 2009



|                                                                |  |               |        |                 |   |                  |  |   |            |   |  |   |        
|--------------------------------------------------------------- |  | ------------- | ------ | --------------- | - | ---------------- |  | - | ---------- | - |  | - | -------
|                                                                |  | AmortizedCost |        | UnrealizedGains |   | UnrealizedLosses |  |   | Fair Value
|                                                                |  |               |        |                
|U.S. federal agency                                             |  | $             | 13,112 |                 | $ | 19               |  | $ | (159       | ) |  | $ | 12,972 
|State and municipal                                             |  |               | 24,761 |                 |   | 597              |  |   | (94        | ) |  |   | 25,264 
|Mortgage-backed securities - residential                        |  |               | 29,732 |                 |   | 1,350            |  |   |           |   |  |   | 31,082 
|Government agency sponsored collateralized mortgage obligations |  |               | 17,718 |                 |   | 456              |  |   | (26        | ) |  |   | 18,148 
|Privately held collateralized mortgage obligations              |  |               | 9,114  |                 |   | 398              |  |   | (18        | ) |  |   | 9,494  
|Corporate debt securities                                       |  |               | 4,993  |                 |   | 165              |  |   | (23        | ) |  |   | 5,135  
|                                                                |  |               |        |                 |   |                  |  |   |            |   |  |   |        
|Total                                                           |  | $             | 99,430 |                 | $ | 2,985            |  | $ | (320       | ) |  | $ | 102,095
|                                                                |  |               |        |                 |   |                  |  |   |            |   |  |   |        



9



---

##### 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



Securities with unrealized losses at June 30, 2010 and December 31, 2009, aggregated by
investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:



|                                         |  |                                                  |       |                |                                                |      |           |  |                |   |           |   |                |  |   |       |  |   |      |  
|---------------------------------------- |  | ------------------------------------------------ | ----- | -------------- | ---------------------------------------------- | ---- | --------- |  | -------------- | - | --------- | - | -------------- |  | - | ----- |  | - | ---- | -
|June 30, 2010                            |  | Continuing UnrealizedLoss
ForLess Than 12 Months |       |                | Continuing UnrealizedLoss
For12 Months or More |      | Total     | 
|Description of Securities                |  | FairValue                                        |       | UnrealizedLoss |                                                |      | FairValue |  | UnrealizedLoss |   | FairValue |   | UnrealizedLoss | 
|                                         |  |                                                  |       |                |                                                |     
|State and municipal                      |  | $                                                | 6,258 |                | $                                              | (93  | )         |  | $              |  |           | $ |               |  | $ | 6,258 |  | $ | (93  | )
|Mortgage-backed securities - residential |  |                                                  | 1,020 |                |                                                | (14  | )         |  |                |  |           |   |               |  |   | 1,020 |  |   | (14  | )
|                                         |  |                                                  |       |                |                                                |      |           |  |                |   |           |   |                |  |   |       |  |   |      |  
|                                         |  |                                                  |       |                |                                                |     
|Total temporarily impaired               |  | $                                                | 7,278 |                | $                                              | (107 | )         |  | $              |  |           | $ |               |  | $ | 7,278 |  | $ | (107 | )
|                                         |  |                                                  |       |                |                                                |      |           |  |                |   |           |   |                |  |   |       |  |   |      |  



|                                                                |  |                                                  |        |                |                                                |      |           |       |                |       |  |           |     |                |  |   |        |  |   |      |  
|--------------------------------------------------------------- |  | ------------------------------------------------ | ------ | -------------- | ---------------------------------------------- | ---- | --------- | ----- | -------------- | ----- |  | --------- | --- | -------------- |  | - | ------ |  | - | ---- | -
|December 31, 2009                                               |  | Continuing UnrealizedLoss ForLess
Than 12 Months |        |                | Continuing UnrealizedLoss
For12 Months or More |      |           | Total |               
|Description of Securities                                       |  | FairValue                                        |        | UnrealizedLoss |                                                |      | FairValue |       | UnrealizedLoss |       |  | FairValue |     | UnrealizedLoss | 
|                                                                |  |                                                  |        |                |                                                |     
|U.S. federal agency                                             |  | $                                                | 10,582 |                | $                                              | (159 | )         |       | $              |      |  | $         |    |                |  | $ | 10,582 |  | $ | (159 | )
|State and municipal                                             |  |                                                  | 5,496  |                |                                                | (67  | )         |       |                | 678   |  |           | (27 | )              |  |   | 6,174  |  |   | (94  | )
|Government agency sponsored collateralized mortgage obligations |  |                                                  | 2,620  |                |                                                | (26  | )         |       |                |      |  |           |    |                |  |   | 2,620  |  |   | (26  | )
|Privately held collateralized mortgage obligations              |  |                                                  | 1,236  |                |                                                | (1   | )         |       |                | 286   |  |           | (17 | )              |  |   | 1,522  |  |   | (18  | )
|Corporate debt securities                                       |  |                                                  |       |                |                                                |     |           |       |                | 962   |  |           | (23 | )              |  |   | 962    |  |   | (23  | )
|                                                                |  |                                                  |        |                |                                                |      |           |       |                |       |  |           |     |                |  |   |        |  |   |      |  
|                                                                |  |                                                  |        |                |                                                |     
|Total temporarily impaired                                      |  | $                                                | 19,934 |                | $                                              | (253 | )         |       | $              | 1,926 |  | $         | (67 | )              |  | $ | 21,860 |  | $ | (320 | )
|                                                                |  |                                                  |        |                |                                                |      |           |       |                |       |  |           |     |                |  |   |        |  |   |      |  

At June 20, 2010, the Company held 13 investments in debt securities which were in an unrealized loss position of which
13 were in an unrealized loss position for less than twelve months and none were in an unrealized loss position for twelve months or more. Management periodically evaluates each investment security for potential other-than-temporary impairment,
relying primarily on industry analyst reports and observation of market conditions and interest rate fluctuations. Management believes it will be able to collect all amounts due according to the contractual terms of the underlying investment
securities and that the noted declines in fair value are considered temporary and due only to normal market interest rate fluctuations. The Company does not intend to sell the securities and is not more likely than not to be required to sell these
debt securities before their anticipated recovery.



10



---

##### 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



Sales of securities available for sale for the three and six months ended June 30, 2010 and 2009
were as follows:



|             |  |                            |       |   |                          |   |        |      |  |   |        |   |  |   |        |  
|------------ |  | -------------------------- | ----- | - | ------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|             |  | Three Months EndedJune 30, |       |   | Six Months EndedJune 30, |  
|             |  | 2010                       |       |   | 2009                     |   |        | 2010 |  |   | 2009   |  
|             |  |                            |       |  
|Proceeds     |  | $                          | 8,824 |   |                          | $ | 18,875 |      |  | $ | 31,718 |   |  | $ | 23,611 |  
|Gross gains  |  |                            | 60    |   |                          |   | 513    |      |  |   | 900    |   |  |   | 648    |  
|Gross losses |  |                            | (11   | ) |                          |   | (16    | )    |  |   | (28    | ) |  |   | (16    | )

Proceeds from calls of securities
available for sale during the three months ended June 30, 2010 and 2009 were $6,595 and $2,765, with gross gains of $2 and $1 and gross losses of $16 and $3, respectively.

Proceeds from calls of securities available for sale during the six months ended June 30, 2010 and 2009 were $9,029 and $5,315 with gross gains of
$2 and $1 and gross losses of $31 and $2.

The amortized cost and fair value of debt securities at June 30, 2010 by contractual maturity
were as follows. Securities not due at a single maturity date, primarily mortgage-backed securities and collateralized mortgage obligations (CMOs), are shown separately.



|                                    |  |               |         |           |   |        
|----------------------------------- |  | ------------- | ------- | --------- | - | -------
|                                    |  | AmortizedCost |         | FairValue
|                                    |  |              
|Due in one year or less             |  | $             |        |           | $ |       
|Due from one to five years          |  |               | 13,387  |           |   | 13,616 
|Due from five to ten years          |  |               | 19,273  |           |   | 19,543 
|Due after ten years                 |  |               | 28,201  |           |   | 28,879 
|                                    |  |               |         |           |   |        
|Subtotal                            |  |               | 60,861  |           |   | 62,038 
|Mortgage-backed securities and CMOs |  |               | 40,544  |           |   | 42,202 
|                                    |  |               |         |           |   |        
|                                    |  |              
|Total                               |  | $             | 101,405 |           | $ | 104,240
|                                    |  |               |         |           |   |        

Securities pledged at June 30, 2010 and December 31, 2009
had a carrying amount of approximately $56,990 and $70,561 and were pledged to secure public deposits, FHLB advances, short-term borrowings through the Federal Reserve Discount Window and cash flow hedges.



11



---

##### 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

Loans at June 30, 2010 and December 31, 2009 were as follows:



|                                     |  |              |         |   |                  |   |         |  
|------------------------------------ |  | ------------ | ------- | - | ---------------- | - | ------- | -
|                                     |  | June 30,2010 |         |   | December 31,2009 |  
|                                     |  |             
|Commercial                           |  | $            | 18,360  |   |                  | $ | 18,122  |  
|Real Estate:                         |  |              |         |   |                  |   |         |  
|One- to four-family                  |  |              | 64,893  |   |                  |   | 70,126  |  
|Five or more family                  |  |              | 9,944   |   |                  |   | 6,743   |  
|Commercial                           |  |              | 81,440  |   |                  |   | 75,506  |  
|Construction                         |  |              | 3,613   |   |                  |   | 5,420   |  
|Land                                 |  |              | 11,320  |   |                  |   | 11,753  |  
|Mortgage warehouse                   |  |              | 76,735  |   |                  |   | 43,765  |  
|Home equity                          |  |              | 14,755  |   |                  |   | 15,704  |  
|Automobile and other                 |  |              | 10,037  |   |                  |   | 11,790  |  
|                                     |  |              |         |   |                  |   |         |  
|Subtotal                             |  |              | 291,097 |   |                  |   | 258,929 |  
|Less: Net deferred loan (fees) costs |  |              | 131     |   |                  |   | 122     |  
|Allowance for loan losses            |  |              | (4,351  | ) |                  |   | (2,776  | )
|                                     |  |              |         |   |                  |   |         |  
|                                     |  |             
|Loans, net                           |  | $            | 286,877 |   |                  | $ | 256,275 |  
|                                     |  |              |         |   |                  |   |         |  

During the month of May 2009, a mortgage warehouse lending division was established at the Bank. This division has approved
specific mortgage companies through which individual mortgage loans are originated by the mortgage company and funded by the Bank as a secured borrowing with pledge of collateral under the Banks agreement with the mortgage company. The
individual mortgage loans are held between the time of origination and subsequent repurchase by the mortgage company for sale of the loan into the secondary market. Each individual mortgage is assigned to the Bank until the loan is repurchased and
sold to the secondary market by the mortgage company. Also, the Bank takes possession of each original note and forwards such note to the end investor once the mortgage company has sold the loan. The individual loans are typically sold by the
mortgage company within 30 days of origination and are seldom held more than 90 days. Interest income is accrued by the Bank during this period and fee income for each loan sold is collected when the sale has been completed. As of June 30, 2010
and 2009, the Bank had repurchase agreements with 10 and 7 mortgage companies, respectively. For the six months ended June 30, 2010 and 2009, the mortgage companies originated $984,119 and $126,038 in mortgage loans and sold $951,301 and
$93,278 in mortgage loans. The Bank recorded interest income of $931 and $221, mortgage warehouse loan fees of $193 and $59, and wire transfer fees of $66 and $12 for the three months ended June 30, 2010 and 2009. For the six months ended
June 30, 2010 and 2009, the Bank recorded interest income of $1,536 and $221, mortgage warehouse loan fees of $315 and $59, and wire transfer fees of $103 and $12.



