**United      States**

**Securities      and Exchange Commission**

**Washington,      D.C. 20549**

**FORM**
**10-KSB**

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

| **o** | **TRANSITION                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF                1934** |
|-------|----------------------------------------------------------------------------------------------------------------------|

**DELANCO      BANCORP, INC.**

| **United                States**(State                or other jurisdiction ofincorporation                or organization)            | **36-4519533**(I.R.S.                Employer Identification No.) |
|----------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------|
| **615                Burlington Avenue,****Delanco,                New Jersey**(Address                of principal executive offices) | **08075**(Zip                Code)                                |

**Common      Stock, par value $0.01 per share**

** **

**DOCUMENTS      INCORPORATED BY REFERENCE: **

**Portions      of the Proxy Statement for the 2007 Annual Meeting of      Stockholders**

**are      incorporated by reference in Part III of this      Form 10-KSB.**

----

**INDEX**

|                        |                                                                                                                                                                | **Page** |
|-----------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                        |                                                                                                                                                                |     |
| **PART                I**   |                                                                                                                                                                |
|                        |                                                                                                                                                                |     |
| Item                1.      | Description                of Business                                                                                                                              | 1        |
|                        |                                                                                                                                                                |     |
| Item                2.      | Description                of Property                                                                                                                              | 14       |
|                        |                                                                                                                                                                |     |
| Item                3.      | Legal                Proceedings                                                                                                                                    | 14       |
|                        |                                                                                                                                                                |     |
| Item                4.      | Submission                of Matters to a Vote of Security Holders                                                                                                  | 14       |
|                        |                                                                                                                                                                |     |
| **PART                II**  |                                                                                                                                                                |
|                        |                                                                                                                                                                |     |
| Item                5.      | Market                for Common Equity and Related Stockholder Matters                                                                                             | 15       |
|                        |                                                                                                                                                                |     |
| Item                6.      | Management’s                Discussion and Analysis or Plan of Operation                                                                                      | 15       |
|                        |                                                                                                                                                                |     |
| Item                7.      | Financial                Statements                                                                                                                                 | 30       |
|                        |                                                                                                                                                                |     |
| Item                8.      | Changes                In and Disagreements With Accountants on Accounting and Financial                Disclosure                                                  | 30       |
|                        |                                                                                                                                                                |     |
| Item                8A.     | Controls                and Procedures                                                                                                                              | 30       |
|                        |                                                                                                                                                                |     |
| Item                8B.     | Other                Information                                                                                                                                    | 30       |
|                        |                                                                                                                                                                |     |
| **PART                III** |                                                                                                                                                                |
|                        |                                                                                                                                                                |     |
| Item                9.      | Directors,                Executive Officers, Promoters, Control Persons and Corporate Governance;                Compliance with Section 16(a) of the Exchange Act | 31       |
|                        |                                                                                                                                                                |     |
| Item                10.     | Executive                Compensation                                                                                                                               | 32       |
|                        |                                                                                                                                                                |     |
| Item                11.     | Security                Ownership of Certain Beneficial Owners and Management and Related                Stockholder Matters                                        | 32       |
|                        |                                                                                                                                                                |     |
| Item                12.     | Certain                Relationships and Related Transactions, and Director                Independence                                                             | 33       |
|                        |                                                                                                                                                                |     |
| Item                13.     | Exhibits                                                                                                                                                            | 33       |
|                        |                                                                                                                                                                |     |
| Item                14.     | Principal                Accountant Fees and Services                                                                                                               | 33       |
|                        |                                                                                                                                                                |     |
| **SIGNATURES**              |                                                                                                                                                                |

----

*This      report contains certain “forward-looking statements” within the meaning of the      federal securities laws that are based on assumptions and may describe future      plans, strategies and expectations of Delanco Bancorp, Inc. (the “Company”),      Delanco MHC and Delanco Federal Savings Bank. These forward-looking statements      are generally identified by terms such as “expects,” “believes,” “anticipates,”“intends,” “estimates,” “projects” and similar expressions. *

*Management’s      ability to predict results or the actual effect of future plans or strategies      is      inherently uncertain. Factors which could have a material adverse effect on      the      operations of Delanco Bancorp and its subsidiaries include, but are not limited      to, the following: interest rate trends; the general economic climate in the      market area in which we operate, as well as nationwide; our ability to control      costs and expenses; competitive products and pricing; loan delinquency rates      and      changes in federal and state legislation and regulation. These risks and      uncertainties should be considered in evaluating the forward-looking statements      and undue reliance should not be placed on such statements. We assume no      obligation to update any forward-looking statements.*

**PART      I**

**ITEM      1.**
**DESCRIPTION      OF BUSINESS**

**General**

**Market      Area**

----

**Competition**

**Lending      Activities**

***One-      to Four-Family Residential Loans***
**.**

----

***Construction      Loans***
***.***

***Commercial      and Multi-Family Real Estate Loans***
**.**

***Commercial      Loans.***

***Consumer      Loans***
**.**

*The      Wall Street Journal*

----

***Loan      Underwriting Risks.***

*Adjustable-Rate      Loans*

*Construction      Loans*

*Commercial      and Multi-Family Real Estate Loans*

*Commercial      Loans*

*Consumer      Loans*

----

*Loan      Originations, Purchases and Sales*

** **

*Loan      Approval Procedures and Authority*

*Loans      to One Borrower*

*Loan      Commitments*

**Investment      Activities**

** **
** **

**Deposit      Activities and Other Sources of Funds**

***General***
**.**

----

***Deposit      Accounts***
**.**

***Borrowings***
**.**

**Personnel**

**Subsidiaries**

**Risk      Factors**

**We      have had low earnings during the last two fiscal years, which have been      supported by non-recurring gains.**

**If      we do not achieve profitability on our new branch, the new branch will hurt      our      earnings.**

----

**Our      increased emphasis on commercial lending may expose us to increased lending      risks.**

**The      unseasoned nature of our commercial loan portfolio may expose us to increased      lending risks.**

**Rising      interest rates may further compress our interest rate spread, which would hurt      our profits.**

**Because      most of our borrowers are located in Burlington County, New Jersey or the      surrounding area, a downturn in the local economy or a decline in local real      estate values could cause increases in nonperforming loans, which could hurt      our      profits.**

----

**Strong      competition within our market area could hurt our profits and slow      growth.**

**We      operate in a highly regulated environment and we may be adversely affected      by      changes in laws and regulations.**

**We      will need to implement additional finance and accounting systems, procedures      and      controls in order to satisfy our new public company reporting requirements,      which will increase our operating expenses. **

**Delanco      MHC’s majority control of our common stock will enable it to exercise voting      control over most matters put to a vote of stockholders and will prevent      stockholders from forcing a sale or a second-step conversion transaction you      may      find advantageous. **

----

**Office      of Thrift Supervision policy on remutualization transactions could prevent      acquisition of Delanco Bancorp, which may adversely affect our stock price.      **

**Office      of Thrift Supervision regulations and anti-takeover provisions in our charter      restrict the accumulation of our common stock, which may adversely affect our      stock price. **

**Regulation      and Supervision**

**General**

----

**Regulation      of Federal Savings Associations**

***Capital      Requirements***
**.**
** **

***Prompt      Corrective Regulatory Action.***
* *

----

***Standards      for Safety and Soundness.***

***Limitation      on Capital Distributions.***
*i.e.*

***Qualified      Thrift Lender Test.***

***Transactions      with Related Parties.***
*e.g*

----

***Insurance      of Deposit Accounts.***

***Federal      Home Loan Bank System.***

***Community      Reinvestment Act.***
* *

----

**Holding      Company Regulation**

***General.***
*** ***

***Restrictions      Applicable to Mutual Holding Companies.***
*** ***

***Stock      Holding Company Subsidiary Regulation.***
*** ***

----

***Waivers      of Dividends by Delanco MHC.***
*** ***

***Conversion      of Delanco MHC to Stock Form.***
*** ***

***Acquisition      of Control.***
*** ***

**ITEM      2.**
**DESCRIPTION      OF PROPERTY**

**ITEM      3.**
**LEGAL      PROCEEDINGS **

**ITEM      4.**
**SUBMISSION      OF MATTERS TO A VOTE OF SECURITY HOLDERS**

----

**PART      II**

**ITEM      5.**
**MARKET      FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER      PURCHASES OF **

**                    EQUITY SECURITIES**

**ITEM      6.**
**MANAGEMENT’S      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**

**Overview**

***Income***
**.      **

----

***Allowance      for Loan Losses***
**.**

***Expenses.***

**Critical      Accounting Policies**

***Allowance      for Loan Losses***
**.      **

----

***Deferred      Income Taxes***
***.***

**Balance      Sheet Analysis**

***Loans***
**.**
** **

| **Table                1: Loan Portfolio Analysis**                                            |   |
|-----------------------------------------------------------------------------------------------------|--------|
|                                                                                                |   | **2007** |   | **2006** |   | **2005** |   |
| March                31, (Dollars in thousands)                                                     |   | **Amount** |   | **Percent** |   | **Amount** |   | **Percent** |   | **Amount** |   | **Percent** |   |
| Real                estate loans:                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Residential                                                       |   | $ | 24,112 |   |   | 30.9 | % | $ | 17,116 |   |   | 41.0 | % | $ | 19,417 |   |   | 55.4 | % |
|                    Commercial and multi-family                                       |   |   | 12,681 |   |   | 16.3 |   |   | 5,669 |   |   | 13.5 |   |   | 3,350 |   |   | 9.6 |   |
|                    Construction                                                      |   |   | 2,061 |   |   | 2.6 |   |   | 205 |   |   | 0.5 |   |   | 240 |   |   | 0.7 |   |
|          Total                real estate loans        |   |   | 38,854 |   |   | 49.8 |   |   | 22,990 |   |   | 55.0 |   |   | 23,007 |   |   | 65.7 |   |
| Commercial                loans                                                                     |   |   | 15,124 |   |   | 19.4 |   |   | 4,162 |   |   | 10.0 |   |   | 1,097 |   |   | 3.1 |   |
| Consumer                loans                                                                       |   |   | 24,066 |   |   | 30.8 |   |   | 14,621 |   |   | 35.0 |   |   | 10,926 |   |   | 31.2 |   |
|                             Total loans |   |   | 78,044 |   |   | 100.0 | % |   | 41,773 |   |   | 100.0 | % |   | 35,030 |   |   | 100.0 | % |
| Loans                in process                                                                     |   |   | (916 | ) |   |   |   |   | (135 | ) |   |   |   |   | — |   |   |   |   |
| Net                deferred loan fees                                                               |   |   | (138 | ) |   |   |   |   | (32 | ) |   |   |   |   | (29 | ) |   |   |   |
| Allowance                for losses                                                                 |   |   | (492 | ) |   |   |   |   | (237 | ) |   |   |   |   | (227 | ) |   |   |   |
|                             Loans, net  |   | $ | 76,498 |   |   |   |   | $ | 41,369 |   |   |   |   | $ | 34,774 |   |   |   |   |

** **

----

| **Table                2: Contractual Maturities and Interest Rate Sensitivity**  |   |
|----------------------------------------------------------------------------------------|--------|
| March                31, 2007 (Dollars in thousands)                                   |   | **Real                Estate****Loans** |   | **Commercial                Loans** |   | **Consumer****Loans** |   | **Total****Loans** |   |
| Amounts                due in:                                                         |   |   |   |   |   |   |   |   |   |
|                    One year or less                                     |   | $ | 3,680 |   | $ | 1,556 |   | $ | 513 |   | $ | 5,749 |   |
|                    More than one to five years                          |   |   | 6,988 |   |   | 7,153 |   |   | 16,421 |   |   | 30,562 |   |
|                    More than five years                                 |   |   | 28,186 |   |   | 6,415 |   |   | 7,132 |   |   | 41,733 |   |
|          Total                            |   | $ | 38,854 |   | $ | 15,124 |   | $ | 24,066 |   | $ | 78,044 |   |
|                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                rate terms on amounts due after one year:                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Fixed-rate loans                                     |   | $ | 32,684 |   | $ | 11,809 |   | $ | 19,929 |   | $ | 64,422 |   |
|                    Adjustable-rate loans                                |   |   | 2,490 |   |   | 1,759 |   |   | 3,624 |   |   | 7,873 |   |
|          Total                            |   | $ | 35,174 |   | $ | 13,568 |   | $ | 23,553 |   | $ | 72,295 |   |

***Securities.***
** **

| **Table                3: Investment Securities**                                        |   |
|-----------------------------------------------------------------------------------------------|--------|
|                                                                                          |   | **2007** |   | **2006** |   | **2005** |   |
| March                31, (Dollars in thousands)                                               |   | **Amortized****Cost** |   | **Fair****Value** |   | **Amortized****Cost** |   | **Fair****Value** |   | **Amortized****Cost** |   | **Fair****Value** |   |
| Securities                available for sale:                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Mutual funds                                                |   | $ | 212 |   | $ | 253 |   | $ | 196 |   | $ | 240 |   | $ | 2,359 |   | $ | 2,297 |   |
|                    Equity securities                                           |   |   | -- |   |   | -- |   |   | 7 |   |   | 434 |   |   | 8 |   |   | 513 |   |
|          Total                available for sale |   |   | 212 |   |   | 253 |   |   | 203 |   |   | 674 |   |   | 2,367 |   |   | 2,810 |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities                held to maturity:                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Government sponsored enterprise securities                  |   |   | 4,000 |   |   | 3,942 |   |   | 5,500 |   |   | 5,352 |   |   | 6,500 |   |   | 6,381 |   |
|                    Mortgage-backed securities                                  |   |   | 11,822 |   |   | 11,810 |   |   | 14,668 |   |   | 14,442 |   |   | 17,514 |   |   | 17,591 |   |
|          Total                held to maturity   |   |   | 15,822 |   |   | 15,752 |   |   | 20,168 |   |   | 19,794 |   |   | 24,014 |   |   | 23,972 |   |
|                             Total |   | $ | 16,034 |   | $ | 16,005 |   | $ | 20,371 |   | $ | 20,468 |   | $ | 26,381 |   | $ | 26,782 |   |

----

| **Table                4: Investment Maturities Schedule**                                                                                  |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                             |   | **One                Year or Less** |   | **More                than One Year to Five Years** |   | **More                than Five Years to Ten Years** |   | **More                than Ten Years** |   | **Total** |   |
|  March                31, 2007(Dollars                in thousands)                                                                         |   | **Carrying                Value** |   | **Weighted****Average****Yield** |   | **Carrying                Value** |   | **Weighted****Average****Yield** |   | **Carrying                Value** |   | **Weighted****Average****Yield** |   | **Carrying                Value** |   | **Weighted****Average****Yield** |   | **Carrying                Value** |   | **Weighted****Average****Yield** |   |
| Securities                available-for-sale:                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Mutual funds                                                                                                   |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   | $ | 253 |   |   | — |   |
|                    Equity securities                                                                                              |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |
|          Total                available for sale                                                    |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 253 |   |   | — |   |
|                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities                held to maturity:                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Government sponsored         enterprise                securities |   |   | 1,500 |   |   | 3.23 |   |   | 2,000 |   |   | 3.43 |   |   | 500 |   |   | 5.04 |   |   |   |   |   |   |   |   | 4,000 |   |   | 3.56 |   |
|                    Mortgage-backed securities                                                                                     |   |   | 5 |   |   | 7.14 |   |   | 6,422 |   |   | 5.23 |   |   | 2,088 |   |   | 4.34 |   |   | 3,307 |   |   | 4.32 |   |   | 11,822 |   |   | 4.82 |   |
|          Total                held to maturity                                                      |   |   | 1,505 |   |   | 3.24 |   |   | 8,422 |   |   | 4.80 |   |   | 2,588 |   |   | 4.48 |   |   | 3,307 |   |   | 4.32 |   |   | 15,822 |   |   | 4.50 |   |
|                Total                                                  |   | $ | 1,505 |   |   | 3.24 |   | $ | 8,422 |   |   | 4.80 |   | $ | 2,588 |   |   | 4.48 |   | $ | 3,307 |   |   | 4.32 |   | $ | 16,075 |   |   | 4.50 |   |

***Deposits***
**.**

| **Table                5: Deposits**                                                     |   |
|-----------------------------------------------------------------------------------------------|--------|
|                                                                                          |   | **2007** |   | **2006** |   | **2005** |   |
| March                31, (Dollars in thousands)                                               |   | **Amount** |   | **Percent** |   | **Amount** |   | **Percent** |   | **Amount** |   | **Percent** |   |
| Noninterest-bearing                demand deposits                                            |   | $ | 3,372 |   |   | 3.5 | % | $ | 2,450 |   |   | 3.7 | % | $ | 1,745 |   |   | 2.8 | % |
| Interest-bearing                demand deposits                                               |   |   | 7,930 |   |   | 8.3 |   |   | 7,387 |   |   | 11.1 |   |   | 8,092 |   |   | 13.0 |   |
| Savings                and money market accounts                                              |   |   | 33,163 |   |   | 34.5 |   |   | 25,186 |   |   | 37.9 |   |   | 21,754 |   |   | 34.9 |   |
| Certificates                of deposit                                                        |   |   | 51,524 |   |   | 53.7 |   |   | 31,509 |   |   | 47.3 |   |   | 30,706 |   |   | 49.3 |   |
|                             Total |   | $ | 95,989 |   |   | 100.0 | % | $ | 66,532 |   |   | 100.0 | % | $ | 62,297 |   |   | 100.0 | % |

| **Table                6: Time Deposit Maturities of $100,000 or more**  |   |                                          |   |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|
| March                31, 2007 (Dollars in thousands)                          |   | **Certificates****of                Deposit** |   |
| **Maturity                Period**                                            |   |                                          |   |
| Three                months or less                                           |   | $                                             | 2,616  |   |
| Over                three through six months                                  |   |                                          | 4,409  |   |
| Over                six through twelve months                                 |   |                                          | 4,195  |   |
| Over                twelve months                                             |   |                                          | 4,103  |   |
|                       Total                     |   | $                                             | 15,323 |   |

----

***Borrowings***
**.      **

| **Table                7: Borrowings**                                   |   |
|-------------------------------------------------------------------------------|--------|
| March                31, (Dollars in thousands)                               |   | **2007** |   | **2006** |   | **2005** |   |
| Maximum                amount outstanding at any month end during the period: |   |   |   |   |   |   |   |
|                    FHLB advances                               |   | $ | 2,800 |   |   | — |   | $ | 500 |   |
| Average                amount outstanding during the period (1):              |   |   |   |   |   |   |   |   |   |   |
|                    FHLB advances                               |   | $ | 658 |   |   | — |   | $ | 42 |   |
| Weighted                average interest rate during the period (1):          |   |   |   |   |   |   |   |   |   |   |
|                    FHLB advances                               |   |   | 5.62 | % |   | — |   |   | N/M |   |
| Balance                outstanding at end of period:                          |   |   |   |   |   |   |   |   |   |   |
|                    FHLB advances                               |   |   | — |   |   | — |   |   | — |   |
| Weighted                average interest rate at end of period:               |   |   |   |   |   |   |   |   |   |   |
|                    FHLB advances                               |   |   | — |   |   | — |   |   | — |   |

| (1) | Averages                are based on month-end balances. Due to the infrequent use of borrowed                funds in fiscal 2006 and 2005, there were frequently no month-end                balances. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Results      of Operations for the Years Ended March 31, 2007 and 2006**

***Financial      Highlights.***

| **Table                8: Summary Income Statements**  |   |     |   |     |   |                            |   |                        |   |
|-------------------------------------------------------------|--------|----------|--------|----------|--------|---------------------------------|--------|-----------------------------|--------|
| Year                Ended March 31, (Dollars in thousands)  |   | **2007** |   | **2006** |   | **2007                v. 2006** |   | **%                Change** |   |
| Net                interest income                          |   | $        | 2,232  |     | $      | 2,066                           |   | $                           | 166    |   |   | 8.0 | % |
| Provision                for loan losses                    |   |     | 255    |     |   | 10                              |   |                        | 245    |   |   | N/M |   |
| Noninterest                income                           |   |     | 622    |     |   | 473                             |   |                        | 149    |   |   | 31.5 |   |
| Noninterest                expenses                         |   |     | 2,862  |     |   | 2,138                           |   |                        | 724    |   |   | 33.9 |   |
| Net                income                                   |   |     | (155   | )        |   | 316                             |   |                        | (471   | ) |   | (149.1 | ) |
|                                                        |   |     |   |     |   |                            |   |                        |   |   |   |   |   |
| Return                on average equity                     |   |     | (1.83  | )%       |   | 4.03                            | %      |                        |   |   |   |   |   |
| Return                on average assets                     |   |     | (0.17  | )%       |   | 0.44                            | %      |                        |   |   |   |   |   |

