**United      States**

**Securities      and Exchange Commission**

**Washington,      D.C. 20549**

**FORM**
**10-K**

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

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

**DELANCO      BANCORP, INC.**

| **United                States**                                                            |   | **36-4519533**                                      |
|---------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|
| (State                or other jurisdiction ofincorporation                or organization) |   | (I.R.S.                Employer Identification No.) |

| **615                Burlington Avenue,****Delanco,                New Jersey** |   | **08075**                 |
|---------------------------------------------------------------------------------|--------|---------------------------|
| (Address                of principal executive offices)                         |   | (Zip                Code) |

| **Common                Stock, par value $0.01 per share** |
|------------------------------------------------------------|
| (Title                of class)                            |

** **

| Large                accelerated filer |  ̈                                                              | Accelerated                filer         |  ̈ |
|----------------------------------------|---------------------------------------------------------------------|------------------------------------------|--------|
| Non-accelerated                filer   |  ̈                (Do not check if a smaller reporting company) | Smaller                reporting company | x      |

**DOCUMENTS      INCORPORATED BY REFERENCE**

**Portions      of the Proxy Statement for the 2008 Annual Meeting of Stockholders are      incorporated by reference in Part III of this Form 10-K.**

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**INDEX**

|                         |                                                                                                                                                 | Page          |
|------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|---------------|
| Part                  I      |
|                         |                                                                                                                                                 |          |
| Item                  1.     | Business                                                                                                                                             | 2   |
| Item                  1A.    | Risk                  Factors                                                                                                                        | 13            |
| Item                  1B.    | Unresolved                  Staff Comments                                                                                                           | 17            |
| Item                  2.     | Properties                                                                                                                                           | 17            |
| Item                  3.     | Legal                  Proceedings                                                                                                                   | 17            |
| Item                  4.     | Submission                  of Matters to a Vote of Security Holders                                                                                 | 17            |
|                         |                                                                                                                                                 |          |
| Part                  II     |
|                         |                                                                                                                                                 |          |
| Item                  5.     | Market                  for Registrant’s Common Equity, Related Stockholder Matters and Issuer                  Purchases of Equity Securities | 18            |
| Item                  6.     | Selected                  Financial Data                                                                                                             | 19            |
| Item                  7.     | Management’s                  Discussion and Analysis of Financial Condition and Results of                  Operations                        | 20            |
| Item                  7A.    | Quantitative                  and Qualitative Disclosures About Market Risk                                                                          | 35            |
| Item                  8.     | Financial                  Statements and Supplementary Data                                                                                         | 35            |
| Item                  9.     | Changes                  in and Disagreements With Accountants on Accounting and Financial                  Disclosure                               | 35            |
| Item 9A(T).   | Controls                  and Procedures                                                                                                             | 35            |
| Item                  9B.    | Other                  Information                                                                                                                   | 35            |
|                         |                                                                                                                                                 |          |
| Part                  III    |
|                         |                                                                                                                                                 |          |
| Item                  10.    | Directors,                  Executive Officers and Corporate Governance                                                                              | 36            |
| Item                  11.    | Executive                  Compensation                                                                                                              | 37            |
| Item                  12.    | Security                  Ownership of Certain Beneficial Owners and Management and Related                  Stockholder Matters                     | 37            |
| Item                  13.    | Certain                  Relationships and Related Transactions, and Director                  Independence                                          | 37            |
| Item                  14.    | Principal                  Accounting Fees and Services                                                                                              | 38            |
|                         |                                                                                                                                                 |          |
| Part                  IV     |
|                         |                                                                                                                                                 |          |
| Item                  15.    | Exhibits                  and Financial Statement Schedules                                                                                          | 38            |
|                         |                                                                                                                                                 |          |
| 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.** | **BUSINESS** |
|--------------------------|--------------|

**General**

**Market      Area**

**Competition**

----

**Lending      Activities**

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

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

----

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

*“Regulation      and Supervision-Supervisory Agreement”*

***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**

**Regulation      and Supervision**

**General**

**Supervisory      Agreement**

----

|   | • | To                refrain from making, investing in, purchasing or otherwise modifying                any                commercial loan without the prior written non-objection of the                OTS. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | By                December 31, 2007, to review each commercial loan file with an outstanding                principal balance that equals or exceeds $250,000, and by February                29,                2008 for all other commercial loans, to determine whether all required                documentation has been obtained. All missing or incomplete documentation                must be obtained by January 31, 2008 for all commercial loans with                an                outstanding principal balance that equals or exceeds $250,000 and                by                February 29, 2008 for all other commercial                loans. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | By                January 31, 2008, to implement a credit administration process utilizing                an electronic system and checklists to facilitate ongoing reviews                of the                financial condition of borrowers and guarantors. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | To                evaluate, on a semiannually basis, the effectiveness of the Bank’s credit                administration function. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | To                engage an independent, third-party service provider to conduct an                internal                loan review of the Bank’s lending operations on a quarterly basis. As part                of the internal loan review program, the Bank must develop and implement                a                risk rating system for all loans. On a quarterly basis, the Board’s Audit                Committee must provide the Board with, and the Board must review                and                evaluate, a written report documenting the findings and recommendations                relating to the internal loan                reviews. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | By                December 31, 2007, to adopt and implement a written program which                satisfies certain OTS regulations and interagency guidelines regarding                the                identification and classification of problem assets. The program                must (i)                provide for and require the maintenance of an adequate allowance                for loan                and lease losses; (ii) ensure the prompt charge-off of loans when                proper;                and (iii) require the timely and accurate reporting of criticized                assets,                the allowance for loan and lease losses and charge-offs in the Bank’s                Thrift Financial Reports (TFRs). |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | • | To                prepare TFRs accurately and in accordance with applicable                instructions. |
|--|---------|----------------------------------------------------------------------------------------------------------|

|   | • | To                ensure that at the end of each quarter, the Bank’s assets have not                increased by an amount greater than 2.5% of the Bank’s total assets at the                end of the prior quarter. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | To                notify and receive the non-objection of the OTS before adding or                replacing                any Board member, employing any person as a senior executive officer                or                entering into or revising any contractual arrangement with any director                or                senior executive officer. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**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              1A.** | **RISK                FACTORS**  |
|---------------------------|---------------------------------------|

**We      had operating losses during the last two fiscal years. Continued losses may      have      an adverse impact on our stock price.**

**We      are a party to a Supervisory Agreement with the Office of Thrift Supervision      and      our failure to comply with that Agreement may result in further regulatory      enforcement actions, including restrictions on our operations.**

*“Regulation      and Supervision—Supervisory Agreement.”*

**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.**

*“Regulation      and Supervision—Supervisory Agreement”*

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

**Changes      in interest rates may hurt our earnings and asset value.**

*Management’s      Discussion and Analysis of Financial Condition and Results of Operations—Risk      Management—Interest Rate Risk Management*

**Changes      in economic conditions could cause an increase in delinquencies and      non-performing assets, including loan charge-offs, which could hurt our income      and growth.**

*“Management’s      Discussion and Analysis of Financial Condition and Results of      Operations*
*—*
*Risk      Management.”*

----

**Our      allowance for loan losses may be inadequate, which could hurt our      earnings.**

*“Allowance      for Loan Losses” *
*“Critical      Accounting Policies*
*Management’s      Discussion and Analysis of Financial Condition and Results of      Operations*
*”*

**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. **

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

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

----

| **ITEM              1B.** | **UNRESOLVED                STAFF COMMENTS**  |
|---------------------------|----------------------------------------------------|

| **ITEM              2.** | **PROPERTIES** |
|--------------------------|----------------|

| **ITEM              3.** | **LEGAL                PROCEEDINGS** |
|--------------------------|--------------------------------------|

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

----

**PART      II**

| **ITEM              5.** | **MARKET                FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER                PURCHASES OF EQUITY                SECURITIES** |
|--------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                          |   | **High** |   | **Low** |   |
|-------------------------------|--------|----------|--------|---------|--------|
|                          |   |     |   |    |   |
| 2007:                         |   |     |   |    |   |
|                          |   |     |   |    |   |
| First                Quarter  |   | $        | 10.25  |    | $      | 8.50 |   |
| Second                Quarter |   |     | 9.40   |    |   | 8.41 |   |
| Third                Quarter  |   |     | 9.00   |    |   | 6.40 |   |
| Fourth                Quarter |   |     | 7.50   |    |   | 6.15 |   |

----

| **ITEM              6.** | **SELECTED                FINANCIAL DATA** |
|--------------------------|--------------------------------------------|

|                                                               |   | **Years Ended March 31,** |    |
|--------------------------------------------------------------------|--------|------------------------------------------|---------|
| (Dollars                in thousands)                              |   | **2008**                                 |    | **2007** |   | **2006** |   |
|                                                               |   |                                     |    |   |   |   |   |
| **Financial                Condition Data:**                       |   |                                     |    |   |   |   |   |
| Total                assets                                        |   | $                                        | 131,530 |   | $ | 111,061 |   | $ | 75,481 |   |
| Investment                securities                               |   |                                     | 12,565  |   |   | 16,075 |   |   | 20,842 |   |
| Loans                receivable, net                               |   |                                     | 96,346  |   |   | 76,498 |   |   | 41,369 |   |
| Deposits                                                           |   |                                     | 117,640 |   |   | 95,989 |   |   | 66,532 |   |
| Borrowings                                                         |   |                                     | ─ |   |   | ─ |   |   | — |   |
| Total                stockholders’ equity                    |   | $                                        | 12,757  |   | $ | 13,822 |   | $ | 8,222 |   |
|                                                               |   |                                     |    |   |   |   |   |   |   |   |
| **Operating                Data:**                                 |   |                                     |    |   |   |   |   |   |   |   |
| Interest                income                                     |   | $                                        | 7,340   |   | $ | 4,766 |   | $ | 3,389 |   |
| Interest                expense                                    |   |                                     | 4,053   |   |   | 2,534 |   |   | 1,323 |   |
| Net                interest income                                 |   |                                     | 3,287   |   |   | 2,232 |   |   | 2,066 |   |
| Provision                for loan losses                           |   |                                     | 1,450   |   |   | 255 |   |   | 10 |   |
| Net                interest income after provision for loan losses |   |                                     | 1,837   |   |   | 1,976 |   |   | 2,056 |   |
| Noninterest                income                                  |   |                                     | 229     |   |   | 622 |   |   | 473 |   |
| Noninterest                expenses                                |   |                                     | 3,485   |   |   | 2,862 |   |   | 2,138 |   |
| Income                before taxes                                 |   |                                     | (1,419  | ) |   | (264 | ) |   | 391 |   |
| Income                tax expense                                  |   |                                     | (352    | ) |   | (109 | ) |   | 75 |   |
| Net                income                                          |   | $                                        | (1,067  | ) | $ | (155 | ) | $ | 316 |   |

----

|                                                                                                          |   | **Years Ended March 31,** |   |
|---------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|--------|
|                                                                                                          |   | **2008**                                 |   | **2007** |   | **2006** |   |
| **Performance Ratios:**                                                                                  |   |                                     |   |   |   |   |   |
| Return                  on average assets                                                                     |   |                                     | (0.85  | )% |   | (0.17 | )% |   | 0.44 | % |
| Return                  on average equity                                                                     |   |                                     | (7.93  | ) |   | (1.83 | ) |   | 4.03 |   |
| Interest                  rate spread (1)                                                                     |   |                                     | 2.53   |   |   | 2.64 |   |   | 2.98 |   |
| Net                  interest margin (2)                                                                      |   |                                     | 2.84   |   |   | 2.76 |   |   | 3.14 |   |
| Noninterest                  expense to average assets                                                        |   |                                     | 2.78   |   |   | 3.16 |   |   | 2.97 |   |
| Efficiency                  ratio (3)                                                                         |   |                                     | 99.12  |   |   | 100.32 |   |   | 84.25 |   |
| Average                  interest-earning assets to average interest-bearing                  liabilities     |   |                                     | 108.88 |   |   | 104.00 |   |   | 108.43 |   |
| Average                  equity to average assets                                                             |   |                                     | 10.73  |   |   | 9.40 |   |   | 10.90 |   |
|                                                                                                          |   |                                     |   |   |   |   |   |   |   |   |
| **Capital                  Ratios (4):**                                                                      |   |                                     |   |   |   |   |   |   |   |   |
| Tangible                  capital                                                                             |   |                                     | 7.29   |   |   | 9.66 |   |   | 10.41 |   |
| Core                  capital                                                                                 |   |                                     | 7.29   |   |   | 9.66 |   |   | 10.41 |   |
| Total                  risk-based capital                                                                     |   |                                     | 9.46   |   |   | 13.62 |   |   | 18.27 |   |
|                                                                                                          |   |                                     |   |   |   |   |   |   |   |   |
| **Asset                  Quality Ratios:**                                                                    |   |                                     |   |   |   |   |   |   |   |   |
| Allowance                  for loan losses as a percent of total loans                                        |   |                                     | 1.37   |   |   | 0.63 |   |   | 0.57 |   |
| Allowance                  for loan losses as a percent of nonperforming loans                                |   |                                     | 76.83  |   |   | 87.23 |   |   | 53.98 |   |
| Net                  charge-offs (recoveries) to average outstanding loans during                  the period |   |                                     | 0.64   |   |   | ─ |   |   | — |   |
| Non-performing                  loans as a percent of total loans                                             |   |                                     | 1.78   |   |   | 0.72 |   |   | 1.05 |   |

| (1) | Represents                the difference between the weighted average yield on average                interest-earning assets and the weighted average cost of interest-bearing                liabilities. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Represents                net interest income as a percent of average interest-earning                assets. |
|-----|---------------------------------------------------------------------------------------------------------------|

| (3) | Represents                noninterest expense divided by the sum of net interest income and                noninterest income. |
|-----|--------------------------------------------------------------------------------------------------------------------------------|

| (4) | Capital                ratios are for Delanco Federal Savings                Bank. |
|-----|------------------------------------------------------------------------------------|

| **ITEM              7.** | **MANAGEMENT’S                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF                OPERATION** |
|--------------------------|------------------------------------------------------------------------------------------------------------------------------|

**Overview**

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

----

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

***Expenses.***

**Critical      Accounting Policies**

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

----

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

**Balance      Sheet Analysis**

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

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

**Table      1: Loan Portfolio Analysis**

|                                            |   | **2008**   |   |        | **2007** |   |       | **2006** |        |
|-------------------------------------------------|--------|------------|--------|-------------|----------|--------|------------|----------|-------------|
| March                31, (Dollars in thousands) |   | **Amount** |   | **Percent** |     |   | **Amount** |     | **Percent** |   |   | **Amount** |   | **Percent** |   |
|                                            |   |       |   |        |     |   |       |     |        |   |   |   |   |   |   |
| Real                estate loans:               |   |       |   |        |     |   |       |     |        |   |   |   |   |   |   |
| Residential                                     |   | $          | 37,183 |        |     | 37.6   | %          |     | $           | 24,112 |   |   | 30.9 | %  |   | $ | 17,116 |   |   | 41.0 | % |
| Commercial                and multi-family      |   |       | 23,974 |        |     | 24.2   |       |     |        | 12,681 |   |   | 16.3 |   |   |   | 5,669 |   |   | 13.5 |   |
| Construction                                    |   |       | 3,121  |        |     | 3.2    |       |     |        | 2,061 |   |   | 2.6 |   |   |   | 205 |   |   | 0.5 |   |
| Total                real estate loans          |   |       | 64,278 |        |     | 65.0   |       |     |        | 38,854 |   |   | 49.8 |   |   |   | 22,990 |   |   | 55.0 |   |
| Commercial                loans                 |   |       | 8,214  |        |     | 8.3    |       |     |        | 15,124 |   |   | 19.4 |   |   |   | 4,162 |   |   | 10.0 |   |
| Consumer                loans                   |   |       | 26,377 |        |     | 26.7   |       |     |        | 24,066 |   |   | 30.8 |   |   |   | 14,621 |   |   | 35.0 |   |
| Total                loans                      |   |       | 98,869 |        |     | 100.0  | %          |     |        | 78,044 |   |   | 100.0 | % |   |   | 41,773 |   |   | 100.0 | % |
| Loans                in process                 |   |       | (1,032 | )           |     |   |       |     |        | (916 | ) |   |   |   |   |   | (135 | ) |   |   |   |
| Net                deferred loan fees           |   |       | (138   | )           |     |   |       |     |        | (138 | ) |   |   |   |   |   | (32 | ) |   |   |   |
| Allowance                for losses             |   |       | (1,353 | )           |     |   |       |     |        | (492 | ) |   |   |   |   |   | (237 | ) |   |   |   |
| Loans,                net                       |   | $          | 96,346 |        |     |   |       |     | $           | 76,498 |   |   |   |   |   | $ | 41,369 |   |   |   |   |