12



---

##### 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 EndedJune 30, |       |   | Six Months EndedJune 30, |  
|                          |  | 2010                       |       |   | 2009                     |   |       | 2010 |  |   | 2009  |  
|                          |  |                            |       |  
|Beginning balance         |  | $                          | 3,659 |   |                          | $ | 2,483 |      |  | $ | 2,776 |   |  | $ | 2,512 |  
|Provision for loan losses |  |                            | 755   |   |                          |   | 209   |      |  |   | 1,664 |   |  |   | 258   |  
|Loans charged-off         |  |                            | (67   | ) |                          |   | (95   | )    |  |   | (104  | ) |  |   | (193  | )
|Recoveries                |  |                            | 4     |   |                          |   | 13    |      |  |   | 15    |   |  |   | 33    |  
|                          |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|                          |  |                            |       |  
|Ending balance            |  | $                          | 4,351 |   |                          | $ | 2,610 |      |  | $ | 4,351 |   |  | $ | 2,610 |  
|                          |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  

Individually impaired loans at June 30, 2010 and December 31, 2009 were as follows:



|                                                                    |  |              |       |                  |   |      
|------------------------------------------------------------------- |  | ------------ | ----- | ---------------- | - | -----
|                                                                    |  | June 30,2010 |       | December 31,2009
|                                                                    |  |             
|Loans with no allocated allowance for loan losses                   |  | $            | 1,077 |                  | $ | 3,067
|Loans with allocated allowance for loan losses                      |  |              | 4,707 |                  |   | 4,397
|                                                                    |  |              |       |                  |   |      
|                                                                    |  |             
|Total                                                               |  | $            | 5,784 |                  | $ | 7,464
|                                                                    |  |              |       |                  |   |      
|                                                                    |  |             
|Amount of the allowance for loan losses allocated to impaired loans |  | $            | 2,025 |                  | $ | 614  

Nonperforming loans at June 30,
2010 and December 31, 2009 were as follows:



|                                             |  |              |       |                  |   |      
|-------------------------------------------- |  | ------------ | ----- | ---------------- | - | -----
|                                             |  | June 30,2010 |       | December 31,2009
|                                             |  |             
|Loans past due over 90 days still on accrual |  | $            |      |                  | $ |     
|Nonaccrual loans                             |  |              | 6,219 |                  |   | 7,716



13



---

##### 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



Purchased Loans

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 outstanding balance and carrying amount of those loans is as follows:



|                                        |  |              |       |                  |   |      
|--------------------------------------- |  | ------------ | ----- | ---------------- | - | -----
|                                        |  | June 30,2010 |       | December 31,2009
|                                        |  |             
|Commercial                              |  | $            | 79    |                  | $ | 93   
|Commercial real estate                  |  |              | 979   |                  |   | 1,000
|Home equity                             |  |              | 14    |                  |   | 16   
|One- to four-family                     |  |              | 169   |                  |   | 170  
|                                        |  |              |       |                  |   |      
|                                        |  |             
|Outstanding balance                     |  | $            | 1,241 |                  | $ | 1,279
|                                        |  |              |       |                  |   |      
|                                        |  |             
|Carrying amount, net of allowance of $0 |  | $            | 1,049 |                  | $ | 797  
|                                        |  |              |       |                  |   |      

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



|                                           |  |                            |     |   |                          |   |     |      |  |   |      |   |  |   |     |  
|------------------------------------------ |  | -------------------------- | --- | - | ------------------------ | - | --- | ---- |  | - | ---- | - |  | - | --- | -
|                                           |  | Three Months EndedJune 30, |     |   | Six Months EndedJune 30, |  
|                                           |  | 2010                       |     |   | 2009                     |   |     | 2010 |  |   | 2009 |  
|                                           |  |                            |     |  
|Beginning balance                          |  | $                          | 14  |   |                          | $ | 62  |      |  | $ | 28   |   |  | $ | 78  |  
|Reclassification from non-accretable yield |  |                            | 283 |   |                          |   | 16  |      |  |   | 289  |   |  |   | 62  |  
|Accretion of income                        |  |                            | (26 | ) |                          |   | (34 | )    |  |   | (46  | ) |  |   | (96 | )
|                                           |  |                            |     |   |                          |   |     |      |  |   |      |   |  |   |     |  
|                                           |  |                            |     |  
|Ending balance                             |  | $                          | 271 |   |                          | $ | 44  |      |  | $ | 271  |   |  | $ | 44  |  
|                                           |  |                            |     |   |                          |   |     |      |  |   |      |   |  |   |     |  

For the purchased loans disclosed above, the Company did not increase the allowance for loan losses during 2010 or 2009. No
allowance for loan losses were reversed during 2010 or 2009.



14



---

##### 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

Fair value is
the exchange price that would be received for an asset or paid to transfer a liability (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. There are three levels of inputs that may be used to measure fair values:

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 companys own assumptions about the
assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant
assumptions to estimate the fair value of each type of financial asset:

Investment Securities Available for Sale: The fair values for
investment securities available for sale are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2).

Loans Held for Sale and Loan Commitment Derivatives: The fair value of loans held for sale and residential mortgage loan commitments
are determined by obtaining quoted prices for similar loans and commitments with similar interest rates and maturities from major secondary markets (Level 2).

Derivatives-Interest Rate Swaps: The fair value of derivatives are based on valuation models using observable market data as of the measurement
date (Level 2). The valuation model inputs consist of available market data, such as interest rates or yield curves. These observable inputs can be validated to external sources, including brokers, market transactions and third-party pricing
services.

Impaired Loans: 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. 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 usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Other Real Estate Owned: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate
owned (OREO) are measured at the lower of carrying amount or fair value, less costs to sell. Fair values are generally based on third party appraisals of the property, resulting in a Level 3 classification. In cases where the carrying amount exceeds
the fair value, less costs to sell, an impairment loss is recognized.



15



---

##### 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



Mortgage Servicing Rights: The fair value of mortgage 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 2). Fair value at June 30, 2010 was
determined using a discount rate of 9.0%, prepayment speeds ranging from 12.8% to 24.8%, depending on the stratification of the specific right, and a weighted average default rate of approximately 0.5%. Fair value at December 31, 2009 was determined
using a discount rate of 9.0%, prepayment speeds ranging from 11.1% to 22.7%, depending on the stratification of the specific right, and a weighted average default rate of approximately 0.5%.

Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which the Company has elected the fair
value option, are summarized below:



|                                                                |  |               |         |   |                                                             |   |                                             |  |   |                                         |   |  |   |  
|--------------------------------------------------------------- |  | ------------- | ------- | - | ----------------------------------------------------------- | - | ------------------------------------------- |  | - | --------------------------------------- | - |  | - | -
|                                                                |  |               |         |   | Fair Value Measurements atJune 30,
2010                    
|                                                                |  | CarryingValue |         |   | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   | SignificantOtherObservable 
Inputs(Level 2) |  |   | SignificantUnobservableInputs(Level
 3)
|Financial Assets                                                |  |               |         |   |                                                             |   |                                             |  |   |                                         |   |  |   |  
|Investment securities available for sale                        |  |               |         |   |                                                             |   |                                             |  |   |                                         |   |  |   |  
|U.S. federal agency                                             |  | $             | 29,331  |   |                                                             | $ |                                            |  | $ | 29,331                                  |   |  | $ | 
|State and municipal                                             |  |               | 32,707  |   |                                                             |   |                                            |  |   | 32,707                                  |   |  |   | 
|Mortgage-backed securities-residential                          |  |               | 22,201  |   |                                                             |   |                                            |  |   | 22,201                                  |   |  |   | 
|Government agency sponsored collateralized mortgage obligations |  |               | 14,337  |   |                                                             |   |                                            |  |   | 14,337                                  |   |  |   | 
|Privately held collateralized mortgage obligations              |  |               | 5,664   |   |                                                             |   |                                            |  |   | 5,664                                   |   |  |   | 
|                                                                |  |               |         |   |                                                             |   |                                             |  |   |                                         |   |  |   |  
|Total investment securities available-for-sale                  |  | $             | 104,240 |   |                                                             | $ |                                            |  | $ | 104,240                                 |   |  | $ | 
|                                                                |  |               |         |   |                                                             |   |                                             |  |   |                                         |   |  |   |  
|                                                                |  |               |         |  
|Loans held for sale                                             |  | $             | 1,112   |   |                                                             | $ |                                            |  | $ | 1,112                                   |   |  | $ | 
|Derivatives  residential mortgage loan commitments             |  |               | 33      |   |                                                             |   |                                            |  |   | 33                                      |   |  |   | 
|                                                                |  |               |         |  
|Financial Liabilities                                           |  |               |         |   |                                                             |   |                                             |  |   |                                         |   |  |   |  
|Derivatives  interest rate swaps                               |  | $             | (1,525  | ) |                                                             | $ |                                            |  | $ | (1,525                                  | ) |  | $ | 



16



---

##### 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



|                                                                |  |               |         |                                                             |   |                                             |  |                                         |         |  |   |  
|--------------------------------------------------------------- |  | ------------- | ------- | ----------------------------------------------------------- | - | ------------------------------------------- |  | --------------------------------------- | ------- |  | - | -
|                                                                |  |               |         | December 31, 2009                                          
|                                                                |  | CarryingValue |         | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   | SignificantOtherObservable 
Inputs(Level 2) |  | SignificantUnobservableInputs(Level
 3)
|Financial Assets                                                |  |               |         |                                                             |   |                                             |  |                                         |         |  |   |  
|Investment securities available for sale                        |  |               |         |                                                             |   |                                             |  |                                         |         |  |   |  
|U.S. federal agency                                             |  | $             | 12,972  |                                                             | $ |                                            |  | $                                       | 12,972  |  | $ | 
|State and municipal                                             |  |               | 25,264  |                                                             |   |                                            |  |                                         | 25,264  |  |   | 
|Mortgage-backed securities  residential                        |  |               | 31,082  |                                                             |   |                                            |  |                                         | 31,082  |  |   | 
|Government agency sponsored collateralized mortgage obligations |  |               | 18,148  |                                                             |   |                                            |  |                                         | 18,148  |  |   | 
|Privately held collateralized mortgage obligations              |  |               | 9,494   |                                                             |   |                                            |  |                                         | 9,494   |  |   | 
|Corporate debt securities                                       |  |               | 5,135   |                                                             |   |                                            |  |                                         | 5,135   |  |   | 
|                                                                |  |               |         |                                                             |   |                                             |  |                                         |         |  |   |  
|                                                                |  |               |         |                                                            
|Total investment securities available-for-sale                  |  | $             | 102,095 |                                                             | $ |                                            |  | $                                       | 102,095 |  | $ | 
|                                                                |  |               |         |                                                             |   |                                             |  |                                         |         |  |   |  
|                                                                |  |               |         |                                                            
|Loans held for sale                                             |  | $             | 981     |                                                             | $ |                                            |  | $                                       | 981     |  | $ | 
|Derivatives  residential mortgage loan commitments             |  |               | 31      |                                                             |   |                                            |  |                                         | 31      |  |   | 
|Derivatives  interest rate swaps                               |  |               | 88      |                                                             |   |                                            |  |                                         | 88      |  |   | 

Loans held for sale were
carried at the fair value of $1,112, which was made up of the outstanding balance of $1,095, net of a valuation of $17 at June 30, 2010, resulting in income of $3 for the three and six months ended June 30, 2010. At December 31, 2009,
loans held for sale were carried at the fair value of $981, which was made up of the outstanding balance of $967, net of a valuation of $14 at December 31, 2009, resulting in income of $14 for the year ending December 31, 2009.