***Net      Interest Income.***

----

| **Table                9: Analysis of Net Interest Income**                            |   |     |   |     |   |                            |   |                        |   |
|---------------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|---------------------------------|--------|-----------------------------|--------|
| Year                Ended March 31, (Dollars in thousands)                                  |   | **2007** |   | **2006** |   | **2007                v. 2006** |   | **%                Change** |   |
| **Components                of net interest income**                                        |   |     |   |     |   |                            |   |                        |   |
|                    Loans                                                     |   | $        | 3,721  |     | $      | 2,138                           |   | $                           | 1,583  |   |   | 74.0 | % |
|                    Investment securities                                     |   |     | 1,045  |     |   | 1,251                           |   |                        | (206   | ) |   | (16.5 | ) |
|          Total                interest income  |   |     | 4,766  |     |   | 3,389                           |   |                        | 1,377  |   |   | 40.6 |   |
|                    Deposits                                                  |   |     | 2,497  |     |   | 1,322                           |   |                        | 1,175  |   |   | 88.9 |   |
|                    Borrowings                                                |   |     | 37     |     |   | 1                               |   |                        | 36     |   |   | N/M |   |
|          Total                interest expense |   |     | 2,534  |     |   | 1,323                           |   |                        | 1,211  |   |   | 91.5 |   |
|          Net                interest income    |   |     | 2,232  |     |   | 2,066                           |   |                        | 166    |   |   | 8.0 |   |
| **Average                yields and rates paid**                                            |   |     |   |     |   |                            |   |                        |   |   |   |   |   |
|                    Interest-earning assets                                   |   |     | 5.90   | %        |   | 5.16                            | %      |                        | 74bp   |   |   |   |   |
|                    Interest-bearing liabilities                              |   |     | 3.26   |     |   | 2.18                            |   |                        | 108    |   |   |   |   |
|                    Interest rate spread                                      |   |     | 2.64   |     |   | 2.98                            |   |                        | (34    | ) |   |   |   |
|                    Net interest margin                                       |   |     | 2.76   |     |   | 3.14                            |   |                        | (38    | ) |   |   |   |
| **Average                balances**                                                         |   |     |   |     |   |                            |   |                        |   |   |   |   |   |
|                    Loans                                                     |   | $        | 58,474 |     | $      | 36,723                          |   |                        | 21,751 |   |   | 59.2 |   |
|                    Investment securities                                     |   |     | 18,583 |     |   | 24,118                          |   |                        | (5,535 | ) |   | (23.0 | ) |
|                    Earning assets                                            |   |     | 80,728 |     |   | 65,729                          |   |                        | 14,999 |   |   | 22.8 |   |
|                    Interest-bearing deposits                                 |   |     | 76,964 |     |   | 60,619                          |   |                        | 16,345 |   |   | 27.0 |   |

***Provision      for Loan Losses.***

*Risk      Management - Analysis and Determination of the Allowance for Loan      Losses*

***Noninterest      Income.***

| **Table                10: Noninterest Income Summary**  |   |     |   |     |   |                        |   |                        |   |
|---------------------------------------------------------------|--------|----------|--------|----------|--------|-----------------------------|--------|-----------------------------|--------|
| Year                Ended March 31, (Dollars in thousands)    |   | **2007** |   | **2006** |   | **$                Change** |   | **%                Change** |   |
| Gain                (loss) on sale of securities              |   | $        | 451    |     | $      | (19                         | )      | $                           | 470    |   |   | N/M |   |
| Net                gain on sale of non-marketable securities  |   |     | 19     |     |   | 345                         |   |                        | (326   | ) |   | (94.5 | ) |
| Service                charges                                |   |     | 85     |     |   | 96                          |   |                        | (11    | ) |   | (11.5 | ) |
| Rental                income                                  |   |     | 12     |     |   | --                          |   |                        | 12     |   |   | N/M |   |
| Income                from bank owned life insurance          |   |     | 10     |     |   | 10                          |   |                        | --     |   |   | -- |   |
| Other                                                         |   |     | 45     |     |   | 41                          |   |                        | 4      |   |   | 9.8 |   |
|                    Total                       |   |     | 622    |     | $      | 473                         |   | $                           | 149    |   |   | 31.5 | % |

----

***Noninterest      Expenses.***
** **

| **Table                11: Noninterest Expense Summary**  |   |     |   |     |   |                        |   |                        |   |
|----------------------------------------------------------------|--------|----------|--------|----------|--------|-----------------------------|--------|-----------------------------|--------|
| Year                Ended March 31, (Dollars in thousands)     |   | **2007** |   | **2006** |   | **$                Change** |   | **%                Change** |   |
| Salaries                and employee benefits                  |   | $        | 1,603  |     | $      | 1,305                       |   | $                           | 298    |   |   | 22.8 |   |
| Advertising                                                    |   |     | 50     |     |   | 47                          |   |                        | 3      |   |   | 6.4 |   |
| Office                supplies, telephone and postage          |   |     | 114    |     |   | 57                          |   |                        | 57     |   |   | 100.0 |   |
| Net                occupancy expense                           |   |     | 437    |     |   | 202                         |   |                        | 235    |   |   | 116.3 |   |
| Federal                insurance premiums                      |   |     | 8      |     |   | 8                           |   |                        | --     |   |   | -- |   |
| Data                processing expenses                        |   |     | 135    |     |   | 99                          |   |                        | 36     |   |   | 36.4 |   |
| MAC                expenses                                    |   |     | 53     |     |   | 50                          |   |                        | 3      |   |   | 6.0 |   |
| Bank                charges and fees                           |   |     | 54     |     |   | 55                          |   |                        | (1     | ) |   | (1.8 | ) |
| Insurance                and surety bond premiums              |   |     | 45     |     |   | 41                          |   |                        | 4      |   |   | 9.8 |   |
| Dues                and subscriptions                          |   |     | 37     |     |   | 44                          |   |                        | (7     | ) |   | (15.9 | ) |
| Audit                service                                   |   |     | 92     |     |   | 61                          |   |                        | 31     |   |   | 50.8 |   |
| On-line                banking expenses                        |   |     | 58     |     |   | 33                          |   |                        | 25     |   |   | 75.8 |   |
| Other                                                          |   |     | 176    |     |   | 136                         |   |                        | 40     |   |   | 29.4 |   |
|                    Total                        |   | $        | 2,862  |     | $      | 2,138                       |   | $                           | 724    |   |   | 33.9 | % |

***Income      Tax Expense.***
** **

----

**Average      Balance Sheets and Related Yields and Rates**

| **Table                12: Average Balance Tables**                                                                |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                    |   | **2007** |   | **2006** |   |
| Year                Ended March 31, (Dollars in thousands)                                                              |   | **Average****Balance** |   | **Interest****and****Dividends** |   | **Yield/****Cost** |   | **Average****Balance** |   | **Interest****and****Dividends** |   | **Yield/****Cost** |   |
| **Assets:**                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning                assets:                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Loans                                                                                 |   | $ | 58,474 |   | $ | 3,721 |   |   | 6.36 | % | $ | 36,723 |   | $ | 2,138 |   |   | 5.82 | % |
|                    Investment securities                                                                 |   |   | 18,583 |   |   | 877 |   |   | 4.72 |   |   | 24,118 |   |   | 1,111 |   |   | 4.61 |   |
|                    Other interest-earning assets                                                         |   |   | 3,671 |   |   | 168 |   |   | 4.58 |   |   | 4,888 |   |   | 140 |   |   | 2.86 |   |
|          Total                interest-earning assets                      |   |   | 80,728 |   |   | 4,766 |   |   | 5.90 |   |   | 65,729 |   |   | 3,389 |   |   | 5.16 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-earning                assets                                                                               |   |   | 9,752 |   |   |   |   |   |   |   |   | 6,150 |   |   |   |   |   |   |   |
|          Total                assets                                       |   | $ | 90,480 |   |   |   |   |   |   |   | $ | 71,879 |   |   |   |   |   |   |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                and equity:**                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                liabilities:                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Interest-bearing demand deposits                                                      |   | $ | 6,844 |   |   | 42 |   |   | .61 |   | $ | 7,956 |   |   | 40 |   |   | 0.50 |   |
|                    Savings and money market accounts                                                     |   |   | 29,795 |   |   | 732 |   |   | 2.46 |   |   | 22,103 |   |   | 288 |   |   | 1.30 |   |
|                    Certificates of deposit                                                               |   |   | 40,325 |   |   | 1,723 |   |   | 4.27 |   |   | 30,560 |   |   | 995 |   |   | 3.26 |   |
|          Total                interest-bearing deposits                    |   |   | 76,964 |   |   | 2,497 |   |   | 3.24 |   |   | 60,619 |   |   | 1,323 |   |   | 2.18 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    FHLB advances                                                                         |   |   | 658 |   |   | 37 |   |   | 5.62 |   |   | — |   |   | — |   |   | — |   |
|          Total                interest-bearing liabilities                 |   |   | 77,622 |   |   | 2,534 |   |   | 3.26 |   |   | 60,619 |   |   | 1,323 |   |   | 2.18 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing                demand deposits                                                                      |   |   | 3,141 |   |   |   |   |   |   |   |   | 1,910 |   |   |   |   |   |   |   |
| Other                noninterest-bearing liabilities                                                                    |   |   | 1,243 |   |   |   |   |   |   |   |   | 1,239 |   |   |   |   |   |   |   |
|          Total                liabilities                                  |   |   | 82,006 |   |   |   |   |   |   |   |   | 63,768 |   |   |   |   |   |   |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Retained                earnings                                                                                        |   |   | 8,474 |   |   |   |   |   |   |   |   | 8,111 |   |   |   |   |   |   |   |
|          Total                liabilities and retained earnings            |   | $ | 90,480 |   |   |   |   |   |   |   | $ | 71,879 |   |   |   |   |   |   |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income                                                                                      |   |   |   |   | $ | 2,232 |   |   |   |   |   |   |   | $ | 2,066 |   |   |   |   |
| Interest                rate spread                                                                                     |   |   |   |   |   |   |   |   | 2.64 |   |   |   |   |   |   |   |   | 2.98 |   |
| Net                interest margin                                                                                      |   |   |   |   |   |   |   |   | 2.76 |   |   |   |   |   |   |   |   | 3.14 |   |
| Average                interest-earning assets to                   average interest-bearing liabilities |   |   | 104.00 | % |   |   |   |   |   |   |   | 108.43 | % |   |   |   |   |   |   |

----

***Rate/Volume      Analysis***
**.**

| **Table                13: Net Interest Income - Changes Due to Rate and                Volume**  |   |       |   |
|--------------------------------------------------------------------------------------------------------|--------|------------|--------|
| 2007                Compared to 2006 (Dollars in thousands)                                            |   | **Volume** |   | **Rate** |   | **Net** |   |
| Interest                income:                                                                        |   |       |   |   |   |   |   |   |   |   |
|                    Loans receivable                                                     |   | $          | 1,266  |   | $ | 317 |   | $ | 1,583 |   |
|                    Investment securities                                                |   |       | (254   | ) |   | 20 |   |   | (234 | ) |
|                    Other interest-earning assets                                        |   |       | (35    | ) |   | 63 |   |   | 28 |   |
|                             Total          |   |       | 977    |   |   | 400 |   |   | 1,377 |   |
| Interest                expense:                                                                       |   |       |   |   |   |   |   |   |   |   |
|                    Deposits                                                             |   |       | 358    |   |   | 816 |   |   | 1,174 |   |
|                    FHLB advances                                                        |   |       | 37     |   |   | - |   |   | 37 |   |
|                             Total          |   |       | 395    |   |   | 816 |   |   | 1,211 |   |
| Increase                (decrease) in net interest income                                              |   | $          | 582    |   | $ | (416 | ) | $ | 166 |   |

**Risk      Management**

***Overview***
**.**

***Credit      Risk Management***
**.**

*Analysis      of Nonperforming and Classified Assets*

----

| **Table                14: Nonperforming Assets**                                                                                         |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| March                31, (Dollars in thousands)                                                                                                |   | **2007** |   | **2006** |   | **2005** |   |
| Nonaccrual                loans:                                                                                                               |   |   |   |   |   |   |   |   |   |   |
|                    Residential real estate                                                                                      |   | $ | — |   | $ | — |   | $ | — |   |
|                    Commercial and multi-family real estate                                                                      |   |   | — |   |   | — |   |   | — |   |
|                    Construction                                                                                                 |   |   | — |   |   | — |   |   | — |   |
|                    Commercial                                                                                                   |   |   | — |   |   | — |   |   | — |   |
|                    Consumer                                                                                                     |   |   | — |   |   | — |   |   | — |   |
|                             Total                                                  |   |   | — |   |   | — |   |   | — |   |
|                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| Accruing                loans past due 90 days or more:                                                                                        |   |   |   |   |   |   |   |   |   |   |
|                    Residential real estate                                                                                      |   |   | 326 |   |   | 439 |   |   | 76 |   |
|                    Commercial and multi-family real estate                                                                      |   |   | 238 |   |   | — |   |   | — |   |
|                    Construction                                                                                                 |   |   | — |   |   | — |   |   | — |   |
|                    Commercial                                                                                                   |   |   | — |   |   | — |   |   | — |   |
|                    Consumer                                                                                                     |   |   | — |   |   | — |   |   | — |   |
|                             Total                                                  |   |   | 564 |   |   | 439 |   |   | 76 |   |
|                             Total of nonaccrual and 90 days or more past due loans |   |   | 564 |   |   | 439 |   |   | 76 |   |
|                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| Real                estate owned                                                                                                               |   |   | — |   |   | — |   |   | — |   |
| Other                nonperforming assets                                                                                                      |   |   | — |   |   | — |   |   | — |   |
|                             Total nonperforming assets                             |   |   | 564 |   |   | 439 |   |   | 76 |   |
| Troubled                debt restructurings                                                                                                    |   |   | — |   |   | — |   |   | — |   |
| Troubled                debt restructurings and total nonperforming assets                                                                     |   | $ | 564 |   | $ | 439 |   | $ | 76 |   |
|                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| Total                nonperforming loans to total loans                                                                                        |   |   | 0.72 | % |   | 1.05 | % |   | 0.22 | % |
| Total                nonperforming loans to total assets                                                                                       |   |   | 0.51 |   |   | 0.58 |   |   | 0.11 |   |
| Total                nonperforming assets and troubled debt restructurings to total                assets                                      |   |   | 0.51 |   |   | 0.58 |   |   | 0.11 |   |

| **Table                15: Classified Assets**       |   |
|-----------------------------------------------------------|--------|
| March                31, (Dollars in thousands)           |   | **2007** |   | **2006** |   | **2005** |   |
| Special                mention assets                     |   | $ | 2,287 |   | $ | 656 |   | $ | 85 |   |
| Substandard                assets                         |   |   | 3,201 |   |   | 395 |   |   | 83 |   |
| Doubtful                assets                            |   |   | 300 |   |   | — |   |   | — |   |
| Loss                assets                                |   |   | - |   |   | — |   |   | — |   |
|                    Total classified assets |   | $ | 5,788 |   | $ | 1,051 |   | $ | 168 |   |

----

*Analysis      and Determination of the Allowance for Loan Losses*

----

| **Table                16: Allocation of Allowance of Loan Losses**  |   |
|---------------------------------------------------------------------------|--------|
|                                                                      |   | **2007** |   | **2006** |   | **2005** |   |
| March                31, (Dollars in thousands)                           |   | **Amount** |   | **%                of****Loans                in****Category****to                Total****Loans** |   | **Amount** |   | **%                of****Loans                in****Category****to                Total****Loans** |   | **Amount** |   | **%                of****Loans                in****Category****to                Total****Loans** |   |
| Residential                real estate                                    |   | $ | 65 |   |   | 30.9 | % | $ | 75 |   |   | 41.0 | % | $ | 20 |   |   | 55.4 | % |
| Commercial                and multi-family real estate                    |   |   | 200 |   |   | 16.3 |   |   | 20 |   |   | 13.5 |   |   | 12 |   |   | 9.6 |   |
| Construction                                                              |   |   | — |   |   | 2.6 |   |   | — |   |   | 0.5 |   |   | — |   |   | 0.7 |   |
| Commercial                                                                |   |   | 132 |   |   | 19.4 |   |   | 15 |   |   | 10.0 |   |   | 4 |   |   | 3.1 |   |
| Consumer                                                                  |   |   | 78 |   |   | 30.8 |   |   | 46 |   |   | 35.0 |   |   | 40 |   |   | 31.2 |   |
| Unallocated                                                               |   |   | 17 |   |   | — |   |   | 81 |   |   | — |   |   | 151 |   |   | — |   |
|                    Total allowance for loan losses         |   | $ | 492 |   |   | 100.0 | % | $ | 237 |   |   | 100.0 | % | $ | 227 |   |   | 100.0 | % |

| **Table                17: Analysis of Loan Loss Experience**                                                           |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|
| Year                Ended March 31, (Dollars in thousands)                                                                   |   | **2007** |   | **2006** |   | **2005** |   |
| Allowance                at beginning of period                                                                              |   | $ | 237 |   | $ | 227 |   | $ | 223 |   |
|                                                                                                                         |   |   |   |   |   |   |   |   |   |   |
| Provision                for loan losses                                                                                     |   |   | 255 |   |   | 10 |   |   | 13 |   |
| Charge                offs:                                                                                                  |   |   |   |   |   |   |   |   |   |   |
|                    Residential real estate loans                                                              |   |   | — |   |   | — |   |   | 6 |   |
|                    Commercial and multi-family real estate loans                                              |   |   | — |   |   | — |   |   | — |   |
|                    Construction loans                                                                         |   |   | — |   |   | — |   |   | — |   |
|                    Commercial loans                                                                           |   |   | — |   |   | — |   |   | — |   |
|                    Consumer loans                                                                             |   |   | — |   |   | — |   |   | 3 |   |
|                             Total charge-offs                    |   |   | — |   |   | — |   |   | 9 |   |
|                                                                                                                         |   |   |   |   |   |   |   |   |   |   |
| Recoveries                                                                                                                   |   |   | — |   |   | — |   |   | — |   |
| Net                charge-offs                                                                                               |   |   | — |   |   | — |   |   | 9 |   |
|                                                                                                                         |   |   |   |   |   |   |   |   |   |   |
|                       Allowance at end of period                                               |   | $ | 492 |   | $ | 237 |   | $ | 227 |   |
|                                                                                                                         |   |   |   |   |   |   |   |   |   |   |
| Allowance                to nonperforming loans                                                                              |   |   | 87.23 | % |   | 53.98 | % |   | 298.68 | % |
| Allowance                to total loans outstanding at the end of the period                                            |   |   | 0.63 |   |   | 0.57 |   |   | 0.65 |   |
| Net                charge-offs (recoveries) to average loans outstanding                    during the period |   |   | — |   |   | — |   |   | 0.02 |   |

***Interest      Rate Risk Management.***

----

| **Table                18: NPV Analysis**                                      |   |
|-------------------------------------------------------------------------------------|--------|
|                                                                                |   | **Net                Portfolio Value****(Dollars                in thousands)** |   | **Net                Portfolio Value as % of****Portfolio                Value of Assets** |   |
| **Basis                Point (“bp”)****Change                in Rates** |   | **$                Amount** |   | **$                Change** |   | **%                Change** |   | **NPV                Ratio** |   | **Change** |   |
|                                                                                |   |   |   |   |   |   |   |   |   |   |   |
| 300                                                                                 |   | $ | 13,011 |   | $ | (2,610 | ) |   | (17 | )% |   | 11.73 | % |   | (187)                bp |   |
| 200                                                                                 |   |   | 13,912 |   |   | (1,710 | ) |   | (11 | )% |   | 12.39 | % |   | (120)                bp |   |
| 100                                                                                 |   |   | 14,761 |   |   | (861 | ) |   | (6 | )% |   | 12.99 | % |   | (60)                bp |   |
| 0                                                                                   |   |   | 15,622 |   |   |   |   |   |   |   |   | 13.59 | % |   |   |   |
| (100)                                                                               |   |   | 16,262 |   |   | 640 |   |   | 4 | % |   | 14.01 | % |   | 42                bp |   |
| (200)                                                                               |   |   | 16,657 |   |   | 1,035 |   |   | 7 | % |   | 14.24 | % |   | 65                bp |   |