** **

----

**Table 2: Contractual Maturities and Interest Rate      Sensitivity **

| March                31, 2008 (Dollars in thousands)              |   | **Real Estate****Loans** |   | **CommercialLoans** |   | **Consumer****Loans** |   | **Total****Loans** |   |
|-------------------------------------------------------------------|--------|-------------------------------|--------|---------------------|--------|-----------------------|--------|--------------------|--------|
|                                                              |   |                          |   |                |   |                  |   |               |   |
| Amounts                due in:                                    |   |                          |   |                |   |                  |   |               |   |
| One                year or less                                   |   | $                             | 9,782  |                | $      | 1,709                 |   | $                  | 2,360  |   | $ | 13,851 |   |
| More                than one to five years                        |   |                          | 24,154 |                |   | 5,885                 |   |               | 16,640 |   |   | 46,679 |   |
| More                than five years                               |   |                          | 30,342 |                |   | 620                   |   |               | 7,377  |   |   | 38,339 |   |
| Total                                                             |   | $                             | 64,278 |                | $      | 8,214                 |   | $                  | 26,377 |   | $ | 98,869 |   |
|                                                              |   |                          |   |                |   |                  |   |               |   |   |   |   |   |
| Interest                rate terms on amounts due after one year: |   |                          |   |                |   |                  |   |               |   |   |   |   |   |
| Fixed-rate                loans                                   |   | $                             | 52,896 |                | $      | ─               |   | $                  | 20,359 |   | $ | 73,255 |   |
| Adjustable-rate                loans                              |   |                          | 1,600  |                |   | 6,505                 |   |               | 3,658  |   |   | 11,763 |   |
| Total                                                             |   | $                             | 54,496 |                | $      | 6,505                 |   | $                  | 24,017 |   | $ | 85,018 |   |

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

**Table      3: Investment      Securities**

|                                                      |   | **2008**              |    | **2007**          |   | **2006**              |   |
|-----------------------------------------------------------|--------|-----------------------|---------|-------------------|--------|-----------------------|--------|
| March                31, (Dollars in thousands)           |   | **Amortized****Cost** |    | **Fair****Value** |   | **Amortized****Cost** |   | **Fair****Value** |   | **Amortized****Cost** |   | **Fair****Value** |   |
|                                                      |   |                  |    |              |   |                  |   |   |   |   |   |   |   |
| Securities                available for sale:             |   |                  |    |              |   |                  |   |   |   |   |   |   |   |
| Mutual                funds                               |   | $                     | 234     |              | $      | 278                   |   | $ | 212 |   | $ | 253 |   | $ | 196 |   | $ | 240 |   |
| Equity                securities                          |   |                  | — |              |   | —               |   |   | — |   |   | — |   |   | 7 |   |   | 434 |   |
| Total                available for sale                   |   |                  | 234     |              |   | 278                   |   |   | 212 |   |   | 253 |   |   | 203 |   |   | 674 |   |
|                                                      |   |                  |    |              |   |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities                held to maturity:               |   |                  |    |              |   |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Government                sponsored enterprise securities |   |                  | 3,500   |              |   | 3,513                 |   |   | 4,000 |   |   | 3,942 |   |   | 5,500 |   |   | 5,352 |   |
| Mortgage-backed                securities                 |   |                  | 8,787   |              |   | 9,015                 |   |   | 11,822 |   |   | 11,810 |   |   | 14,668 |   |   | 14,442 |   |
| Total                held to maturity                     |   |                  | 12,287  |              |   | 12,528                |   |   | 15,822 |   |   | 15,752 |   |   | 20,168 |   |   | 19,794 |   |
| Total                                                     |   | $                     | 12,521  |              | $      | 12,806                |   | $ | 16,034 |   | $ | 16,005 |   | $ | 20,371 |   | $ | 20,468 |   |

----

**Table      4: Investment Maturities      Schedule**

|                                                                     |   | **One Year or Less** |    | **More than OneYear to Five Years** |   | **More than FiveYears to Ten Years** |    | **More than TenYears** |    | **Total**                         |   |
|--------------------------------------------------------------------------|--------|-------------------------------------|---------|--------------------------------------------------------------|--------|---------------------------------------------------------------|---------|----------------------------------|---------|-----------------------------------|--------|
|  March                31, 2008(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                                              |   |                                | ─ |                                                         |   | ─                                                       |    |                             | ─ |                              |   | ─ |   |   | ─ |   |   | ─ |   |   | ─ |   |   | ─ |   | $ | 278 |   |   | ─ |   |
| Equity                securities                                         |   |                                | ─ |                                                         |   | ─                                                       |    |                             | ─ |                              |   | ─ |   |   | ─ |   |   | ─ |   |   | ─ |   |   | ─ |   |   | ─ |   |   | ─ |   |
| Total                available for sale                                  |   |                                | ─ |                                                         |   | ─                                                       |    |                             | ─ |                              |   | ─ |   |   | ─ |   |   | ─ |   |   | ─ |   |   | ─ |   |   | 278 |   |   | ─ |   |
|                                                                     |   |                                |    |                                                         |   |                                                          |    |                             |    |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities                held to maturity:                              |   |                                |    |                                                         |   |                                                          |    |                             |    |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Government                sponsored enterprise securities           |   | $                                   | 1,000   |                                                         |   | 3.15                                                          | %       | $                                | 2,000   |                              |   | 5.01 | % | $ | 500 |   |   | 5.10 | % |   | ─ |   |   | ─ |   |   | 3,500 |   |   | 4.49 | % |
| Mortgage-backed                securities                                |   |                                | 80      |                                                         |   | 5.02                                                          |    |                             | 5,602   |                              |   | 5.24 |   |   | 944 |   |   | 4.43 |   | $ | 2,161 |   |   | 4.34 | % |   | 8,787 |   |   | 4.93 |   |
| Total                held to maturity                                    |   |                                | 1,080   |                                                         |   | 3.29                                                          |    |                             | 7,602   |                              |   | 5.18 |   |   | 1,444 |   |   | 4.66 |   |   | 2,161 |   |   | 4.34 |   |   | 12,287 |   |   | 4.81 |   |
| Total                                                                    |   | $                                   | 1,080   |                                                         |   | 3.29                                                          | %  | $                                | 7,602   |                              |   | 5.18 | % | $ | 1,444 |   |   | 4.66 | % | $ | 2,161 |   |   | 4.34 | % | $ | 12,565 |   |   | 4.81 | % |

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

**Table      5: Deposits**

|                                               |   | **2008**   |    | **2007**    |   | **2006**   |    |
|----------------------------------------------------|--------|------------|---------|-------------|--------|------------|---------|
| March                31, (Dollars in thousands)    |   | **Amount** |    | **Percent** |   | **Amount** |    | **Percent** |   | **Amount** |   | **Percent** |   |
|                                               |   |       |    |        |   |       |    |   |   |   |   |   |   |
| Noninterest-bearing                demand deposits |   | $          | 4,860   |        |   | 4.1        | %  | $ | 3,372 |   |   | 3.5 | %  | $ | 2,450 |   |   | 3.7 | % |
| Interest-bearing                demand deposits    |   |       | 7,839   |        |   | 6.7        |    |   | 7,930 |   |   | 8.3 |   |   | 7,387 |   |   | 11.1 |   |
| Savings                and money market accounts   |   |       | 35,369  |        |   | 30.1       |    |   | 33,163 |   |   | 34.5 |   |   | 25,186 |   |   | 37.9 |   |
| Certificates                of deposit             |   |       | 69,572  |        |   | 59.1       |    |   | 51,524 |   |   | 53.7 |   |   | 31,509 |   |   | 47.3 |   |
| Total                                              |   | $          | 117,640 |        |   | 100.0      | %       | $ | 95,989 |   |   | 100.0 | % | $ | 66,532 |   |   | 100.0 | % |

**Table      6: Time Deposit Maturities of $100,000 or      more**

| March                31, 2008 (Dollars in thousands) |   | **Certificates****of                Deposit** |    |
|------------------------------------------------------|--------|-----------------------------------------------|---------|
|                                                 |   |                                          |    |
| **Maturity                Period**                   |   |                                          |    |
| Three                months or less                  |   | $                                             | ─ |   |
| Over                three through six months         |   |                                          | 672     |   |
| Over                six through twelve months        |   |                                          | 861     |   |
| Over                twelve months                    |   |                                          | 520     |   |
| Total                                                |   | $                                             | 2,053   |   |

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

----

**Table      7: Borrowings **

| March                31, (Dollars in thousands)                               |   | **2008** |    | **2007** |   | **2006** |   |
|-------------------------------------------------------------------------------|--------|----------|---------|----------|--------|----------|--------|
|                                                                          |   |     |    |     |   |     |   |
| Maximum                amount outstanding at any month end during the period: |   |     |    |     |   |     |   |
| FHLB                advances                                                  |   | $        | 750     |     | $      | 2,800    |   |   | — |   |
| Average                amount outstanding during the period (1):              |   |     |    |     |   |     |   |   |   |   |
| FHLB                advances                                                  |   | $        | 104     |     | $      | 658      |   |   | — |   |
| Weighted                average interest rate during the period (1):          |   |     |    |     |   |     |   |   |   |   |
| FHLB                advances                                                  |   |     | 5.19    | %        |   | 5.62     | %      |   | — |   |
| 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, there were frequently no month-end                balances. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Results      of Operations for the Years Ended March 31, 2008 and 2007**

***Financial      Highlights.***

**Table 8: Summary Income      Statements**

| Year                Ended March 31, (Dollars in thousands) |   | **2008** |   | **2007** |   | **2008 v. 2007** |   | **% Change** |   |
|------------------------------------------------------------|--------|----------|--------|----------|--------|----------------------------|--------|-------------------|--------|
|                                                       |   |     |   |     |   |                       |   |              |   |
| Net                interest income                         |   | $        | 3,287  |     | $      | 2,232                      |   | $                 | 1,055  |   |   | 47.3 | % |
| Provision                for loan losses                   |   |     | 1,450  |     |   | 255                        |   |              | 1,195  |   |   | 468.6 |   |
| Noninterest                income                          |   |     | 229    |     |   | 622                        |   |              | (393   | ) |   | (63.2 | ) |
| Noninterest                expenses                        |   |     | 3,485  |     |   | 2,862                      |   |              | 623    |   |   | 21.8 |   |
| Net                income                                  |   |     | (1,067 | )        |   | (155                       | )      |              | (912   | ) |   | (588.4 | ) |
|                                                       |   |     |   |     |   |                       |   |              |   |   |   |   |   |
| Return                on average equity                    |   |     | (7.93) | %        |   | (1.83                      | )%     |              |   |   |   |   |   |
| Return                on average assets                    |   |     | (0.85) | %        |   | (0.17                      | )%     |              |   |   |   |   |   |

***Net      Interest Income.***

----

**Table      9: Analysis of Net Interest      Income**

| Year                Ended March 31, (Dollars in thousands) |   | **2008** |    | **2007** |   | **2008 v. 2007** |   | **% Change** |   |
|------------------------------------------------------------|--------|----------|---------|----------|--------|----------------------------|--------|-------------------|--------|
|                                                       |   |     |    |     |   |                       |   |              |   |
| **Components                of net interest income**       |   |     |    |     |   |                       |   |              |   |
| Loans                                                      |   | $        | 6,298   |     | $      | 3,721                      |   | $                 | 2,577  |   |   | 69.3 | % |
| Investment                securities                       |   |     | 1,042   |     |   | 1,045                      |   |              | (3     | ) |   | (0.3 | ) |
| Total                interest income                       |   |     | 7,340   |     |   | 4,766                      |   |              | 2,574  |   |   | 54.0 |   |
| Deposits                                                   |   |     | 4,048   |     |   | 2,497                      |   |              | 1,551  |   |   | 62.1 |   |
| Borrowings                                                 |   |     | 5       |     |   | 37                         |   |              | (32    | ) |   | (86.5 | ) |
| Total                interest expense                      |   |     | 4,053   |     |   | 2,534                      |   |              | 1,519  |   |   | 59.9 |   |
| Net                interest income                         |   |     | 3,287   |     |   | 2,232                      |   |              | 1,055  |   |   | 47.3 |   |
| **Average                yields and rates paid**           |   |     |    |     |   |                       |   |              |   |   |   |   |   |
| Interest-earning                assets                     |   |     | 6.34    | %        |   | 5.90                       | %      |              | 44     | bp  |   |   |   |
| Interest-bearing                liabilities                |   |     | 3.81    |     |   | 3.26                       |   |              | 55     |   |   |   |   |
| Interest                rate spread                        |   |     | 2.53    |     |   | 2.64                       |   |              | (11    | ) |   |   |   |
| Net                interest margin                         |   |     | 2.84    |     |   | 2.76                       |   |              | 8      |   |   |   |   |
| **Average                balances**                        |   |     |    |     |   |                       |   |              |   |   |   |   |   |
| Loans                                                      |   | $        | 92,667  |     | $      | 58,474                     |   | $                 | 34,193 |   |   | 58.5 |   |
| Investment                securities                       |   |     | 14,295  |     |   | 18,583                     |   |              | (4,288 | ) |   | (23.1 | ) |
| Earning                assets                              |   |     | 115,794 |     |   | 80,728                     |   |              | 35,066 |   |   | 43.4 |   |
| Interest-bearing                deposits                   |   |     | 106,244 |     |   | 76,964                     |   |              | 29,280 |   |   | 38.0 |   |

***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)   |   | **2008** |    | **2007** |   | **$ Change** |   | **% Change** |   |
|--------------------------------------------------------------|--------|----------|---------|----------|--------|-------------------|--------|-------------------|--------|
|                                                         |   |     |    |     |   |              |   |              |   |
| Gain                on sale of securities                    |   | $        | ─ |     | $      | 451               |   | $                 | (451   | ) |   | (100.0 | )% |
| Net                gain on sale of non-marketable securities |   |     | ─ |     |   | 19                |   |              | (19    | ) |   | (100.0 | ) |
| Service                charges                               |   |     | 134     |     |   | 85                |   |              | 49     |   |   | 57.6 |   |
| Rental                income                                 |   |     | 22      |     |   | 12                |   |              | 10     |   |   | 83.3 |   |
| Income                from bank owned life insurance         |   |     | ─ |     |   | 10                |   |              | (10    | ) |   | (100.0 | ) |
| Other                                                        |   |     | 73      |     |   | 45                |   |              | 28     |   |   | 62.2 |   |
| Total                                                        |   | $        | 229     |     | $      | 622               |   | $                 | (393   | ) |   | 63.2 | % |