17



---

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



|                          |  |               |       |                                                             |   |                                            |  |                                         |     |  |   |      
|------------------------- |  | ------------- | ----- | ----------------------------------------------------------- | - | ------------------------------------------ |  | --------------------------------------- | --- |  | - | -----
|                          |  |               |       | Fair Value Measurements 
atJune 30, 2010                   
|                          |  | CarryingValue |       | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   | SignificantOtherObservable Inputs(Level 2) |  | SignificantUnobservableInputs(Level
 3)
|Impaired loans            |  | $             | 2,682 |                                                             | $ |                                           |  | $                                       |    |  | $ | 2,682
|Mortgage servicing rights |  |               | 327   |                                                             |   |                                           |  |                                         | 327 |  |   |     



|                             |  |               |       |                                                             |   |                                            |  |                                         |     |  |   |      
|---------------------------- |  | ------------- | ----- | ----------------------------------------------------------- | - | ------------------------------------------ |  | --------------------------------------- | --- |  | - | -----
|                             |  |               |       | Fair Value Measurements 
atDecember 31, 2009               
|                             |  | CarryingValue |       | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   | SignificantOtherObservable Inputs(Level 2) |  | SignificantUnobservableInputs(Level
 3)
|Impaired loans               |  | $             | 3,783 |                                                             | $ |                                           |  | $                                       |    |  | $ | 3,783
|Other real estate owned, net |  |               | 230   |                                                             |   |                                           |  |                                         |    |  |   | 230  
|Mortgage servicing rights    |  |               | 318   |                                                             |   |                                           |  |                                         | 318 |  |   |     

Impaired loans, which
are measured for impairment using the fair value of the collateral for collateral dependent loans, had an outstanding amount of $4,707, with a valuation allowance of $2,025 at June 30, 2010, resulting in an additional provision for loan losses
of $631 and $1,431 for the three and six months ended June 30, 2010. At December 31, 2009, impaired loans had an outstanding amount of $4,397, with a valuation allowance of $614, resulting in an additional provision for loan losses of $323
for the year ending December 31, 2009.

Other real estate owned, which is measured at the lower of cost or fair value less costs to sell,
had a net carrying amount of $230, which was made up of the outstanding balance of $308, net of a valuation allowance of $78 at December 31, 2009, resulting in a write-down of $78 for the year ending December 31, 2009.

Mortgage servicing rights, which are carried at lower of cost or fair value, were carried at their fair value of $327, which was made up of the
outstanding balance of $405, net of a valuation allowance of $78 at June 30, 2010, resulting in a charge of $25 and $28 for the three and six months ended June 30, 2010. At December 31, 2009, mortgage servicing rights were carried at
their fair value of $318, which was made up of the outstanding balance of $368, net of a valuation allowance of $50, resulting in a charge of $8 for the year ending December 31, 2009.



18



---

##### 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 carrying amounts and estimated fair values of financial instruments, at June 30, 2010 and
December 31, 2009 are as follows:



|                                                |  |                |          |   |            |   |          |  
|----------------------------------------------- |  | -------------- | -------- | - | ---------- | - | -------- | -
|                                                |  | CarryingAmount |          |   | Fair Value |  
|June 30, 2010                                   |  |                |          |   |            |   |          |  
|                                                |  |               
|Financial assets                                |  |                |          |   |            |   |          |  
|Cash and due from financial institutions        |  | $              | 6,223    |   |            | $ | 6,223    |  
|Securities available-for-sale                   |  |                | 104,240  |   |            |   | 104,240  |  
|Federal Home Loan Bank stock                    |  |                | 4,206    |   |            |   | N/A      |  
|Loans held for sale                             |  |                | 1,112    |   |            |   | 1,112    |  
|Loans, net                                      |  |                | 286,877  |   |            |   | 292,034  |  
|Accrued interest receivable                     |  |                | 1,324    |   |            |   | 1,324    |  
|                                                |  |               
|Financial liabilities                           |  |                |          |   |            |   |          |  
|Deposits                                        |  | $              | (294,805 | ) |            | $ | (291,331 | )
|Federal Home Loan Bank advances                 |  |                | (78,946  | ) |            |   | (80,470  | )
|Subordinated debentures                         |  |                | (5,155   | ) |            |   | (4,778   | )
|FDIC guaranteed unsecured borrowings            |  |                | (4,884   | ) |            |   | (5,202   | )
|Accrued interest payable                        |  |                | (363     | ) |            |   | (363     | )
|Derivatives  interest rate swaps               |  |                | (1,525   | ) |            |   | (1,525   | )
|                                                |  |               
|                                                |  | CarryingAmount |          |   | Fair Value |  
|December 31, 2009                               |  |                |          |   |            |   |          |  
|                                                |  |               
|Financial assets                                |  |                |          |   |            |   |          |  
|Cash and due from financial institutions        |  | $              | 6,000    |   |            | $ | 6,000    |  
|Securities available-for-sale                   |  |                | 102,095  |   |            |   | 102,095  |  
|Federal Home Loan Bank stock                    |  |                | 4,206    |   |            |   | N/A      |  
|Loans held for sale                             |  |                | 981      |   |            |   | 981      |  
|Loans, net                                      |  |                | 256,275  |   |            |   | 260,311  |  
|Accrued interest receivable                     |  |                | 1,650    |   |            |   | 1,650    |  
|Derivatives  interest rate swaps               |  |                | 88       |   |            |   | 88       |  
|                                                |  |               
|Financial liabilities                           |  |                |          |   |            |   |          |  
|Deposits                                        |  | $              | (273,408 | ) |            | $ | (263,933 | )
|Federal Home Loan Bank advances                 |  |                | (52,773  | ) |            |   | (54,547  | )
|Subordinated debentures                         |  |                | (5,155   | ) |            |   | (4,360   | )
|FDIC guaranteed unsecured borrowings            |  |                | (4,852   | ) |            |   | (5,152   | )
|Federal Reserve Bank discount window borrowings |  |                | (16,675  | ) |            |   | (16,675  | )
|Accrued interest payable                        |  |                | (396     | ) |            |   | (396     | )



19



---

##### 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 methods and assumptions, not previously presented, used to estimate fair value are described as
follows:

Carrying amount is the estimated fair value for cash and due from financial institutions, accrued interest receivable and payable,
demand deposits, Federal Reserve Bank discount window borrowings, and variable rate loans or deposits that reprice frequently and fully. The methods for determining the fair values for securities, loans held for sale, and interest rate swap
derivatives were described previously. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the
estimated life and credit risk. Fair value of debt is based on current rates for similar financing. It was not practicable to determine the fair value of FHLB stock due to restrictions placed on its transferability. The fair value of off-balance
sheet items is not considered material.

NOTE 7  DERIVATIVES

The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The
notional amount of the interest rate swap does not represent an amount exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreement.

Interest Rate Swaps Designated as Cash Flow Hedges: Interest rate swaps with notional amounts of $30.25 million and $15.25 million as of
June 30, 2010 and December 31, 2009, were designated as cash flow hedges of subordinated debentures, future FHLB advances and certain CDARS deposits and were determined to be fully effective during all periods presented. As such, no amount
of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the swaps is recorded in other liabilities with changes in fair value recorded in other comprehensive income (loss). The amount included in accumulated other
comprehensive income (loss) would be reclassified to current earnings should the hedges no longer be considered effective. The hedge would no longer be considered effective if a portion of the hedge becomes ineffective, the item hedged is no longer
in existence or the Company discontinues hedge accounting. The Company expects the hedges to remain fully effective during the remaining terms of the swaps. The Company does not expect any amounts to be reclassed from other comprehensive income
(loss) over the next twelve months.



20



---

##### 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  DERIVATIVES - continued



Information related to the interest-rate swaps designated as cash flow hedges as of June 30, 2010
is as follows:



|                                                                |  |   |                    |  
|--------------------------------------------------------------- |  | - | ------------------ | -
|Subordinated debentures                                         |  |   |                    |  
|Notional amount                                                 |  | $ | 5,000              |  
|Fixed interest rate payable                                     |  |   | 5.54               | %
|Variable interest rate receivable(Three month LIBOR plus 3.10%) |  |   | 3.64               | %
|Maturity date                                                   |  |   | March 26, 2014     |  
|                                                                | 
|Unrealized losses                                               |  |   | (162               | )
|CDARS deposits                                                  |  |   |                    |  
|Notional amount                                                 |  | $ | 10,250             |  
|Fixed interest rate payable                                     |  |   | 3.19               | %
|Variable interest rate receivable(One month LIBOR plus 0.55%)   |  |   | 0.90               | %
|Maturity date                                                   |  |   | October 9, 2014    |  
|Unrealized losses                                               |  |   | (422               | )
|                                                                | 
|FHLB advance                                                    |  |   |                    |  
|Notional amount                                                 |  | $ | 5,000              |  
|Maturity date                                                   |  |   | September 20, 2015 |  
|Unrealized losses                                               |  |   | (288               | )
|                                                                | 
|FHLB advance                                                    |  |   |                    |  
|Notional amount                                                 |  | $ | 10,000             |  
|Maturity date                                                   |  |   | July 19, 2016      |  
|Unrealized losses                                               |  |   | (653               | )

Interest income (expense) recorded on
these swap transactions totaled $(86) and $(175) for the three and six months ended June 30, 2010 and is reported as a component of interest expense on subordinated debentures and deposits.