***Liquidity      Management***
**.**

----

***Capital      Management.***
*Regulation      and Supervision—Regulation of Federal Savings Associations—Capital      Requirements,*

----

***Off-Balance      Sheet Arrangements***
**.**

**ITEM      7.**
**FINANCIAL      STATEMENTS**

**ITEM      8.**
**CHANGES      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL      DISCLOSURE**

**ITEM      8A.**
**CONTROLS      AND PROCEDURES **

**ITEM      8B.**
**OTHER      INFORMATION **

----

**PART      III**

| **ITEM              9.** | **DIRECTORS,                EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS AND CORPORATE                GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE                ACT** |
|--------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Directors**

*“Proposal      1 - Election of Directors”*

**Executive      Officers and Key Employees**

| **Name**                             |   | **Position**                                                                    |
|--------------------------------------|--------|---------------------------------------------------------------------------------|
| Robert                M. Notigan     |   | President                and Chief Executive Officer                            |
| Douglas                R. Allen, Jr. |   | Senior                Vice-President and Chief Financial                Officer |

*Robert      M. Notigan*

| **Name**                             |   | **Position**                                                                        |
|--------------------------------------|--------|-------------------------------------------------------------------------------------|
| Robert                M. Notigan     |   | President                and Chief Executive Officer                                |
| Douglas                R. Allen, Jr. |   | Senior                Vice President and Chief Financial Officer                    |
| Ronald                E. Casperite   |   | Vice                President - Retail Lending and Secretary                        |
| Robert                A. Miller      |   | Vice                President - Deposit Operations                                  |
| Nicholas                Consolo      |   | Vice                President - Commercial Lending                                  |
| Thomas                D. Schlett     |   | Vice                President - Business Development, Branch                Manager |

*Douglas      R. Allen, Jr.*

*Ronald      E. Casperite*

----

*Robert      A. Miller*

*Nicholas      Consolo*

*Thomas      D. Schlett*

**Compliance      with Section 16(a) of the Exchange Act**

*“Compliance      with Section 16(a) of the Exchange Act” *

**Disclosure      of Code of Ethics **

**Corporate      Governance**

*“Corporate      Governance - Meetings and Committees of the Board of Directors”*

**ITEM      10.      **
**EXECUTIVE      COMPENSATION**

*“Executive      Compensation”*
*“Corporate      Governance - Directors’ Compensation”*

| **ITEM              11.** | **SECURITY                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED                STOCKHOLDER MATTERS** |
|---------------------------|----------------------------------------------------------------------------------------------------------------------------------|

|   | **(a)** | **Security                Ownership of Certain                Owners** |
|--------|---------|------------------------------------------------------------------------|

*“Stock      Ownership”*

|   | **(b)** | **Security                Ownership of Management** |
|--------|---------|-----------------------------------------------------|

*“Stock      Ownership”*

|   | **(c)** | **Changes                in Control** |
|--------|---------|---------------------------------------|

----

|   | **(d)** | **Equity                Compensation** |
|--------|---------|----------------------------------------|

**ITEM      12.**
**CERTAIN      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR      INDEPENDENCE**

**Certain      Relationships and Related Transactions**

*“Transactions      with Related Persons”*

**Corporate      Governance**

*“Proposal      1 - Election of Directors”*

**ITEM      13.**
**EXHIBITS**

| 3.1 | Charter                of Delanco Bancorp, Inc.                (Incorporated herein by reference to Exhibit 3.1 to the Registration                Statement on Form SB-2 (File No. 333-139339))  |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.2 | Bylaws                of Delanco Bancorp, Inc.                (Incorporated herein by reference to Exhibit 3.2 to the Registration                Statement on Form SB-2 (File No.                333-139339)) |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.0 | Stock                Certificate of Delanco Bancorp, Inc.                (Incorporated herein by reference to Exhibit 4.1 to the Registration                Statement on Form SB-2 (File No.                333-139339)) |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.1 | Employment                Agreement between Delanco Bancorp, Inc. and Robert M.                Notigan* |
|------|---------------------------------------------------------------------------------------------------------|

| 10.2 | Employment                Agreement between Delanco Federal Savings Bank and Robert M                Notigan* |
|------|---------------------------------------------------------------------------------------------------------------|

| 10.3 | Employment                Agreement between Delanco Bancorp, Inc. and Douglas R. Allen,                Jr.* |
|------|-------------------------------------------------------------------------------------------------------------|

| 10.4 | Employment                Agreement between Delanco Federal Savings Bank and Douglas R. Allen,                Jr.* |
|------|--------------------------------------------------------------------------------------------------------------------|

| 10.5 | Delanco                Federal Savings Bank Employee Severance Compensation                Plan* |
|------|--------------------------------------------------------------------------------------------------|

| 10.6 | Delanco                Federal Savings Bank Directors Retirement Plan* (Incorporated                herein by reference to Exhibit 10.5 to the Registration Statement                on Form                SB-2 (File No. 333-139339)) |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.7 | Non-Qualified                Retirement Program Selective Incentive Plan for John W.                Seiber* (Incorporated                herein by reference to Exhibit 10.6 to the Registration Statement                on Form                SB-2 (File No. 333-139339)) |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 31.1 | Rule                13a-14(a)/15d-14(a) Certification of Chief Executive                Officer |
|------|-------------------------------------------------------------------------------------------------|

| 31.2 | Rule                13a-14(a)/15d-14(a) Certification of Chief Financial                Officer |
|------|-------------------------------------------------------------------------------------------------|

| 32.0 | Section                1350 Certification |
|------|-------------------------------------------|

----

| * | Management                contract or compensatory plan contract or arrangement filed pursuant                to                Item 601(b)(10)(ii)(A) of Regulation                S-B. |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ITEM      14.**
**PRINCIPAL      ACCOUNTANT FEES AND SERVICES**

*“Proposal      2 *
*-*
*      Ratification of Independent Registered Public Accounting Firm *
*-*
* *
*Audit      and Non-Audit Fees”*

----

**SIGNATURES**

|                              | DELANCO                BANCORP, INC.                                                                                                                                                                                                                               |
|-----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                              |                                                                                                                                                                                                                                                               |
|                              |                                                                                                                                                                                                                                                               |
| Date:                July 2, 2007 | By:  /s/                Robert M.                Notigan                                 |
|                              |                        Robert M. Notigan                                                                                                                                                                                        |
|                              |                        President and Chief Executive                Officer                                                                                                                                                     |

| Name                                                                                                                                                                                                                        |   | Title                                                                                                                                  |   | Date                        |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|
| /s/                Robert M.                Notigan                              Robert                M. Notigan                                     |   | President                and Chief Executive Officer (principal executive officer)                                                          |   | July                2, 2007 |
|                                                                                                                                                                                                                        |   |                                                                                                                                        |   |                        |
| /s/                Douglas R. Allen,                Jr.                           Douglas                R. Allen, Jr.                                               |   | Senior                Vice President and Chief Financial Officer (principal accounting                and                financial officer) |   | July                9, 2007 |
|                                                                                                                                                                                                                        |   |                                                                                                                                        |   |                        |
| /s/                Thomas J. Coleman, III                       Thomas                J. Coleman, III                                                                                    |   | Director                                                                                                                                    |   | July                2, 2007 |
|                                                                                                                                                                                                                        |   |                                                                                                                                        |   |                        |
| /s/                Robert H. Jenkins,                Jr.           Robert                H. Jenkins, Jr.                                                             |   | Director                                                                                                                                    |   | July                3, 2007 |
|                                                                                                                                                                                                                        |   |                                                                                                                                        |   |                        |
| /s/                William C.                Jenkins                William                C. Jenkins                                       |   | Director                                                                                                                                    |   | July                9, 2007 |
|                                                                                                                                                                                                                        |   |                                                                                                                                        |   |                        |
| /s/                John A.                Latimer                    John                A. Latimer                     |   | Director                                                                                                                                    |   | July                9, 2007 |
|                                                                                                                                                                                                                        |   |                                                                                                                                        |   |                        |
| /s/                Donald R.                Neff                                     Donald                R. Neff |   | Director                                                                                                                                    |   | July                5, 2007 |
|                                                                                                                                                                                                                        |   |                                                                                                                                        |   |                        |
| /s/                John W.                Seiber                     John                W. Seiber                 |   | Director                                                                                                                                    |   | July                5, 2007 |
|                                                                                                                                                                                                                        |   |                                                                                                                                        |   |                        |
| /s/                James W.                Verner                                  James                W. Verner                 |   | Director                                                                                                                                    |   | July                3, 2007 |
|                                                                                                                                                                                                                        |   |                                                                                                                                        |   |                        |
| /s/                Renee C.                Vidal                      Renee                C. Vidal           |   | Director                                                                                                                                    |   | July                9, 2007 |

----

**REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

**Board      of Directors and Stockholders**

**Delanco      Bancorp, Inc. **

**615      Burlington Avenue**

**Delanco,      New Jersey 08075**

**We      have audited the accompanying consolidated statements of financial condition      of      Delanco Bancorp, Inc. and subsidiary (the “Company”) as of March 31, 2007 and      2006, and the related consolidated statements of operations, changes in      stockholders’ equity and comprehensive income (loss), and cash flows for the      years then ended. These consolidated financial statements are the responsibility      of the Company’s management. Our responsibility is to express an opinion on      these consolidated financial statements based on our      audits.**

**We      conducted our audits in accordance with the standards of the Public Company      Accounting Oversight Board (United States). Those standards require that we      plan      and perform the audit to obtain reasonable assurance about whether the      consolidated financial statements are free of material misstatement. The Company      is not required to have, nor were we engaged to perform, an audit of its      internal control over financial reporting. Our audits included consideration      of      internal control over financial reporting as a basis for designing audit      procedures that are appropriate in the circumstances, but not for the purpose      of      expressing an opinion on the effectiveness of the Company’s internal control      over financial reporting. Accordingly, we express no such opinion. An audit      also      includes examining, on a test basis, evidence supporting the amounts and      disclosures in the consolidated financial statements, assessing the accounting      principles used and significant estimates made by management, as well as      evaluating the overall financial statement presentation. We believe that our      audits provide a reasonable basis for our opinion.**

**In      our opinion, the consolidated financial statements referred to above present      fairly, in all material respects, the consolidated financial position of Delanco      Bancorp, Inc. and subsidiary as of March 31, 2007 and 2006, and the results      of      their operations and cash flows for the years then ended in conformity with      accounting principles generally accepted in the United States of      America.**

**As      discussed in note 3 to the consolidated financial statements, the Company has      adopted Financial Accounting Standards Board Statement (FASB) No. 158,      Employers’ Accounting for Defined Benefit Pension and other Postretirement Plans      - an amendment of FASB statements No. 87, 88, 106 and 132(R) in      2007.**

|                                                 |   |   |   |
|------------------------------------------------------|--------|--------|--------|
| **/s/              Connolly, Grady & Cha, P.C.** |   |   |        |
| **Certified Public              Accountants**        |   |   |        |
| **Philadelphia,                Pennsylvania**        |   |   |        |

**June      22, 2007**

----

**DELANCO        BANCORP, INC. AND SUBSIDIARY**

**CONSOLIDATED        STATEMENTS OF FINANCIAL CONDITION**

**ASSETS**

|                                                                                                                                                             |   | **March                  31,** |            |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|-----------------|
|                                                                                                                                                             |   | **2007**                       |            | **2006** |   |
| **Cash                  and cash equivalents**                                                                                                                   |   |                           |            |   |   |
| **Cash                  and due from banks**                                                                                                                     |   | **$**                          | **271,007**     |   | **$** | **312,943** |   |
| **Interest-bearing                  deposits**                                                                                                                   |   |                           | **8,405,373**   |   |   | **5,240,115** |   |
| **Total                  cash and cash equivalents**                                                                                                             |   |                           | **8,676,380**   |   |   | **5,553,058** |   |
| **Investment                  securities**                                                                                                                       |   |                           |                 |   |   |  |   |
| **Securities                  held-to-maturity**                                                                                                                 |   |                           | **15,822,529**  |   |   | **20,167,613** |   |
| **Securities                  available-for-sale**                                                                                                               |   |                           | **252,647**     |   |   | **674,627** |   |
| **Total                  investment securities**                                                                                                                 |   |                           | **16,075,176**  |   |   | **20,842,240** |   |
| **Loans,                  net of allowance for loan losses of $492,448 and $237,448 at March                  31,                  2007 and 2006, respectively** |   |                           | **76,497,739**  |   |   | **41,368,965** |   |
| **Accrued                  interest receivable**                                                                                                                 |   |                           | **425,872**     |   |   | **286,050** |   |
| **Premises                  and equipment, net**                                                                                                                 |   |                           | **8,422,457**   |   |   | **6,875,521** |   |
| **Investment                  required by law-stock in Federal Home Loan Bank, at                  cost**                                                        |   |                           | **102,700**     |   |   | **105,700** |   |
| **Deferred                  income taxes**                                                                                                                       |   |                           | **240,100**     |   |   |  |   |
| **Bank-owned                  life insurance**                                                                                                                   |   |                           | **124,412**     |   |   | **113,990** |   |
| **Pre-paid                  income taxes**                                                                                                                       |   |                           | **231,230**     |   |   | **114,480** |   |
| **Other                  assets**                                                                                                                                |   |                           | **265,204**     |   |   | **220,765** |   |
| **TOTAL                  ASSETS**                                                                                                                                |   | **$**                          | **111,061,270** |   | **$** | **75,480,769** |   |

**(Continued)**

----

**DELANCO        BANCORP, INC. AND SUBSIDIARY**

**CONSOLIDATED        STATEMENTS OF FINANCIAL CONDITION**

**LIABILITIES        AND STOCKHOLDERS’ EQUITY**

|                                                                                                                                                                                                                                   |   | **March                    31,** |            |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|-----------------|
|                                                                                                                                                                                                                                   |   | **2007**                         |            | **2006** |   |
| **LIABILITIES**                                                                                                                                                                                                                        |   |                             |            |   |   |
| **Deposits**                                                                                                                                                                                                                           |   |                             |            |   |   |
| **Non-interest                    bearing deposits**                                                                                                                                                                                   |   | **$**                            | **3,372,058**   |   | **$** | **2,450,557** |   |
| **Interest-bearing                    deposits**                                                                                                                                                                                       |   |                             | **92,617,217**  |   |   | **64,081,772** |   |
| **Total                    deposits**                                                                                                                                                                                                  |   |                             | **95,989,275**  |   |   | **66,532,329** |   |
| **Accrued                    interest payable**                                                                                                                                                                                        |   |                             | **349,178**     |   |   | **47,529** |   |
| **Advance                    payments by borrowers for taxes and insurance**                                                                                                                                                           |   |                             | **260,262**     |   |   | **226,639** |   |
| **Deferred                    income taxes**                                                                                                                                                                                           |   |                             |                 |   |   | **66,800** |   |
| **Other                    liabilities**                                                                                                                                                                                               |   |                             | **640,206**     |   |   | **385,785** |   |
| **Total                    liabilities**                                                                                                                                                                                               |   |                             | **97,238,921**  |   |   | **67,259,082** |   |
|                                                                                                                                                                                                                                   |   |                             |            |   |   |   |   |
| **COMMITMENTS                    AND CONTINGENCIES (NOTE 18)**                                                                                                                                                                         |   |                             |                 |   |   |  |   |
|                                                                                                                                                                                                                                   |   |                             |            |   |   |   |   |
| **STOCKHOLDERS’                    EQUITY**                                                                                                                                                                                      |   |                             |                 |   |   |  |   |
|                                                                                                                                                                                                                                   |   |                             |                 |   |   |  |   |
| **Preferred                    stock, $.01 par value, 3,000,000 shares                    authorized;**                                                                                                                                |   |                             |                 |   |   |  |   |
| **None                    issued**                                                                                                                                                                                                     |   |                             |                 |   |   |  |   |
|                                                                                                                                                                                                                                   |   |                             |                 |   |   |  |   |
| **Common                    stock, $.01 par value, 7,000,000 shares authorized; 1,634,725                    and 100                    shares issued and outstanding as of March 31, 2007 and 2006,                    respectively** |   | **$**                            | **16,347**      |   | **$** | **1** |   |
|                                                                                                                                                                                                                                   |   |                             |                 |   |   |  |   |
| **Additional                    paid-in capital**                                                                                                                                                                                      |   |                             | **6,688,921**   |   |   |  |   |
|                                                                                                                                                                                                                                   |   |                             |                 |   |   |  |   |
| **Retained                    earnings, substantially restricted**                                                                                                                                                                     |   |                             | **7,797,552**   |   |   | **7,952,763** |   |
|                                                                                                                                                                                                                                   |   |                             |                 |   |   |  |   |
| **Unearned                    employee stock ownership plan**                                                                                                                                                                          |   |                             | **(640,810**    | **)** |   |  |   |
| **Accumulated                    other comprehensive income (loss)**                                                                                                                                                                   |   |                             | **(39,661**     | **)** |   | **268,923** |   |
| **Total                    stockholders’ equity**                                                                                                                                                                                |   |                             | **13,822,349**  |   |   | **8,221,687** |   |
| **TOTAL                    LIABILITIES**                                                                                                                                                                                               |   |                             |                 |   |   |  |   |
| **AND                    STOCKHOLDERS’ EQUITY**                                                                                                                                                                                  |   | **$**                            | **111,061,270** |   | **$** | **75,480,769** |   |

**See        notes to consolidated financial statements.**

----

**DELANCO        BANCORP, INC. AND SUBSIDIARY**

**CONSOLIDATED        STATEMENTS OF OPERATIONS**

|                                                                     |   | **Years                    EndedMarch 31,** |                              |
|--------------------------------------------------------------------------|--------|---------------------------------------------|-----------------------------------|
|                                                                     |   | **2007**                                    |                              | **2006** |   |
|                                                                     |   |                                        |                              |   |   |
| **INTEREST                    INCOME**                                   |   |                                        |                              |   |   |
| **Loans**                                                                |   | **$**                                       | **3,721,284**                     |   | **$** | **2,137,927** |   |
| **Investment                    securities**                             |   |                                        | **1,044,559**                     |   |   | **1,251,369** |   |
| **Total                    interest income**                             |   |                                        | **4,765,843**                     |   |   | **3,389,296** |   |
|                                                                     |   |                                        |                                   |   |   |  |   |
| **INTEREST                    EXPENSE**                                  |   |                                        |                                   |   |   |  |   |
| **Interest-bearing                    checking accounts**                |   |                                        | **41,934**                        |   |   | **39,909** |   |
| **Passbook                    and money market accounts**                |   |                                        | **732,626**                       |   |   | **287,773** |   |
| **Certificates                    of deposits**                          |   |                                        | **1,722,819**                     |   |   | **994,860** |   |
| **Advances                    from Federal Home Loan Bank**              |   |                                        | **36,965**                        |   |   | **503** |   |
| **Total                    interest expense**                            |   |                                        | **2,534,344**                     |   |   | **1,323,045** |   |
|                                                                     |   |                                        |                                   |   |   |  |   |
| **Net                    interest income**                               |   |                                        | **2,231,499**                     |   |   | **2,066,251** |   |
|                                                                     |   |                                        |                                   |   |   |  |   |
| **Provision                    for loan losses**                         |   |                                        | **255,000**                       |   |   | **10,000** |   |
| **Net                    interest income after**                         |   |                                        |                                   |   |   |  |   |
| **provision                    for loan losses**                         |   |                                        | **1,976,499**                     |   |   | **2,056,251** |   |
|                                                                     |   |                                        |                                   |   |   |  |   |
| **NONINTEREST                    INCOME**                                |   |                                        |                                   |   |   |  |   |
| **Net                    gain on sale of non-marketable**                |   |                                        |                                   |   |   |  |   |
| **securities**                                                           |   |                                        | **18,492**                        |   |   | **345,166** |   |
| **Net                    gain (loss) on sale of securities**             |   |                                        |                                   |   |   |  |   |
| **available-for-sale**                                                   |   |                                        | **450,737**                       |   |   | **(19,102** | **)** |
| **Service                    charges**                                   |   |                                        | **85,262**                        |   |   | **96,244** |   |
| **Income                    from bank owned life insurance**             |   |                                        | **10,422**                        |   |   | **10,270** |   |
| **Rental                    income**                                     |   |                                        | **11,622**                        |   |   |   |   |
| **Other**                                                                |   |                                        | **45,221**                        |   |   | **40,906** |   |
| **Total                    noninterest income**                          |   |                                        | **621,756**                       |   |   | **473,484** |   |
|                                                                     |   |                                        |                                   |   |   |  |   |
| **NONINTEREST                    EXPENSE**                               |   |                                        |                                   |   |   |  |   |
| **Salaries                    and employee benefits**                    |   |                                        | **1,602,621**                     |   |   | **1,305,277** |   |
| **Advertising**                                                          |   |                                        | **49,750**                        |   |   | **46,572** |   |
| **Office                    supplies, telephone and postage**            |   |                                        | **114,106**                       |   |   | **56,810** |   |
| **Net                    occupancy expense**                             |   |                                        | **436,829**                       |   |   | **202,257** |   |
| **Federal                    insurance premiums**                        |   |                                        | **8,445**                         |   |   | **8,378** |   |
| **Data                    processing expenses**                          |   |                                        | **135,479**                       |   |   | **99,324** |   |
| **MAC                    expenses**                                      |   |                                        | **53,346**                        |   |   | **49,738** |   |
| **Bank                    charges and fees**                             |   |                                        | **53,549**                        |   |   | **54,736** |   |
| **Insurance                    and surety bond premium**                 |   |                                        | **45,199**                        |   |   | **40,531** |   |
| **Dues                    and subscriptions**                            |   |                                        | **37,139**                        |   |   | **43,818** |   |
| **Professional                    fees**                                 |   |                                        | **92,176**                        |   |   | **61,444** |   |
| **On-line                    banking expense**                           |   |                                        | **58,123**                        |   |   | **33,109** |   |
| **Other**                                                                |   |                                        | **175,688**                       |   |   | **136,585** |   |
| **Total                    noninterest expense**                         |   |                                        | **2,862,450**                     |   |   | **2,138,579** |   |
|                                                                     |   |                                        |                                   |   |   |  |   |
| **INCOME                    (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)** |   |                                        | **(264,195**                      | **)** |   | **391,156** |   |
|                                                                     |   |                                        |                                   |   |   |  |   |
| **Federal                    income tax (benefit)**                      |   |                                        | **(89,962**                       | **)** |   | **52,831** |   |
| **State                    income tax (benefit)**                        |   |                                        | **(19,022**                       | **)** |   | **21,887** |   |
| **Total                    income taxes (benefit)**                      |   |                                        | **(108,984**                      | **)** |   | **74,718** |   |
|                                                                     |   |                                        |                                   |   |   |  |   |
| **NET                    INCOME (LOSS)**                                 |   |                                        | **($                    155,211** | **)** | **$** | **316,438** |   |