----

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

**Table      11: Noninterest Expense      Summary**

| Year                Ended March 31, (Dollars in thousands) |   | **2008** |   | **2007** |   | **$ Change** |   | **% Change** |   |
|------------------------------------------------------------|--------|----------|--------|----------|--------|-------------------|--------|-------------------|--------|
|                                                       |   |     |   |     |   |              |   |              |   |
| Salaries                and employee benefits              |   | $        | 1,810  |     | $      | 1,603             |   | $                 | 207    |   |   | 12.9 | % |
| Advertising                                                |   |     | 61     |     |   | 50                |   |              | 11     |   |   | 22.0 |   |
| Office                supplies, telephone and postage      |   |     | 129    |     |   | 114               |   |              | 15     |   |   | 13.2 |   |
| Net                occupancy expense                       |   |     | 686    |     |   | 437               |   |              | 249    |   |   | 57.0 |   |
| Federal                insurance premiums                  |   |     | 29     |     |   | 8                 |   |              | 21     |   |   | 262.5 |   |
| Data                processing expenses                    |   |     | 126    |     |   | 135               |   |              | (9     | ) |   | (6.7 | ) |
| MAC                expenses                                |   |     | 61     |     |   | 53                |   |              | 8      |   |   | 15.1 |   |
| Bank                charges and fees                       |   |     | 55     |     |   | 54                |   |              | 1      |   |   | 1.9 |   |
| Insurance                and surety bond premiums          |   |     | 57     |     |   | 45                |   |              | 12     |   |   | 26.7 |   |
| Dues                and subscriptions                      |   |     | 79     |     |   | 37                |   |              | 42     |   |   | 113.5 |   |
| Professional                fees                           |   |     | 134    |     |   | 92                |   |              | 42     |   |   | 45.7 |   |
| On-line                banking expenses                    |   |     | 91     |     |   | 58                |   |              | 33     |   |   | 56.9 |   |
| Other                                                      |   |     | 167    |     |   | 176               |   |              | (9     | ) |   | (5.1 | ) |
| Total                                                      |   | $        | 3,485  |     | $      | 2,862             |   | $                 | 623    |   |   | 21.8 | % |

***Income      Tax Credit.***
** **

----

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

**Table      12: Average Balance Tables**

|                                                                                                  |   | **2008**               |    | **2007**                         |   |
|-------------------------------------------------------------------------------------------------------|--------|------------------------|---------|----------------------------------|--------|
| 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                                                                                                 |   | $                      | 92,667  |                             | $      | 6,298 |   |   | 6.80 | %  | $ | 58,474 |   | $ | 3,721 |   |   | 6.36 | % |
| Investment                securities                                                                  |   |                   | 14,295  |                             |   | 765 |   |   | 5.35 |   |   | 18,583 |   |   | 877 |   |   | 4.72 |   |
| Other                interest-earning assets                                                          |   |                   | 8,832   |                             |   | 277 |   |   | 3.14 |   |   | 3,671 |   |   | 168 |   |   | 4.58 |   |
| Total                interest-earning assets                                                          |   |                   | 115,794 |                             |   | 7,340 |   |   | 6.34 |   |   | 80,728 |   |   | 4,766 |   |   | 5.90 |   |
|                                                                                                  |   |                   |    |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-earning                assets                                                             |   |                   | 9,532   |                             |   |   |   |   |   |   |   | 9,752 |   |   |   |   |   |   |   |
| Total                assets                                                                           |   | $                      | 125,326 |                             |   |   |   |   |   |   | $ | 90,480 |   |   |   |   |   |   |   |
|                                                                                                  |   |                   |    |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                and equity:**                                                            |   |                   |    |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                liabilities:                                                          |   |                   |    |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                demand deposits                                                       |   | $                      | 7,926   |                             |   | 50 |   |   | 0.63 |   | $ | 6,844 |   |   | 42 |   |   | 0.61 |   |
| Savings                and money market accounts                                                      |   |                   | 35,801  |                             |   | 978 |   |   | 2.73 |   |   | 29,795 |   |   | 732 |   |   | 2.46 |   |
| Certificates                of deposit                                                                |   |                   | 62,517  |                             |   | 3,020 |   |   | 4.83 |   |   | 40,325 |   |   | 1,723 |   |   | 4.27 |   |
| Total                interest-bearing deposits                                                        |   |                   | 106,244 |                             |   | 4,048 |   |   | 3.81 |   |   | 76,964 |   |   | 2,497 |   |   | 3.24 |   |
|                                                                                                  |   |                   |    |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| FHLB                advances                                                                          |   |                   | 104     |                             |   | 5 |   |   | 4.81 |   |   | 658 |   |   | 37 |   |   | 5.62 |   |
| Total                interest-bearing liabilities                                                     |   |                   | 106,348 |                             |   | 4,053 |   |   | 3.81 |   |   | 77,622 |   |   | 2,534 |   |   | 3.26 |   |
|                                                                                                  |   |                   |    |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing                demand deposits                                                    |   |                   | 4,370   |                             |   |   |   |   |   |   |   | 3,141 |   |   |   |   |   |   |   |
| Other                noninterest-bearing liabilities                                                  |   |                   | 1,390   |                             |   |   |   |   |   |   |   | 1,243 |   |   |   |   |   |   |   |
| Total                liabilities                                                                      |   |                   | 112,108 |                             |   |   |   |   |   |   |   | 82,006 |   |   |   |   |   |   |   |
|                                                                                                  |   |                   |    |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Retained                earnings                                                                      |   |                   | 13,218  |                             |   |   |   |   |   |   |   | 8,474 |   |   |   |   |   |   |   |
| Total                liabilities and retained earnings                                                |   | $                      | 125,326 |                             |   |   |   |   |   |   | $ | 90,480 |   |   |   |   |   |   |   |
|                                                                                                  |   |                   |    |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income                                                                    |   |                   |    |                             | $      | 3,287 |   |   |   |   |   |   |   | $ | 2,232 |   |   |   |   |
| Interest                rate spread                                                                   |   |                   |    |                             |   |   |   |   | 2.53 |   |   |   |   |   |   |   |   | 2.64 |   |
| Net                interest margin                                                                    |   |                   |    |                             |   |   |   |   | 2.84 |   |   |   |   |   |   |   |   | 2.76 |   |
| Average                interest-earning assets to average interest-bearing                liabilities |   |                   | 108.88  | %                           |   |   |   |   |   |   |   | 104.00 | %  |   |   |   |   |   |   |

----

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

**Table      13: Net Interest Income – Changes Due to Rate and Volume**

| 2008                Compared to 2007 (Dollars in thousands) |   | **Volume** |   | **Rate** |   | **Net** |   |
|-------------------------------------------------------------|--------|------------|--------|----------|--------|---------|--------|
|                                                        |   |       |   |     |   |    |   |   |   |   |
| Interest                income:                             |   |       |   |     |   |    |   |   |   |   |
| Loans                receivable                             |   | $          | 2,175  |     | $      | 402     |   | $ | 2,577 |   |
| Investment                securities                        |   |       | (202   | )        |   | 90      |   |   | (112 | ) |
| Other                interest-earning assets                |   |       | 236    |     |   | (127    | )      |   | 109 |   |
| Total                                                       |   |       | 2,209  |     |   | 365     |   |   | 2,574 |   |
| Interest                expense:                            |   |       |   |     |   |    |   |   |   |   |
| Deposits                                                    |   |       | 949    |     |   | 602     |   |   | 1,551 |   |
| FHLB                advances                                |   |       | (31    | )        |   | (1      | )      |   | (32 | ) |
| Total                                                       |   |       | 918    |     |   | 601     |   |   | 1,519 |   |
| Increase                (decrease) in net interest income   |   | $          | 1,291  |     | $      | (236    | )      | $ | 1,055 |   |

**Risk      Management**

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

***Credit      Risk Management***
**.**
*“Regulation      and Supervision—Supervisory Agreement”*

*Analysis      of Nonperforming and Classified Assets*

----

**Table      14: Nonperforming Assets**

| March                31, (Dollars in thousands)                                                           |   | **2008** |    | **2007** |   | **2006** |   |
|-----------------------------------------------------------------------------------------------------------|--------|----------|---------|----------|--------|----------|--------|
|                                                                                                      |   |     |    |     |   |     |   |   |   |   |
| 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                                                                    |   |     | 78      |     |   | 326      |   |   | 439 |   |
| Commercial                and multi-family real estate                                                    |   |     | 1,630   |     |   | 238      |   |   | ─ |   |
| Construction                                                                                              |   |     | ─ |     |   | ─  |   |   | ─ |   |
| Commercial                                                                                                |   |     | ─ |     |   | ─  |   |   | ─ |   |
| Consumer                                                                                                  |   |     | 53      |     |   | ─  |   |   | ─ |   |
| Total                                                                                                     |   |     | 1,761   |     |   | 564      |   |   | 439 |   |
| Total                of nonaccrual and 90 days or more past due loans                                     |   |     | 1,761   |     |   | 564      |   |   | 439 |   |
|                                                                                                      |   |     |    |     |   |     |   |   |   |   |
| Real                estate owned                                                                          |   |     | ─ |     |   | ─  |   |   | ─ |   |
| Other                nonperforming assets                                                                 |   |     | ─ |     |   | ─  |   |   | ─ |   |
| Total                nonperforming assets                                                                 |   |     | 1,761   |     |   | 564      |   |   | 439 |   |
| Troubled                debt restructurings                                                               |   |     | ─ |     |   | ─  |   |   | ─ |   |
| Troubled                debt restructurings and total nonperforming assets                                |   | $        | 1,761   |     | $      | 564      |   | $ | 439 |   |
|                                                                                                      |   |     |    |     |   |     |   |   |   |   |
| Total                nonperforming loans to total loans                                                   |   |     | 1.78    | %        |   | 0.72     | %      |   | 1.05 | % |
| Total                nonperforming loans to total assets                                                  |   |     | 1.34    |     |   | 0.51     |   |   | 0.58 |   |
| Total                nonperforming assets and troubled debt restructurings to total                assets |   |     | 1.34    |     |   | 0.51     |   |   | 0.58 |   |

**Table      15: Classified Assets**

| March                31, (Dollars in thousands) |   | **2008** |    | **2007** |   | **2006** |   |
|-------------------------------------------------|--------|----------|---------|----------|--------|----------|--------|
|                                            |   |     |    |     |   |     |   |
| Special                mention assets           |   | $        | 2,372   |     | $      | 2,287    |   | $ | 656 |   |
| Substandard                assets               |   |     | 4,348   |     |   | 3,201    |   |   | 395 |   |
| Doubtful                assets                  |   |     | 243     |     |   | 300      |   |   | — |   |
| Loss                assets                      |   |     | — |     |   | —  |   |   | — |   |
| Total                classified assets          |   | $        | 6,963   |     | $      | 5,788    |   | $ | 1,051 |   |

----

*Analysis      and Determination of the Allowance for Loan Losses*

----

**Table      16: Allocation of Allowance of Loan Losses**

|                                                   |   | **2008**   |    | **2007**                                                                   |   | **2006**   |    |
|--------------------------------------------------------|--------|------------|---------|----------------------------------------------------------------------------|--------|------------|---------|
| 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                 |   | $          | 25      |                                                                       |   | 37.6       | %  | $ | 65 |   |   | 30.9 | %  | $ | 75 |   |   | 41.0 | % |
| Commercial                and multi-family real estate |   |       | 1,130   |                                                                       |   | 24.2       |    |   | 200 |   |   | 16.3 |   |   | 20 |   |   | 13.5 |   |
| Construction                                           |   |       | — |                                                                       |   | 3.2        |    |   | — |   |   | 2.6 |   |   | — |   |   | 0.5 |   |
| Commercial                                             |   |       | 13      |                                                                       |   | 8.3        |    |   | 132 |   |   | 19.4 |   |   | 15 |   |   | 10.0 |   |
| Consumer                                               |   |       | 185     |                                                                       |   | 26.7       |    |   | 78 |   |   | 30.8 |   |   | 46 |   |   | 35.0 |   |
| Unallocated                                            |   |       | — |                                                                       |   | —    |    |   | 17 |   |   | — |   |   | 81 |   |   | — |   |
| Total                allowance for loan losses         |   | $          | 1,353   |                                                                       |   | 100.0      | %       | $ | 492 |   |   | 100.0 | % | $ | 237 |   |   | 100.0 | % |

**Table      17: Analysis of Loan Loss Experience**

| Year                Ended March 31, (Dollars in thousands)                                                |   | **2008** |    | **2007** |   | **2006** |   |
|-----------------------------------------------------------------------------------------------------------|--------|----------|---------|----------|--------|----------|--------|
|                                                                                                      |   |     |    |     |   |     |   |   |   |   |
| Allowance                at beginning of period                                                           |   | $        | 492     |     | $      | 237      |   | $ | 227 |   |
|                                                                                                      |   |     |    |     |   |     |   |   |   |   |
| Provision                for loan losses                                                                  |   |     | 1,450   |     |   | 255      |   |   | 10 |   |
| Charge                offs:                                                                               |   |     |    |     |   |     |   |   |   |   |
| Residential                real estate loans                                                              |   |     | ─ |     |   | —  |   |   | — |   |
| Commercial                and multi-family real estate loans                                              |   |     | 357     |     |   | —  |   |   | — |   |
| Construction                loans                                                                         |   |     | ─ |     |   | —  |   |   | — |   |
| Commercial                loans                                                                           |   |     | 105     |     |   | —  |   |   | — |   |
| Consumer                loans                                                                             |   |     | 131     |     |   | —  |   |   | — |   |
| Total                charge-offs                                                                          |   |     | 593     |     |   | —  |   |   | — |   |
|                                                                                                      |   |     |    |     |   |     |   |   |   |   |
| Recoveries                                                                                                |   |     | 4       |     |   | —  |   |   | — |   |
| Net                charge-offs                                                                            |   |     | 589     |     |   | —  |   |   | — |   |
|                                                                                                      |   |     |    |     |   |     |   |   |   |   |
| Allowance                at end of period                                                                 |   | $        | 1,353   |     | $      | 492      |   | $ | 237 |   |
|                                                                                                      |   |     |    |     |   |     |   |   |   |   |
| Allowance                to nonperforming loans                                                           |   |     | 76.83   | %        |   | 87.23    | %      |   | 53.98 | % |
| Allowance                to total loans outstanding at the end of the period                              |   |     | 1.37    |     |   | 0.63     |   |   | 0.57 |   |
| Net                charge-offs (recoveries) to average loans outstanding during the                period |   |     | 0.64    |     |   | —  |   |   | — |   |