21



---

##### 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  DERIVATIVES - continued



The following table presents the net gains (losses) recorded in accumulated other comprehensive income
and the Consolidated Statements of Income and Comprehensive Income relating to the cash flow derivative instruments for the three and six months ended June 30, 2010 and 2009:



|                        |  |                                                              |        |   |                                                                 |   |                                                                                      |  |   |  
|----------------------- |  | ------------------------------------------------------------ | ------ | - | --------------------------------------------------------------- | - | ------------------------------------------------------------------------------------ |  | - | -
|                        |  | Three Months Ended June 30, 2010                            
|                        |  | Net amount of gain(loss)
recognizedin OCI(Effective Portion) |        |   | Net amountof gain
(loss)reclassified from OCIto interest income |   | Net amount of gain (loss)recognized in
othernon interest income(Ineffective Portion)
|Interest rate contracts |  | $                                                            | (790   | ) |                                                                 | $ |                                                                                     |  | $ | 
|                        | 
|                        |  | Three Months Ended June 30, 2009                            
|                        |  | Net amount of gain(loss)
recognizedin OCI(Effective Portion) |        |   | Net amountof gain
(loss)reclassified from OCIto interest income |   | Net amount of gain (loss)recognized in
othernon interest income(Ineffective Portion)
|Interest rate contracts |  | $                                                            | 58     |   |                                                                 | $ |                                                                                     |  | $ | 
|                        | 
|                        |  | Six Months Ended June 30, 2010                              
|                        |  | Net amount of gain(loss)
recognizedin OCI(Effective Portion) |        |   | Net amountof gain
(loss)reclassified from OCIto interest income |   | Net amount of gain (loss)recognized in
othernon interest income(Ineffective Portion)
|Interest rate contracts |  | $                                                            | (1,065 | ) |                                                                 | $ |                                                                                     |  | $ | 
|                        | 
|                        |  | Six Months Ended June 30, 2009                              
|                        |  | Net amount of gain(loss)
recognizedin OCI(Effective Portion) |        |   | Net amountof gain
(loss)reclassified from OCIto interest income |   | Net amount of gain (loss)recognized in
othernon interest income(Ineffective Portion)
|Interest rate contracts |  | $                                                            | 58     |   |                                                                 | $ |                                                                                     |  | $ | 



22



---

##### 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)



The following table reflects the cash flow hedges included in the Consolidated Balance Sheet as of
June 30, 2010 and December 31, 2009:



|                                                       |  |                |         |   |                   |   |        |                |  |   |           |   |  |   |   
|------------------------------------------------------ |  | -------------- | ------- | - | ----------------- | - | ------ | -------------- |  | - | --------- | - |  | - | --
|                                                       |  | June 30, 2010  |         |   | December 31, 2009
|                                                       |  | NotionalAmount |         |   | FairValue         |   |        | NotionalAmount |  |   | FairValue
|Included in other assets (liabilities):                |  |                |         |   |                   |   |        |                |  |   |           |   |  |   |   
|Interest rate swaps related to Subordinated debentures |  | $              | (5,000  | ) |                   | $ | (162   | )              |  | $ | (5,000    | ) |  | $ | 34
|CDARS deposits                                         |  |                | (10,250 | ) |                   |   | (422   | )              |  |   | (10,250   | ) |  |   | 54
|FHLB advances                                          |  |                | (15,000 | ) |                   |   | (941   | )              |  |   |          |   |  |   |  
|                                                       |  |                |         |   |                   |   |        |                |  |   |           |   |  |   |   
|                                                       |  |                |         |  
|Total included in other assets (liabilities)           |  | $              | (30,250 | ) |                   | $ | (1,525 | )              |  | $ | (15,250   | ) |  | $ | 88
|                                                       |  |                |         |   |                   |   |        |                |  |   |           |   |  |   |   

The counterparty to the Companys derivatives is exposed to
credit risk whenever the derivative is in a liability position. As a result, the Company has collateralized the liability with cash and security collateral held in safekeeping by Bank of New York. At June 30, 2010 and December 31, 2009,
the Company had $100 in cash and securities with a fair value of $1,196 and $251, respectively, posted as collateral for these derivatives.



23



---

##### 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, 2009. 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 assessments and premiums we are required to pay for FDIC deposit insurance;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | legislative or regulatory changes that affect our business including the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank
Act) and its impact on our compliance costs;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to successfully manage 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 success of our mortgage warehouse lending program including the impact of the Dodd-Frank Act on the mortgage companies; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.



24



---

##### 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 June 30, 2010 and December 31, 2009

General: Total assets increased $32.6 million, or 8.0%, to $438.5 million at June 30, 2010 from $405.8 million at
December 31, 2009. The increase was primarily due to an increase in net loans of $30.6 million, primarily attributable to the increase in mortgage warehouse loans. This increase in assets was funded through an increase in total deposits of
$21.4 million as well as an increase in FHLB of Indianapolis advances of $26.2 million partially offset by a decrease in Federal Reserve discount window borrowings of $16.7 million.

Investment Securities:Total securities available for sale increased $2.1 million, or 2.1%, to $104.2 million at June 30,
2010 from $102.1 million at December 31, 2009 primarily due to an increase in deposits. We have continued to increase the percentage of government agency and tax exempt securities owned and have reduced the mortgage backed and CMO securities,
as well as eliminated the corporate bond exposure when compared to December 31, 2009.

As of June 30, 2010, management reviewed the
securities portfolio for possible other-than-temporary impairment and determined there were no impairment charges to be recorded. At June 30, 2010, the total available for sale securities portfolio reflected a net unrealized gain of $2.8
million compared to a net unrealized gain of $2.7 million at December 31, 2009.

Loans Held for Sale:There was no
material change in the balance of loans held for sale at June 30, 2010 compared to December 31, 2009.

Net Loans:Net loans increased $30.6 million, or 11.9%, to $286.9 million at June 30, 2010 compared to $256.3 million at December 31, 2009. This increase is primarily attributable to an increase in mortgage warehouse loans and to a lesser degree
commercial real estate and five or more family residential loans. We experienced a decrease in one-to-four-family residential loans, attributable to continued refinance activity and also because we are selling the majority of the loans we originate
into the secondary market. We also saw a decrease in commercial construction loans compared to the previous year-end due to a slow demand as well as one loan converting to permanent financing.

There was no material change in the balance of commercial business and land loans at June 30, 2010 compared to December 31, 2009. We expect
this type of loan activity to remain slow in the near future primarily due to the overall national and local economic concerns. Due to the increased risk associated with commercial business loans, management revised the Banks loan policy
during the second quarter of 2010 increasing the required debt service coverage ratio for loans secured by equipment, accounts receivable and inventory.

Commercial real estate loans increased $5.9 million, or 7.9%, to $81.4 million at June 30, 2010 compared to $75.5 million at December 31, 2009.
This increase was primarily due to the conversion of a commercial construction loan totaling $4.8 million to permanent financing for a complex housing a hotel and medical office in Michigan City, Indiana.

Total construction loans decreased $1.8 million, or 33.3%, to $3.6 million at June 30, 2010 compared to $5.4 million at December 31, 2009. This
decrease is primarily due to the conversion of the previously mentioned commercial construction loan to permanent financing. At December 31, 2009 the balance on this construction loan was $1.8 million. At June 30, 2010, unused commitments
on construction loans totaled $7.5 million.

Mortgage warehouse loans increased $33.0 million, to $76.7 million at June 30, 2010 compared
to $43.8 million at December 31, 2009. This increase is primarily due to the increased activity in residential mortgages with mortgage companies outside of our local market. The continued increase in demand from the mortgage companies is
primarily attributable to the low level of interest rates and the continued refinance activity on the east and west coasts, as well as the tax credit that was available for new home purchases in the second quarter of 2010.



25



---

##### Table of Contents

PART I  FINANCIAL INFORMATION

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



One-to-four-family residential loans decreased $5.2 million, or 7.5%, to $64.9 million at June 30,
2010 compared to $70.1 million at December 31, 2009, primarily attributable to refinance activity along with repayment activity. We continue to sell the majority of the one-to-four-family residential loans that we originate.

There was an increase in five or more family residential loans of $3.2 million, or 47.5%, to $9.9 million at June 30, 2010 compared to $6.7 million
at December 31, 2009, primarily due to a $3.1 million loan for an existing apartment complex in South Bend, Indiana. We have seen an increase in the demand for these loans, primarily attributable to the increased demand for this type of
housing.

Consumer and home equity loans, including indirect automobile loans, decreased $2.7 million, or 9.8%, to $24.8 million at
June 30, 2010 compared to $27.5 million at December 31, 2009. There was a decrease of $668,000 in home equity lines of credit, as well as a decrease in indirect automobile loans of $829,000 and a decrease of $877,000 in fixed consumer
loans. The demand for all consumer and home equity lending continues to decrease due to the current economic conditions and the continued decline in home values.

The allowance for loan losses increased $1.6 million, or 56.7%, to $4.4 million at June 30, 2010 compared to $2.8 million at December 31, 2009.
The allowance for loan losses to total loans ratio was 1.49% at June 30, 2010 compared to 1.13% at December 31, 2009. The increase is due to an increase in the provision of $755,000 allocated in the second quarter of 2010 as well as a
provision of $909,000 in the first quarter of 2010. The increase in the provision for the second quarter of 2010 was partially attributable to one commercial loan relationship consisting of one commercial real estate loan in the amount of $350,000
with a 50% SBA guarantee as well as a commercial business loan in the amount of $400,000 secured by equipment, accounts receivable and inventory. These loans were placed into nonperforming status at the end of the first quarter of 2010 due to cash
flow concerns although still performing at that time. At that time a potential sale of the business was in negotiation. In the second quarter of 2010 the business closed and negotiations for the sale of the business ceased, which led to an increase
in the specific reserve of $475,000 assigned to this relationship from March 31, 2010. The balance of this relationship after the specific reserve is now $209,000. There was also an increase in the reserve due to the increase in the outstanding
balance of mortgage warehouse loans.

Total nonperforming loans to total loans ratio was 2.14% as of June 30, 2010 compared to 2.98% at
December 31, 2009 decreasing $1.5 million, primarily due to the $1.0 million in insurance proceeds received and applied to one nonperforming loan during the first quarter of 2010. Nonperforming loans totaled $6.2 million as of June 30,
2010 down from $7.7 million as of December 31, 2009. As of June 30, 2010, nonaccrual loans to wholesale chemical manufacturing companies totaled $2.2 million, to construction contractors totaled $750,000, to entertainment and recreation
business totaled $729,000, to construction and land developers totaled $408,000, restaurants totaled $219,000, and all other commercial industry types totaled $411,000. One-tofour-family residential loans on nonaccrual totaled $694,000 as of
June 30, 2010. Home equity loans on non-accrual totaled $388,000 and all other consumer and land loans on non-accrual totaled $462,000.