**See        notes to consolidated financial statements. **

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**CONSOLIDATED      STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY **

**AND      COMPREHENSIVE INCOME (LOSS)**

**YEARS      ENDED MARCH 31, 2007 AND 2006**

|                                                                                                                                                               |       | **Common                  Stock** |               | **AdditionalPaid-in** |       | **Retained**      |       | **Unearned                  Employee Stock****Ownership** |               | **Accumulated                  Other****Comprehensive****Income** |       | **Total****Stockholders’** |       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------|--------------------|-----------------------|------------|-------------------|------------|-----------------------------------------------------------|--------------------|-------------------------------------------------------------------|------------|----------------------------------|------------|
|                                                                                                                                                               |       | **Shares**                        |               | **Amount**            |       | ** Capital** |       | **Earnings**                                              |               | **Plan**                                                          |       | **(Loss)**                       |       | **Equity** |   |
| **BALANCES,                  MARCH 31, 2005**                                                                                                                      | ** ** | ** **                        | **100**            | ** **            | **$**      | **1**             | ** ** | ** **                                                |                    | ** **                                                        | **$**      | **7,636,325**                    | ** ** | ** $** | ** ** | ** ** | **$** | **252,773** | ** ** | **$** | **7,889,099** | ** ** |
| **COMPREHENSIVE                  INCOME**                                                                                                                          | ** ** | ** **                        |                    | ** **            | ** ** |                   | ** ** | ** **                                                |                    | ** **                                                        | ** ** |                                  | ** ** | ** ** |  | ** ** | ** ** |  | ** ** | ** ** |  | ** ** |
| **Net                  income**                                                                                                                                    | ** ** | ** **                        |                    | ** **            | ** ** |                   | ** ** | ** **                                                |                    | ** **                                                        | ** ** | **316,438**                      | ** ** | ** ** |  | ** ** | ** ** |  | ** ** | ** ** | **316,438** | ** ** |
| **Other                  comprehensive income, net of tax:**                                                                                                       | ** ** | ** **                        |                    | ** **            | ** ** |                   | ** ** | ** **                                                |                    | ** **                                                        | ** ** |                                  | ** ** | ** ** |  | ** ** | ** ** |  | ** ** | ** ** |  | ** ** |
| **Change                  in unrealized gain (loss) on securities available- for-sale, net                  of                  deferred income taxes of $12,328** | ** ** | ** **                        |                    | ** **            | ** ** |                   | ** ** | ** **                                                |                    | ** **                                                        | ** ** |                                  | ** ** | ** ** |  | ** ** | ** ** | **16,341** | ** ** | ** ** | **16,341** | ** ** |
| **Less:                  reclassification adjustment, net of deferred income tax benefit                  of                  ($144)**                             | ** ** | ** **                        |                    | ** **            | ** ** |                   | ** ** | ** **                                                |                    | ** **                                                        | ** ** |                                  | ** ** | ** ** |  | ** ** | ** ** | **(                  191** | **)** | ** ** | **(                  191** | **)** |
| **Total                  comprehensive income**                                                                                                                    | ** ** | ** **                        |          | ** **            | ** ** |         | ** ** | ** **                                                |     | ** **                                                        | ** ** |                        | ** ** | ** ** |    | ** ** | ** ** |     | ** ** | ** ** | **332,588** | ** ** |
| **BALANCES,                  MARCH 31, 2006**                                                                                                                      | ** ** | ** **                        | **100**            | ** **            | **$**      | **1**             | ** ** | ** $**                                               | ** **         | ** **                                                        | **$**      | **7,952,763**                    | ** ** | **$** | ** ** | ** ** | **$** | **268,923** | ** ** | **$** | **8,221,687** | ** ** |
| **COMPREHENSIVE                  INCOME**                                                                                                                          | ** ** | ** **                        |                    | ** **            | ** ** |                   | ** ** | ** **                                                |                    | ** **                                                        | ** ** |                                  | ** ** | ** ** |  | ** ** | ** ** |  | ** ** | ** ** |  | ** ** |
| **Net                  loss**                                                                                                                                      | ** ** | ** **                        |                    | ** **            | ** ** |                   | ** ** | ** **                                                |                    | ** **                                                        | ** ** | **(                  155,211**   | **)**      | ** ** |  | ** ** | ** ** |  | ** ** | ** ** | **(                  155,211** | **)** |
| **Other                  comprehensive income, net of tax:**                                                                                                       | ** ** | ** **                        |                    | ** **            | ** ** |                   | ** ** | ** **                                                |                    | ** **                                                        | ** ** |                                  | ** ** | ** ** |  | ** ** | ** ** |  | ** ** | ** ** |  | ** ** |
| **Change                  in unrealized gain (loss) on securities available- for-sale, net                  of                  deferred income taxes of $4,487**  | ** ** | ** **                        |                    | ** **            | ** ** |                   | ** ** | ** **                                                |                    | ** **                                                        | ** ** |                                  | ** ** | ** ** |  | ** ** | ** ** | **6,730** | ** ** | ** ** | **6,730** | ** ** |
| **Less:                  reclassification adjustment, net of deferred income tax benefit                  of                  ($190,937)**                         | ** ** | ** **                        |                    | ** **            | ** ** |                   | ** ** | ** **                                                |                    | ** **                                                        | ** ** |                                  | ** ** | ** ** |  | ** ** | ** ** | **(                  251,018** | **)** | ** ** | **(                  251,018** | **)** |
| **Total                  comprehensive loss**                                                                                                                      | ** ** | ** **                        |                    | ** **            | ** ** |                   | ** ** | ** **                                                |                    | ** **                                                        | ** ** |                                  | ** ** | ** ** |  | ** ** | ** ** |  | ** ** | ** ** | **(399,499** | **)** |
| **Issuance                  of common stock for cash at $0.01 per share**                                                                                          | ** ** | ** **                        | **899,099**        | ** **            | ** ** | **8,991**         | ** ** | ** **                                                |                    | ** **                                                        | ** ** |                                  | ** ** | ** ** |  | ** ** | ** ** |  | ** ** | ** ** | **8,991** | ** ** |
| **Issuance                  of common stock for cash at $10.00 per share**                                                                                         | ** ** | ** **                        | **735,626**        | ** **            | ** ** | **7,356**         | ** ** | ** **                                                | **7,348,904**      | ** **                                                        | ** ** |                                  | ** ** | ** ** |  | ** ** | ** ** |  | ** ** | ** ** | **7,356,260** | ** ** |
| **Less:                  Stock offering costs**                                                                                                                    | ** ** | ** **                        |                    | ** **            | ** ** |                   | ** ** | ** **                                                | **(659,983**       | **)**                                                             | ** ** |                                  | ** ** | ** ** |  |  | ** ** |  | ** ** | ** ** | **(                  659,983** | **)** |
| **Retirement                  of common stock**                                                                                                                    | ** ** | ** **                        | **(100**           | **)**                 | ** ** | **(1**            | **)**      | ** **                                                |                    | ** **                                                        | ** ** |                                  | ** ** | ** ** |  | ** ** | ** ** |  | ** ** | ** ** | **(1** | **)** |
| **ESOP                  contribution**                                                                                                                             | ** ** | ** **                        |                    | ** **            | ** ** |                   | ** ** | ** **                                                |                    | ** **                                                        | ** ** |                                  | ** ** | ** ** | **(                  640,810** | **)** | ** ** |  | ** ** | ** ** | **(640,810** | **)** |
| **Adjustments                  to initially apply SFAS 158**                                                                                                       | ** ** | ** **                        |     | ** **            | ** ** |         | ** ** | ** **                                                |          | ** **                                                        | ** ** |                        | ** ** | ** ** |    | ** ** | ** ** | **(                  64,296** | **)** | ** ** | **(                  64,296** | **)** |
| **BALANCES,                  MARCH 31, 2007**                                                                                                                      | ** ** | ** **                        | **1,634,725**      | ** **            | **$**      | **16,347**        | ** ** | **$**                                                     | **6,688,921**      | ** **                                                        | **$**      | **7,797,552**                    | ** ** | ** ** | **($640,810** | **)** | ** ** | **($                  39,661** | **)** | **$** | **13,822,349** |   |

**See        notes to consolidated financial statements. **

----

**DELANCO        BANCORP, INC. AND SUBSIDIARY**

**CONSOLIDATED        STATEMENTS OF CASH FLOWS**

|                                                                      |   | **Years                  Ended March 31,** |                            |
|---------------------------------------------------------------------------|--------|--------------------------------------------|---------------------------------|
|                                                                      |   | **2007**                                   |                            | **2006** |   |
|                                                                      |   |                                       |                            |   |   |
| **CASH                  FLOWS FROM OPERATING ACTIVITIES**                 |   |                                       |                            |   |   |
|                                                                      |   |                                       |                            |   |   |
| **Net                  income (loss)**                                    |   |                                       | **($                  155,211** | **)** | **$** | **316,438** |   |
| **Adjustments                  to reconcile net income (loss) to net**    |   |                                       |                                 |   |   |  |   |
| **cash                  provided by (used in) operating activities:**     |   |                                       |                                 |   |   |  |   |
| **Deferred                  income taxes**                                |   |                                       | **(184,747**                    | **)** |   | **(15,888** | **)** |
| **Depreciation**                                                          |   |                                       | **222,816**                     |   |   | **79,533** |   |
| **Discount                  accretion net of premium amortization**       |   |                                       | **(11,620**                     | **)** |   | **(11,998** | **)** |
| **Income                  from bank owned life insurance**                |   |                                       | **(10,422**                     | **)** |   | **(10,270** | **)** |
| **Provision                  for loan losses**                            |   |                                       | **255,000**                     |   |   | **10,000** |   |
| **Net                  (gain) loss on sale of securities**                |   |                                       |                                 |   |   |  |   |
| **available-for-sale**                                                    |   |                                       | **(450,737**                    | **)** |   | **19,102** |   |
| **Net                  (gain) on sale of non marketable**                 |   |                                       |                                 |   |   |  |   |
| **security**                                                              |   |                                       | **(18,492**                     | **)** |   | **(345,166** | **)** |
| **Changes                  in operating assets and liabilities**          |   |                                       |                                 |   |   |  |   |
| **(Increase)                  decrease in:**                              |   |                                       |                                 |   |   |  |   |
| **Accrued                  interest receivable**                          |   |                                       | **(139,822**                    | **)** |   | **16,531** |   |
| **Other                  assets**                                         |   |                                       | **(44,439**                     | **)** |   | **(81,291** | **)** |
| **Prepaid                  taxes**                                        |   |                                       | **(116,750**                    | **)** |   | **114,480** |   |
| **Increase                  (decrease) in:**                              |   |                                       |                                 |   |   |  |   |
| **Accrued                  interest payable**                             |   |                                       | **301,649**                     |   |   | **31,889** |   |
| **Other                  liabilities**                                    |   |                                       | **254,421**                     |   |   | **(                  47,047** | **)** |
|                                                                      |   |                                       |                                 |   |   |  |   |
| **Net                  cash provided by (used in) operating activities**  |   |                                       | **(98,354**                     | **)** |   | **76,313** |   |
|                                                                      |   |                                       |                                 |   |   |  |   |
| **CASH                  FLOWS FROM INVESTING ACTIVITIES**                 |   |                                       |                                 |   |   |  |   |
|                                                                      |   |                                       |                                 |   |   |  |   |
| **Proceeds                  from sale of non marketable securities**      |   |                                       | **18,492**                      |   |   | **360,166** |   |
| **Proceeds                  from sale of securities available-for-sale**  |   |                                       | **457,596**                     |   |   | **2,329,027** |   |
| **Purchases                  of securities available-for-sale**           |   |                                       | **(15,616**                     | **)** |   | **(195,973** | **)** |
| **Purchases                  of securities held-to-maturity**             |   |                                       |                                 |   |   |  |   |
| **Proceeds                  from maturities and principal repayments of** |   |                                       |                                 |   |   |  |   |
| **securities                  held-to-maturity**                          |   |                                       | **4,356,703**                   |   |   | **3,858,829** |   |
| **Proceeds                  from sale (purchase) of investment required** |   |                                       |                                 |   |   |  |   |
| **by                  law - stock in Federal Home Loan Bank**             |   |                                       | **3,000**                       |   |   | **316,700** |   |
| **Net                  increase in loans**                                |   |                                       | **(35,383,774**                 | **)** |   | **(                  6,605,422** | **)** |
| **Purchases                  of premises and equipment**                  |   |                                       | **(1,769,752**                  | **)** |   | **(                  4,131,333** | **)** |
|                                                                      |   |                                       |                                 |   |   |  |   |
| **Net                  cash (used in) investing activities**              |   |                                       | **(32,333,351**                 | **)** |   | **(                  4,068,006** | **)** |
| **CASH                  FLOWS FROM FINANCING ACTIVITIES**                 |   |                                       |                                 |   |   |  |   |
|                                                                      |   |                                       |                                 |   |   |  |   |
| **Net                  increase (decrease) in deposits**                  |   |                                       | **29,456,946**                  |   |   | **4,235,172** |   |
| **Net                  increase (decrease) in advance payments by**       |   |                                       |                                 |   |   |  |   |
| **borrowers                  for taxes and insurance**                    |   |                                       | **33,623**                      |   |   | **9,885** |   |
| **Net                  proceeds from issuance of common stock**           |   |                                       | **6,705,268**                   |   |   |  |   |
| **Purchase                  of ESOP shares**                              |   |                                       | **(640,810**                    | **)** |   |       |   |
|                                                                      |   |                                       |                                 |   |   |  |   |
| **Net                  cash provided by financing activities**            |   |                                       | **35,555,027**                  |   |   | **4,245,057** |   |

**(Continued)**

----

**DELANCO        BANCORP, INC. AND SUBSIDIARY**

**CONSOLIDATED        STATEMENTS OF CASH FLOWS**

|                                                                                                                    |   | **Years                    EndedMarch 31,** |          |
|-------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|---------------|
|                                                                                                                    |   | **2007**                                    |          | **2006** |   |
|                                                                                                                    |   |                                        |          |   |   |
| **NET                    INCREASE IN CASH AND CASH EQUIVALENTS**                                                        |   | **$**                                       | **3,123,322** |   | **$** | **253,364** |   |
| **Cash                    and cash equivalents, beginning of year**                                                     |   |                                        | **5,553,058** |   |   | **5,299,694** |   |
|                                                                                                                    |   |                                        |               |   |   |  |   |
| **CASH                    AND CASH EQUIVALENTS, END OF YEAR**                                                           |   | **$**                                       | **8,676,380** |   | **$** | **5,553,058** |   |
|                                                                                                                    |   |                                        |               |   |   |  |   |
| **SUPPLEMENTAL                    DISCLOSURES**                                                                         |   |                                        |               |   |   |  |   |
|                                                                                                                    |   |                                        |               |   |   |  |   |
| **Cash                    paid during the year for interest**                                                           |   | **$**                                       | **2,232,695** |   | **$** | **1,287,904** |   |
|                                                                                                                    |   |                                        |               |   |   |  |   |
| **Cash                    paid during the year for income taxes**                                                       |   | **$**                                       | **83,339**    |   | **$** | **248,903** |   |
|                                                                                                                    |   |                                        |               |   |   |  |   |
| **Loans                    transferred to foreclosed real estate during the                    year**                   |   | **$**                                       | **-0-**       |   | **$** | **-0-** |   |
|                                                                                                                    |   |                                        |               |   |   |  |   |
| **Proceeds                    from sales of foreclosed real estate financed through                    loans**          |   | **$**                                       | **-0-**       |   | **$** | **-0-** |   |
|                                                                                                                    |   |                                        |          |   |   |   |   |
| **Total                    increase (decrease) in unrealized gain on securities                    available-for-sale** |   |                                        | **($430,738** | **)** | **$** | **28,334** |   |

**See          notes to consolidated financial statements.**

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006**

**1.**
**SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES**

**Nature      of Operations**

|   | **Delanco                Bancorp, Inc. (The Company), is a federally-chartered subsidiary                holding                company whose principal activity is the ownership and management                of its                wholly-owned subsidiary, Delanco Federal Savings Bank (The Bank),                and its                wholly-owned inactive subsidiary, Delanco Financial Services Corporation.                The Company is majority owned by Delanco MHC, a federally chartered                mutual                holding Company. Delanco MHC has virtually no operations or assets                other                than an investment in the Company, and is not included in these financial                statements. The Bank provides a variety of financial services to                individual and business customers located primarily in Southern New                Jersey                and Southeastern Pennsylvania. The Bank’s primary source of revenue is                from single-family residential and commercial loans. The Bank is                subject                to regulation by the Office of Thrift Supervision and the Federal                Deposit                Insurance Corporation.** |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **On                March 30, 2007, the Company completed its initial public offering.                A total                of 735,626 shares were sold at a price of $10.00 per share, including                64,081 shares that were purchased by the Company’s Employee Stock                Ownership Plan. In connection with the offering, the Company sold                899,099                shares to Delanco MHC at $0.01 per share. Net proceeds of the offering                were $6,705,268.** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Basis      of Consolidation**