***Interest      Rate Risk Management.***

----

**Table      18: NPV Analysis**

| **Basis Point (“bp”)** |   | **Net Portfolio Value****(Dollars in thousands)** |   | **Net Portfolio Value as % of****Portfolio Value of Assets** |   |
|----------------------------------------------|--------|-----------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------|--------|
| **Change in Rates**                |   | **$ Amount**                                                     |   | **$ Change**                                                                                    |   | **% Change** |   | **NPV Ratio** |   | **Change** |   |
| 300                                          |   | $                                                                     | 9,151  |                                                                                                 | $      | (3,927 | ) |   | (30 | )% |   | 6.97 | % |   | (258 | )bp   |
| 200                                          |   |                                                                  | 10,682 |                                                                                                 |   | (2,396 | ) |   | (18 | ) |   | 8.01 |   |   | (154 | )         |
| 100                                          |   |                                                                  | 12,100 |                                                                                                 |   | (978 | ) |   | (7 | ) |   | 8.94 |   |   | (61 | ) |
| 50                                           |   |                                                                  | 12,650 |                                                                                                 |   | (429 | ) |   | (3 | ) |   | 9.28 |   |   | (26 | ) |
| 0                                            |   |                                                                  | 13,078 |                                                                                                 |   |   |   |   |   |   |   | 9.55 |   |   |   |   |
| (50)                                         |   |                                                                  | 13,404 |                                                                                                 |   | 326 |   |   | 2 |   |   | 9.74 |   |   | 19 |   |
| (100)                                        |   |                                                                  | 13,670 |                                                                                                 |   | 592 |   |   | 5 |   |   | 9.89 |   |   | 35 |   |

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

----

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

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

----

| **ITEM 7A.** | **QUANTITATIVE                AND QUALITATIVE DISCLOSURES ABOUT MARKET                RISK** |
|-------------------|----------------------------------------------------------------------------------------------|

*“Management’s      Discussion and Analysis of Financial Condition and Results of      Operations.”*

| **ITEM 8.** | **FINANCIAL                STATEMENTS AND SUPPLEMENTARY                DATA** |
|------------------|-------------------------------------------------------------------------------|

| **ITEM 9.** | **CHANGES                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL                DISCLOSURE** |
|------------------|------------------------------------------------------------------------------------------------------------------------|

| **ITEM 9A(T).** | **CONTROLS                AND PROCEDURES** |
|----------------------|--------------------------------------------|

|   | (a) | Disclosure                Controls and Procedures |
|--------|-----|---------------------------------------------------|

|   | (b) | Internal                Control Over Financial Reporting |
|--------|-----|----------------------------------------------------------|

|   |   | Management’s                report on internal control over financial reporting is incorporated                herein                by reference to the section captioned *“Management’s                Report on Internal Control Over Financial Reporting”*                immediately preceding the Company’s Consolidated Financial Statements                beginning on page F-1 of this Annual Report on Form                10-K. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Changes                in Internal Control Over Financial                Reporting |
|--------|-----|------------------------------------------------------------------------------------|

| **ITEM 9B.** | **OTHER                INFORMATION** |
|-------------------|--------------------------------------|

----

**PART      III**

| **ITEM 10.** | **DIRECTORS,                EXECUTIVE OFFICERS AND CORPORATE                GOVERNANCE** |
|-------------------|------------------------------------------------------------------------------------------|

**Directors**

*“Proposal      1 – Election of Directors”*

**Executive      Officers and Key Employees**

| **Name**                             |   | **Position**                                                                       |
|--------------------------------------|--------|------------------------------------------------------------------------------------|
| Douglas                R. Allen, Jr. |   | President,                Chief Executive Officer and Chief Financial Officer      |
| James                E. Igo          |   | Executive                Vice President and Chief Operating                Officer |

| **Name**                             |   | **Position**                                                                              |
|--------------------------------------|--------|-------------------------------------------------------------------------------------------|
| Douglas                R. Allen, Jr. |   | President,                Chief Executive Officer and Chief Financial Officer             |
| James                E. Igo          |   | Executive                Vice President and Chief Operating Officer                       |
| Robert                A. Miller      |   | Vice                President – Deposit Operations                                  |
| Thomas                D. Schlett     |   | Vice                President – Business Development, Branch                Manager |

*Douglas      R. Allen, Jr.*

*James      E. Igo*

*Robert      A. Miller*

*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—Committees of the Board of Directors—Audit      Committee”*

| **ITEM 11.** | **EXECUTIVE                COMPENSATION** |
|-------------------|-------------------------------------------|

*“Executive      Compensation”*
*“Directors’      Compensation”*

| **ITEM 12.** | **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 13.** | **CERTAIN                RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR                INDEPENDENCE** |
|-------------------|-------------------------------------------------------------------------------------------------------------|

**Certain      Relationships and Related Transactions**

*“Other      Information Relating to Directors and Executive Officers—Transactions with      Related Persons”*

----

**Corporate      Governance**

*“Corporate      Governance—Director Independence”*

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

*“Items      to be Voted on by Stockholders*
*—*
*Item      2*
*—*
*      Ratification of Independent Registered Public Accounting Firm*
*—*
*Audit      and Non-Audit Fees”*
*“Items      to be Voted on by Stockholders*
*—Item      2—Ratification of Independent Registered Public Accounting Firm—Policy on Audit      Committee Pre-Approval of Audit Committee and Permissible Non-Audit Services      by      the Independent Registered Public Accounting Firm” *

| **ITEM 15.** | **EXHIBITS                AND FINANCIAL STATEMENT                SCHEDULES** |
|-------------------|------------------------------------------------------------------------------|

|  | (1) | The                financial statements required in response to this item are incorporated                by                reference from Item 8 of this                report. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | All                financial statement schedules are omitted because they are not required                or                applicable, or the required information is shown in the consolidated                financial statements or the notes                thereto. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3) | 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 | Supervisory                Agreement, dated December 17, 2007, by and between Delanco Federal                Savings                Bank and the Office                of Thrift Supervision (Incorporated by reference from Exhibit 99.1 of                the Form 8-K filed with the  Securities                and Exchange Commission on December 20,                2007.) |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.2 | Employment                Agreement between Delanco Bancorp, Inc. and Douglas R. Allen, Jr.*                (Incorporated by reference from Exhibit 10.3 of the Form 10-KSB                filed with the Securities and Exchange Commission on July 13,                2007) |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.3 | Employment                Agreement between Delanco Federal Savings Bank and Douglas R. Allen,                Jr.*                (Incorporated by reference from Exhibit 10.4 of the Form 10-KSB                filed with the Securities and Exchange Commission on July 13,                2007) |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.4 | First                Amendment to Company Employment Agreement between Delanco Bancorp,                Inc.                and Douglas R. Allen,                Jr. (Incorporated by reference from Exhibit 10.1 of the                Form 10-QSB filed with the Securities and Exchange Commission on                November 14, 2007) |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.5 | First                Amendment to Bank Employment Agreement between Delanco Federal Savings                Bank and Douglas R.  Allen,                Jr. (Incorporated by reference from Exhibit 10.2 of the                Form 10-QSB filed with the Securities and  Exchange                Commission on November 14, 2007) |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.6 | Delanco                Federal Savings Bank Employee Severance Compensation Plan* (Incorporated                by reference from Exhibit 10.5 of the Form 10-KSB filed with the                Securities and Exchange Commission on July 13,                2007) |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.7 | 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)) |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.8 | 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 and                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. |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**SIGNATURES**

|                                 | DELANCO                  BANCORP, INC. |
|--------------------------------------|----------------------------------------|
|                                 |                                   |
| Date:                  June 16, 2008 | By:                                    | /s/                  Douglas R. Allen, Jr.  |
|                                 |                                   | Douglas                  R. Allen, Jr. |
|                                 |                                   | President,                  Chief Executive Officer and |
|                                 |                                   | Chief                  Financial Officer |

| Name                                                                           |   | Title                                                       |   | Date                               |
|--------------------------------------------------------------------------------|--------|-------------------------------------------------------------|--------|------------------------------------|
| /s/                        Douglas R. Allen, Jr.                          |   | President,                      Chief Executive Officer and |   | June                      16, 2008 |
| Douglas                      R. Allen, Jr.                                |   | Chief                      Financial Officer (principal     |   |                               |
|                                                                           |   | accounting                      and financial officer)      |   |                               |
|                                                                           |   |                                                        |   |                               |
| /s/                        Thomas                        J. Coleman, III  |   | Director                                                    |   | June                      16, 2008 |
| Thomas                        J. Coleman, III                                  |   |                                                        |   |                               |
|                                                                           |   |                                                        |   |                               |
| /s/Robert                      H. Jenkins, Jr.                                 |   | Director                                                    |   | June                      16, 2008 |
| Robert                        H. Jenkins, Jr.                                  |   |                                                        |   |                               |
|                                                                           |   |                                                        |   |                               |
| /s/William                      C. Jenkins                                     |   | Director                                                    |   | June                      16, 2008 |
| William                      C. Jenkins                                        |   |                                                        |   |                               |
|                                                                           |   |                                                        |   |                               |
| /s/John                      A. Latimer                                        |   | Director                                                    |   | June                      16, 2008 |
| John                      A. Latimer                                           |   |                                                        |   |                               |
|                                                                           |   |                                                        |   |                               |
| /s/ Donald                    R. Neff                                     |   | Director                                                    |   | June                      16, 2008 |
| Donald                      R. Neff                                            |   |                                                        |   |                               |
|                                                                           |   |                                                        |   |                               |
| /s/ Robert                    M. Notigan                                  |   | Director                                                    |   | June                      16, 2008 |
| Robert                      M. Notigan                                         |   |                                                        |   |                               |
|                                                                           |   |                                                        |   |                               |
| /s/ John                    W. Seiber                                     |   | Director                                                    |   | June                      16, 2008 |
| John                      W. Seiber                                            |   |                                                        |   |                               |
|                                                                           |   |                                                        |   |                               |
| /s/ James                    W. Verner                                    |   | Director                                                    |   | June                      16, 2008 |
| James                      W. Verner                                           |   |                                                        |   |                               |
|                                                                           |   |                                                        |   |                               |
| /s/ Renee                    C. Vidal                                     |   | Director                                                    |   | June                      16, 2008 |
| Renee                      C. Vidal                                            |   |                                                        |   |                               |

----

**MANAGEMENT’S        REPORT ON **

**INTERNAL        CONTROL OVER FINANCIAL REPORTING**

----

*Internal        Control-Integrated Framework, issued by the Committee of Sponsoring        Organizations of the Treadway Commission*

----

**REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

**To      the 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, 2008 and      2007, and the related consolidated statements of operations, changes in      stockholders’ equity and cash flows for the years then ended. These 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 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 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 financial position of Delanco Bancorp,      Inc. and subsidiary as of March 31, 2008 and 2007, and the results of their      operations and their 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, on December 31, 2006, the Company adopted the provisions      of      the Statement of Financial Accounting Standards No. 158.**

**/s/      Connolly, Grady & Cha,      P.C. **

**Certified      Public Accountants**

**Philadelphia,      Pennsylvania**

**May      19, 2008**

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**CONSOLIDATED      STATEMENTS OF FINANCIAL CONDITION**

**ASSETS**

|                                                                                                                                                              |   | **March                31,** |            |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|-----------------|
|                                                                                                                                                              |   | **2008**                     |            | **2007** |   |
|                                                                                                                                                              |   |                         |            |   |   |
| **Cash                and cash equivalents**                                                                                                                      |   |                         |            |   |   |   |   |
|                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Cash                and due from banks**                                                                                                                        |   | **$**                        | **357,136**     |   | **$** | **271,007** |   |
| **Interest-bearing                deposits**                                                                                                                      |   |                         | **12,321,997**  |   |   | **8,405,373** |   |
|                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Total                cash and cash equivalents**                                                                                                                |   |                         | **12,679,133**  |   |   | **8,676,380** |   |
|                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Investment                securities**                                                                                                                          |   |                         |            |   |   |   |   |
|                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Securities                held-to-maturity (fair value of $12,527,691 and $15,752,386 at March                31,                2008 and 2007, respectively)** |   |                         | **12,287,265**  |   |   | **15,822,529** |   |
| **Securities                available-for-sale (amortized cost of $234,106 and $211,589 at March                31,                2008 and 2007, respectively)** |   |                         | **277,876**     |   |   | **252,647** |   |
|                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Total                investment securities**                                                                                                                    |   |                         | **12,565,141**  |   |   | **16,075,176** |   |
|                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Loans,                net of allowance for loan losses of $1,353,467 and $492,448 at March                31,                2008 and 2007,****respectively**   |   |                         | **96,345,527**  |   |   | **76,497,739** |   |
|                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Accrued                interest receivable**                                                                                                                    |   |                         | **599,514**     |   |   | **425,872** |   |
|                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Premises                and equipment, net**                                                                                                                    |   |                         | **8,129,682**   |   |   | **8,422,457** |   |
|                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Federal                Home Loan Bank stock, at cost**                                                                                                          |   |                         | **139,100**     |   |   | **102,700** |   |
|                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Deferred                income taxes**                                                                                                                          |   |                         | **395,000**     |   |   | **240,100** |   |
|                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Bank                owned life insurance**                                                                                                                      |   |                         | **124,412**     |   |   | **124,412** |   |
|                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Pre-paid                income taxes**                                                                                                                          |   |                         | **297,679**     |   |   | **231,230** |   |
|                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Other                assets**                                                                                                                                   |   |                         | **254,568**     |   |   | **265,204** |   |
|                                                                                                                                                              |   |                         |            |   |   |   |   |
| **TOTAL                ASSETS**                                                                                                                                   |   | **$**                        | **131,529,756** |   | **$** | **111,061,270** |   |

**(Continued)**

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**CONSOLIDATED      STATEMENTS OF FINANCIAL CONDITION**

**LIABILITIES      AND STOCKHOLDERS’ EQUITY**

|                                                                                                                                                                              |   | **March                31,** |            |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|-----------------|
|                                                                                                                                                                              |   | **2008**                     |            | **2007** |   |
|                                                                                                                                                                              |   |                         |            |   |   |
| **LIABILITIES**                                                                                                                                                                   |   |                         |            |   |   |   |   |
|                                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Deposits**                                                                                                                                                                      |   |                         |            |   |   |   |   |
|                                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Non-interest                bearing deposits**                                                                                                                                  |   | **$**                        | **4,860,365**   |   | **$** | **3,372,058** |   |
| **Interest-bearing                deposits**                                                                                                                                      |   |                         | **112,779,708** |   |   | **92,617,217** |   |
|                                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Total                deposits**                                                                                                                                                 |   |                         | **117,640,073** |   |   | **95,989,275** |   |
|                                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Accrued                interest payable**                                                                                                                                       |   |                         | **299,418**     |   |   | **349,178** |   |
|                                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Advance                payments by borrowers for taxes and insurance**                                                                                                          |   |                         | **290,864**     |   |   | **260,262** |   |
|                                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Other                liabilities**                                                                                                                                              |   |                         | **542,178**     |   |   | **640,206** |   |
|                                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Total                liabilities**                                                                                                                                              |   |                         | **118,772,533** |   |   | **97,238,921** |   |
|                                                                                                                                                                              |   |                         |            |   |   |   |   |
| **COMMITMENTS                AND CONTINGENCIES (NOTE 18)**                                                                                                                        |   |                         |            |   |   |   |   |
|                                                                                                                                                                              |   |                         |            |   |   |   |   |
| **STOCKHOLDERS’                EQUITY**                                                                                                                                     |   |                         |            |   |   |   |   |
|                                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Preferred                stock, $.01 par value, 3,000,000 shares authorized; None                issued**                                                                       |   |                         |            |   |   |   |   |
|                                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Common                stock, $.01 par value, 7,000,000 shares authorized; 1,634,725 shares                issued and outstanding as of March 31, 2008 and                2007** |   | **$**                        | **16,347**      |   | **$** | **16,347** |   |
|                                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Additional                paid-in capital**                                                                                                                                     |   |                         | **6,688,921**   |   |   | **6,688,921** |   |
|                                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Retained                earnings, substantially restricted**                                                                                                                    |   |                         | **6,730,799**   |   |   | **7,797,552** |   |
|                                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Unearned                common stock held by employee stock ownership plan**                                                                                                    |   |                         | **(640,810**    | **)** |   | **(640,810** | **)** |
|                                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Accumulated                other comprehensive (loss)**                                                                                                                         |   |                         | **(38,034**     | **)** |   | **(39,661** | **)** |
|                                                                                                                                                                              |   |                         |            |   |   |   |   |
| **Total                stockholders’ equity**                                                                                                                               |   |                         | **12,757,223**  |   |   | **13,822,349** |   |
|                                                                                                                                                                              |   |                         |            |   |   |   |   |
| **TOTAL                LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                               |   | **$**                        | **131,529,756** |   | **$** | **111,061,270** |   |