26



---

##### 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.



|                                                          |  |                        |       |   |                  |   |       |  
|--------------------------------------------------------- |  | ---------------------- | ----- | - | ---------------- | - | ----- | -
|                                                          |  | June 30,2010           |       |   | December 31,2009 |  
|                                                          |  | (Dollars in thousands) |      
|Nonaccrual loans:                                         |  |                        |       |   |                  |   |       |  
|Real estate:                                              |  |                        |       |   |                  |   |       |  
|One- to four- family (1)                                  |  | $                      | 694   |   |                  | $ | 1,059 |  
|Five or more family                                       |  |                        |      |   |                  |   |      |  
|Commercial                                                |  |                        | 3,028 |   |                  |   | 3,854 |  
|Construction                                              |  |                        | 1,266 |   |                  |   | 858   |  
|Land                                                      |  |                        | 458   |   |                  |   | 1,169 |  
|                                                          |  |                        |       |   |                  |   |       |  
|Total real estate                                         |  | $                      | 5,446 |   |                  | $ | 6,940 |  
|Consumer and other loans:                                 |  |                        |       |   |                  |   |       |  
|Home equity (2)                                           |  |                        | 388   |   |                  |   | 392   |  
|Commercial                                                |  |                        | 381   |   |                  |   | 381   |  
|Automobile and other                                      |  |                        | 4     |   |                  |   | 3     |  
|                                                          |  |                        |       |   |                  |   |       |  
|Total consumer and other loans                            |  |                        | 773   |   |                  |   | 776   |  
|                                                          |  |                        |       |   |                  |   |       |  
|Total nonaccrual loans                                    |  | $                      | 6,219 |   |                  | $ | 7,716 |  
|                                                          |  |                        |       |   |                  |   |       |  
|                                                          |  |                       
|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                                                |  |                        |      |   |                  |   |      |  
|Automobile and other                                      |  |                        |      |   |                  |   |      |  
|                                                          |  |                        |       |   |                  |   |       |  
|Total consumer and other loans                            |  | $                      |      |   |                  | $ |      |  
|                                                          |  |                        |       |   |                  |   |       |  
|                                                          |  |                       
|Total nonperforming loans                                 |  | $                      | 6,219 |   |                  | $ | 7,716 |  
|                                                          |  |                        |       |   |                  |   |       |  
|                                                          |  |                       
|Foreclosed assets:                                        |  |                        |       |   |                  |   |       |  
|One- to four- family                                      |  | $                      | 199   |   |                  | $ | 399   |  
|Five or more family                                       |  |                        |      |   |                  |   |      |  
|Commerical                                                |  |                        | 154   |   |                  |   | 155   |  
|Construction                                              |  |                        |      |   |                  |   |      |  
|Land                                                      |  |                        |      |   |                  |   |      |  
|Consumer                                                  |  |                        |      |   |                  |   |      |  
|Business assets                                           |  |                        |      |   |                  |   |      |  
|                                                          |  |                        |       |   |                  |   |       |  
|Total foreclosed assets                                   |  | $                      | 353   |   |                  | $ | 554   |  
|                                                          |  |                        |       |   |                  |   |       |  
|                                                          |  |                       
|Total nonperforming assets                                |  | $                      | 6,572 |   |                  | $ | 8,270 |  
|                                                          |  |                        |       |   |                  |   |       |  
|                                                          |  |                       
|Ratios:                                                   |  |                        |       |   |                  |   |       |  
|Nonperforming loans to total loans                        |  |                        | 2.14  | % |                  |   | 2.98  | %
|Nonperforming assets to total assets                      |  |                        | 1.50  | % |                  |   | 2.04  | %



|(1) | $118 and $120 of the nonaccrual one- to four- family loans at June 30, 2010 and December 31, 2009, respectively, were loans acquired with credit deterioration
from the acquisition of City Savings Bank.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | $14 and $16 of the nonaccrual home equity loans at June 30, 2010 and December 31, 2009, respectively, were loans acquired with credit deterioration from the
acquisition of City Savings Bank.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



27



---

##### Table of Contents

PART I  FINANCIAL INFORMATION

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



Other Real Estate Owned:Other real estate owned decreased $201,000, or 36.3%, to
$353,000 at June 30, 2010 compared to $554,000 at December 31, 2009, primarily due to the sale of one of the properties. At June 30, 2010, the Company held four properties in other real estate owned, of which three are
one-to-four-family residential homes and one is a commercial car wash facility.

Goodwill and Other Intangible Assets:
The Companys goodwill totaled $8.4 million at June 30, 2010 and at December 31, 2009. Accounting standards require 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 annual
impairment review of the $8.4 million of goodwill previously recorded was performed in the fourth quarter of 2009. As a result of the impairment testing performed, no impairment charge was recorded by the Company.

The Companys stock price has increased from the previous analysis and earnings have continued to increase therefore, management determined that an
updated analysis from an independent third party as of the end of the second quarter was not necessary at this time. A full independent review will be done to test the goodwill for impairment annually unless circumstances indicate an updated review
is necessary. 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 June 30, 2010, 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 $21.4 million, or 7.8%, to $294.8 million at June 30, 2010 compared to $273.4 million at
December 31, 2009, primarily attributable to an increase in money market accounts of $20.4 million, of which approximately $14.5 million came from public fund accounts. The increase in money market accounts was used to help fund the increase in
mortgage warehouse loans. There was an increase in other savings and interest checking accounts of $2.1 million, in addition to an increase in non-interest bearing checking accounts of $1.6 million. We have continued to see an increase in both
retail and commercial accounts in the majority of our markets served. These increases were partially offset by a decrease in certificates of deposit and IRAs less than $100,000 of $2.2 million, primarily attributable to the competitive interest
rates being offered at other local financial institutions.

Borrowed Funds:Federal Home Loan Bank of Indianapolis
(FHLBI) borrowings increased $26.2 million, or 49.6%, to $78.9 million at June 30, 2010 compared to $52.8 million at December 31, 2009, primarily used to partially fund the increase in the mortgage warehouse loans. The increase
in FHLBI borrowings was partially offset by a decrease of $16.7 million in overnight borrowings at the Federal Reserve discount window at June 30, 2010 compared to December 31, 2009. We started utilizing the Federal Reserve discount window
in addition to the FHLBI in the first quarter of 2009 when they announced that they were opening up the availability to borrow to all financial institutions and not only on a lender of last resort basis as they had in the past. The cost
of funding was also lower than borrowings at the FHLBI at that time. During the second quarter of 2010, the Federal Reserve announced that they would be returning to their original intent of lender of last resort and therefore we
increased our borrowings at the FHLBI.

Total Shareholders Equity:Total shareholders equity increased
$202,000, or less than 1%, to $50.1 million at June 30, 2010 compared to $49.9 million at December 31, 2009, due to an increase in retained earnings of $1.2 million offset by a decrease in other comprehensive income (loss) of $953,000. The
unrealized gain on securities available for sale increased $112,000 over the same time period primarily due to the changes in the fair values on such securities held in the Companys available-for-sale investment portfolio. There was a decrease
of $1.1 million in other comprehensive income (loss) related to the interest rate swaps the Company has entered into as of June 30, 2010 compared to December 31, 2009, primarily attributable to the continued decline in interest rates and
the impact this has on the fair value of these swaps. The interest rate swaps are tested monthly by an independent third party for effectiveness and at June 30, 2010 all of the interest rate swaps were effective.



28



---

##### Table of Contents

PART I  FINANCIAL INFORMATION

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



Comparison of Operating Results For Three Month Period Ended June 30, 2010 and June 30,
2009

Net Income:Net income increased $66,000, or 13.2%, to $568,000 for the three months ended June 30, 2010
compared to $502,000 for the three months ended June 30, 2009. This increase is primarily due to an increase in net interest income and fees attributable to the new mortgage warehouse division. The increase was partially offset by an increase
in the provision for loan losses of $546,000 in the second quarter of 2010 compared to the same prior year period. The prior year period also reflected gains on sales of securities of $495,000 compared to $35,000 in gains on the sale of securities
in the current period. There was also a decrease in noninterest expense in the current quarter of $436,000 compared to the prior year period attributable to a FHLBI advance prepayment penalty and a special FDIC assessment, both in the prior year
period.

Net Interest Income:Net interest income increased $620,000, or 24.6%, to $3.1 million for the three months
ended June 30, 2010 compared to $2.5 million for the three months ended June 30, 2009. The increase is primarily due to an increase in the annualized net interest spread of 41 basis points, to 3.03%, for the second quarter of 2010 compared
to 2.62% for the same prior year period. This increase in the net interest spread reflects a decrease in the annualized average cost of interest-bearing liabilities of 54 basis points, partially offset by a decrease in the annualized average yield
on interest-earning assets of 13 basis points. The decrease in the annualized average yield on interest-earning assets was minimized due to the addition of the mortgage warehouse loans at an annualized average yield of 6.99% compared to the overall
average yield of the total loan portfolio of 6.13% as of June 30, 2010.

Interest and Dividend Income:Interest
and dividend income increased $354,000, or 7.6%, for the three month period ending June 30, 2010 compared to the same prior year period, primarily due to an increase in the average total interest-earning assets of $35.2 million, primarily due
to the increase in mortgage warehouse loans. The mortgage warehouse program originated in May of 2009 and therefore is not fully reflected in the prior year periods average assets. Partially offsetting the increase in interest and dividend
income is a decrease in the annualized average yield on interest-earning assets of 13 basis points, due to the continued decline in interest rates and the impact this has had, particularly on the securities portfolio.

Interest income on loans, including fees, increased $551,000, or 15.9%, for the three month period ending June 30, 2010 compared to the same prior
year period. This increase is primarily due to an increase in the average loan balances of $28.1 million attributable to the increase in the mortgage warehouse loans. The annualized average yield on loans increased 21 basis points in the second
quarter of 2010 compared to the same prior year period, also attributable to the increase in the mortgage warehouse loans.

Interest income
from taxable securities decreased $362,000, or 35.0%, for the three months ended June 30, 2010 compared to the same prior year period, primarily due to a decrease in the average balance of taxable securities of $11.8 million. The annualized
average yield on taxable securities also decreased 114 basis points which also contributed to the decrease in interest income. The decrease in the interest income from taxable securities was partially offset by an increase in tax exempt securities
over the same time period of $17.4 million resulting in an increase in interest income of $167,000. The company has restructured the securities portfolio over the last several quarters in order to take advantage of the tax benefit on the municipal
securities.

There was no material change in the dividend income from Federal Home Loan Bank of Indianapolis (FHLBI) stock in the three months
ended June 30, 2010 compared to the same prior year period.