**The      consolidated financial statements of Delanco Bancorp, Inc. include the accounts      of Delanco Federal Savings Bank, and its subsidiary, Delanco Financial Services      Corporation. All intercompany accounts and transactions have been eliminated      in      consolidation.**

|   | **Use                of Estimates** |
|--------|-------------------------------------|

|   | **The                preparation of financial statements in conformity with generally                accepted                accounting principals requires management to make estimates and                assumptions that affect the reported amounts of assets and liabilities                and                disclosure of contingent assets and liabilities at the date of the                financial statements and the reported amounts of revenues and expenses                during the reporting period. Actual results could differ from those                estimates.** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Material                estimates that are particularly susceptible to significant change                relate                to the determination of the allowance for losses on loans and the                valuation of foreclosed real estate. In connection with the determination                of the estimated losses on loans and foreclosed real estate, management                obtains independent appraisals for significant                properties.** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **A                majority of the Bank’s loan portfolio consist of single-family residential                and commercial loans in Southern New Jersey and Southeastern Pennsylvania.                Accordingly, the ultimate collectibility of a substantial portion                of the                Bank’s loan portfolio and the recovery of a substantial portion of the                carrying amount of foreclosed real estate are susceptible to changes                in                local market conditions.** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **While                management uses available information to recognize losses on loans                and                foreclosed real estate, further reductions in the carrying amounts                of                loans and foreclosed assets may be necessary based on changes in                local                economic conditions. In addition, regulatory agencies, as an integral                part                of their examination process, periodically review the estimated losses                on                loans and foreclosed real estate. Such agencies may require the Bank                to                recognize additional losses based on their judgments about information                available to them at the time of their examination. Because of these                factors, it is reasonably possible that the estimated losses on loans                and                foreclosed real estate may change materially in the near term. However,                the amount of the change that is reasonably possible cannot be                estimated.** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006**

| **1.** | **SUMMARY                OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**  |
|--------|---------------------------------------------------------------------------------|

|   | **Investment                Securities**** ** |
|--------|----------------------------------------------------|

|   | **Securities                Held-to-Maturity****:                Securities that management has the positive intent and ability to                hold to                maturity are reported at cost, adjusted for amortization of premiums                and                accretion of discounts that are recognized in interest income using                the                interest method over the period to maturity. Mortgage-backed securities                represent participating interests in pools of long-term first mortgage                loans originated and serviced by issuers of the securities.                Mortgage-backed securities are carried at unpaid principal balances,                adjusted for unamortized premiums and unearned discounts. Premiums                and                discounts are amortized using the interest method over the remaining                period to contractual maturity, adjusted for anticipated                prepayments.** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Securities                Available-for-Sale****:                Available-for-sale securities consist of investment securities not                classified as trading securities or as held-to-maturity securities.                Unrealized holding gains and losses, net of tax, on available-for-sale                securities are included in other comprehensive income. Realized gains                (losses) on available-for-sale securities are included in other income                (expense) and, when applicable, are reported as a reclassification                adjustment, net of tax, in other comprehensive income. Gains and                losses on                the sale of available-for-sale securities are determined using the                specific-identification method. The amortization of premiums and                the                accretion of discounts are recognized in interest income using the                interest method over the period of                maturity.** |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Declines                in the fair value of individual held-to-maturity and available-for-sale                securities below their cost that are other than temporary result                in                write-downs of the individual securities to their fair value. The                related                write-downs are included in earnings as realized losses. In estimating                other than temporary impairment losses, management considers (1)                the                length of time and the extent to which the fair value has been less                than                cost, (2) the financial condition and near-term prospects of the                issuer,                and (3) the intent and ability of the Bank to retain its investment                in the                issuer for a period of time sufficient to allow for any anticipated                recovery in fair value.** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Loans                and Allowance for Loan                Losses** |
|--------|-----------------------------------------------------------------------|

|   | **The                Bank grants mortgage, commercial, consumer and lines of credit loans                to                customers. A substantial portion of the loan portfolio is represented                by                mortgage and commercial loans in Southern New Jersey and Southeastern                Pennsylvania. The ability of the Bank’s debtors to honor their contracts                is dependent upon the real estate and general economic conditions                in these                areas.** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Loans                are stated at unpaid principal balances, less the allowance for loan                losses and net deferred loan fees and unearned                discounts.** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Loan                origination and commitment fees, as well as certain direct origination                costs, are deferred and amortized as a yield adjustment over the                lives of                the related loans using the interest method. Amortization of deferred                loan                fees is discontinued when a loan is placed on nonaccrual                status.** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**The      recognition of income on a loan is discontinued and previously accrued interest      is reversed, when interest or principal payments become ninety (90) days past      due unless, in the opinion of management, the outstanding interest remains      collectible. Past due status is determined based on contractual terms. Interest      is subsequently recognized only as received until the loan is returned to      accrual status. A loan is restored to accrual status when all interest and      principal payments are current and the borrower has demonstrated to management      the ability to make payments of principal and interest as scheduled. The Bank’s      practice is to charge off any loan or portion of a loan when the loan is      determined by management to be uncollectible due to the borrower’s failure to      meet repayment terms, the borrower’s deteriorating or deteriorated financial**
**condition,      the depreciation of the underlying collateral, the loan’s classification as a      loss by regulatory examiners, or for other reasons.**

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006**

**1.**
**SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**

|   | **The                allowance for loan losses is established as losses are estimated                to have                occurred through a provision for loan losses charged to earnings.                Loan                losses are charged against the allowance when management believes                the                uncollectibility of a loan balance is confirmed. Subsequent recoveries,                if                any, are credited to the                allowance.** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **The                allowance for loan losses is evaluated on a regular basis by management                and is based upon management’s periodic review of the collectibility of                the loans in light of historical experience, the nature and volume                of the                loan portfolio, adverse situations that may affect the borrower’s ability                to repay, estimated value of any underlying collateral, and prevailing                economic conditions. This evaluation is inherently subjective as                it                requires estimates that are susceptible to significant revision as                more                information becomes                available.** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **The                allowance consists of specific, general, and unallocated components.                The                specific component relates to loans that are classified as doubtful,                substandard, or special mention. For such loans that are also classified                as impaired, an allowance is established when the discounted cash                flows                (or collateral value or observable market price) of the impaired                loan is                lower than the carrying value of that loan. The general component                covers                non-classified loans and is based on historical loss experience adjusted                for qualitative factors. An unallocated component is maintained to                cover                uncertainties that could affect management’s estimate of probable losses.                The unallocated component of the allowance reflects the margin of                imprecision inherent in the underlying assumptions used in the                methodologies for estimating specific and general losses in the                portfolio.** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **A                loan is considered impaired when, based on current information and                events,                it is probable that the Bank will be unable to collect the scheduled                payments of principal or interest when due according to the contractual                terms of the loan agreement. Factors considered by management in                determining impairment include payment status, collateral value,                and the                probability of collecting scheduled principal and interest payments                when                due. Loans that experience insignificant payment delays and payment                shortfalls generally are not classified as impaired. Management determines                the significance of payment delays and payment shortfalls on a                case-by-case basis, taking into consideration all of the circumstances                surrounding the loan and the borrower, including the length of the                delay,                the reason for the delay, the borrower’s prior payment record, and the                amount of the shortfall in relation to the principal and interest                owed.                Impairment is measured on a loan-by-loan basis for commercial and                construction loans by either the present value of expected future                cash                flows discounted at the loan’s effective interest rate, the loan’s                obtainable market price, or the fair value of the collateral if the                loan                is collateral dependent.** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Large                groups of smaller balance homogeneous loans are collectively evaluated                for                impairment. Accordingly, the Bank does not separately identify individual                consumer and residential loans for impairment disclosures, unless                such                loans are the subject of a restructuring                agreement.** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Bank-Owned                Life Insurance** |
|--------|----------------------------------------------|

|   | **The                Bank owns a life insurance policy on the life of a member of the                Board of                Directors. The cash surrender value of the policy is recorded as                an asset                of the bank and changes in this value are reflected in non-interest                income. Death benefit proceeds in excess of the policy’s cash surrender                value will be recognized as income upon receipt. There are no policy                loans                offset against the cash surrender value or restrictions on the use                of the                proceeds.** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006 **

**1.**
**SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**

|   | **Premises                and Equipment** |
|--------|-------------------------------------------|

**Land      is carried at cost. Other premises and equipment are recorded at cost less      accumulated depreciation. Office buildings and improvements are depreciated      using the straight line method using useful lives ranging from 3 to 40 years.      Furniture, fixtures and equipment are depreciated using the straight line method      with useful lives ranging from 3 to 10 years. Charges for maintenance and      repairs are expensed as incurred.**

|   | **Foreclosed                Real Estate** |
|--------|-------------------------------------------|

|   | **Foreclosed                real estate includes both formally foreclosed property and in-substance                foreclosed property. In-substance foreclosed properties are those                properties for which the institution has taken physical possession,                regardless of whether formal foreclosure proceedings have taken place.** |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**At      the time of foreclosure, foreclosed real estate is recorded at the fair value      less cost to sell, which becomes the property’s new basis. Any write-downs based      on the asset’s fair value at date of acquisition are charged to the allowance      for loan losses. After foreclosure, valuations are periodically performed by      management and property held-for-sale is carried at the lower of the new cost      basis or fair value less cost to sell. **
**Impairment      losses on property to be held and used are measured as the amount by which      the      carrying amount of a property exceeds its fair value. Costs incurred in      maintaining foreclosed real estate and subsequent adjustments to the carrying      amount of the property are included in income (loss) on foreclosed real      estate.**

|   | **The                Company did not have any foreclosed real estate as of March 31, 2007                and                2006.** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------|

**Income      Taxes**

|   | **Income                taxes are provided for the tax effects of the transactions reported                in the                financial statements and consist of taxes currently due plus deferred                taxes related primarily to differences between the basis of                available-for-sale securities, allowance for loan losses, accrued                post                retirement benefits, non qualified retirement plans and accumulated                depreciation for financial and income tax reporting. The deferred                tax                assets and liabilities represent the future tax return consequences                of                those differences, which will either be taxable or deductible when                the                assets and liabilities are recovered or settled. Deferred tax assets                and                liabilities are reflected at income tax rates applicable to the period                in                which the deferred tax assets or liabilities are expected to be realized                or settled. As changes in tax laws or rates are enacted, deferred                tax                assets and liabilities are adjusted through the provision for income                taxes.** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Statements      of Cash Flows**

|   | **The                Company considers all cash and amounts due from depository institutions                and interest-bearing deposits in other banks to be cash equivalents                for                purposes of the statements of cash                flows.** |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Advertising                Costs** |
|--------|--------------------------------------|

|   | **Advertising                costs are expensed as incurred. Advertising expenses totaled $49,750                and                $46,572 for the years ended March 31, 2007 and 2006,                respectively.** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Reclassifications** |
|--------|-----------------------|

|   | **At                March 31, 2007, prepaid income taxes is presented as a separate line                item                on the consolidated statements of financial condition. Prepaid income                taxes of $114,480 as of March 31, 2006 has been reclassified from                other                assets to conform with the 2007 presentation. On the consolidated                statements of operations certain expenses were reclassified as of                March                31, 2006 to conform with the 2007 presentation. There was no impact                on net                income or stockholders’ equity for the                reclassifications.** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006 **

|   | **Earnings                Per Share** |
|--------|---------------------------------------|

**The      Company had 100 shares of common stocks issued and outstanding for the year      ending March 31, 2006 and from April 1, 2006 to March 30, 2007. On March 30,      2007, the Company issued 1,634,725 shares of common stock and cancelled 100      shares. Earnings per share is not presented on the consolidated statement of      operations because it is not meaningful. Earnings per share will be presented      in      future periods.**

**2.**
**RESTRICTIONS      ON CASH AND DUE FROM BANKS**

**The      Bank is required to maintain reserve funds in cash or on deposit with the      Federal Reserve Bank. The required reserve at March 31, 2007 and 2006 was      approximately $ -0- and $8,000, respectively.**

| **3.** | **RECENT                ACCOUNTING PRONOUNCEMENTS** |
|--------|-----------------------------------------------------|

**In      February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid      Financial Instruments,” an amendment of FASB Statements No. 133 and 140. This      Statement amends FASB Statements No. 133, “Accounting for Derivative Instruments      and Hedging Activities,” and No. 140, “Accounting for Transfers and Servicing of      Financial Assets and Extinguishments of Liabilities.” **
**This      Statement resolves issues addressed in Statement 133 Implementation Issue No.      D1, “Application of Statement 133 to Beneficial Interests in Securitized      Financial Assets.” This Statement (a) permits fair value remeasurement for any      hybrid financial instrument that contains an embedded derivative that otherwise      would require bifurcation, (b) clarifies which interest-only strips and      principal-only strips are not subject to the requirements of Statement 133,      (c)      establishes a requirement to evaluate interests in securitized financial assets      to identify interests that are freestanding derivatives or that are hybrid      financial instruments that contain an embedded derivative requiring bifurcation,      (d) clarifies that concentrations of credit risk in the form of subordination      are not embedded derivatives and (e) amends Statement 140 to eliminate the      prohibition on a qualifying special-purpose entity from holding a derivative      financial instrument that pertains to a beneficial interest other than another      derivative financial instrument. This Statement is effective for all financial      instruments acquired or issued after the beginning of an entity’s first fiscal      year that begins after September 15, 2006. Adoption of this Statement is not      expected to have a material impact on the Company’s financial      statements.**

|   | **In                March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of                Financial Assets,” an amendment of FASB Statement No. 140. This Statement                amends FASB Statement No. 140, “Accounting for Transfers and Servicing of                Financial Assets and Extinguishments of Liabilities,” with respect to the                accounting for separately recognized servicing assets and servicing                liabilities. This Statement requires an entity to recognize a servicing                asset or servicing liability each time it undertakes an obligation                to                service a financial asset by entering into a servicing contract in                certain                specified situations. This Statement requires all separately recognized                servicing assets and servicing liabilities to be initially measured                at                fair value, if practicable. This Statement permits an entity to choose                either of the following subsequent measurement methods for each class                of                separately recognized servicing assets and servicing liabilities                (a)                amortization method - amortize servicing assets or servicing liabilities                in proportion to and over the period of estimated net servicing income                or                net servicing loss and assess servicing assets or servicing liabilities                for impairment or increased obligation based on fair value at each                reporting date, (b) fair value measurement method - measure servicing                assets or servicing **liabilities                at fair value at each reporting date and report changes in fair value                in                earnings in the period in which the changes occur. This Statement                requires                separate presentation of servicing assets and servicing liabilities                subsequently measured at fair value in the statement of financial                position                and additional disclosures for all separately recognized servicing                assets                and servicing liabilities.** **This                Statement is effective as of the beginning of an entity’s first fiscal                year that begins after September 15, 2006. The adoption of this Statement                is not expected to have a material impact on the Company’s financial                statements.**** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006 **

| **3.** | **RECENT                ACCOUNTING PRONOUNCEMENTS                (Continued)** |
|--------|--------------------------------------------------------------------------------|

|   | **In                September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.”                This Statement defines fair value, establishes a framework for measuring                fair value in generally accepted accounting principles, and expands                disclosures about fair value measurements. This Statement applies                under                other accounting pronouncements that require or permit fair value                measurements, the Board having previously concluded in those accounting                pronouncements that fair value is the relevant measurement attribute.                Accordingly, this Statement does not require any new fair value                measurements. However, for some entities, the application of this                Statement will change current practice. This Statement is effective                for                financial statements issued for fiscal years beginning after November                15,                2007, and interim periods within those fiscal years. The adoption                of this                Statement is not expected to have a material impact on the Company’s                financial statements.** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **In                September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for                Deferred Benefit Pension and Other Postretirement Plans,” an amendment of                FASB Statements No. 87, 88, 106 and 132(R). This Statement improves                financial reporting by requiring an employer to recognize the overfunded                or underfunded status of a defined benefit postretirement plan (other                than                a multiemployer plan) as an asset or liability in its statement of                financial position and to recognize changes in that funded status                in the                year in which the changes occur through comprehensive income of a                business                entity or changes in unrestricted net assets of a not-for-profit                organization. This Statement also improves financial reporting by                requiring an employer to measure the funded status of a plan as of                the                date of its year-end statement of financial position, with limited                exceptions. An employer with publicly traded equity securities is                required                to initially recognize the funded status of a defined benefit                postretirement plan and to provide the required disclosures as of                the end                of the fiscal year ending after December 15, 2006. An employer without                publicly traded equity securities is required to recognize the funded                status of a defined benefit postretirement plan and to provide the                required disclosures as of the end of the fiscal year ending after                June                15, 2007. The requirement to measure plan assets and benefit obligations                as of the date of the employer’s fiscal year-end statement of financial                position is effective for fiscal years ending after December 15,                2008. The                impact on the Company’s consolidated financial statement was to recognize                and record a liability of $107,096 for the unfunded pension costs                at March                31, 2007.** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**In      September 2006, the SEC staff issued Staff Accounting Bulletin No. 108 (SAB      108)“Considering the Effects of Prior Year Misstatements when Quantifying      Misstatements in Current Year Financial Statements”. SAB 108 was issued to      provide consistency among registrants in the quantification of financial      statement misstatements. SAB 108 established an approach that requires      quantification of financial statement misstatements based on the effects of      the      misstatement on each of the Company’s financial statements and the related      disclosures. SAB 108 allows registrants to initially apply the approach either      by (1) retroactively adjusting prior financial statements as if the approach      had      always been used or (2) recording the cumulative effect of initially applying      the approach as adjustments to the carrying values of assets and liabilities      as      of January 1, 2006 with the related offset recorded to the opening balance      of      retained earnings. Use of the “cumulative effect” transition requires full      disclosure as to the nature and amount of each individual error being corrected.      SAB 108 was adopted by the Company during 2007 and did not have a material      impact on the Company’s consolidated financial statements.**

**In      February 2007, FASB issued Statement No. 159 (SFAS 159), “The Fair Value Option      for Financial Assets and Financial Liabilities-Including an amendment of FASB      No. 115”. SFAS 159 permits entities to choose to measure many financial      instruments and certain other items at fair value. This statement is effective      for the beginning of the first fiscal year that begins after November 15, 2007.      Management is currently evaluating the impact on the Company’s consolidated      financial statements.**

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006 **

**4.**
**INVESTMENT      SECURITIES **

|   | **Investment                securities have been classified according to management’s intent. The                amortized cost of securities and their approximate fair values as                of March                31, 2007 and 2006 are as                follows:** |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                              |   |  **Held-to-Maturity**          |           |
|---------------------------------------------------|--------|-------------------------------------|----------------|
|                                              |   | **March                  31, 2007** |           |
|                                              |   |                                |           | **Gross** |   | **Gross** |   |   |   |
|                                              |   | **Amortized**                       |           | **Unrealized** |   | **Unrealized** |   | **Fair** |   |
|                                              |   | **Cost**                            |           | **Gains** |   | **Losses** |   | **Value** |   |
| **Federal                  Home Loan Bank Bonds** |   | **$**                               | **1,000,000**  |   | **$** |   |   |   | **($16,715** | **)** | **$** | **983,285** |   |
| **Federal                  Farm Credit Bonds**    |   |                                | **1,000,000**  |   |   |   |   |   | **(14,685** | **)** |   | **985,315** |   |
| **Federal                  National Mortgage**    |   |                                |           |   |   |   |   |   |   |   |   |   |   |
| **Corporation                  Bonds**            |   |                                | **500,000**    |   |   |   |   |   | **(10,310** | **)** |   | **489,690** |   |
| **Federal                  Home Loan Mortgage**   |   |                                |           |   |   |   |   |   |   |   |   |   |   |
| **Corporation                  Bonds**            |   |                                | **1,500,000**  |   |   |    |   |   | **(16,090** | **)** |   | **1,483,910** |   |
|                                              |   |                                |           |   |   |   |   |   |   |   |   |   |   |
|                                              |   |                                | **4,000,000**  |   |   |    |   |   | **(57,800** | **)** |   | **3,942,200** |   |
|                                              |   |                                |           |   |   |   |   |   |   |   |   |   |   |
| **Mortgage-Backed                  Securities:**  |   |                                |           |   |   |   |   |   |   |   |   |   |   |
| **Federal                  Home Loan Mortgage**   |   |                                |           |   |   |   |   |   |   |   |   |   |   |
| **Corporation**                                   |   |                                | **1,763,384**  |   |   | **2,063** |   |   | **(39,992** | **)** |   | **1,725,455** |   |
| **Federal                  National Mortgage**    |   |                                |           |   |   |   |   |   |   |   |   |   |   |
| **Corporation**                                   |   |                                | **8,413,494**  |   |   | **114,502** |   |   | **(127,940** | **)** |   | **8,400,056** |   |
| **Government                  National Mortgage** |   |                                |           |   |   |   |   |   |   |   |   |   |   |
| **Corporation**                                   |   |                                | **1,645,651**  |   |   | **44,046** |   |   | **(5,022** | **)** |   | **1,684,675** |   |
|                                              |   |                                |           |   |   |   |   |   |   |   |   |   |   |
|                                              |   |                                | **11,822,529** |   |   | **160,611** |   |   | **(172,954** | **)** |   | **11,810,186** |   |
|                                              |   |                                |           |   |   |   |   |   |   |   |   |   |   |
| **Total**                                         |   | **$**                               | **15,822,529** |   | **$** | **160,611** |   |   | **($230,754** | **)** | **$** | **15,752,386** |   |