**See      accompanying notes to consolidated financial      statements.**

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**CONSOLIDATED      STATEMENTS OF OPERATIONS**

|                                                                   |   | **Years                Ended****March                31,** |           |
|------------------------------------------------------------------------|--------|------------------------------------------------------------|----------------|
|                                                                   |   | **2008**                                                   |           | **2007** |   |
|                                                                   |   |                                                       |           |   |   |
| **INTEREST                INCOME**                                     |   |                                                       |           |   |   |   |   |
| **Loans**                                                              |   | **$**                                                      | **6,297,509**  |   | **$** | **3,721,284** |   |
| **Investment                securities**                               |   |                                                       | **1,042,092**  |   |   | **1,044,559** |   |
| **Total                interest income**                               |   |                                                       | **7,339,601**  |   |   | **4,765,843** |   |
|                                                                   |   |                                                       |           |   |   |   |   |
| **INTEREST                EXPENSE**                                    |   |                                                       |           |   |   |   |   |
| **Interest-bearing                checking accounts**                  |   |                                                       | **49,506**     |   |   | **41,934** |   |
| **Passbook                and money market accounts**                  |   |                                                       | **978,378**    |   |   | **732,626** |   |
| **Certificates                of deposits**                            |   |                                                       | **3,020,015**  |   |   | **1,722,819** |   |
| **Advances                from Federal Home Loan Bank**                |   |                                                       | **4,946**      |   |   | **36,965** |   |
| **Total                interest expense**                              |   |                                                       | **4,052,845**  |   |   | **2,534,344** |   |
| **Net                interest income**                                 |   |                                                       | **3,286,756**  |   |   | **2,231,499** |   |
|                                                                   |   |                                                       |           |   |   |   |   |
| **Provision                for loan losses**                           |   |                                                       | **1,450,000**  |   |   | **255,000** |   |
| **Net                interest income after provision for loan losses** |   |                                                       | **1,836,756**  |   |   | **1,976,499** |   |
|                                                                   |   |                                                       |           |   |   |   |   |
| **NON-INTEREST                INCOME**                                 |   |                                                       |           |   |   |   |   |
| **Net                gain on sale of non-marketable securities**       |   |                                                       |           |   |   | **18,492** |   |
| **Net                gain on sale of securities available-for-sale**   |   |                                                       |           |   |   | **450,737** |   |
| **Service                charges**                                     |   |                                                       | **134,329**    |   |   | **85,262** |   |
| **Income                from bank owned life insurance**               |   |                                                       |           |   |   | **10,422** |   |
| **Rental                income**                                       |   |                                                       | **21,669**     |   |   | **11,622** |   |
| **Other**                                                              |   |                                                       | **72,804**     |   |   | **45,221** |   |
| **Total                non-interest income**                           |   |                                                       | **228,802**    |   |   | **621,756** |   |
|                                                                   |   |                                                       |           |   |   |   |   |
| **NON-INTEREST                EXPENSE**                                |   |                                                       |           |   |   |   |   |
| **Salaries                and employee benefits**                      |   |                                                       | **1,809,625**  |   |   | **1,602,621** |   |
| **Advertising**                                                        |   |                                                       | **61,002**     |   |   | **49,750** |   |
| **Office                supplies, telephone and postage**              |   |                                                       | **129,270**    |   |   | **114,106** |   |
| **Occupancy                expense**                                   |   |                                                       | **685,548**    |   |   | **436,829** |   |
| **Federal                insurance premiums**                          |   |                                                       | **29,262**     |   |   | **8,445** |   |
| **Data                processing expenses**                            |   |                                                       | **126,289**    |   |   | **135,479** |   |
| **ATM                expenses**                                        |   |                                                       | **61,443**     |   |   | **53,346** |   |
| **Bank                charges and fees**                               |   |                                                       | **54,649**     |   |   | **53,549** |   |
| **Insurance                and surety bond premium**                   |   |                                                       | **57,429**     |   |   | **45,199** |   |
| **Dues                and subscriptions**                              |   |                                                       | **78,539**     |   |   | **37,139** |   |
| **Professional                fees**                                   |   |                                                       | **133,994**    |   |   | **92,176** |   |
| **On-line                banking expense**                             |   |                                                       | **90,822**     |   |   | **58,123** |   |
| **Other**                                                              |   |                                                       | **167,033**    |   |   | **175,688** |   |
| **Total                non-interest expense**                          |   |                                                       | **3,484,905**  |   |   | **2,862,450** |   |
|                                                                   |   |                                                       |           |   |   |   |   |
| **LOSS                BEFORE INCOME TAX BENEFIT**                      |   |                                                       | **(1,419,347** | **)** |   | **(264,195** | **)** |
| **Federal                income tax benefit**                          |   |                                                       | **(320,185**   | **)** |   | **(89,962** | **)** |
| **State                income tax benefit**                            |   |                                                       | **(32,409**    | **)** |   | **(19,022** | **)** |
| **Total                income tax benefit**                            |   |                                                       | **(352,594**   | **)** |   | **(108,984** | **)** |
|                                                                   |   |                                                       |           |   |   |   |   |
| **NET                LOSS**                                            |   | **$**                                                      | **(1,066,753** | **)** | **$** | **(155,211** | **)** |
| **(Loss)                per share**                                    |   |                                                       |           |   |   |   |   |
| **Basic**                                                              |   | **$**                                                      | **(.65**       | **)** |   |   |   |
| **Diluted**                                                            |   | **$**                                                      | **(.65**       | **)** |   |   |   |
| **Weighted                average shares outstanding**                 |   |                                                       |           |   |   |   |   |
| **Basic**                                                              |   |                                                       | **1,634,725**  |   |   |   |   |
| **Diluted**                                                            |   |                                                       | **1,634,725**  |   |   |   |   |

**See      accompanying notes to consolidated financial statements.**

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

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

**YEARS      ENDED MARCH 31, 2008 AND 2007**

|                                                                                                                                                    |   |                            |                                   |           |   |               |   |                          |                             | **Accumulated**            |   |                             |   |              |                       |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|----------------------------------------|----------------|--------|--------------------|--------|-------------------------------|----------------------------------|----------------------------|--------|----------------------------------|--------|-------------------|----------------------------|
|                                                                                                                                                    |   |                            |                                   | **Additional** |   |               |   | **Common**                    |                             | **Other**                  |   | **Total**                        |   |              |                       |
|                                                                                                                                                    |   | **Common                Stock** |                                   | **Paid-in**    |   | **Retained**       |   | **Stock                Held** |                             | **Comprehensive**          |   | **Stockholders’**          |   | **Comprehensive** |                       |
|                                                                                                                                                    |   | **Shares**                      |                                   | **Amount**     |   | **Capital**        |   | **Earnings**                  |                             | **By                ESOP** |   | **Income                (Loss)** |   | **Equity**        |                       | **(Loss)** |   |
|                                                                                                                                                    |   |                            |                                   |           |   |               |   |                          |                             |                       |   |                             |   |              |                       |   |   |
| **BALANCES,                MARCH 31, 2006**                                                                                                             |   |                            | **100**                                |           | **$**  | **1**              |   |                          |                   |                       | **$**  | **7,952,763**                    |   | **$**             |                  |   | **$** | **268,923** |   | **$** | **8,221,687** |   | **$** |   |   |
| **Net                loss**                                                                                                                             |   |                            |                                   |           |   |               |   |                          |                             |                       |   | **(155,211**                     | **)**  |              |                       |   |   |   |   |   | **(155,211** | **) ** |   | **(155,211** | **)** |
| **Net                change in unrealized gain on on securities available- for-sale, net                of                deferred taxes of $4,487**    |   |                            |                                   |           |   |               |   |                          |                             |                       |   |                             |   |              |                       |   |   | **6,730** |   |   | **6,730** |   |   | **6,730** |   |
| **Reclassification                adjustment, net of deferred tax benefit of                ($190,937)**                                                |   |                            |                              |           |   |          |   |                          |                        |                       |   |                        |   |              |                  |   |   | **(251,018** | **)** |   | **(251,018** | **)** |   | **(251,018** | **)** |
|                                                                                                                                                    |   |                            |                                   |           |   |               |   |                          |                             |                       |   |                             |   |              |                       |   |   |   |   |   |   |   |   |   |   |
| **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, net of tax**                                                                                  |   |                            |                    |           |   |          |   |                          |                        |                       |   |                        |   |              |                  |   |   | **(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** |   |   |   |   |
|                                                                                                                                                    |   |                            |                                   |           |   |               |   |                          |                             |                       |   |                             |   |              |                       |   |   |   |   |   |   |   |   |   |   |
| **Net                loss**                                                                                                                             |   |                            |                                   |           |   |               |   |                          |                             |                       |   | **(1,066,753**                   | **)**  |              |                       |   |   |   |   |   | **(1,066,753** | **)** |   | **(1,066,753** | **)** |
| **Net                change in unrealized gain (loss) on securities available-for-sale,                net of                deferred taxes of $1,085** |   |                            |                              |           |   |          |   |                          |                        |                       |   |                        |   |              |                  |   |   | **1,627** |   |   | **1,627** |   |   | **1,627** |   |
|                                                                                                                                                    |   |                            |                                   |           |   |               |   |                          |                             |                       |   |                             |   |              |                       |   |   |   |   |   |   |   |   |   |   |
| **Comprehensive                loss**                                                                                                                   |   |                            |                                   |           |   |               |   |                          |                             |                       |   |                             |   |              |                       |   |   |   |   |   |   |   |   | **(1,065,126** | **)** |
|                                                                                                                                                    |   |                            |                                   |           |   |               |   |                          |                             |                       |   |                             |   |              |                       |   |   |   |   |   |   |   |   |   |   |
| **BALANCES,                MARCH 31, 2008**                                                                                                             |   |                            | **1,634,725**                          |           | **$**  | **16,347**         |   | **$**                         | **6,688,921**                    |                       | **$**  | **6,730,799**                    |   | **$**             | **(640,810**               | **) ** | **$** | **(38,034** | **) ** | **$** | **12,757,223** |   |   |                     |   |

**See      accompanying notes to consolidated financial statements.**

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

|                                                                                                                        |   | **Years                Ended****March                31,** |                                 |
|-----------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------|--------------------------------------|
|                                                                                                                        |   | **2008**                                                   |                                 | **2007** |   |
|                                                                                                                        |   |                                                       |                                 |   |   |
| **CASH                FLOWS FROM OPERATING ACTIVITIES**                                                                     |   |                                                       |                                 |   |   |   |   |
|                                                                                                                        |   |                                                       |                                 |   |   |   |   |
| **Net                loss**                                                                                                 |   | **$**                                                      | **(1,066,753**                       | **)  ** | **$** | **(155,211** | **)** |
| **Adjustments                to reconcile net loss to net cash provided by (used in) operating                activities:** |   |                                                       |                                 |   |   |   |   |
| **Deferred                income taxes**                                                                                    |   |                                                       | **(155,985**                         | **)** |   | **(184,747** | **)** |
| **Depreciation**                                                                                                            |   |                                                       | **323,298**                          |   |   | **222,816** |   |
| **Discount                accretion net of premium amortization**                                                           |   |                                                       | **(28,728**                          | **)** |   | **(11,620** | **)** |
| **Income                from bank owned life insurance**                                                                    |   |                                                       |                                 |   |   | **(10,422** | **)** |
| **Provision                for loan losses**                                                                                |   |                                                       | **1,450,000**                        |   |   | **255,000** |   |
| **Net                gain on sale of securities available-for-sale**                                                        |   |                                                       |                                 |   |   | **(450,737** | **)** |
| **Net                gain on sale of non marketable security**                                                              |   |                                                       |                                 |   |   | **(18,492** | **)** |
| **Changes                in operating assets and liabilities**                                                              |   |                                                       |                                 |   |   |   |   |
| **(Increase)                decrease in:**                                                                                  |   |                                                       |                                 |   |   |   |   |
| **Accrued                interest receivable**                                                                              |   |                                                       | **(173,642**                         | **)** |   | **(139,822** | **)** |
| **Other                assets**                                                                                             |   |                                                       | **10,636**                           |   |   | **(44,439** | **)** |
| **Prepaid                taxes**                                                                                            |   |                                                       | **(66,449**                          | **)** |   | **(116,750** | **)** |
| **Increase                (decrease) in:**                                                                                  |   |                                                       |                                 |   |   |   |   |
| **Accrued                interest payable**                                                                                 |   |                                                       | **(49,760**                          | **)** |   | **301,649** |   |
| **Other                liabilities**                                                                                        |   |                                                       | **(98,028**                          | **)** |   | **254,421** |   |
|                                                                                                                        |   |                                                       |                                 |   |   |   |   |
| **Net                cash provided by (used in) operating activities**                                                      |   |                                                       | **144,589**                          |   |   | **(98,354** | **)** |
|                                                                                                                        |   |                                                       |                                 |   |   |   |   |
| **CASH                FLOWS FROM INVESTING ACTIVITIES**                                                                     |   |                                                       |                                 |   |   |   |   |
|                                                                                                                        |   |                                                       |                                 |   |   |   |   |
| **Proceeds                from sale of non marketable securities**                                                          |   |                                                       |                                 |   |   | **18,492** |   |
| **Proceeds                from sale of securities available-for-sale**                                                      |   |                                                       | **4,811**                            |   |   | **457,596** |   |
| **Purchases                of securities available-for-sale**                                                               |   |                                                       | **(27,328**                          | **)** |   | **(15,616** | **)** |
| **Purchases                of securities held-to-maturity**                                                                 |   |                                                       | **(3,000,000**                       | **)** |   |  |   |
| **Proceeds                from maturities and principal repayments of securities                held-to-maturity**          |   |                                                       | **6,563,992**                        |   |   | **4,356,703** |   |
| **Proceeds                from sale (purchase) of Federal Home Loan Bank stock**                                            |   |                                                       | **(36,400**                          | **)** |   | **3,000** |   |
| **Net                increase in loans**                                                                                    |   |                                                       | **(21,297,788**                      | **)** |   | **(35,383,774** | **)** |
| **Purchases                of premises and equipment**                                                                      |   |                                                       | **(30,523**                          | **)** |   | **(1,769,752** | **)** |
|                                                                                                                        |   |                                                       |                                 |   |   |   |   |
| **Net                cash used in investing activities**                                                                    |   |                                                       | **(17,823,236**                      | **)** |   | **(32,333,351** | **)** |
|                                                                                                                        |   |                                                       |                                 |   |   |   |   |
| **CASH                FLOWS FROM FINANCING ACTIVITIES**                                                                     |   |                                                       |                                 |   |   |   |   |
|                                                                                                                        |   |                                                       |                                 |   |   |   |   |
| **Net                increase in deposits**                                                                                 |   |                                                       | **21,650,798**                       |   |   | **29,456,946** |   |
| **Net                increase in advance payments by borrowers for taxes and                insurance**                     |   |                                                       | **30,602**                           |   |   | **33,623** |   |
| **Net                proceeds from issuance of common stock**                                                               |   |                                                       |                                 |   |   | **6,705,268** |   |
| **Purchase                of ESOP shares**                                                                                  |   |                                                       |        |   |   | **(640,810** | **)** |
|                                                                                                                        |   |                                                       |                                 |   |   |   |   |
| **Net                cash provided by financing activities**                                                                |   |                                                       | **21,681,400**                       |   |   | **35,555,027** |   |