29



---

##### Table of Contents

PART I  FINANCIAL INFORMATION

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 June 30, 2010 and June 30, 2009. 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 June 30, |        
|                                                       |  | 2010                                |         |          | 2009 |                     
|                                                       |  | (Dollars in thousands)              |        
|                                                       |  | AverageOutstandingBalance           |         | Interest |      | AnnualizedYield/Cost |  |      | AverageOutstandingBalance |  | Interest |         | AnnualizedYield/Cost |  
|Loans                                                  |  | $                                   | 262,102 |          | $    | 4,015                |  | 6.13 | %                         |  | $        | 233,964 |                      | $ | 3,464 |  | 5.92 | %
|Taxable securities                                     |  |                                     | 80,872  |          |      | 673                  |  | 3.33 | %                         |  |          | 92,667  |                      |   | 1,035 |  | 4.47 | %
|Tax exempt securities                                  |  |                                     | 27,713  |          |      | 278                  |  | 4.01 | %                         |  |          | 10,268  |                      |   | 111   |  | 4.32 | %
|Federal Home Loan Bank of Indianapolis stock           |  |                                     | 4,206   |          |      | 21                   |  | 2.00 | %                         |  |          | 4,206   |                      |   | 23    |  | 2.19 | %
|Federal funds sold and other interest-bearing deposits |  |                                     | 2,869   |          |      | 1                    |  | 0.14 | %                         |  |          | 1,470   |                      |   | 1     |  | 0.27 | %
|                                                       |  |                                     |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Total interest earning assets                          |  |                                     | 377,762 |          |      | 4,988                |  | 5.28 | %                         |  |          | 342,575 |                      |   | 4,634 |  | 5.41 | %
|Non-interest earning assets                            |  |                                     | 40,246  |          |      |                      |  |      |                           |  |          | 41,794  |                      |   |       |  |      |  
|                                                       |  |                                     |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Total assets                                           |  | $                                   | 418,008 |          |      |                      |  |      |                           |  | $        | 384,369 |                      |   |       |  |      |  
|                                                       |  |                                     |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|                                                       |  |                                     |         |          |      |                     
|Savings deposits                                       |  | $                                   | 45,717  |          |      | 12                   |  | 0.10 | %                         |  | $        | 44,040  |                      |   | 12    |  | 0.11 | %
|Money market and NOW accounts                          |  |                                     | 71,414  |          |      | 162                  |  | 0.91 | %                         |  |          | 40,074  |                      |   | 81    |  | 0.81 | %
|CDs and IRAs                                           |  |                                     | 145,015 |          |      | 991                  |  | 2.73 | %                         |  |          | 139,893 |                      |   | 1,155 |  | 3.30 | %
|                                                       |  |                                     |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Total interest-bearing deposits                        |  |                                     | 262,146 |          |      | 1,165                |  | 1.78 | %                         |  |          | 224,007 |                      |   | 1,248 |  | 2.23 | %
|FHLB advances                                          |  |                                     | 53,064  |          |      | 556                  |  | 4.19 | %                         |  |          | 63,872  |                      |   | 743   |  | 4.65 | %
|Subordinated debentures                                |  |                                     | 5,155   |          |      | 70                   |  | 5.43 | %                         |  |          | 5,155   |                      |   | 68    |  | 5.28 | %
|FDIC guaranteed unsecured borrowing                    |  |                                     | 4,875   |          |      | 51                   |  | 4.18 | %                         |  |          | 4,810   |                      |   | 50    |  | 4.16 | %
|Federal Reserve Bank discount window borrowings        |  |                                     | 3,759   |          |      | 7                    |  | 0.74 | %                         |  |          | 4,920   |                      |   | 6     |  | 0.49 | %
|                                                       |  |                                     |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Total interest-bearing liabilities                     |  |                                     | 328,999 |          |      | 1,849                |  | 2.25 | %                         |  |          | 302,764 |                      |   | 2,115 |  | 2.79 | %
|                                                       |  |                                     |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Non-interest bearing deposits                          |  |                                     | 35,643  |          |      |                      |  |      |                           |  |          | 30,705  |                      |   |       |  |      |  
|Other liabilities                                      |  |                                     | 3,434   |          |      |                      |  |      |                           |  |          | 3,354   |                      |   |       |  |      |  
|                                                       |  |                                     |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Total liabilities                                      |  |                                     | 368,076 |          |      |                      |  |      |                           |  |          | 336,823 |                      |   |       |  |      |  
|Shareholders equity                                   |  |                                     | 49,932  |          |      |                      |  |      |                           |  |          | 47,546  |                      |   |       |  |      |  
|                                                       |  |                                     |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Total liabilities & shareholders equity               |  | $                                   | 418,008 |          |      |                      |  |      |                           |  | $        | 384,369 |                      |   |       |  |      |  
|                                                       |  |                                     |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|                                                       |  |                                     |         |          |      |                     
|Net interest income                                    |  |                                     |         |          | $    | 3,139                |  |      |                           |  |          |         |                      | $ | 2,519 |  |      |  
|                                                       |  |                                     |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Net interest rate spread                               |  |                                     |         |          |      |                      |  | 3.03 | %                         |  |          |         |                      |   |       |  | 2.62 | %
|Net interest margin                                    |  |                                     |         |          |      |                      |  | 3.32 | %                         |  |          |         |                      |   |       |  | 2.94 | %



30



---

##### Table of Contents

PART I  FINANCIAL INFORMATION

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



Interest Expense:Interest expense decreased $266,000, or 12.6%, for the three
months ended June 30, 2010 compared to the same prior year period. The decrease is primarily attributable to a decrease in the annualized average cost of interest-bearing liabilities of 54 basis points to 2.25% for the three months ended
June 30, 2010 from 2.79% for the same prior year period. The decrease is primarily due to a decrease in the interest rates paid on new and maturing certificates of deposit and IRA time deposits as well as a decrease in the annualized average
cost of FHLBI advances compared to the same prior year period.

The annualized average cost of interest-bearing deposits decreased 45 basis
points to 1.78% for the three months ended June 30, 2010 compared to 2.23% for the same prior year period, primarily due to the continued decrease in the annualized average cost of certificates of deposit and IRA time deposits of 57 basis
points. The annualized average cost of savings deposits remained flat and the cost of money market and NOW accounts increased 10 basis points over the same time period. The company has continued to offer a competitive interest rate on money market
accounts in order to attract relatively low cost funds to help fund its mortgage warehouse division.

Interest expense on FHLBI advances
decreased $187,000, or 25.2%, for the three months ended June 30, 2010 compared to the same prior year period. This decrease is primarily due to the decrease in the average balance of $10.8 million as well as a decrease in the annualized
average cost of 46 basis points. Management expects the average cost of FHLBI advances to continue to decrease in 2010 due to $15.0 million in advances maturing in the next six months at an average cost of 6.04%. On February 3, 2010, the
Company entered into two forward interest rate swap contracts against the $15.0 million in advances, in order to address the concern of rising interest rates and in order to lock in interest rates for a longer time period. There was no material
change in the interest expense on the subordinated debentures, the FDIC guaranteed unsecured debt or the interest expense on the Federal Reserve discount window borrowings.

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
$755,000 for the second quarter of 2010 compared to $209,000 for the same prior year period. Net charge-offs for the 2010 and 2009 periods were $63,000 and $83,000, respectively.

The increase in the provision for the second quarter of 2010 was partially attributable to one commercial loan relationship consisting of
one commercial real estate loan in the amount of $350,000 with a 50% SBA guarantee as well as a commercial business loan in the amount of $400,000 secured by inventory, accounts receivable and equipment. During the second quarter of 2010
negotiations for the sale of the business ceased and the business subsequently closed, which led to an increase in the specific reserve of $475,000 assigned to this relationship from March 31, 2010. The balance of this relationship after the
specific reserve and SBA 50% guarantee is now $209,000. The provision for the mortgage warehouse loans also increased in the second quarter of 2010, due to the increase in the loan balances compared to the previous quarter.

One of the factors management considers when evaluating the allowance for loan losses is the historical loan loss experience. Given the
existing overall economic concerns, we elected to rely on more recent loan loss experience to establish the minimum reserve ratios for the general loan pools.



31



---

##### Table of Contents

PART I  FINANCIAL INFORMATION

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



Noninterest Income:Noninterest income decreased $401,000, or 30.8%, to $900,000
for the three months ended June 30, 2010 compared to $1.3 million for the same prior year period. This decrease is primarily attributable to a $460,000 decrease in net gains on securities as well as a decrease in net gains on mortgage banking
activities of $176,000. We have seen a decrease in the refinance activity for one-to-four-family residential loans locally compared to the prior year period, which was anticipated due to the length of time interest rates have remained at
historically low levels, and do not anticipate a significant increase in the near future. Service charge income on deposit accounts decreased $11,000, or 5.2%, in the second quarter 2010, primarily attributable to a decrease in overdraft charges of
$15,000. We anticipate a continued decrease in these charges due to the impact of new regulations. Trust fees decreased $33,000 attributable to the closure of the trust department in 2010.

Partially offsetting these decreases in noninterest income was an increase in ATM and debit card fees of $19,000 due to increased activity. Mortgage
warehouse loan fees and wire transfer fees increased a total of $188,000 in the second quarter of 2010 compared to the same prior year period since the department was started in May of 2009 and activity has substantially increased since that time.

Noninterest Expense:Noninterest expense decreased $436,000, or 14.3%, to $2.6 million for the three months ended
June 30, 2010 compared to $3.1 million for the same prior year period. This decrease is primarily due to the $427,000 prepayment penalty fee assessed to retire the FHLB advance in the prior year period as well as a decrease in FDIC insurance of
$193,000. In the prior year period there was also a special assessment of 5 basis points on total assets less Tier 1 Capital as of June 30, 2009. The special assessment resulted in an expense of $176,000 in the second quarter of 2009 which was
not applicable in the current period.

Partially offsetting these decreases in noninterest expense was an increase in salaries and employee
benefits of $222,000, or 18.9%, primarily attributable to the termination in the prior year period of one of the Banks post retirement life insurance benefit plans that it had established for a limited number of exempt employees, resulting in
a $173,000 decrease in that expense in the second quarter 2009. Partially offsetting this decrease was an increase in exempt payroll expense of $39,000, primarily attributable to the addition of the mortgage warehouse staff.

Income Taxes:Income tax expense increased $43,000 for the three months ended June 30, 2010 compared to the same prior year
period, primarily due to the increase in income before taxes of $109,000. The effective tax rate was 15.2% for the second quarter of 2010 and 10.5% for the same prior year period. The prior year period had a lower tax rate primarily due to the
beneficial tax treatment of the reversal of the post retirement plan expense during that period. A tax deduction had not previously been recorded for this expense and therefore the reversal did not have a tax impact. Our deferred tax asset increased
from $1.0 million at December 31, 2009 to $1.7 million at June 30, 2010. The Companys federal and state net operating loss deferred tax asset has decreased from $1.4 million at December 31, 2009 to $900,000 at June 30,
2010, which contributed to a decrease in our valuation allowance from $680,000 at December 31, 2009 to $622,000 at June 30, 2010. This decrease in the deferred tax asset for net operating loss carryforwards was offset by an increase in the
deferred tax asset for bad debt expense from $1.1 million at December 31, 2009 to $1.7 million at June 30, 2010, as well as, a decrease in the deferred tax liability related to net unrealized gain/loss on securities and interest rate swaps
from $900,000 at December 31, 2009 to $400,000 at June 30, 2010.

Comparison of Operating Results For Six Month Period
Ended June 30, 2010 and June 30, 2009

Net Income:Net income increased $246,000, or 24.8%, to $1.2
million for the six months ended June 30, 2010 compared to $992,000 for the same prior year period. This increase is primarily attributable to an increase in net interest income of $1.1 million, an increase in noninterest income of $254,000 and
a decrease in noninterest expense of $389,000. Partially offsetting these items was an increase in the provision for loan losses of $1.4 million compared to the prior year period. The mortgage warehousing line of business continues to have a
positive impact on net income while the company also continues to add to its allowance for loan losses during the challenging economic conditions and high local unemployment.