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006 **

**4.**
**INVESTMENT      SECURITIES (Continued)**

|                                              |   |  **Held-to-Maturity**                |                                      |
|---------------------------------------------------|--------|-------------------------------------------|-------------------------------------------|
|                                              |   |  **March                  31, 2006** |
|                                              |   |                                      |                                      | **Gross** |   | **Gross** |   |  |   |
|                                              |   | **Amortized**                             |                                      | **Unrealized** |   | **Unrealized** |   | **Fair** |   |
|                                              |   | **Cost**                                  |                                      | **Gains** |   | **Losses** |   | **Value** |   |
|                                              |   |                                      |                                      |   |   |   |   |   |   |
| **Federal                  Home Loan Bank Bonds** |   | **$**                                     | **2,000,000**                             |   | **$** |   |   |   | **($                  54,215** | **)** | **$** | **1,945,785** |   |
| **Federal                  Farm Credit Bonds**    |   |                                      | **1,000,000**                             |   |   |   |   |   | **(28,125** | **)** |   | **971,875** |   |
| **Federal                  National Mortgage**    |   |                                      |                                      |   |   |   |   |   |   |   |   |   |   |
| **Corporation                  Bonds**            |   |                                      | **500,000**                               |   |   |   |   |   | **(19,530** | **)** |   | **480,470** |   |
| **Federal                  Home Loan Mortgage**   |   |                                      |                                      |   |   |   |   |   |   |   |   |   |   |
| **Corporation                  Bonds**            |   |                                      | **2,000,000**                             |   |   |     |   |   | **(46,415** | **)** |   | **1,953,585** |   |
|                                              |   |                                      |                                      |   |   |   |   |   |   |   |   |   |   |
|                                              |   |                                      | **5,500,000**                             |   |   |   |   |   | **(148,285** | **)** |   | **5,351,715** |   |
| **Mortgage-Backed                  Securities:**  |   |                                      |                                      |   |   |   |   |   |   |   |   |   |   |
| **Federal                  Home Loan Mortgage**   |   |                                      |                                      |   |   |   |   |   |   |   |   |   |   |
| **Corporation**                                   |   |                                      | **2,198,946**                             |   |   |   |   |   | **(88,338** | **)** |   | **2,110,608** |   |
| **Federal                  National Mortgage**    |   |                                      |                                      |   |   |   |   |   |   |   |   |   |   |
| **Corporation**                                   |   |                                      | **10,161,742**                            |   |   |  |   |   | **(                  179,920** | **)** |   | **9,981,822** |   |
| **Government                  National Mortgage** |   |                                      |                                      |   |   |   |   |   |   |   |   |   |   |
| **Corporation**                                   |   |                                      | **2,306,925**                             |   |   | **43,024** |   |   |   |   |   | **2,349,949** |   |
|                                              |   |                                      |                                      |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |                                      | **14,667,613**                            |   |   | **43,024** |   |   | **(268,258** | **)** |   | **14,442,379** |   |
|                                              |   |                                      |                                      |   |   |   |   |   |   |   |   |   |   |
| **Total**                                         |   | **$**                                     | **20,167,613**                            |   | **$** | **43,024** |   |   | **($416,543** | **)** | **$** | **19,794,094** |   |
|                                              |   |                                      |                                      |   |   |   |   |   |   |   |   |   |   |
|                                              |   |                                      |  **Available-for-Sale**              |   |
|                                              |   |                                      |  **March                  31, 2007** |   |
|                                                   |   |                                      |                                           |   |   | **Gross** |   |   | **Gross** |   |   |  |   |
|                                                   |   |                                      | **Amortized**                             |   |   | **Unrealized** |   |   | **Unrealized** |   |   | **Fair** |   |
|                                              |   |                                      | **Cost**                                  |   |   | **Gains** |   |   | **Losses** |   |   | **Value** |   |
| **Mutual                  Fund Shares**           |   | **$**                                     | **211,589**                               |   | **$** | **46,732** |   |   | **($                  5,674** | **)** | **$** | **252,647** |   |
|                                              |   |                                      |                                      |   |   |   |   |   |   |   |   |   |   |
|                                                   |
|                                              |   |                                      |  **Available-for-Sale**              |
|                                              |   |                                      |  **March                  31, 2006** |   |
|                                                   |   |                                      |                                           |   |   | **Gross** |   |   | **Gross** |   |   |  |   |
|                                                   |   |                                      | **Amortized**                             |   |   | **Unrealized** |   |   | **Unrealized** |   |   | **Fair** |   |
|                                                   |   |                                      | **Cost**                                  |   |   | **Gains** |   |   | **Losses** |   |   | **Value** |   |
|                                              |   |                                      |                                      |   |   |   |   |   |   |   |   |   |   |
| **Mutual                  Fund Shares**           |   | **$**                                     | **195,973**                               |   | **$** | **44,334** |   | **$** |   |   | $ | **240,307** |   |
|                                              |   |                                      |                                      |   |   |   |   |   |   |   |   |   |   |
| **Federal                  Home Loan Mortgage**   |   |                                      |                                      |   |   |   |   |   |   |   |   |   |   |
| **Corporation                  Stock**            |   |                                      | **6,859**                                 |   |   | **427,461** |   |   |    |   |   | **434,320** |   |
|                                              |   |                                      |                                      |   |   |   |   |   |   |   |   |   |   |
|                                              |   | **$**                                     | **202,832**                               |   | **$** | **471,795** |   | **$** |   |   | **$** | **674,627** |   |

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006 **

**4.**
**INVESTMENT      SECURITIES (Continued)**

|   | **Investment                securities with a carrying amount of approximately $500,000 were                pledged                as collateral with FHLB of New York as required at March 31, 2007                and                2006.** |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **The                following is a summary of maturities of securities held-to-maturity                and                available-for-sale as of March 31, 2007 and                2006.** |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                          |   |  **March                  31, 2007** |                                |
|-----------------------------------------------|--------|-------------------------------------------|-------------------------------------|
|                                          |   | **Held-to-maturity**                      |                                | **Available-for-sale** |   |
|                                          |   | **Amortized**                             |                                | **Fair** |   | **Amortized** |   | **Fair** |   |
|                                          |   | **Cost**                                  |                                | **Value** |   | **Cost** |   | **Value** |   |
| **Amounts                  maturing in:**     |   |                                      |                                |   |   |   |   |   |   |
| **One                  year or less**         |   | **$**                                     | **1,504,823**                       |   | **$** | **1,491,289** |   | **$** |   |   | **$** |  |   |
| **After                  one year through**   |   |                                      |                                |   |   |   |   |   |   |   |   |   |   |
| **five                  years**               |   |                                      | **8,422,033**                       |   |   | **8,440,119** |   |   |   |   |   |   |   |
| **After                  five years through** |   |                                      |                                |   |   |   |   |   |   |   |   |   |   |
| **ten                  years**                |   |                                      | **2,588,395**                       |   |   | **2,520,225** |   |   |   |   |   |   |   |
| **After                  ten years**          |   |                                      | **3,307,278**                       |   |   | **3,300,753** |   |   |   |   |   |   |   |
| **Equity                  securities**        |   |                                      |                           |   |   |    |   |   | **211,589** |   |   | **252,647** |   |
|                                          |   |                                      |                                |   |   |   |   |   |   |   |   |   |   |
|                                          |   | **$**                                     | **15,822,529**                      |   | **$** | **15,752,386** |   | **$** | **211,589** |   | **$** | **252,647** |   |
|                                          |   |                                      |                                |   |   |   |   |   |   |   |   |   |   |
|                                               |   |                                      | **March                  31, 2006** |   |
|                                               |   |                                      | **Held-to-maturity**                |   |   | **Available-for-sale** |   |
|                                               |   |                                      | **Amortized**                       |   |   | **Fair** |   |   | **Amortized** |   |   | **Fair** |   |
|                                               |   |                                      | **Cost**                            |   |   | **Value** |   |   | **Cost** |   |   | **Value** |   |
| **Amounts                  maturing in:**     |   |                                      |                                |   |   |   |   |   |   |   |   |   |   |
| **One                  year or less**         |   | **$**                                     | **1,006,001**                       |   | **$** | **990,959** |   | **$** |   |   | **$** |  |   |
| **After                  one year through**   |   |                                      |                                |   |   |   |   |   |   |   |   |   |   |
| **five                  years**               |   |                                      | **8,003,913**                       |   |   | **7,747,926** |   |   |   |   |   |   |   |
| **After                  five years through** |   |                                      |                                |   |   |   |   |   |   |   |   |   |   |
| **ten                  years**                |   |                                      | **6,342,788**                       |   |   | **6,321,496** |   |   |   |   |   |   |   |
| **After                  ten years**          |   |                                      | **4,814,911**                       |   |   | **4,733,713** |   |   |   |   |   |   |   |
| **Equity                  securities**        |   |                                      |                           |   |   |    |   |   | **202,832** |   |   | **674,627** |   |
|                                          |   |                                      |                                |   |   |   |   |   |   |   |   |   |   |
|                                          |   | **$**                                     | **20,167,613**                      |   | **$** | **19,794,094** |   | **$** | **202,832** |   | **$** | **674,627** |   |

----

**DELANCO        BANCORP, INC. AND SUBSIDIARY**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH        31, 2007 AND 2006 **

**4.**
**INVESTMENT        SECURITIES (Continued)**

|   | **The                  amortized cost and fair value of mortgage-backed securities are                  presented                  in the held-to-maturity category by contractual maturity in the                  preceding                  table. Expected maturities will differ from contractual maturities                  because                  borrowers may have the right to call or prepay obligations without                  call or                  prepayment penalties.** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **During                  2007, the Bank sold securities available-for-sale for total proceeds                  of                  $457,596 resulting in gross realized gains of $450,737. During                  2006, the                  Bank sold securities available-for-sale for total proceeds of $2,329,027                  resulting in gross realized gains of $62,904 and gross realized                  losses of                  $82,006.** |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Information                  pertaining to securities with gross unrealized losses at March                  31, 2007                  and 2006, aggregated by investment category and length of time                  that                  individual securities have been in a continuous loss position,                  follows:** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                             |   | **Less                  Than 12 Months** |         | **12                  Months or Greater** |   | **Total**    |   |
|--------------------------------------------------|--------|------------------------------------------|--------------|-------------------------------------------|--------|--------------|--------|
|                                             |   |                                     |         | **Gross**                                 |   |         |   | **Gross** |   |   |   |   |   |
|                                             |   | **Fair**                                 |         | **Unrealized**                            |   | **Fair**     |   | **Unrealized** |   |   |   | **Unrealized** |   |
| **March                  31, 2007**              |   | **Value**                                |         | **Losses**                                |   | **Value**    |   | **Losses** |   | **Value** |   | **Losses** |   |
|                                             |   |                                     |         |                                      |   |         |   |   |   |   |   |   |   |
| **Federal                  Home Loan Bank**      |   |                                     |         |                                      |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Bonds**                                        |   | **$**                                    |         |                                      | **$**  |         |   | **$** | **983,285** |   |   | **($16,715** | **)** | **$** | **983,285** |   |   | **($16,715** | **)** |
| **Federal                  Farm Credit**         |   |                                     |         |                                      |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Bonds**                                        |   |                                     |         |                                      |   |         |   |   | **985,315** |   |   | **(14,685** | **)** |   | **985,315** |   |   | **(14,685** | **)** |
| **Federal                  National Mortgage**   |   |                                     |         |                                      |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Association                  Bonds**           |   |                                     |         |                                      |   |         |   |   | **489,690** |   |   | **(10,310** | **)** |   | **489,690** |   |   | **(10,310** | **)** |
| **Federal                  Home Loan**           |   |                                     |         |                                      |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Mortgage                  Corporation**        |   |                                     |    |                                      |   |    |   |   | **1,483,910** |   |   | **(16,090** | **)** |   | **1,483,910** |   |   | **(16,090** | **)** |
|                                             |   |                                     |         |                                      |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |   |                                     |    |                                      |   |    |   |   | **3,942,200** |   |   | **(57,800** | **)** |   | **3,942,200** |   |   | **(57,800** | **)** |
|                                             |   |                                     |         |                                      |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Mortgage-Backed                  Securities:** |   |                                     |         |                                      |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Federal                  Home Loan**           |   |                                     |         |                                      |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Mortgage                  Corporation**        |   |                                     | **65,689**   |                                      |   | **(217**     | **)**  |   | **1,574,307** |   |   | **(39,775** | **)** |   | **1,639,996** |   |   | **(39,992** | **)** |
| **Federal                  National**            |   |                                     |         |                                      |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Mortgage                  Corporation**        |   |                                     |         |                                      |   |         |   |   | **4,825,282** |   |   | **(127,940** | **)** |   | **4,825,282** |   |   | **(127,940** | **)** |
| **Government                  National**         |   |                                     |         |                                      |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Mortgage                  Association**        |   |                                     | **14,837**   |                                      |   | **(163**     | **)**  |   | **698,201** |   |   | **(4,859** | **)** |   | **713,038** |   |   | **(5,022** | **)** |
|                                             |   |                                     | **80,526**   |                                      |   | **(380**     | **)**  |   | **7,097,790** |   |   | **(                  172,574** | **)** |   | **7,178,316** |   |   | **(172,954** | **)** |
|                                             |   |                                     |         |                                      |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Mutual                  Fund Shares**          |   |                                     | **132,651**  |                                      |   | **(5,674**   | **)**  |   |    |   |   |     |   |   | **132,651** |   |   | **(5,674** | **)** |
|                                             |   |                                     |         |                                      |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total**                                        |   | **$**                                    | **213,177**  |                                      |   | **($6,054**  | **)**  | **$** | **11,039,990** |   |   | **($230,374** | **)** | **$** | **11,253,167** |   |   | **($236,428** | **)** |

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH          31, 2007 AND 2006 **

**4.****INVESTMENT          SECURITIES (Continued)**

|                                               |   | **Less                    Than 12                    Months** |         |  **12 Months or                    Greater** |   | **Total**          |   |
|----------------------------------------------------|--------|---------------------------------------------------------------|--------------|---------------------------------------------------|--------|--------------------|--------|
|                                               |   |                                                          |         | **Gross**                                         |   |               |   | **Gross**  |   |   |   |   |   |
|                                               |   | **Fair **                                                |         | **Unrealized**                                    |   | **Fair**      |   | **Unrealized**  |   |   |   | **Unrealized**    |   |
| **March                    31, 2006**         |   | **Value**                                                     |         | **Losses**                                        |   | **Value**          |   | ** Losses**  |   | **Value**  |   | ** Losses**  |   |
| **Federal                    Home Loan Bank**      |   |                                                               |         |                                              |   |               |   |   |   |   |   |   |   |
| **Bonds**                                          |   | **$**                                                         |         |                                              | **$**  |               |   | **$** | **1,945,785** |   |   | **($54,215** | **)** | **$** | **1,945,785** |   |   | **($                    54,215** | **)** |
| **Federal                    Farm Credit**         |   |                                                          |         |                                              |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Bonds**                                          |   |                                                          |         |                                              |   |               |   |   | **971,875** |   |   | **(28,125** | **)** |   | **971,875** |   |   | **(28,125** | **)** |
| **Federal                    National Mortgage**   |   |                                                          |         |                                              |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Association                    Bonds**           |   |                                                          |         |                                              |   |               |   |   | **480,470** |   |   | **(19,530** | **)** |   | **480,470** |   |   | **(19,530** | **)** |
| **Federal                    Home Loan**           |   |                                                          |         |                                              |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Mortgage                    Corporation**        |   |                                                          |    |                                              |   |     |   |   | **1,953,585** |   |   | **(46,415** | **)** |   | **1,953,585** |   |   | **(46,415** | **)** |
|                                               |   |                                                          |         |                                              |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                               |   |                                                          |    |                                              |   |     |   |   | **5,351,715** |   |   | **(                    148,285** | **)** |   | **5,351,715** |   |   | **(148,285** | **)** |
|                                               |   |                                                          |         |                                              |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Mortgage-Backed                    Securities:** |   |                                                          |         |                                              |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Federal                    Home Loan**           |   |                                                          |         |                                              |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Mortgage                    Corporation**        |   |                                                          |         |                                              |   |               |   |   | **2,110,608** |   |   | **(88,338** | **)** |   | **2,110,608** |   |   | **(88,338** | **)** |
| **Federal                    National**            |   |                                                          |         |                                              |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Mortgage                    Corporation**        |   |                                                          |    |                                              |   |          |   |   | **9,981,822** |   |   | **(179,920** | **)** |   | **9,981,822** |   |   | **(179,920** | **)** |
|                                               |   |                                                          |    |                                              |   |          |   |   | **12,092,430** |   |   | **(268,258** | **)** |   | **12,092,430** |   |   | **(268,258** | **)** |
| **Total**                                          |   | **$**                                                         |    |                                              | **$**  |               |   | **$** | **17,444,145** |   |   | **($                    416,543** | **)** | **$** | **17,444,145** |   |   | **($416,543** | **)** |

|   | **Management                evaluates securities for other-than-temporary impairment at least                on a                quarterly basis, and more frequently when economic or market concerns                warrant such evaluation. Consideration is given to (1) the length                of time                and the extent to which the fair value has been less than cost, (2)                the                financial condition and near-term prospects of the issuer, and (3)                the                intent and ability of the Bank to retain its investment in the issuer                for                a period of time sufficient to allow for any anticipated recovery                in fair                value.** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **At                March 31, 2007, the twenty-four debt securities with unrealized losses                have depreciated 2.0% from the Bank’s amortized cost basis. These                unrealized losses relate principally to current interest rates for                similar                types of securities. In analyzing an issuer’s financial condition,                management considers whether the securities are issued by the federal                government, its agencies, or other governments, whether downgrades                by bond                rating agencies have occurred, and the results of reviews of the                issuer’s                financial condition. As management has the ability to hold debt securities                until maturity, or for the foreseeable future if classified as                available-for-sale, no declines are deemed to be                other-than-temporary.** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**The      Bank has pledged FHLMC mortgage backed securities with a market value of      approximately $712,300 at March 31, 2007 to the New Jersey State Department      of      Banking under the Government Unit Deposit Protection Act.**

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006 **

| **5.** | **LOANS** |
|--------|-----------|

**Loans      at March 31, 2007 and 2006 are summarized as follows:**

|                                                    |   | **March                  31,** |                             |
|---------------------------------------------------------|--------|--------------------------------|----------------------------------|
|                                                    |   | **2007**                       |                             | **2006** |   |
| **Residential                  (one to four family)**   |   | **$**                          | **24,112,328**                   |   | **$** | **17,115,779** |   |
| **Multi-family                  and commercial**        |   |                           | **12,680,440**                   |   |   | **5,668,910** |   |
| **Commercial**                                          |   |                           | **15,124,054**                   |   |   | **4,161,756** |   |
| **Home                  equity**                        |   |                           | **22,670,378**                   |   |   | **14,156,666** |   |
| **Consumer**                                            |   |                           | **1,396,012**                    |   |   | **465,063** |   |
| **Construction**                                        |   |                           | **2,061,150**                    |   |   | **204,835** |   |
|                                                    |   |                           |                             |   |   |   |   |
|                                                    |   |                           | **78,044,362**                   |   |   | **41,773,009** |   |
|                                                    |   |                           |                             |   |   |   |   |
| **Loans                  in process**                   |   |                           | **(                  916,542**   | **)** |   | **(                  135,000** | **)** |
| **Net                  deferred loan origination fees** |   |                           | **(                  137,633**   | **)** |   | **(                  31,596** | **)** |
| **Allowance                  for loan losses**          |   |                           | **(                  492,448**   | **)** |   | **(                  237,448** | **)** |
|                                                    |   |                           |                             |   |   |   |   |
|                                                    |   |                           | **(                  1,546,623** | **)** |   | **(                  404,044** | **)** |
|                                                    |   |                           |                             |   |   |   |   |
| **Loans,                  net**                         |   | **$**                          | **76,497,739**                   |   | **$** | **41,368,965** |   |