**(Continued)**

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

|                                                                                                                        |   | **Years                Ended****March                31,** |           |
|-----------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------|----------------|
|                                                                                                                        |   | **2008**                                                   |           | **2007** |   |
|                                                                                                                        |   |                                                       |           |   |   |
| **NET                INCREASE IN CASH AND CASH EQUIVALENTS**                                                                |   | **$**                                                      | **4,002,753**  |   | **$** | **3,123,322** |   |
|                                                                                                                        |   |                                                       |           |   |   |   |   |
| **CASH                AND CASH EQUIVALENTS, BEGINNING OF YEAR**                                                             |   |                                                       | **8,676,380**  |   |   | **5,553,058** |   |
|                                                                                                                        |   |                                                       |           |   |   |   |   |
|                                                                                                                        |   |                                                       |           |   |   |   |   |
| **CASH                AND CASH EQUIVALENTS, END OF YEAR**                                                                   |   | **$**                                                      | **12,679,133** |   | **$** | **8,676,380** |   |
|                                                                                                                        |   |                                                       |           |   |   |   |   |
|                                                                                                                        |   |                                                       |           |   |   |   |   |
| **SUPPLEMENTAL                DISCLOSURES OF CASH FLOW INFORMATION**                                                        |   |                                                       |           |   |   |   |   |
|                                                                                                                        |   |                                                       |           |   |   |   |   |
| **Cash                paid during the year for interest**                                                                   |   | **$**                                                      | **4,102,605**  |   | **$** | **2,232,695** |   |
|                                                                                                                        |   |                                                       |           |   |   |   |   |
| **Cash                paid during the year for income taxes**                                                               |   | **$**                                                      | **-0-**        |   | **$** | **83,339** |   |
|                                                                                                                        |   |                                                       |           |   |   |   |   |
| **Loans                transferred to foreclosed real estate**                                                              |   | **$**                                                      | **-0-**        |   | **$** | **-0-** |   |
|                                                                                                                        |   |                                                       |           |   |   |   |   |
| **Proceeds                from sales of foreclosed real estate**                                                            |   | **$**                                                      | **-0-**        |   | **$** | **-0-** |   |
|                                                                                                                        |   |                                                       |           |   |   |   |   |
| **Total                increase (decrease) in unrealized gain on securities available-for-sale,                net of tax** |   | **$**                                                      | **2,712**      |   | **$** | **(430,738** | **)** |

**See      accompanying notes to consolidated financial      statements.**

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2008 AND 2007**

| **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, the valuation                of foreclosed real estate and the evaluation of income taxes. 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 consists 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, 2008 AND 2007**

| **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 not 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, 2008 AND 2007**

| **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 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, 2008 AND 2007**

| **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 Bank 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, 2008                and                2007.** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------|

**Income      Taxes**

|   | **Deferred                tax assets and liabilities are recognized for the future tax consequences                attributable to differences between the financial statement carrying                amounts of existing assets and liabilities and their respective tax                bases,                as well as operating loss carry forwards. Deferred tax assets and                liabilities are measured using enacted tax rates expected to apply                to                taxable income in the years in which those temporary differences                are                expected to be recovered or settled. The effect on deferred tax assets                and                liabilities of a change in tax rates is recognized in income in the                period                that includes the enactment date. A valuation allowance is established                against deferred tax assets when in the judgment of management, it                is more                likely than not that such deferred tax assets will not become available.                Because the judgment about the level of future taxable income is                dependent                to a great extent on matters that may, at least in part be beyond                the                Company’s control, it is at least reasonably possible that management’s                judgment about the need for a valuation allowance for deferred taxes                could                change in the near term.** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**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      $**
**61,002 **
**and      $49,750 for the years ended March 31, 2008 and 2007,      respectively.**

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2008 AND 2007 **

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

|   | **Employee                Stock Ownership Plan                (“ESOP”)** |
|--------|--------------------------------------------------------------------------------------|

|   | **The                Company accounts for its ESOP based on guidance from the American                Institute of Certified Public Accountants (“AICPA”) Statement of Position                (“SOP”) 96-3 “Employer’s Accounting for Employee Stock Ownership Plans”.                Shares are released to participants proportionately as the loan is                repaid.                If the Company declares a dividend, the dividends on the allocated                shares                would be recorded as dividends and charged to retained earnings.                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. Allocation of shares                to                the ESOP participants is contingent upon the repayment of the loan                to the                Company.** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

**Basic      earnings per share is calculated on the basis of net income divided by the      weighted average number of shares outstanding. Diluted earnings per share      includes dilutive potential shares as computed under the treasury stock method      using average common stock prices. Diluted earnings per share is calculated      on      the basis of the weighted average number of shares outstanding plus the weighted      average number of additional dilutive shares.**

**The      Company had 100 shares of common stock issued and outstanding 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 for the year ended      March 31, 2007 is not presented on the consolidated statement of operations      because it is not meaningful.**

| **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, 2008 and 2007 was $      -0-.**

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

|   | **In                June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for                Uncertainty in Income Taxes” (FIN 48). This interpretation clarifies the                accounting for uncertainty in income taxes recognized in an enterprise’s                financial statements in accordance with FASB Statement No. 109,                “Accounting for Income Taxes”. Specifically, the interpretation prescribes                a recognition threshold and measurement attribute for the financial                statement recognition and measurement of an income tax position taken                or                expected to be taken in a tax return. This interpretation is effective                for                fiscal years beginning after December 15, 2006. The Company adopted                this                statement in 2007 and there was no effect on its results of operations                or                financial position.** |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **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** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2008 AND 2007 **

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

|   | **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 FASB ratified Emerging Issues Task Force (EITF)                06-4,                “Accounting for Deferred Compensation and Postretirement Benefit Aspects                of Endorsement Split-Dollar Life Insurance Arrangements” (EITF 06-4). EITF                06-4 addresses accounting for endorsement split-dollar life insurance                arrangements that provide a benefit to an employee that extends to                post-retirement periods. EITF 06-4 requires that the post-retirement                benefit aspects of an endorsement-type split-dollar life insurance                arrangement be recognized as a liability by the employer and that                the                obligation is not settled upon entering into an insurance arrangement.                EITF 06-4 is effective for fiscal years beginning after December                15, 2007.                The Company is currently evaluating the impact of EITF 06-4 on the                consolidated financial                statements.** |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **In                September 2006, the FASB ratified Emerging Issues Task Force Issue                06-5,                “Accounting for Purchases of Life Insurance - Determining the Amount                That                Could Be Realized in Accordance with FASB Technical Bulletin No.                85-4”.                EITF 06-5 explains how to determine the amount that could be realized                from                a life insurance contract and requires policyholders to determine                the                amount that could be realized under a life insurance contract assuming                individual policies are surrendered. EITF 06-5 is effective for fiscal                years beginning after December 15, 2006. The Company adopted this                EITF in                2007, and it did not have a material effect on the Company’s financial                position or results of                operations.** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**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, 2008 AND 2007 **

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

**In      November 2007, the SEC issued Staff Accounting Bulletin (“SAB”) No. 109,“Written Loan Commitments Recorded at Fair Value through Earnings” (“SAB 109”).      This SAB supersedes SAB No. 105, “Application of Accounting Principles to Loan      Commitments” (“SAB 105”) and expresses the current view of the staff that,**
**consistent      with guidance in SFAS No. 156 and 159, the expected net future cash flows      related to the associated servicing of a loan should be included in the      measurement of all written loan commitments that are accounted for at fair      value      through earnings. Additionally, this SAB expands SAB 105’s view that      internally-developed **
**intangible      assets should not be recorded as part of the fair value for any written loan      commitments that are **
**accounted      for at fair value through earnings. This SAB was effective for fiscal quarters      beginning after December 15, 2007. This Company will adopt SAB 109 for any      loan      commitments issued or modified on or after April 1, 2008.**

**In        December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” which        replaces SFAS No. 141, “Business Combinations” (“SFAS No. 141”). This Statement        retains the fundamental requirements in SFAS No. 141 that the        ac**
**quisition        method of accounting (formerly referred to as the purchase method) be used        for        all business combinations and that an acquirer be identified for each business        combination. This Statement defines the acquirer as the entity that obtains        control of one or more businesses in the business combination and establishes        the acquisition date as of the date that the acquirer takes control. This        Statement requires an acquirer to recognize the assets acquired, the liabilities        assumed, and any noncontrolling interest in the acquiree at the acquisition        date, measured at fair values. This Statement requires the acquirer to recognize        acquisition-related costs and restructuring costs separately from the business        combination as period expense. This Statement is effective for business        combinations for which the acquisition is on or after the first annual reporting        period of the acquisition beginning on or after December 15, 2008. The adoption        of this Statement will impact the accounting and reporting of acquisitions        after        April 1, 2009. **

**In      December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in      Consolidated Financial Statements - an Amendment to ARB No. 51.” This Statement      established new accounting and reporting standards that require that ownership      interests in subsidiaries held by parties other than the parent be clearly      identified and presented in the consolidated statement of financial position      within equity, but separate from the parent’s equity. This Statement also      requires that the amount of consolidated net income attributable to the parent      and to the noncontrolling interest be clearly identified and presented on the      face of the consolidated statement of income. In addition, when a subsidiary      is      deconsolidated, any retained noncontrolling equity investment in the former      subsidiary shall be initially measured at fair value, with the gain or loss      on      the deconsolidation of the subsidiary measured using fair value of any      noncontrolling equity investments rather than the carrying amount of that      retained investment. SFAS No. 160 also clarifies that changes in parent’s      ownership interest in a subsidiary that do not result in deconsolidation are      equity transactions if the parent retains its expanded disclosure requirements      regarding the interests of the parent and its noncontrolling interest. This      Statement is effective for fiscal years beginning on or after December 15,      2008.      Early adoption is prohibited. The Company will evaluate the impact of adopting      this Statement on the Company’s consolidated financial      statements.**

**In      March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative      Instruments and Hedging Activities”. This Statement requires enhanced      disclosures about an entity’s derivative and hedging activities and thereby      improves the transparency of financial reporting. This Statement is effective      for financial statements issued for fiscal years and interim periods beginning      after November 15, 2008, with early adoption encouraged. The Company will      evaluate the impact of adopting this Statement on the Company’s consolidated      financial statements.**

| **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, 2008 and 2007 are as                follows:** |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2008 AND 2007 **

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

|                                                            |   | **Held-to-Maturity**         |           |
|-----------------------------------------------------------------|--------|------------------------------|----------------|
|                                                            |   | **March 31, 2008** |           |
|                                                            |   |                         |           | **Gross** |   | **Gross** |   |   |   |
|                                                            |   | **Amortized**                |           | **Unrealized** |   | **Unrealized** |   | **Fair** |   |
|                                                            |   | **Cost**                     |           | **Gains** |   | **Losses** |   | **Value** |   |
|                                                            |   |                         |           |   |   |   |   |   |   |
| **Federal                Home Loan Bank Bonds**                 |   | **$**                        | **2,000,000**  |   | **$** | **11,095** |   | **$** |   |   | **$** | **2,011,095** |   |
| **Federal                Farm Credit Bonds**                    |   |                         | **500,000**    |   |   | **625** |   |   |   |   |   | **500,625** |   |
| **Federal                National Mortgage Corporation Bonds**  |   |                         | **500,000**    |   |   | **470** |   |   |   |   |   | **500,470** |   |
| **Federal                Home Loan Mortgage Corporation Bonds** |   |                         | **500,000**    |   |   | **770** |   |   |       |   |   | **500,770** |   |
|                                                            |   |                         |           |   |   |   |   |   |   |   |   |   |   |
|                                                            |   |                         | **3,500,000**  |   |   | **12,960** |   |   |      |   |   | **3,512,960** |   |
|                                                            |   |                         |           |   |   |   |   |   |   |   |   |   |   |
| **Mortgage-Backed                Securities:**                  |   |                         |           |   |   |   |   |   |   |   |   |   |   |
| **Federal                Home Loan Mortgage Corporation**       |   |                         | **1,360,099**  |   |   | **10,472** |   |   |   |   |   | **1,370,571** |   |
| **Federal                National Mortgage Corporation**        |   |                         | **6,316,828**  |   |   | **180,959** |   |   | **(9,284** | **)** |   | **6,488,503** |   |
| **Government                National Mortgage Corporation**     |   |                         | **1,110,338**  |   |   | **46,480** |   |   | **(1,161** | **)** |   | **1,155,657** |   |
|                                                            |   |                         |           |   |   |   |   |   |   |   |   |   |   |
|                                                            |   |                         | **8,787,265**  |   |   | **237,911** |   |   | **(10,445** | **)** |   | **9,014,731** |   |
|                                                            |   |                         |           |   |   |   |   |   |   |   |   |   |   |
| **Total**                                                       |   | **$**                        | **12,287,265** |   | **$** | **250,871** |   | **$** | **(10,445** | **)  ** | **$** | **12,527,691** |   |

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2008 AND 2007 **

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

|                                                            |   | **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** |   |

|                                  |   | **Available-for-Sale**            |        |
|---------------------------------------|--------|-----------------------------------|-------------|
|                                  |   | **March                31, 2008** |        |
|                                  |   |                              |        | **Gross** |   | **Gross** |   |   |   |
|                                  |   | **Amortized**                     |        | **Unrealized** |   | **Unrealized** |   | **Fair** |   |
|                                  |   | **Cost**                          |        | **Gains** |   | **Losses** |   | **Value** |   |
|                                  |   |                              |        |   |   |   |   |   |   |
| **Mutual                Fund Shares** |   | **$**                             | **234,106** |   | **$** | **43,847** |   | **$** | **(77** | **)  ** | **$** | **277,876** |   |

|                                  |   | **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** |   |

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2008 AND 2007 **

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

|   | **Investment                securities with a carrying amount of approximately $5,228,000 and                $6,611,000 were pledged as collateral with FHLB of New York as required                at                March 31, 2008 and 2007,                respectively.** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **The                following is a summary of maturities of securities held-to-maturity                and                available-for-sale as of March 31, 2008 and                2007.** |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                  |   | **March                31, 2008** |           |
|-------------------------------------------------------|--------|-----------------------------------|----------------|
|                                                  |   | **Held-to-maturity**              |           | **Available-for-sale** |   |
|                                                  |   | **Amortized**                     |           | **Fair** |   | **Amortized** |   | **Fair** |   |
|                                                  |   | **Cost**                          |           | **Value** |   | **Cost** |   | **Value** |   |
| **Amounts                maturing in:**               |   |                              |           |   |   |   |   |   |   |   |   |   |   |
| **One                year or less**                   |   | **$**                             | **1,080,415**  |   | **$** | **1,083,317** |   | **$ ** | ** ** | ** ** | **$** |   | ** ** |
| **After                one year through five years**  |   |                              | **7,601,614**  |   |   | **7,821,535** |   |   |   |   |   |   |   |
| **After                five years through ten years** |   |                              | **1,443,678**  |   |   | **1,437,628** |   |   |   |   |   |   |   |
| **After                ten years**                    |   |                              | **2,161,558**  |   |   | **2,185,211** |   |   |   |   |   |   |   |
| **Equity                securities**                  |   |                              |           |   |   |   |   |   | **234,106** |   |   | **277,876** |   |
|                                                  |   |                              |           |   |   |   |   |   |   |   |   |   |   |
|                                                  |   | **$**                             | **12,287,265** |   | **$** | **12,527,691** |   | **$** | **234,106** |   | **$** | **277,876** |   |

|                                                  |   | **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** |   |

|   | **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                2008, the Bank sold securities available-for-sale for total proceeds                of                $4,811 resulting in gross realized gains of $ -0-. During 2007, the                Bank                sold securities available-for-sale for total proceeds of $457,596                resulting in gross realized gains of                $450,737.** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2008 AND 2007 **