32



---

##### Table of Contents

PART I  FINANCIAL INFORMATION

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 six months ended June 30, 2010 and June 30, 2009. 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 Six Months Ended June 30, |        
|                                                       |  | 2010                              |         |          | 2009 |                     
|                                                       |  | (Dollars in thousands)            |        
|                                                       |  | AverageOutstandingBalance         |         | Interest |      | AnnualizedYield/Cost |  |      | AverageOutstandingBalance |  | Interest |         | AnnualizedYield/Cost |  
|Loans                                                  |  | $                                 | 253,219 |          | $    | 7,785                |  | 6.15 | %                         |  | $        | 228,545 |                      | $ | 6,848 |  | 5.99 | %
|Taxable securities                                     |  |                                   | 79,344  |          |      | 1,452                |  | 3.66 | %                         |  |          | 93,229  |                      |   | 2,174 |  | 4.66 | %
|Tax exempt securities                                  |  |                                   | 26,245  |          |      | 528                  |  | 4.02 | %                         |  |          | 8,627   |                      |   | 182   |  | 4.22 | %
|Federal Home Loan Bank of Indianapolis stock           |  |                                   | 4,206   |          |      | 42                   |  | 2.00 | %                         |  |          | 4,206   |                      |   | 65    |  | 3.09 | %
|Federal funds sold and other interest-bearing deposits |  |                                   | 4,316   |          |      | 3                    |  | 0.14 | %                         |  |          | 1,798   |                      |   | 2     |  | 0.22 | %
|                                                       |  |                                   |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Total interest earning assets                          |  |                                   | 367,330 |          |      | 9,810                |  | 5.34 | %                         |  |          | 336,405 |                      |   | 9,271 |  | 5.51 | %
|Non-interest earning assets                            |  |                                   | 40,937  |          |      |                      |  |      |                           |  |          | 42,525  |                      |   |       |  |      |  
|                                                       |  |                                   |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Total assets                                           |  | $                                 | 408,267 |          |      |                      |  |      |                           |  | $        | 378,930 |                      |   |       |  |      |  
|                                                       |  |                                   |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|                                                       |  |                                   |         |          |      |                     
|Savings deposits                                       |  | $                                 | 45,099  |          |      | 25                   |  | 0.11 | %                         |  | $        | 43,448  |                      |   | 28    |  | 0.13 | %
|Money market and NOW accounts                          |  |                                   | 63,933  |          |      | 285                  |  | 0.89 | %                         |  |          | 38,950  |                      |   | 157   |  | 0.81 | %
|CDs and IRAs                                           |  |                                   | 145,355 |          |      | 2,011                |  | 2.77 | %                         |  |          | 138,207 |                      |   | 2,330 |  | 3.37 | %
|                                                       |  |                                   |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Total interest-bearing deposits                        |  |                                   | 254,387 |          |      | 2,321                |  | 1.82 | %                         |  |          | 220,605 |                      |   | 2,515 |  | 2.28 | %
|FHLB advances                                          |  |                                   | 52,704  |          |      | 1,135                |  | 4.31 | %                         |  |          | 66,743  |                      |   | 1,519 |  | 4.55 | %
|Subordinated debentures                                |  |                                   | 5,155   |          |      | 139                  |  | 5.39 | %                         |  |          | 5,155   |                      |   | 125   |  | 4.85 | %
|FDIC guaranteed unsecured borrowing                    |  |                                   | 4,867   |          |      | 101                  |  | 4.15 | %                         |  |          | 3,731   |                      |   | 76    |  | 4.07 | %
|Federal Reserve Bank discount window borrowings        |  |                                   | 2,936   |          |      | 10                   |  | 0.68 | %                         |  |          | 3,015   |                      |   | 7     |  | 0.46 | %
|                                                       |  |                                   |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Total interest-bearing liabilities                     |  |                                   | 320,049 |          |      | 3,706                |  | 2.32 | %                         |  |          | 299,249 |                      |   | 4,242 |  | 2.84 | %
|                                                       |  |                                   |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Non-interest bearing deposits                          |  |                                   | 34,828  |          |      |                      |  |      |                           |  |          | 29,390  |                      |   |       |  |      |  
|Other liabilities                                      |  |                                   | 3,447   |          |      |                      |  |      |                           |  |          | 3,212   |                      |   |       |  |      |  
|                                                       |  |                                   |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Total liabilities                                      |  |                                   | 358,324 |          |      |                      |  |      |                           |  |          | 331,851 |                      |   |       |  |      |  
|Shareholders equity                                   |  |                                   | 49,943  |          |      |                      |  |      |                           |  |          | 47,079  |                      |   |       |  |      |  
|                                                       |  |                                   |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Total liabilities & shareholders equity               |  | $                                 | 408,267 |          |      |                      |  |      |                           |  | $        | 378,930 |                      |   |       |  |      |  
|                                                       |  |                                   |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|                                                       |  |                                   |         |          |      |                     
|Net interest income                                    |  |                                   |         |          | $    | 6,104                |  |      |                           |  |          |         |                      | $ | 5,029 |  |      |  
|                                                       |  |                                   |         |          |      |                      |  |      |                           |  |          |         |                      |   |       |  |      |  
|Net interest rate spread                               |  |                                   |         |          |      |                      |  | 3.02 | %                         |  |          |         |                      |   |       |  | 2.67 | %
|Net interest margin                                    |  |                                   |         |          |      |                      |  | 3.32 | %                         |  |          |         |                      |   |       |  | 2.99 | %



33



---

##### Table of Contents

PART I  FINANCIAL INFORMATION

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



Net Interest Income:Net interest income increased $1.1 million, or 21.4%, for
the first six months of 2010 compared to the same prior year period. This increase is primarily due to an increase in the average net interest-earning assets of $10.1 million, attributable to the increase in mortgage warehouse loans, as well as an
increase in the annualized net interest spread of 35 basis points, to 3.02% from 2.67%. 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 borrowings.

Interest and Dividend Income:Interest
and dividend income increased $539,000, or 5.8%, for the six months ended June 30, 2010 compared to the same prior year period, primarily due to an increase in the average total interest-earning assets of $30.9 million. The mortgage warehouse
program was originated in May of 2009 and therefore is not fully reflected in the prior year period when compared to the current period, which resulted in an increase in average warehouse loans of $37.8 million. Partially offsetting the impact of
this increase is a decrease in the annualized average yield on interest-earning assets of 17 basis points over the same time period, due to the continued decline in interest rates and the impact this has had, particularly on the securities
portfolio.

Interest income on loans, including fees, increased $937,000, or 13.7%, for the first six months of 2010 compared to the same
prior year period. This increase is primarily due to an increase in the average loan balances of $24.7 million attributable to the increase in the mortgage warehouse loans. The annualized average yield on loans increased 16 basis points in the same
period, primarily attributable to the yield on the mortgage warehouse loans and its impact during the first six months of 2010.

Interest
income from taxable securities decreased $722,000, or 33.2%, for the six months ended June 30, 2010 compared to the same prior year period, primarily due to a decrease in the annualized average yield on taxable securities of 100 basis points as
well as a decrease in the average balance of taxable securities of $13.9 million. This is primarily due to the company restructuring and selling some of its taxable securities during 2010 and reinvesting into tax exempt securities and at the same
time recording securities gains. The decrease in the interest income from taxable securities was partially offset by an increase in income on tax exempt securities of $346,000 over the same time period. The average balance of tax exempt securities
increased $17.6 million over the same time period. The company expects to reduce its income tax expense as a result of the increase in tax exempt securities income.

Dividend income from Federal Home Loan Bank of Indianapolis (FHLBI) stock decreased $23,000, or 35.4%, for the first six months of 2010 compared to the
same prior year period, attributable to the decrease in the annualized average yield paid by the FHLBI. The FHLBI has decreased the dividend over this time period due to impairment charges they have recorded attributable to their private label
mortgage backed securities, however have continued to pay a dividend each quarter.

Interest Expense:Interest expense
decreased $536,000, or 12.6%, for the six months ended June 30, 2010 compared to the same prior year period. This decrease is primarily attributable to a decrease in the annualized average cost of interest-bearing liabilities of 52 basis points
to 2.32% for the first six months of 2010 from 2.84% for the same prior year period. Interest expense on FHLBI advances decreased $384,000 primarily due to a decrease in the average balance of $14.0 million as well as a decrease in the annualized
average cost of 24 basis points for the first six months of 2010. Management expects the average cost of FHLBI advances to continue to decrease in 2010 due to $15.0 million in advances maturing in the next six months at an average cost of 6.04%. On
February 3, 2010, the Company entered into two forward interest rate swap contracts against the $15.0 million in advances, in order to address the concern of rising interest rates and in order to lock in interest rates for a longer time period.
There was no material change in the interest expense on the subordinated debentures, the FDIC guaranteed unsecured debt or the Federal Reserve discount window borrowings.



34



---

##### Table of Contents

PART I  FINANCIAL INFORMATION

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



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 $1.7 million for the first six months of 2010 compared to $258,000 for the same prior year period. Net charge-offs for the 2010 and 2009 periods were $89,000 and $160,000, respectively.

The increase in the provision for the second quarter of 2010 was partially attributable to two commercial loan relationships, one totaling
$2.2 million, which is secured by a chemical manufacturing facility, equipment and inventory and a personal guarantee. The Company had a more extensive review of the chemical inventory in late March which led to the additional reserve in the first
quarter. The balance of this relationship after the specific reserve is now $995,000. The second relationship consists of one commercial real estate loan in the amount of $350,000 with a 50% SBA guarantee as well as a commercial business loan in the
amount of $400,000 secured by inventory, accounts receivable and equipment. During the second quarter of 2010, negotiations for the sale of the business ceased and the business subsequently closed, which led to the additional reserve. The balance of
this relationship after the specific reserve and SBA 50% guarantee is now $209,000. The provision for the mortgage warehouse loans also increased in the first six months of 2010 compared to the prior year period, due to the increase in the
outstanding loan balances.

One of the factors management considers when evaluating the allowance for loan losses is the historical loan loss
experience. Given the existing overall economic concerns, we elected to rely on more recent loan loss experience to establish the minimum reserve ratios for the general loan pools.

Noninterest Income:Noninterest income increased $254,000, or 12.0%, to $2.4 million for the first six months of 2010 compared to
$2.1 million for the same prior year period. This increase is primarily attributable to an increase in mortgage warehouse loan fees and wire transfer fees of $354,000 in total compared to the prior year period. There was also an increase in net
gains on securities of $212,000 in the first six months of 2010 when compared to the prior year period, attributable to gains taken in the first quarter of 2010. Managements analysis determined that market conditions provided the opportunity
to sell a number of securities and add these gains to capital permanently without a negative impact to long-term earnings. The potential for rising interest rates, and the announcement that the Federal Reserve Boards program to purchase
mortgage backed securities will end sometime in 2010, led to concern of eroding prices on these securities and the potential to negatively impact capital at some point in the future. ATM and debit card fees increased $38,000, or 26.8%, attributable
to increased activity.