**An      analysis of the allowance for loan losses at March 31, 2007 and 2006 is as      follows:**

|                                            |   | **March                  31,** |        |
|-------------------------------------------------|--------|--------------------------------|-------------|
|                                            |   | **2007**                       |        | **2006** |   |
| **Balance,                  beginning of year** |   | **$**                          | **237,448** |   | **$** | **227,448** |   |
| **Loans                  charged-off**          |   |                           | **0**       |   |   | **0** |   |
| **Recoveries**                                  |   |                           | **0**       |   |   | **0** |   |
| **Provision                  for losses**       |   |                           | **255,000** |   |   | **10,000** |   |
| **Balance,                  end of year**       |   | **$**                          | **492,448** |   | **$** | **237,448** |   |

|   | **At                March 31, 2007 and 2006, there were $562,897 and $439,273 of loans                that                were ninety days or more past due,                respectively.** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **The                Bank has no commitments to loan additional funds to the borrowers                whose                loans have been modified.** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006 **

| **5.** | **LOANS                (Continued)** |
|--------|--------------------------------------|

|   | **In                the ordinary course of business, the Bank has and expects to continue                to                have transactions, including borrowings, with its officers, directors                and                employees. In the opinion of management, such transactions were on                the                same terms, including interest rates and collateral, as those prevailing                at the time of comparable transactions with other persons and did                not                involve more than a normal risk of collectibility or present any                other                unfavorable features to the Bank. Loans to such borrowers are summarized                as follows:** |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                            |   | **March                  31,** |          |
|-------------------------------------------------|--------|--------------------------------|---------------|
|                                            |   | **2007**                       |          | **2006** |   |
| **Balance,                  beginning of year** |   | **$**                          | **1,229,201** |   | **$** | **1,152,657** |   |
| **Payments**                                    |   |                           | **(445,186**  | **)** |   | **(224,425** | **)** |
| **Borrowings**                                  |   |                           | **213,084**   |   |   | **300,969** |   |
|                                            |   |                           |          |   |   |   |   |
| **Balance,                  end of year**       |   | **$**                          | **997,099**   |   | **$** | **1,229,201** |   |

**6.**
**LOAN      SERVICING**

|   | **Mortgage                loans serviced for others are not included in the accompanying statement                of financial condition. The unpaid principal balances of these loans                at                March 31, 2007 and 2006 are summarized as                follows:** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                   |   | **March                  31,** |          |
|------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|---------------|
|                                                                                                                   |   | **2007**                       |          | **2006** |   |
| **Mortgage                  Loan Servicing Portfolio:****Mortgage                  Partnership Finance FHLB New York** |   | **$**                          | **3,236,246** |   | **$** | **3,632,142** |   |

**7.**
**ACCRUED      INTEREST RECEIVABLE**

|   | **Accrued                interest receivable at March 31, 2007 and 2006 consists of the                following:** |
|--------|---------------------------------------------------------------------------------------------------------------------|

|                                            |   | **March                  31,** |        |
|-------------------------------------------------|--------|--------------------------------|-------------|
|                                            |   | **2007**                       |        | **2006** |   |
| **Loans**                                       |   | **$**                          | **339,347** |   | **$** | **175,244** |   |
| **Investment                  securities**      |   |                           | **35,497**  |   |   | **46,451** |   |
| **Mortgage                  backed securities** |   |                           | **51,028**  |   |   | **64,355** |   |
|                                            |   |                           |        |   |   |   |   |
|                                            |   | **$**                          | **425,872** |   | **$** | **286,050** |   |

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006 **

**8.**
**PREMISES      AND EQUIPMENT**

|   | **Premises                and equipment at March 31, 2007 and 2006 consists of the                following:** |
|--------|----------------------------------------------------------------------------------------------------------------|

|                                                   |   | **March                  31,** |           |
|--------------------------------------------------------|--------|--------------------------------|----------------|
|                                                   |   | **2007**                       |           | **2006** |   |
| **Construction                  in progress**          |   | **$**                          |           |   | **$** | **3,296,987** |   |
| **Land**                                               |   |                           | **1,361,165**  |   |   | **1,361,165** |   |
| **Buildings**                                          |   |                           | **6,793,746**  |   |   | **2,487,018** |   |
| **Furniture,                  fixtures and equipment** |   |                           | **1,766,003**  |   |   | **1,005,992** |   |
|                                                   |   |                           | **9,920,914**  |   |   | **8,151,162** |   |
| **Accumulated                  depreciation**          |   |                           | **(1,498,457** | **)** |   | **(1,275,641** | **)** |
|                                                   |   |                           |           |   |   |   |   |
|                                                   |   | **$**                          | **8,422,457**  |   | **$** | **6,875,521** |   |

|   | **Depreciation                expense amounted to $222,816 and $79,533 for the years ended March                31,                2007 and 2006,                respectively.** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **9.** | **FEDERAL                HOME LOAN BANK STOCK** |
|--------|-------------------------------------------------|

|   | **The                Bank is a member of the Federal Home Loan Bank System. As a member,                the                Bank maintains an investment in the capital stock of the Federal                Home Loan                Bank of New York in an amount not less than 1% of its outstanding                home                loans or 1/20 of its outstanding notes payable, if any, to the Federal                Home Loan Bank of New York, whichever is greater, as calculated December                31 of each year.** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**10.**
**DEPOSITS**

|   | **Deposit                account balances at March 31, 2007 and 2006 are summarized as                follows:** |
|--------|------------------------------------------------------------------------------------------------------------------|

|                                                    |   | **March                  31, 2007** |           |
|---------------------------------------------------------|--------|-------------------------------------|----------------|
|                                                    |   | **Amount**                          |           | **Weighted                  Average Interest Rate** |   | **Percent                  of Portfolio** |   |
| **Non                  interest bearing accounts**      |   | **$**                               | **3,372,058**  |   |   |   |   |   | **3.52** |   |
| **Interest                  bearing checking accounts** |   |                                | **7,929,647**  |   |   | **.52** |   |   | **8.26** |   |
| **Passbook                  savings accounts**          |   |                                | **12,705,865** |   |   | **.80** |   |   | **13.24** |   |
| **Money                  Market accounts**              |   |                                | **20,293,630** |   |   | **3.89** |   |   | **21.14** |   |
| **Club                  accounts**                      |   |                                | **164,170**    |   |   | **.80** |   |   | **.17** |   |
|                                                    |   |                                | **44,465,370** |   |   |  |   |   | **46.33** |   |
|                                                    |   |                                |           |   |   |   |   |   |   |   |
| **Certificates                  of Deposits:**          |   |                                |           |   |   |   |   |   |   |   |
| **2.00%                  to 2.99%**                     |   |                                | **4,242**      |   |   | **2.71** |   |   |   |   |
| **3.00%                  to 3.99%**                     |   |                                | **3,366,048**  |   |   | **3.69** |   |   | **3.51** |   |
| **4.00%                  to 4.99%**                     |   |                                | **28,070,975** |   |   | **4.67** |   |   | **29.24** |   |
| **5.00%                  to 5.99%**                     |   |                                | **20,082,640** |   |   | **5.20** |   |   | **20.92** |   |
|                                                    |   |                                | **51,523,905** |   |   |   |   |   | **53.67** |   |
|                                                    |   |                                |           |   |   |   |   |   |   |   |
|                                                    |   | **$**                               | **95,989,275** |   |   |   |   |   | **100.0** | **%** |

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006 **

**10.**
**DEPOSITS      (Continued)**

|                                                    |   | **March                  31, 2006** |           |
|---------------------------------------------------------|--------|-------------------------------------|----------------|
|                                                    |   | **Amount**                          |           | **Weighted                  Average Interest Rate** |   | **Percent                  of Portfolio** |   |
| **Non                  interest bearing accounts**      |   | **$**                               | **2,450,557**  |   |   |   |   |   | **3.68** |   |
| **Interest                  bearing checking accounts** |   |                                | **7,386,833**  |   |   | **.71** |   |   | **11.10** |   |
| **Passbook                  savings accounts**          |   |                                | **13,245,888** |   |   | **.80** |   |   | **19.91** |   |
| **Money                  Market accounts**              |   |                                | **11,777,350** |   |   | **2.59** |   |   | **17.70** |   |
| **Club                  accounts**                      |   |                                | **163,196**    |   |   | **.80** |   |   | **.25** |   |
|                                                    |   |                                | **35,023,824** |   |   |   |   |   | **52.64** |   |
|                                                    |   |                                |           |   |   |   |   |   |   |   |
| **Certificates                  of Deposits:**          |   |                                |           |   |   |   |   |   |   |   |
| **2.00%                  to 2.99%**                     |   |                                | **935,103**    |   |   | **2.85** |   |   | **1.41** |   |
| **3.00%                  to 3.99%**                     |   |                                | **20,548,908** |   |   | **3.40** |   |   | **30.89** |   |
| **4.00%                  to 4.99%**                     |   |                                | **10,024,494** |   |   | **4.22** |   |   | **15.06** |   |
|                                                    |   |                                | **31,508,505** |   |   |  |   |   | **47.36** |   |
|                                                    |   |                                |           |   |   |   |   |   |   |   |
|                                                    |   | **$**                               | **66,532,329** |   |   |   |   |   | **100.0** | **%** |

|   | **The                aggregate amount of certificates of deposits with a minimum denomination                of $100,000 was $11,229,952 and $4,520,924 at March 31, 2007 and                2006,                respectively. Deposit account balances in excess of $100,000 are                not                insured by the Federal Deposit Insurance Corporation.** |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Scheduled                maturities of certificates of deposits at March 31, 2007 and 2006                are as                follows:** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------|

|                                     |   | **March                  31,** |           |
|------------------------------------------|--------|--------------------------------|----------------|
|                                     |   | **2007**                       |           | **2006** |   |
| **2007**                                 |   | **$**                          |           |   | **$** | **17,309,138** |   |
| **2008**                                 |   |                           | **30,992,815** |   |   | **6,702,904** |   |
| **2009**                                 |   |                           | **12,645,173** |   |   | **4,706,415** |   |
| **2010**                                 |   |                           | **5,200,828**  |   |   | **1,539,994** |   |
| **2011**                                 |   |                           | **1,165,058**  |   |   | **1,250,054** |   |
| **2012                  and thereafter** |   |                           | **1,520,031**  |   |   |     |   |
|                                     |   |                           |           |   |   |   |   |
|                                     |   | **$**                          | **51,523,905** |   | **$** | **31,508,505** |   |

|   | **The                Bank held deposits from officers, directors and employees of approximately                $1,007,000 and $324,000 at March 31, 2007 and 2006, respectively.                These                transactions were on the same terms as those prevailing at the time                of                comparable transactions with other                persons.** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006 **

| **11.** | **ADVANCES                FROM FEDERAL HOME LOAN                BANK** |
|---------|------------------------------------------------------------------------|

|   | **As                of March 31, 2007, the Bank had a borrowing capacity in a combination                of                term advances and overnight borrowings of up to $5,908,678 at the                FHLB of                New York. Borrowings are collateralized by a blanket security agreement                and pledged mortgage backed securities that are held by the FHLB                of New                York that totaled $6,611,267 at March 31,                2007.** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **As                of March 31, 2007 and 2006, there were no borrowings from the FHLB                of New                York.** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------|

**12.**
**FEDERAL      INCOME TAXES**

|   | **The                Company and subsidiary file a consolidated federal income tax return                with                its parent company. The Company’s consolidated provision for income taxes                for the years ended March 31, 2007 and 2006 consists of the                following:** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                       |   | **Years                  Ended March 31,** |                            |
|------------------------------------------------------------|--------|--------------------------------------------|---------------------------------|
|                                                       |   | **2007**                                   |                            | **2006** |   |
| **Income                  Tax Expense (benefit)**          |   |                                       |                            |   |   |
| **Current                  federal tax expense (benefit)** |   |                                       |                            |   |   |
| **Federal**                                                |   |                                       | **(                  52,700**   | **)** | **$** | **72,207** |   |
| **State**                                                  |   |                                       | **2,500**                       |   |   | **18,399** |   |
| **Deferred                  tax (benefit)**                |   |                                       |                            |   |   |   |   |
| **Federal**                                                |   |                                       | **(                  37,262**   | **)** |   | **(                  19,376** | **)** |
| **State**                                                  |   |                                       | **(                  21,522**   | **)** |   | **3,488** |   |
|                                                       |   |                                       |                            |   |   |   |   |
|                                                       |   |                                       | **($                  108,984** | **)** | **$** | **74,718** |   |

|   | **The                consolidated provision for federal income taxes for the years ended                March                31, 2007 and 2006 differs from that computed by applying federal                statutory                rates to income before federal income tax expense, as indicated in                the                following analysis:** |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                      |   | **Years                  Ended March 31,** |                           |
|---------------------------------------------------------------------------|--------|--------------------------------------------|--------------------------------|
|                                                                      |   | **2007**                                   |                           | **2006** |   |
| **Expected                  federal tax provision (benefit) at 34% rate** |   |                                       | **($                  89,826** | **)** | **$** | **132,993** |   |
| **State                  income tax effect**                              |   |                                       | **6,467**                      |   |   | **(                  7,442** | **)** |
| **Bank                  owned life insurance**                            |   |                                       | **(                  3,543**   | **)** |   | **(                  3,492** | **)** |
| **Dividend                  deduction**                                   |   |                                       | **(                  3,045**   | **)** |   | **(                  3,100** | **)** |
| **Other                  items, net**                                     |   |                                       | **(                  15**      | **)** |   | **(                  66,128** | **)** |
|                                                                      |   |                                       |                           |   |   |   |   |
| **Federal                  income tax expense (benefit)**                 |   |                                       | **($                  89,962** | **)** | **$** | **52,831** |   |
|                                                                      |   |                                       |                           |   |   |   |   |
| **Effective                  tax rate (benefit)**                         |   |                                       | **(                  34.0%**   | **)** |   | **13.5** | **%** |

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006 **

**12.**
**FEDERAL      INCOME TAXES (Continued)**

|   | **Deferred                tax liabilities as of March 31, 2007 and 2006 have been provided                for                taxable temporary differences related to unrealized gains on                available-for-sale securities and depreciation. Deferred tax assets                have                been provided for deductible temporary differences related to deferred                loan fees, directors pension costs, post retirement medical benefits,                accrued retirement costs and accrued pension costs. The net deferred                tax                assets (liabilities) in the accompanying consolidated statements                of                financial condition include the following                components:** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                    |   | **March                  31,** |                           |
|-------------------------------------------------------------------------|--------|--------------------------------|--------------------------------|
|                                                                    |   | **2007**                       |                           | **2006** |   |
| **Deferred                  tax assets:**                               |   |                           |                           |   |   |
| **Allowance                  for loan losses**                          |   | **$**                          | **106,000**                    |   | **$** | **9,700** |   |
| **Deferred                  loan fees**                                 |   |                           | **200**                        |   |   | **300** |   |
| **Directors’                  benefit plans**                     |   |                           | **58,400**                     |   |   | **40,000** |   |
| **Accrued                  retirement plan**                            |   |                           | **43,200**                     |   |   | **51,700** |   |
| **Accrued                  pension costs**                              |   |                           | **6,700**                      |   |   | **11,200** |   |
| **FASB                  158 - unrecognized transition costs**           |   |                           | **42,800**                     |   |   |   |   |
| **Unrealized                  losses on securities available-for-sale** |   |                           | **16,400**                     |   |   |   |   |
| **Accrued                  post retirement medical plan**               |   |                           | **33,300**                     |   |   | **42,900** |   |
|                                                                    |   |                           |                           |   |   |   |   |
| **Total                  deferred tax assets**                          |   | **$**                          | **307,000**                    |   | **$** | **155,800** |   |
|                                                                    |   |                           |                           |   |   |   |   |
| **Deferred                  tax liabilities:**                          |   |                           |                           |   |   |   |   |
| **Accumulated                  depreciation**                           |   |                           | **($                  66,900** | **)** |   | **($                  19,700** | **)** |
| **Unrealized                  gains on securities**                     |   |                           |                           |   |   |   |   |
| **available-for-sale**                                                  |   |                           |                      |   |   | **(                  202,900** | **)** |
|                                                                    |   |                           |                           |   |   |   |   |
| **Total                  deferred tax liabilities**                     |   |                           | **(                  66,900**  | **)** |   | **($                  222,600** | **)** |
|                                                                    |   |                           |                           |   |   |   |   |
| **NET                  DEFERRED TAX ASSETS (LIABILITIES)**              |   | **$**                          | **240,100**                    |   |   | **($                  66,800** | **)** |

| **13.** | **EMPLOYEE                BENEFITS** |
|---------|--------------------------------------|

|   | **Cash/Deferred                Profit Sharing Plan** |
|--------|------------------------------------------------------|

|   | **The                Bank maintains a cash/deferred profit sharing plan covering all full                time                employees with one year of service and who are at least twenty-one                years                of age. Participants enter the Plan on the 1st of January or 1st                of July                subsequent to meeting the above                requirements.** |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **The                Bank may contribute up to 10% of the annual compensation of each                eligible                employee. The Bank’s contribution to the plan was $61,100 and $45,895 for                the years ended March 31, 2007 and 2006,                respectively.** |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Retirement                Incentive Plan** |
|--------|----------------------------------------------|

|   | **A                retired officer of the Bank is covered by a Retirement Incentive                Plan that                pays him $1,416.67 per month for ten years from the date of retirement                at                age sixty-five.** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **To                fund the above benefit, the Bank has purchased and is the sole beneficiary                of a life insurance policy on the life of the officer. The cash surrender                value of this policy was $124,412 and $113,990 as of March 31, 2007                and                2006, respectively and is reflected on the consolidated statement                of                financial position as Bank-owned life insurance.** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006 **

| **14.** | **BOARD                OF DIRECTORS’ RETIREMENT                PLAN** |
|---------|-----------------------------------------------------------------------------|

|   | **The                Bank established a Defined Benefit Retirement Plan for the Bank’s Board of                Directors on January 1, 2002. This plan provides a monthly retirement                benefit equal to 4% of the board fees payable as of their retirement                date,                multiplied by their completed years of service, up to a maximum of                80% of                the final fee amount. Directors must complete at least ten years                of                service in order to receive a retirement benefit under the plan.                Director                retirement benefits are payable in equal monthly installments during                the                director’s lifetime, unless the director elects to receive an actuarially                equivalent benefit in the form of an annuity.** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **As                of March 31, 2007, the Company adopted SFAS 158 “Employers’ Accounting for                Defined Benefit and Other Retirement Plans” which requires recognition of                the funded status of these plans in the consolidated statement of                financial condition. At March 31, 2007, the incremental effect of                applying                SFAS 158 on individual line items in the consolidated statement of                financial condition are as                follows:** |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Consolidated                  Statement of Financial Condition****-****Line                  Items**             |   | **Before                  Application of SFAS 158** |           | **Adjustments** |   | **After                  Application of****SFAS                  158** |   |
|--------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|----------------|-----------------|--------|------------------------------------------------------------------------|--------|
| **Deferred                  income taxes**                                                                         |   | **$**                                               | **197,300**    |            | **$**  | **42,800**                                                             |   | **$** | **240,100** |   |
| **Total                  assets**                                                                                  |   |                                                | **11,018,470** |            |   | **42,800**                                                             |   |   | **11,061,270** |   |
| **Pension                  benefit liability**                                                                     |   |                                                | **146,003**    |            |   | **107,096**                                                            |   |   | **253,099** |   |
| **Other                  liabilities (includes pension benefit liability shown                  above)**           |   |                                                | **533,110**    |            |   | **107,096**                                                            |   |   | **640,206** |   |
| **Total                  liabilities**                                                                             |   |                                                | **97,196,121** |            |   | **42,800**                                                             |   |   | **97,238,921** |   |
| **Accumulated                  other comprehensive income (loss) - net of deferred income                  taxes** |   |                                                | **24,635**     |            |   | **(                  64,296**                                          | **)**  |   | **(39,661** | **)** |
| **Total                  stockholders’ equity**                                                              |   |                                                | **13,886,645** |            |   | **(                  64,296**                                          | **)**  |   | **13,822,349** |   |
| **Total                  liabilities and stockholders’ equity**                                              |   |                                                | **11,018,470** |            |   | **42,800**                                                             |   |   | **11,061,270** |   |

|   | **Amounts                recognized is accumulated other comprehensive income (loss) at March                31,                2007 are as follows:** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Net                  loss**           |   | **$**  | **15,654** |   |
|-----------------------------------------|--------|--------|------------|--------|
| **Prior                  service cost** |   |   | **91,442** |   |

|   | **The                estimated net loss, net prior service cost, and net transition obligation                for the pension benefits that will be amortized from accumulated                other                comprehensive income into net periodic pension costs over the next                fiscal                year are $0, $15,192 and $0,                respectively.** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006 **

| **14.** | **BOARD                OF DIRECTORS’ RETIREMENT PLAN                (Continued)** |
|---------|-----------------------------------------------------------------------------------------|