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

|   | **Information                pertaining to securities with gross unrealized losses at March 31,                2008                and 2007, 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, 2008**                              |   | **Value**                              |                             | **Losses**                              |   | **Value**                  |   | **Losses** |   | **Value** |   | **Losses** |   |
|                                                           |   |                                   |                             |                                    |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Federal                Home Loan Bank Bonds**                |   | **$**                                  |                                  |                                    | **$**  |                            |   | **$** |  |   | **$** |  |   | **$** |  |   | **$** |   |   |
| **Federal                Farm Credit Bonds**                   |   |                                   |                             |                                    |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Federal                National Mortgage Association Bonds** |   |                                   |                             |                                    |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Federal                Home Loan Mortgage Corporation**      |   |                                   |                             |                                    |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                           |   |                                   |                        |                                    |   |                  |   |   |    |   |   |    |   |   |    |   |   |    |   |
|                                                           |   |                                   | **-0-**                          |                                    |   | **-0-**                    |   |   | **-0-** |   |   | **-0-** |   |   | **-0-** |   |   | **-0-** |   |
|                                                           |   |                                   |                        |                                    |   |                  |   |   |    |   |   |    |   |   |    |   |   |    |   |
| **Mortgage-Backed                Securities:**                 |   |                                   |                             |                                    |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Federal                Home Loan Mortgage Corporation**      |   |                                   |                             |                                    |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Federal                National Mortgage Corporation**       |   |                                   |                             |                                    |   |                       |   |   | **916,835** |   |   | **(9,284** | **)** |   | **916,835** |   |   | **(9,284** | **)** |
| **Government                National Mortgage Association**    |   |                                   | **83,369**                       |                                    |   | **(1,022**                 | **)**  |   | **8,223** |   |   | **(139** | **)** |   | **91,592** |   |   | **(1,161** | **)** |
|                                                           |   |                                   |                   |                                    |   |                  |   |   |    |   |   |    |   |   |    |   |   |    |   |
|                                                      |   |                                   | **83,369**                       |                                    |   | **(1,022**                 | **)**  |   | **925,058** |   |   | **(9,423** | **)** |   | **1,008,427** |   |   | **(10,445** | **)** |
|                                                           |   |                                   |                        |                                    |   |                  |   |   |    |   |   |    |   |   |    |   |   |    |   |
| **Mutual                Fund Shares**                          |   |                                   | **  **                 |                                    |   | **  **           |   |   | **  ** |   |   | **  ** |   |   | **  ** |   |   | **  ** |   |
|                                                           |   |                                   |                        |                                    |   |                  |   |   |    |   |   |    |   |   |    |   |   |    |   |
| **Total**                                                      |   | **$**                                  | **83,369**                       |                                    | **$**  | **(1,022**                 | **)**  | **$** | **925,058** |   | **$** | **(9,423** | **) ** | **$** | **1,008,427** |   | **$** | **(10,445** | **)** |

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2008 AND 2007 **

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

|                                                           |   | **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** | **)** |

**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, 2008, the three debt securities with unrealized losses                have                depreciated 0.07% 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 $607,000 and $712,000 at March 31, 2008 and 2007, respectively,      to      the New Jersey Commissioner of Banking and Insurance under the provisions of      the      Government Unit Deposit Protection Act that enables the Bank to act as a public      depository. **

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2008 AND 2007 **

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

**Loans      at March 31, 2008 and 2007 are summarized as follows:**

|                                                  |   | **March                31,** |           |
|-------------------------------------------------------|--------|------------------------------|----------------|
|                                                  |   | **2008**                     |           | **2007** |   |
|                                                  |   |                         |           |   |   |
| **Residential                (one to four family)**   |   | **$**                        | **37,183,231** |   | **$** | **24,112,328** |   |
| **Multi-family                and commercial**        |   |                         | **23,973,905** |   |   | **12,680,440** |   |
| **Commercial**                                        |   |                         | **8,214,750**  |   |   | **15,124,054** |   |
| **Home                equity**                        |   |                         | **20,286,074** |   |   | **22,670,378** |   |
| **Consumer**                                          |   |                         | **6,090,431**  |   |   | **1,396,012** |   |
| **Construction**                                      |   |                         | **3,121,003**  |   |   | **2,061,150** |   |
|                                                  |   |                         |           |   |   |   |   |
|                                                  |   |                         | **98,869,394** |   |   | **78,044,362** |   |
|                                                  |   |                         |           |   |   |   |   |
| **Loans                in process**                   |   |                         | **(1,032,036** | **)** |   | **(916,542** | **)** |
| **Net                deferred loan origination fees** |   |                         | **(138,364**   | **)** |   | **(137,633** | **)** |
| **Allowance                for loan losses**          |   |                         | **(1,353,467** | **)** |   | **(492,448** | **)** |
|                                                  |   |                         |           |   |   |   |   |
|                                                  |   |                         | **(2,523,867** | **)** |   | **(1,546,623** | **)** |
|                                                  |   |                         |           |   |   |   |   |
| **Loans,                net**                         |   | **$**                        | **96,345,527** |   | **$** | **76,497,739** |   |

**An      analysis of the allowance for loan losses at March 31, 2008 and 2007 is as      follows:**

|                                          |   | **March                31,** |          |
|-----------------------------------------------|--------|------------------------------|---------------|
|                                          |   | **2008**                     |          | **2007** |   |
|                                          |   |                         |          |   |   |
| **Balance,                beginning of year** |   | **$**                        | **492,448**   |   | **$** | **237,448** |   |
| **Loans                charged-off**          |   |                         | **(592,881**  | **)** |   | **0** |   |
| **Recoveries**                                |   |                         | **3,900**     |   |   | **0** |   |
| **Provision                for losses**       |   |                         | **1,450,000** |   |   | **255,000** |   |
| **Balance,                end of year**       |   | **$**                        | **1,353,467** |   | **$** | **492,448** |   |

|   | **At                March 31, 2008 and 2007, there were $1,761,194 and $562,897 of loans                that                were ninety days or more past due, and still accruing                interest.** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **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, 2008 AND 2007 **

| **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,** |          |
|-----------------------------------------------|--------|------------------------------|---------------|
|                                          |   | **2008**                     |          | **2007** |   |
|                                          |   |                         |          |   |   |
| **Balance,                beginning of year** |   | **$**                        | **997,099**   |   | **$** | **1,229,201** |   |
| **Payments**                                  |   |                         | **(580,239**  | **)** |   | **(445,186** | **)** |
| **Borrowings**                                |   |                         | **1,180,333** |   |   | **213,084** |   |
|                                          |   |                         |          |   |   |   |   |
| **Balance,                end of year**       |   | **$**                        | **1,597,193** |   | **$** | **997,099** |   |

**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, 2008 and 2007 are summarized as                follows:** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                          |   | **March                31,** |        |
|---------------------------------------------------------------|--------|------------------------------|-------------|
|                                                          |   | **2008**                     |        | **2007** |   |
|                                                          |   |                         |        |   |   |
| **Mortgage                Loan Servicing Portfolio:**         |   |                         |        |   |   |   |   |
| **Mortgage                Partnership Finance FHLB New York** |   | **$**                        | **443,494** |   | **$** | **3,236,246** |   |

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

|   | **Accrued                interest receivable at March 31, 2008 and 2007 consists of the                following:** |
|--------|---------------------------------------------------------------------------------------------------------------------|

|                                          |   | **March                31,** |        |
|-----------------------------------------------|--------|------------------------------|-------------|
|                                          |   | **2008**                     |        | **2007** |   |
|                                          |   |                         |        |   |   |
| **Loans**                                     |   | **$**                        | **500,882** |   | **$** | **339,347** |   |
| **Investment                securities**      |   |                         | **59,446**  |   |   | **35,497** |   |
| **Mortgage                backed securities** |   |                         | **39,186**  |   |   | **51,028** |   |
|                                          |   |                         |        |   |   |   |   |
|                                          |   | **$**                        | **599,514** |   | **$** | **425,872** |   |

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2008 AND 2007 **

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

|   | **Premises                and equipment at March 31, 2008 and 2007 consists of the                following:** |
|--------|----------------------------------------------------------------------------------------------------------------|

|                                                 |   | **March                31,** |           |
|------------------------------------------------------|--------|------------------------------|----------------|
| ** **                                           |   | **2008**                     |           | **2007** |   |
| ** **                                           |   | ** **                   |           | ** ** |   |
| **Land**                                             |   | **$**                        | **1,380,609**  |   | **$** | **1,361,165** |   |
| **Buildings**                                        |   |                         | **6,794,418**  |   |   | **6,793,746** |   |
| **Furniture,                fixtures and equipment** |   |                         | **1,776,410**  |   |   | **1,766,003** |   |
| ** **                                           |   |                         | **9,951,437**  |   |   | **9,920,914** |   |
| **Accumulated                depreciation**          |   |                         | **(1,821,755** | **)** |   | **(1,498,457** | **)** |
| ** **                                           |   |                         |           |   |   |   |   |
| ** **                                           |   | **$**                        | **8,129,682**  |   | **$** | **8,422,457** |   |

|   | **Depreciation                expense amounted to $323,298 and $222,816 for the years ended March                31,                2008 and 2007,                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, 2008 and 2007 are summarized as                follows:** |
|--------|------------------------------------------------------------------------------------------------------------------|

|                                                  |   | **March 31, 2008** |            |
|-------------------------------------------------------|--------|------------------------------|-----------------|
| ** **                                            |   | **Amount**                   |            | **Weighted Average Interest Rate** |   | **Percent of Portfolio** |   |
| ** **                                            |   | ** **                   |            | ** ** |   | ** ** |   |
| **Non                interest bearing accounts**      |   | **$**                        | **4,860,365**   |   |   |   |   |   | **4.13** |   |
| **Interest                bearing checking accounts** |   |                         | **7,839,099**   |   |   | **0.37** |   |   | **6.66** |   |
| **Passbook                savings accounts**          |   |                         | **11,632,618**  |   |   | **0.5** |   |   | **9.89** |   |
| **Money                Market accounts**              |   |                         | **23,584,296**  |   |   | **2.73** |   |   | **20.05** |   |
| **Club                accounts**                      |   |                         | **151,847**     |   |   | **0.5** |   |   | **0.13** |   |
| ** **                                            |   |                         | **48,068,225**  |   |   |   |   |   | **40.86** |   |
| ** **                                            |   |                         |            |   |   |   |   |   |   |   |
| **Certificates                of Deposits:**          |   |                         |            |   |   |   |   |   |   |   |
| **3.00%                to 3.99%**                     |   |                         | **4,229,375**   |   |   | **3.73** |   |   | **3.59** |   |
| **4.00%                to 4.99%**                     |   |                         | **35,444,079**  |   |   | **4.24** |   |   | **30.13** |   |
| **5.00%                to 5.99%**                     |   |                         | **29,898,394**  |   |   | **5.41** |   |   | **25.42** |   |
| ** **                                            |   |                         | **69,571,848**  |   |   |   |   |   | **59.14** |   |
| ** **                                            |   |                         |            |   |   |   |   |   |   |   |
| ** **                                            |   | **$**                        | **117,640,073** |   |   |  |   |   | **100.0** | % |

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2008 AND 2007 **

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

|                                                  |   | **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** | **%** |

**The      aggregate amount of certificates of deposits with a minimum denomination of      $100,000 was $15,547,938**
**      and $11,229,952 at March 31, 2008 and 2007, 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, 2008 and 2007                are as                follows:** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------|

|                                   |   | **March                31,** |           |
|----------------------------------------|--------|------------------------------|----------------|
| ** **                             |   | **2008**                     |           | **2007** |   |
| ** **                             |   | ** **                   |           | ** ** |   |
| **2008**                               |   | **$**                        |           |   | **$** | **30,992,815** |   |
| **2009**                               |   |                         | **54,285,686** |   |   | **12,645,173** |   |
| **2010**                               |   |                         | **8,834,214**  |   |   | **5,200,828** |   |
| **2011**                               |   |                         | **2,049,709**  |   |   | **1,165,058** |   |
| **2012**                               |   |                         | **1,124,696**  |   |   | **1,520,031** |   |
| **2013                and thereafter** |   |                         | **3,277,543**  |   |   | **  ** |   |
| ** **                             |   |                         |           |   |   |   |   |
| ** **                             |   | **$**                        | **69,571,848** |   | **$** | **51,523,905** |   |

**The      Bank held deposits from officers, directors and employees of approximately      $800,000 **
**and      $1,007,000 at March 31, 2008 and 2007, 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, 2008 AND 2007 **

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

|   | **As                of March 31, 2008, the Bank had a borrowing capacity in a combination                of                term advances and overnight borrowings of up to $5,099,000 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 $5,228,117 at March 31,                2008.** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **As                of March 31, 2008 and 2007, 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, 2008 and 2007 consists of the                following:** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                     |   | **Years                Ended** |         |
|----------------------------------------------------------|--------|--------------------------------|--------------|
| ** **                                               |   | **March                31,**   |         |
| ** **                                               |   | **2008**                       |         | **2007** |   |
| ** **                                               |   | ** **                     |         | ** ** |   |
| **Income                Tax Expense (benefit)**          |   |                           |         |   |   |   |   |
| **Current                federal tax expense (benefit)** |   |                           |         |   |   |   |   |
| **Federal**                                              |   | **$**                          | **(199,185** | **)** | **$** | **(52,700** | **)** |
| **State**                                                |   |                           | **2,500**    |   |   | **2,500** |   |
| **Deferred                tax (benefit)**                |   |                           |         |   |   |   |   |
| **Federal**                                              |   |                           | **(121,000** | **)** |   | **(37,262** | **)** |
| **State**                                                |   |                           | **(34,909**  | **)** |   | **(21,522** | **)** |
| ** **                                               |   |                           |         |   |   |   |   |
| ** **                                               |   | **$**                          | **(352,594** | **)** | **$** | **(108,984** | **)** |

|   | **The                consolidated provision for federal income taxes for the years ended                March                31, 2008 and 2007 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,**   |         |
| ** **                                                              |   | **2008**                       |         | **2007** |   |
| ** **                                                              |   | ** **                     |         | ** ** |   |
| **Expected                federal tax provision (benefit) at 34% rate** |   | **$**                          | **(482,578** | **)** | **$** | **(89,826** | **)** |
| **State                income tax effect**                              |   |                           | **69,393**   |   |   | **6,467** |   |
| **Bank                owned life insurance**                            |   |                           |         |   |   | **(3,543** | **)** |
| **Dividend                deduction**                                   |   |                           |         |   |   | **(3,045** | **)** |
| **Other                items, net**                                     |   |                           |         |   |   | **(15** | **)** |
| **Deferred                tax adjustments**                             |   |                           | **93,000**   |   |   | **  ** |   |
| ** **                                                              |   |                           |         |   |   |   |   |
| **Federal                income tax (benefit)**                         |   | **$**                          | **(320,185** | **)** | **$** | **(89,962** | **)** |
| ** **                                                              |   |                           |         |   |   |   |   |
| **Effective                tax rate (benefit)**                         |   |                           | **(22.5**    | **)% ** |   | **(34.0** | **)%** |