Partially offsetting these increases in noninterest income was a decrease of $370,000, or 57.9%, in net gains on
mortgage banking activities in the first six months of 2010 compared to the prior year period. Mortgage banking activities locally have slowed down significantly from the same prior year period. Refinance activity has leveled off, which was
anticipated due to the length of time interest rates have remained at historically low levels. Trust fees decreased $66,000, or 91.7%, attributable to the closing of the trust department in 2010. Service charges on deposit accounts decreased
$34,000, or 8.3%, primarily attributable to a decrease in overdraft charges of $28,000. We anticipate a continued decrease in these charges due to the impact of new regulations.



35



---

##### Table of Contents

PART I  FINANCIAL INFORMATION

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



Noninterest Expense:Noninterest expense decreased $389,000, or 6.8%, to $5.3
million for the six month period ending June 30, 2010 compared to $5.7 million for the six month period ending June 30, 2009. This decrease is primarily due to the $427,000 prepayment penalty fee assessed to retire the FHLB advance in the
prior year period as well as a decrease in FDIC insurance of $183,000. In the prior year period there was also a special assessment of 5 basis points on total assets less Tier 1 Capital as of June 30, 2009. The special assessment resulted in an
expense of $176,000 in the second quarter of 2009 which was not applicable in the current period. Occupancy expense decreased $42,000, or 4.4%, in the first six months of 2010 compared to the same prior year period, primarily due to a decrease in
depreciation expense of $42,000, a decrease in utility costs of $12,000 and a decrease in ATM network costs of $13,000. Partially offsetting these decreases in occupancy was an increase in building services expense of $33,000 over the same time
period, primarily due to higher than normal snow removal costs in the first quarter of 2010. Amortization of intangibles decreased $39,000 in the first six months of 2010 when compared to the prior year period, since the core deposit intangible
asset is amortized into expense on an accelerated basis.

These decreases in noninterest expense were partially offset by an increase in
salaries and employee benefits of $268,000, or 10.5%, over the same time period. This increase is primarily attributable to the termination of one of the Banks post retirement life insurance benefit plans that it had established for a limited
number of exempt employee in the prior year period, resulting in a $173,000 decrease in that expense in the second quarter 2009. There was also an increase in exempt payroll expense of $96,000, which is primarily due to an increase in the addition
of the mortgage warehouse staff in the second quarter of 2009.

Income Taxes:Income tax expense increased $66,000 for
the six months ended June 30, 2010 compared to the same prior year period, primarily due to the increase in income before taxes of $312,000. The effective tax rate was 17.6% for the first six months of 2010 and 16.7% for the same prior year
period. The prior year period had a lower tax rate primarily due to the beneficial tax treatment of the reversal of the post retirement plan expense during that period. A tax deduction had not previously been recorded for this expense and therefore
the reversal did not have a tax impact. Our deferred tax asset increased from $1.0 million at December 31, 2009 to $1.7 million at June 30, 2010. The Companys federal and state net operating loss deferred tax asset has decreased from
$1.4 million at December 31, 2009 to $900,000 at June 30, 2010, which contributed to a decrease in our valuation allowance from $680,000 at December 31, 2009 to $622,000 at June 30, 2010. This decrease in the deferred tax asset
for net operating loss carryforwards was offset by an increase in the deferred tax asset for bad debt expense from $1.1 million at December 31, 2009 to $1.7 million at June 30, 2010, as well as, a decrease in the deferred tax liability
related to net unrealized gain/loss on securities and interest rate swaps from $900,000 at December 31, 2009 to $400,000 at June 30, 2010.

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.



36



---

##### Table of Contents

PART I  FINANCIAL INFORMATION

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



The Companys liquid assets, defined as cash and due from financial institutions and the market
value of unpledged securities available-for-sale totaled $53.4 million at June 30, 2010 and constituted 12.18% of total assets at that date, compared to $37.4 million, or 9.22%, of total assets at December 31, 2009.

The Company also maintains lines of credit with the Federal Home Loan Bank. The total of these lines of credit were $88.0 million at June 30, 2010,
of which $78.9 million in Federal Home Loan Bank advances were outstanding. The Company has additional securities and certain approved real estate loans available to pledge as collateral in order to increase our lines of credit with the Federal Home
Loan Bank. At June 30, 2010, we had $47.2 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 June 30, 2010, $47.3 million of these advances were due
within one year, and $31.6 million had maturities greater than a year.

The Company also utilizes the Federal Reserve discount window as a
source of short-term funding. At June 30, 2010, the Companys overnight borrowings with the Federal Reserve Bank discount window totaled $0. The Companys borrowing capacity at the Federal Reserve Bank discount window is based on the
collateral value of pledged securities. The collateral value of securities pledged to the Federal Reserve discount window at June 30, 2010 totaled $20.5 million. At June 30, 2010, we had $47.2 million in unpledged securities available for
sale.

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 14.58% and 13.33% at June 30, 2010, 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 June 30, 2010, the Banks leverage ratio was 10.20%. Capital levels
for the Bank remain above the established regulatory capital requirements.

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.



37



---

##### 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 +/- 3.00%) 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 June 30, 2010, given a +3.00% or 3.00% shock in interest rates, our model results in
the Banks net interest income for the next twelve months changing by $(31,000), or (0.21)%, and $(335,000), or (2.25)%, 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 June 30, 2010, given a +3.00% or -3.00% shock in interest rates, our model results in the Banks economic value of equity at risk for the
next twelve months changing by (4.47)%, and (15.98)%, 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.



38



---

##### Table of Contents

PART II  OTHER INFORMATION



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

As of
June 30, 2010, 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
|-------- | ------------

In addition
to the other information contained in this Quarterly Report on Form 10-Q, the following risk factor represents a material update and addition to the risk factors previously disclosed in the Companys Annual Report on Form 10-K for the year
ended December 31, 2009. Additional risks not presently known to us, or that we currently deem immaterial, may also adversely affect our business, financial condition or results of operations. Further, to the extent that any of the information
contained in this Quarterly Report on Form 10-Q constitutes forward-looking statements, the risk factor set forth below also is a cautionary statement identifying important factors that could cause our actual results to differ materially from those
expressed in any forward-looking statements made by or on behalf of us.

Financial reform legislation recently enacted by
Congress will, among other things, eliminate the Office of Thrift Supervision, tighten capital standards, create a new Consumer Financial Protection Bureau and result in new laws and regulations that are expected to increase our costs of operations.

Congress recently enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). This
new law will significantly change the current bank regulatory structure and affect the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies. The Dodd-Frank Act requires various federal
agencies to adopt a broad range of new implementing rules and regulations, and to prepare numerous studies and reports for Congress. The federal agencies are given significant discretion in drafting the implementing rules and regulations, and
consequently, many of the details and much of the impact of the Dodd-Frank Act may not be known for many months or years.

Certain provisions of the Dodd-Frank Act are expected to have a near-term impact on the Company. For example, the new law provides that
the Office of Thrift Supervision, which currently is the primary federal regulator for the Company, will cease to exist one year from the date of the new laws enactment. The Board of Governors of the Federal Reserve System will supervise and
regulate all savings and loan holding companies that were formerly regulated by the Office of Thrift Supervision, including the Company and The La Porte Savings Bank, MHC.

Also effective one year after the date of enactment is a provision of the Dodd-Frank Act that eliminates the federal prohibitions on
paying interest on demand deposits, thus allowing businesses to have interest bearing checking accounts. Depending on competitive responses, this significant change to existing law could have an adverse impact on the Companys interest expense.

The Dodd-Frank Act also broadens the base for Federal Deposit Insurance Corporation insurance assessments. Assessments will
now be based on the average consolidated total assets less tangible equity capital of a financial institution. The Dodd-Frank Act also permanently increases the maximum amount of deposit insurance for banks, savings institutions and credit unions to
$250,000 per depositor, retroactive to January 1, 2009, and non-interest bearing transaction accounts have unlimited deposit insurance through December 31, 2013.

The Dodd-Frank Act will require publicly traded companies to give stockholders a non-binding vote on executive compensation and so-called
golden parachute payments, and by authorizing the Securities and Exchange Commission to promulgate rules that would allow stockholders to nominate their own candidates using a companys proxy materials. The legislation also directs
the Federal Reserve Board to promulgate rules prohibiting excessive compensation paid to bank holding company executives, regardless of whether the company is publicly traded or not.



39



---

##### Table of Contents

PART II  OTHER INFORMATION



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



The Dodd-Frank Act creates a new Consumer Financial Protection Bureau with broad powers
to supervise and enforce consumer protection laws. The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to
prohibit unfair, deceptive or abusive acts and practices. The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Savings
institutions such as Legacy Banks with $10 billion or less in assets will continue to be examined for compliance with the consumer laws by their primary bank regulators.

It is difficult to predict at this time what specific impact the Dodd-Frank Act and the yet to be written implementing rules and
regulations will have on community banks. However, it is expected that at a minimum they will increase our operating and compliance costs and could increase our interest expense.



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



| | (a) | Unregistered Sales of Equity Securities: Not applicable
| | --- | -------------------------------------------------------



| | (b) | Use of Proceeds: Not applicable
| | --- | -------------------------------



| | (c) | Repurchase of Our Equity Securities
| | --- | -----------------------------------

The following table presents a summary of the Companys share repurchases during the quarter ended June 30, 2010.



|                 |  |                                |  |                            |      |                                                                                  |       |                                                                                |       
|---------------- |  | ------------------------------ |  | -------------------------- | ---- | -------------------------------------------------------------------------------- | ----- | ------------------------------------------------------------------------------ | ------
|Period           |  | Total numberof sharespurchased |  | Averageprice paidper share |      | Total number ofshares purchased aspart of publiclyannounced plans orprograms
(1) |       | Maximum numberof shares that mayyet be purchasedunder the plans orprograms
(1)
|April 1-April 30 |  | 400                            |  | $                          | 6.05 |                                                                                  | 400   |                                                                                | 16,300
|May 1-May 31     |  | 2,200                          |  |                            | 7.35 |                                                                                  | 2,200 |                                                                                | 14,100
|June 1-June 30   |  |                               |  |                            |     |                                                                                  |      |                                                                                | 14,100
|                 |  |                                |  |                            |      |                                                                                  |       |                                                                                |       
|Total            |  | 2,600                          |  | $                          | 7.15 |                                                                                  | 2,600 |                                                                                | 14,100
|                 |  |                                |  |                            |      |                                                                                  |       |                                                                                |       



|(1) | On November 13, 2009, the Company commenced a stock repurchase program pursuant to which the Company intends to repurchase, in the open market and in privately
negotiated transactions, up to 3 percent (approximately 63,400 shares) of the Companys then outstanding public shares. The timing of the repurchases will depend on certain factors, including but not limited to, market conditions and prices,
the Companys liquidity requirements and alternative uses of capital. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

None



|ITEM 4. | REMOVED AND RESERVED
|------- | --------------------



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

None



40



---

##### Table of Contents

PART II  OTHER INFORMATION



|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



41



---

##### 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.                
|                | 
|August 10, 2010 |  | /s/ Lee A. Brady                     
|Date            |  | Lee A. Brady,                        
|                |  | President and Chief Executive Officer
|                | 
|August 10, 2010 |  | /s/ Michele M. Thompson              
|Date            |  | Michele M. Thompson,                 
|                |  | Executive Vice President and         
|                |  | Chief Financial Officer              



42