**Net      pension expense was $30,512 and $29,412 for years ended March 31, 2007 and      2006,      respectively. The components of net pension cost are as      follows:**

|                                               |   | **Years                  Ended March 31,** |       |
|----------------------------------------------------|--------|--------------------------------------------|------------|
|                                               |   | **2007**                                   |       | **2006** |   |
| **Service                  cost**                  |   | **$**                                      | **6,904**  |   | **$** | **5,360** |   |
| **Interest                  cost**                 |   |                                       | **10,580** |   |   | **10,604** |   |
| **Return                  on assets**              |   |                                       | **-0-**    |   |   | **-0-** |   |
| **Net                  amortization and deferral** |   |                                       | **13,028** |   |   | **13,448** |   |
|                                               |   |                                       |       |   |   |   |   |
| **Net                  periodic pension cost**     |   | **$**                                      | **30,512** |   | **$** | **29,412** |   |

|   | **The                following table presents a reconciliation of the funded status of                the                defined benefit pension plan at  **March                31, 2007 and                2006:**** |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                  |   | **March                  31,** |        |
|-------------------------------------------------------------------------------------------------------|--------|--------------------------------|-------------|
|                                                                                                  |   | **2007**                       |        | **2006** |   |
| **Accumulated                  benefit obligation**                                                   |   | **$**                          | **226,268** |   | **$** | **144,675** |   |
| **Projected                  benefit obligation**                                                     |   |                           | **253,099** |   |   | **180,100** |   |
| **Fair                  value of plan assets**                                                        |   |                           | **-0-**     |   |   | **-0-** |   |
| **Unfunded                  of plan assets over projected benefit obligation**                        |   |                           | **253,099** |   |   | **180,100** |   |
| **Unrecognized                  net gain**                                                            |   |                           | **N/A**     |   |   | **42,025** |   |
| **Unrecognized                  prior service cost**                                                  |   |                           | **N/A**     |   |   | **(                  106,634** | **)** |
| **Accrued                  pension cost included in the consolidated balance                  sheet** |   | **$**                          | **N/A**     |   | **$** | **115,491** |   |

**The      following table presents a reconciliation of beginning and end balances of      benefit obligations and plan assets:**

|                                                                   |   | **March                  31,** |        |
|------------------------------------------------------------------------|--------|--------------------------------|-------------|
|                                                                   |   | **2007**                       |        | **2006** |   |
| **Change                  in Projected Benefit Obligation**            |   |                           |        |   |   |
| **Projected                  benefit obligation at beginning of year** |   | **$**                          | **180,100** |   | **$** | **173,126** |   |
| **Service                  cost**                                      |   |                           | **6,904**   |   |   | **5,360** |   |
| **Interest                  cost**                                     |   |                           | **10,580**  |   |   | **10,604** |   |
| **Actuarial                  (gain) loss**                             |   |                           | **55,515**  |   |   | **(                  8,990** | **)** |
| **Benefits                  paid**                                     |   |                           | **-0-**     |   |   | **-0-** |   |
| **Projected                  benefit obligation at end of year**       |   | **$**                          | **253,099** |   | **$** | **180,100** |   |
|                                                                   |   |                           |        |   |   |   |   |
| **Change                  in Plan Assets**                             |   |                           |        |   |   |   |   |
| **Fair                  value of plan assets at beginning of year**    |   |                           | **-0-**     |   |   | **-0-** |   |
| **Actual                  return of plan assets**                      |   |                           | **-0-**     |   |   | **-0-** |   |
| **Employer                  contribution**                             |   |                           | **-0-**     |   |   | **-0-** |   |
| **Benefits                  paid**                                     |   |                           | **-0-**     |   |   | **-0-** |   |
| **Fair                  value of plan assets at end of year**          |   |                           | **-0-**     |   |   | **-0-** |   |

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006 **

| **14.** | **BOARD                OF DIRECTORS’ RETIREMENT PLAN                (Continued)** |
|---------|-----------------------------------------------------------------------------------------|

|   | **Actuarial                assumptions used in determining pension amounts are as                follows:** |
|--------|-------------------------------------------------------------------------------------------------------------|

|                                                                                                        |   | **Years                  Ended March 31,** |     |
|-------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|----------|
|                                                                                                        |   | **2007**                                   |     | **2006** |   |
| **Discount                  rate for periodic pension cost**                                                |   |                                       | **6.25** | **%** |   | **5.875** | **%** |
| **Discount                  rate for benefit obligation**                                                   |   |                                       | **3.50** | **%** |   | **3.00** | **%** |
| **Rate                  of increase in compensation levels and social security wage                  base** |   |                                       | **4.00** | **%** |   | **4.00** | **%** |
| **Expected                  long-term rate of return on plan assets**                                       |   |                                       | **N/A**  |   |   | **N/A** |   |

| **15.** | **EMPLOYEE                STOCK OWNERSHIP PLAN                (ESOP)** |
|---------|------------------------------------------------------------------------|

|   | **In                March 2007, the Company established an Employee Stock Ownership Plan                (“ESOP”) covering all eligible employees as defined by the ESOP. The ESOP                is a tax-qualified plan designed to invest primarily in the Company’s                common stock that provides employees with the opportunity to receive                a                funded retirement benefit based primarily on the value of the Company’s                common stock. The Company accounts for its ESOP in accordance with                Statement of Position (“SOP”) 93-6, “Employer’s Accounting for Employee                Stock Ownership Plans,” issued by the Accounting Standards Division of the                American Institute of Certified Public Accountants                (“AICPA”).** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **To                purchase the Company’s common stock, the ESOP borrowed $640, 810 from the                Company to purchase 64,081 shares of the Company’s common stock in the                Company’s initial public offering. The ESOP loan is being repaid                principally from the Bank’s contributions to the ESOP over a period of up                to 20 years. Dividends declared on common stock held by the ESOP                and not                allocated to the account of a participant can be used to repay the                loan.                Compensation expense is recognized in accordance with SOP 93-6. The                number                of shares released annually is based upon the ratio that the current                principal and interest payment bears to the current and all remaining                scheduled future principal and interest                payments.** |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **All                shares that have not been released for allocation to participants                are held                in a suspense account by the ESOP for future allocation as the loan                is                repaid. Unallocated common stock purchased by the ESOP is recorded                as a                reduction of stockholders’ equity at cost. For the year ended March 31,                2007 expense related to this plan was                $0.** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**16.**
**FAIR      VALUES OF FINANCIAL INSTRUMENTS**

|   | **Statement                of Financial Accounting Standards No. 107,*****Disclosures                about Fair Value of Financial Instruments*****,                requires disclosure of fair value information about financial instruments,                whether or not recognized in the statement of financial condition.                In                cases where quoted market prices are not available, fair values are                based                on estimates using present value or other valuation techniques. Those                techniques are significantly affected by the assumptions used, including                the discount rate and estimates of future cash flows. In that regard,                the                derived fair value estimates cannot be substantiated by comparison                to                independent markets and, in many cases, could not be realized in                immediate                settlement of the instruments. Statement No. 107 excludes certain                financial instruments and all nonfinancial instruments from its disclosure                requirements. Accordingly, the aggregate fair value amounts presented                do                not represent the underlying value of the                Company.** |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **The                following methods and assumptions were used by the Company in estimating                its fair value disclosures for financial                instruments:** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006 **

| **16.** | **FAIR                VALUES OF FINANCIAL INSTRUMENTS                (Continued)** |
|---------|------------------------------------------------------------------------------------|

|   | **Cash                and cash equivalents** |
|--------|----------------------------------------------|

|   | **The                carrying amounts reported in the consolidated statements of financial                condition for cash and cash equivalents approximate those assets'                fair                values.** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Investment                securities** |
|--------|------------------------------------------|

|   | **Fair                values for investment securities are based on quoted market prices,                where                available. If quoted market prices are not available, fair values                are                based on quoted market prices of comparable                instruments.** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Loans** |
|--------|-----------|

|   | **Fair                values are estimated for portfolios of loans with similar financial                characteristics. Loans are segregated by type such as residential                mortgage, construction, land and consumer. Each loan category is                further                segmented into fixed and adjustable rate interest terms and by performing                and nonperforming                categories.** |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Fair                value of performing loans is estimated by discounting cash flows                using                estimated market discount rates at which similar loans would be made                to                borrowers and reflect similar credit ratings and interest rate risk                for                the same remaining                maturities.** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Fair                value for significant nonperforming loans is based on recent external                appraisals of collateral securing such loans, adjusted for the timing                of                anticipated cash flows.** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Deposits** |
|--------|--------------|

|   | **The                fair value of deposits with no stated maturity, such as                noninterest-bearing demand deposits, savings, and NOW and money market                accounts, is equal to the amount payable on demand. The fair value                of                certificates of deposit is based on the discounted value of contractual                cash flows. The discount rate is estimated using the rates currently                offered for deposits of similar remaining                maturities.** |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Accrued                Interest** |
|--------|-------------------------------------|

|   | **The                carrying amounts of accrued interest approximate the fair                values.** |
|--------|---------------------------------------------------------------------------------------------------------|

|   | **Advanced                payments by borrowers for taxes and insurance                (escrows)** |
|--------|----------------------------------------------------------------------------------------------------|

|   | **The                carrying amount of escrow accounts approximate fair                value.** |
|--------|--------------------------------------------------------------------------------------------------|

|   | **The                estimated fair values of the Bank's financial instruments as of March                31,                2007 and 2006 are as                follows:** |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                           |   | **March                  31, 2007**  |           | **March                  31, 2006** |   |
|------------------------------------------------|--------|--------------------------------------|----------------|-------------------------------------|--------|
|                                           |   | **Carrying                  Amount** |           | **Fair                  Value**     |   | **Carrying                  Amount** |   | **Fair                  Value** |   |
| **Financial                  Assets:**         |   |                                 |           |                                |   |   |   |   |   |
| **Cash                  and cash equivalents** |   | **$**                                | **8,676,380**  |                                | **$**  | **8,676,380** |   | **$** | **5,553,058** |   | **$** | **5,553,058** |   |
| **Investment                  securities**     |   |                                 | **16,034,118** |                                |   | **16,005,033** |   |   | **20,370,445** |   |   | **20,468,721** |   |
| **Loans                  - net**               |   |                                 | **76,697,739** |                                |   | **76,598,814** |   |   | **41,368,965** |   |   | **40,912,621** |   |
| **Accrued                  interest**          |   |                                 |           |                                |   |   |   |   |   |   |   |   |   |
| **receivable**                                 |   |                                 | **425,872**    |                                |   | **425,872** |   |   | **286,050** |   |   | **286,050** |   |

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006 **

| **16.** | **FAIR                VALUES OF FINANCIAL INSTRUMENTS                (Continued)** |
|---------|------------------------------------------------------------------------------------|

|                                                                       |   | **March                  31, 2007**  |           | **March                  31, 2006** |   |
|----------------------------------------------------------------------------|--------|--------------------------------------|----------------|-------------------------------------|--------|
|                                                                       |   | **Carrying                  Amount** |           | **Fair                  Value**     |   | **Carrying                  Amount** |   | **Fair                  Value** |   |
| **Financial                Liabilities:**                                  |   |                                 |           |                                |   |   |   |   |   |   |   |   |   |
| **Deposits**                                                               |   |                                 | **95,989,275** |                                |   | **96,026,000** |   |   | **66,532,329** |   |   | **66,114,000** |   |
| **Advance                  payments by borrowers for taxes and insurance** |   |                                 | **260,262**    |                                |   | **260,262** |   |   | **226,639** |   |   | **226,639** |   |
| **Accrued                  interest payable**                              |   |                                 | **349,178**    |                                |   | **349,178** |   |   | **47,529** |   |   | **47,529** |   |

|   | **The                carrying amounts in the preceding table are included in the statement                of                financial condition under the applicable captions. The contract or                notional amounts of the Company's financial instruments with                off-balance-sheet risk are disclosed in Note 18. No derivatives were                held                by the Bank for trading purposes. It is not practicable to estimate                the                fair value of Federal Home Loan Bank (FHLB) stock because it is not                marketable. The carrying amount of that investment is reported in                the                consolidated statements of financial                condition.** |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**17.**
**REGULATORY      CAPITAL**

**The      Bank is subject to various regulatory capital requirements administered by      its      primary federal regulator, the Office of Thrift Supervision (OTS). Failure      to      meet the minimum regulatory capital requirements can initiate certain mandatory,      and possible additional discretionary actions by regulators, that if undertaken,      could have a direct material affect on the Bank and the consolidated financial      statements. Under the regulatory capital adequacy guidelines and the regulatory      framework for prompt corrective action, the Bank must meet specific capital      guidelines involving quantitative measures of the Bank’s assets, liabilities,      and certain off-balance-sheet items as calculated under regulatory accounting      practices. The Bank’s capital amounts and classification under the prompt      corrective action guidelines are also subject to qualitative judgments by the      regulators about components, risk weightings, and other      factors.**

|   | **Quantitative                measures established by regulation to ensure capital adequacy require                the                Bank to maintain minimum amounts and ratios of: total risk-based                capital                and Tier I capital to risk-weighted assets (as defined in the                regulations), Tier I capital to adjusted total assets (as defined),                and                tangible capital to adjusted total assets (as defined). Management                believes that, as of March 31, 2007 and 2006, the Bank met all capital                adequacy requirements to which it was                subject.** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **As                of March 31, 2007, the most recent notification from the OTS, the                Bank was                categorized as “well capitalized” under the regulatory framework for                prompt corrective action. To remain categorized as “well capitalized”, the                Bank would have to maintain minimum total risk-based, Tier I risk-based,                Tier I leverage and Tangible Capital to adjusted total assets ratios                as                disclosed in the table below. There are no conditions or events since                the                most recent notification that management believes have changed the                Bank’s                prompt corrective action                category.** |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006 **

**17.**
**REGULATORY      CAPITAL (Continued)**

|   | **The                  Bank’s actual and required capital amounts and ratios as of March 31,                  2007                  and 2006 are as follows:** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                    |   | **Actual** |           | **For                    Capital Adequacy Purposes and to Be Adequately Capitalized Under                    the                    Prompt Corrective Action Provisions** |   |
|-------------------------------------------------------------------------|--------|------------|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                    |   | **Amount** |           | **Ratio**                                                                                                                                                                 |   | **Amount** |   | **Ratio** |   |
| **As                  of March 31, 2007:**                              |   |       |           |                                                                                                                                                                      |   |   |   |   |   |
| **Total                  Risk-Based Capital (to Risk-Weighted Assets)** |   | **$**      | **11,218,000** |                                                                                                                                                                      |   | **13.84** | **%** | **≥$** | ** 6,589,000** |   | **≥** | ** 8.0** | **%** |
| **Tier                  I Capital (to Risk-Weighted Assets)**           |   |       | **10,726,000** |                                                                                                                                                                      |   | **13.25** | **%** | **≥**  | ** 3,294,500** |   | **≥** | ** 4.0** | **%** |
| **Tier                  I Capital (to Adjusted Total Assets)**          |   |       | **10,726,000** |                                                                                                                                                                      |   | **9.81** | **%** | **≥** | ** 4,444,500** |   | **≥** | ** 4.0** | **%** |
| **Tangible                  Capital (to Adjusted Total Assets)**        |   |       | **10,726,000** |                                                                                                                                                                      |   | **9.81** | **%** | **≥** | ** 1,666,700** |   | **≥** | ** 1.5** | **%** |
|                                                                    |   |       |           |                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |
| **As                  of March 31,2006:**                               |   |       |           |                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |
| **Total                  Risk-Based Capital (to Risk-Weighted Assets)** |   | **$**      | **8,083,000**  |                                                                                                                                                                      |   | **18.27** | **%** | **≥$** | ** 3,540,000** |   | **≥** | ** 8.0** | **%** |
| **Tier                  I Capital (to Risk-Weighted Assets)**           |   |       | **7,846,000**  |                                                                                                                                                                      |   | **17.73** | **%** | **≥** | ** 1,769,800** |   | **≥** | ** 4.0** | **%** |
| **Tier                  I Capital (to Adjusted Total Assets)**          |   |       | **7,846,000**  |                                                                                                                                                                      |   | **10.41** | **%** | **≥** | ** 3,013,000** |   | **≥** | ** 4.0** | **%** |
| **Tangible                  Capital (to Adjusted Total Assets)**        |   |       | **7,846,000**  |                                                                                                                                                                      |   | **10.41** | **%** | **≥** | ** 1,130,130** |   | **≥** | ** 1.5** | **%** |

**The      following is a reconciliation of the Bank’s equity as reported under accounting      principles generally accepted in the United States of America (GAAP) to      regulatory capital as of March 31, 2007 and 2006:**

|                                                                              |   | **March                  31,** |                          |
|-----------------------------------------------------------------------------------|--------|--------------------------------|-------------------------------|
|                                                                              |   | **2007**                       |                          | **2006** |   |
| **GAAP                  equity**                                                  |   | **$**                          | **10,686,000**                |   | **$** | **8,115,000** |   |
| **Accumulated                  other comprehensive income - net of income taxes** |   |                           | **(                  40,000** | **)** |   | **(                  269,000** | **)** |
| **TIER                  I CAPITAL**                                               |   |                           | **10,726,000**                |   |   | **7,846,000** |   |
| **Allowance                  for loan losses**                                    |   |                           | **492,000**                   |   |   | **237,000** |   |
|                                                                              |   |                           |                          |   |   |   |   |
| **TOTAL                  RISK BASED CAPITAL**                                     |   | **$**                          | **11,218,000**                |   | **$** | **8,083,000** |   |

|   | **Federal                regulations place certain restrictions on dividends paid by the Bank                to                the Company. The total amount of dividends that may be paid at any                date is                generally limited to the earnings of the Bank year to date plus retained                earnings for the prior two fiscal years, net of any prior capital                distributions. In addition, dividends paid by the Bank to the Company                would be prohibited if the distribution would cause the Bank’s capital to                be reduced below the applicable minimum capital                requirements.** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2007 AND 2006 **

**18.**
**COMMITMENTS      AND CONTINGENCIES **

|   | **In                the normal course of business, the Bank has various outstanding                commitments and contingent liabilities that are not reflected in                the                accompanying consolidated financial statements. The principal commitments                of the Bank are as                follows:** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **The                Bank had outstanding commitments to originate loans as of March 31,                2007                and 2006 as follows:** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|                             |   | **March                    31, 2007** |           |
|----------------------------------|--------|---------------------------------------|----------------|
|                             |   | **Fixed-Rate**                        |           | **Variable-****Rate** |   | **Total** |   |
| **First-mortgage**               |   | **$**                                 | **590,000**    |   | **$** |   |   | **$** | **590,000** |   |
| **Commercial**                   |   |                                  | **10,909,000** |   |   | **2,485,000** |   |   | **13,394,000** |   |
| **Home                  equity** |   |                                  | **347,000**    |   |   | **200,000** |   |   | **547,000** |   |
|                             |   |                                  |           |   |   |   |   |   |   |   |
| **Total**                        |   | **$**                                 | **11,846,000** |   | **$** | **2,685,000** |   | **$** | **14,531,000** |   |

|                             |   | **March                  31, 2006** |        |
|----------------------------------|--------|-------------------------------------|-------------|
|                             |   | **Fixed-Rate**                      |        | **Variable-Rate** |   | **Total** |   |
| **First-mortgage**               |   | **$**                               | **780,000** |   | **$** |   |   | **$** | **780,000** |   |
| **Commercial**                   |   |                                |        |   |   | **3,729,000** |   |   | **3,729,000** |   |
| **Home                  equity** |   |                                | **115,000** |   |   |   |   |   | **115,000** |   |
|                             |   |                                |        |   |   |   |   |   |   |   |
| **Total**                        |   | **$**                               | **895,000** |   | **$** | **3,729,000** |   | **$** | **4,624,000** |   |

**Unadvanced      funds as of March 31, 2007 and 2006 are as follows:**

|                                                   |   | **March                  31,** |          |
|--------------------------------------------------------|--------|--------------------------------|---------------|
|                                                   |   | **2007**                       |          | **2006** |   |
| **Home                  equity line of credit**        |   | **$**                          | **3,720,296** |   | **$** | **3,208,026** |   |
| **Commercial**                                         |   |                           | **1,533,353** |   |   | **3,815** |   |
| **Consumer                  unsecured line of credit** |   |                           | **316,370**   |   |   | **154,216** |   |
|                                                   |   |                           |          |   |   |   |   |
|                                                   |   | **$**                          | **5,570,019** |   | **$** | **3,366,057** |   |

|   | **The                Company from time to time is subject to claims and lawsuits which                arise                primarily in the ordinary course of business, the aggregate effect                of                which, in management’s and legal counsel’s opinion, would not be material                to the consolidated financial condition of the                Company.** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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