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2008 AND 2007 **

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

|   | **A                summary of deferred tax assets and liabilities as of March 31, 2008                and                2007 are as follows:** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                  |   | **March                31,** |         |
|-----------------------------------------------------------------------|--------|------------------------------|--------------|
| ** **                                                            |   | **2008**                     |         | **2007** |   |
| **Deferred                tax assets:**                               |   |                         |         |   |   |   |   |
| **Allowance                for loan losses**                          |   | **$**                        | **441,100**  |   | **$** | **106,000** |   |
| **Deferred                loan fees**                                 |   |                         | **200**      |   |   | **200** |   |
| **Directors’                benefit plans**                     |   |                         | **68,000**   |   |   | **58,400** |   |
| **Accrued                retirement plan**                            |   |                         | **38,000**   |   |   | **43,200** |   |
| **Accrued                pension costs**                              |   |                         | **11,400**   |   |   | **6,700** |   |
| **FASB                158 – unrecognized transition costs**     |   |                         | **42,800**   |   |   | **42,800** |   |
| **Unrealized                losses on securities available-for-sale** |   |                         |         |   |   | **16,400** |   |
| **Accrued                post retirement medical plan**               |   |                         | **26,400**   |   |   | **33,300** |   |
| ** **                                                            |   |                         | **627,900**  |   |   | **307,000** |   |
| **Less:                Valuation allowance**                          |   |                         | **(120,000** | **)**  |   | ** ** |   |
| ** **                                                            |   |                         |         |   |   |   |   |
| **Total                deferred tax assets**                          |   | **$**                        | **507,900**  |   | **$** | **307,000** |   |
| ** **                                                            |   |                         |         |   |   |   |   |
| **Deferred                tax liabilities:**                          |   |                         |         |   |   |   |   |
| **Accumulated                depreciation**                           |   | **$**                        | **(95,400**  | **)** | **$** | **(66,900** | **)** |
| **Unrealized                gains on securities available-for-sale**  |   |                         | **(17,500**  | **)** |   |   |   |
| ** **                                                            |   |                         |         |   |   | **  ** |   |
| **Total                deferred tax liabilities**                     |   | **$**                        | **(112,900** | **)** | **$** | **(66,900** | **)**  |
| ** **                                                            |   |                         |         |   |   |   |   |
| **NET                DEFERRED TAX ASSETS**                            |   | **$**                        | **395,000**  |   | **$** | **240,100** |   |

|   | **The                Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in                Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”) on                April 1, 2007. FIN 48 clarifies the accounting and reporting for                income                taxes where interpretation of the tax law may be uncertain. FIN 48                prescribes a comprehensive model for the financial statement recognition,                measurement, presentation and disclosure of income tax uncertainties                with                respect to positions taken or expected to be taken in income tax                returns.** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **As                of April 1, 2007 and March 31, 2008, the Company had no material                unrecognized tax benefits or accrued interest and penalties. The                Company’s                policy is to account for interest as a component of interest expense                and                penalties as a component of other expense. Tax years 2004 through                2007                remain subject to examination by Federal and New Jersey taxing                authorities.** |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**The        Company believes that it is more likely than not that the deferred tax assets,        net of a valuation allowance, will be realized through taxable earnings or        alternative tax strategies. The ultimate realization of deferred tax assets        is        dependent upon the generation of future taxable income during periods in        which        those temporary differences become deductible. Based on the level of historical        taxable income and projections for future taxable income over the periods        in        which the deferred tax assets are deductible; the Company believes the net        deferred tax assets are more likely than not to be        realized.**

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2008 AND 2007 **

| **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 $ -0- **
**and      $61,100 for the years ended March 31, 2008 and 2007,      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 as of March 31, 2008 and 2007 and                is                reflected on the consolidated statement of financial position as                Bank-owned life insurance.** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **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.** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **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.** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Net      pension expense was $38,124 and $30,512 for years ended March 31, 2008 and      2007,      respectively. The components of net pension cost are as      follows:**

|                                             |   | **Years                Ended March 31,** |       |
|--------------------------------------------------|--------|------------------------------------------|------------|
| ** **                                       |   | **2008**                                 |       | **2007** |   |
| ** **                                       |   | ** **                               |       | ** ** |   |
| **Service                cost**                  |   | **$**                                    | **7,348**  |   | **$** | **6,904** |   |
| **Interest                cost**                 |   |                                     | **15,584** |   |   | **10,580** |   |
| **Return                on assets**              |   |                                     | **-0-**    |   |   | **-0-** |   |
| **Net                amortization and deferral** |   |                                     | **15,192** |   |   | **13,028** |   |
| ** **                                       |   |                                     |       |   |   |   |   |
| **Net                periodic pension cost**     |   | **$**                                    | **38,124** |   | **$** | **30,512** |   |

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2008 AND 2007 **

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

**The          following table presents a reconciliation of the funded status of the defined          benefit pension plan at **
****March          31, 2008 and 2007:****

|                                                     |   | **March                31,** |        |
|----------------------------------------------------------|--------|------------------------------|-------------|
| ** **                                               |   | **2008**                     |        | **2007** |   |
| ** **                                               |   | ** **                   |        | ** ** |   |
| **Accumulated                benefit obligation**        |   | **$**                        | **248,935** |   | **$** | **226,268** |   |
| **Projected                benefit obligation**          |   |                         | **277,853** |   |   | **253,099** |   |
| **Fair                value of plan assets**             |   |                         | **-0-**     |   |   | **-0-** |   |
| **Unfunded                projected benefit obligation** |   |                         | **277,853** |   |   | **253,099** |   |

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

|                                                                 |   | **March                31,** |        |
|----------------------------------------------------------------------|--------|------------------------------|-------------|
| ** **                                                           |   | **2008**                     |        | **2007** |   |
| **Change                in Benefit Obligation**                      |   |                         |        |   |   |   |   |
| **Projected                benefit obligation at beginning of year** |   | **$**                        | **253,099** |   | **$** | **180,100** |   |
| **Service                cost**                                      |   |                         | **7,348**   |   |   | **6,904** |   |
| **Interest                cost**                                     |   |                         | **15,584**  |   |   | **10,580** |   |
| **Actuarial                (gain) loss**                             |   |                         | **6,653**   |   |   | **55,515** |   |
| **Benefits                paid**                                     |   |                         | **(4,831**  | **)** |   | **-0-** |   |
| **Benefit                obligation at end of year**                 |   | **$**                        | **277,853** |   | **$** | **253,099** |   |
| ** **                                                           |   |                         |        |   |   |   |   |
| **Change                in Assets**                                  |   |                         |        |   |   |   |   |
| **Fair                value of assets at beginning of year**         |   |                         | **-0-**     |   |   | **-0-** |   |
| **Actual                return on assets**                           |   |                         | **-0-**     |   |   | **-0-** |   |
| **Employer                contribution**                             |   |                         | **4,831**   |   |   | **-0-** |   |
| **Benefits                paid**                                     |   |                         | **(4,831**  | **)** |   | **-0-** |   |
| **Fair                value of assets at end of year**               |   |                         | **-0-**     |   |   | **-0-** |   |

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

|                                                                                                    |   | **Years                Ended March 31,** |     |
|---------------------------------------------------------------------------------------------------------|--------|------------------------------------------|----------|
| ** **                                                                                              |   | **2008**                                 |     | **2007** |   |
| ** **                                                                                              |   | ** **                               |     | ** ** |   |
| **Discount                rate for periodic pension cost**                                              |   |                                     | **6.75** | **%** |   | **6.25** | **%** |
| **Discount                rate for benefit obligation**                                                 |   |                                     | **3.50** | **%** |   | **3.50** | **%** |
| **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”).** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2008 AND 2007 **

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

|   | **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 years ended March 31,                2008 and 2007, expense related to this plan was $1,000 and $-0-,                respectively.** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**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:** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **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.** |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2008 AND 2007 **

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

|   | **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.** |
|--------|--------------------------------------------------------------------------------------------------|

|   | **Off-balance                sheet instruments** |
|--------|--------------------------------------------------|

|   | **Off-balance                sheet instruments are primarily comprised of loan commitments and                unfunded                lines of credit which are generally priced at market rate at the                time of                funding. Therefore, these instruments have nominal value prior to                funding.** |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **The                estimated fair values of the Bank's financial instruments as of March                31,                2008 and 2007 are as                follows:** |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                        |   | **March                31, 2008** |            | **March                31, 2007** |   |
|-----------------------------------------------------------------------------|--------|-----------------------------------|-----------------|-----------------------------------|--------|
| ** **                                                                  |   | **Carrying**                      |            | **Fair**                          |   | **Carrying** |   | **Fair** |   |
| ** **                                                                  |   | **Amount**                        |            | **Value**                         |   | **Amount** |   | **Value** |   |
| ** **                                                                  |   | ** **                        |            | ** **                        |   | ** ** |   | ** ** |   |
| **Financial                Assets:**                                        |   |                              |            |                              |   |   |   |   |   |   |   |   |   |
| **Cash                and cash equivalents**                                |   | **$**                             | **12,679,133**  |                              | **$**  | **12,679,133** |   | **$** | **8,676,380** |   | **$** | **8,676,380** |   |
| **Investment                securities**                                    |   |                              | **12,521,371**  |                              |   | **12,805,567** |   |   | **16,034,118** |   |   | **16,005,033** |   |
| **Loans                - net**                                              |   |                              | **96,345,527**  |                              |   | **99,189,000** |   |   | **76,497,739** |   |   | **76,599,000** |   |
| **FHLB                bank stock**                                          |   |                              | **139,100**     |                              |   | **139,100** |   |   | **102,700** |   |   | **102,700** |   |
| **Accrued                  interest** **receivable**                   |   |                              | **599,514**     |                              |   | **599,514** |   |   | **425,872** |   |   | **425,872** |   |
| ** **                                                                  |   |                              |            |                              |   |   |   |   |   |   |   |   |   |
| **Total                financial assets**                                   |   | **$**                             | **122,284,645** |                              | **$**  | **125,412,314** |   | **$** | **101,736,809** |   | **$** | **101,808,985** |   |
| ** **                                                                  |   |                              |            |                              |   |   |   |   |   |   |   |   |   |
| **Financial                Liabilities:**                                   |   |                              |            |                              |   |   |   |   |   |   |   |   |   |
| **Deposits**                                                                |   |                              | **117,640,073** |                              |   | **119,520,000** |   |   | **95,989,275** |   |   | **96,026,000** |   |
| **Advance                payments by borrowers for taxes and****insurance** |   |                              | **290,864**     |                              |   | **290,864** |   |   | **260,262** |   |   | **260,262** |   |
| **FHLB                advances**                                            |   |                              |            |                              |   |   |   |   |   |   |   |   |   |
| **Accrued                interest payable**                                 |   |                              | **299,418**     |                              |   | **299,418** |   |   | **349,178** |   |   | **349,178** |   |
| ** **                                                                  |   |                              |            |                              |   |   |   |   |   |   |   |   |   |
| **Total                financial liabilities**                              |   | **$**                             | **118,230,355** |                              | **$**  | **120,110,282** |   | **$** | **96,598,715** |   | **$** | **96,635,440** |   |

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2008 AND 2007 **

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

|                                              |   | **Contract                Value** |    | **Estimated                Fair Value** |   | **Contract                Value** |   | **Estimated                Fair Value** |           |
|---------------------------------------------------|--------|-----------------------------------|---------|-----------------------------------------|--------|-----------------------------------|--------|-----------------------------------------|----------------|
| **Off-balance                sheet instruments:** |   |                              |    |                                    |   |                              |   |                                    |           |   |   |   |   |
| **Commitments                to extend credit**   |   | **$**                             | **-0-** |                                    | **$**  | **-0-**                           |   | **$**                                   | **14,531,000** |   | **$** | **-0-** |   |

**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, 2008, the Bank met all capital adequacy                requirements to which it was                subject.** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
|   | **As                of March 31, 2008, 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, 2008 AND 2007 **

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

**The      Bank’s actual and required capital amounts and ratios as of March 31, 2008 and      2007 are as follows:**

|                                                                  |   |                     |           |                                 |   | **For                Capital Adequacy Purposes and to Be Adequately Capitalized                Under the Prompt Corrective** |                    |
|-----------------------------------------------------------------------|--------|--------------------------|----------------|--------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------|-------------------------|
| ** **                                                            |   | ****Actual****** ** |           | **Action                Provisions** |   |
| ** **                                                            |   | **Amount**               |           | **Ratio**                            |   | **Amount**                                                                                                                   |                    | **Ratio** |   |
| **As                of March 31, 2008:**                              |   |                     |           |                                 |   |                                                                                                                         |                    |   |   |   |   |  |   |
| **Total                Risk-Based Capital (to Risk-Weighted Assets)** |   | **$**                    | **10,924,000** |                                 |   | **9.46**                                                                                                                     | **%   ** | **≥$** | **9,235,700** |   | **≥** | **8.0** | % |
| **Tier                I Capital (to Risk-Weighted Assets)**           |   |                     | **9,571,000**  |                                 |   | **8.29**                                                                                                                     | **%**                   | **≥** | **4,617,800** |   | **≥** | **4.0** | **%** |
| **Tier                I Capital (to Adjusted Total Assets)**          |   |                     | **9,571,000**  |                                 |   | **7.29**                                                                                                                     | **%**                   | **≥** | **5,249,700** |   | **≥** | **4.0** | **%** |
| **Tangible                Capital (to Adjusted Total Assets)**        |   |                     | **9,571,000**  |                                 |   | **7.29**                                                                                                                     | **%**                   | **≥** | **1,968,600** |   | **≥** | **1.5** | **%** |
| ** **                                                            |   |                     |           |                                 |   |                                                                                                                         |                    |   |   |   |   |   |   |
| **As                of March 31, 2007:**                              |   |                     |           |                                 |   |                                                                                                                         |                    |   |   |   |   |   |   |
| **Total                Risk-Based Capital (to Risk-Weighted Assets)** |   | **$**                    | **11,218,000** |                                 |   | **13.62**                                                                                                                    | **%**                   | **≥$** | **6,589,000** |   | **≥** | **8.0** | **%** |
| **Tier                I Capital (to Risk-Weighted Assets)**           |   |                     | **10,726,000** |                                 |   | **13.02**                                                                                                                    | **%**                   | **≥** | **3,294,500** |   | **≥** | **4.0** | **%** |
| **Tier                I Capital (to Adjusted Total Assets)**          |   |                     | **10,726,000** |                                 |   | **9.66**                                                                                                                     | **%**                   | **≥** | **4,444,500** |   | **≥** | **4.0** | **%** |
| **Tangible                Capital (to Adjusted Total Assets)**        |   |                     | **10,726,000** |                                 |   | **9.66**                                                                                                                     | **%**                   | **≥** | **1,666,700** |   | **≥** | **1.5** | **%** |

|   | **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.** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**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 did not have any outstanding commitments to originate loans                as of                March 31, 2008.** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2008 AND 2007 **

**18.**
**COMMITMENTS      AND CONTINGENCIES (Continued)**

**The      Bank had outstanding commitments to originate loans as of March 31, 2007 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** |   |

**Unadvanced      funds as of March 31, 2008 and 2007 are as follows:**

|                                                 |   | **March                31,** |          |
|------------------------------------------------------|--------|------------------------------|---------------|
| ** **                                           |   | **2008**                     |          | **2007** |   |
| ** **                                           |   | ** **                   |          | ** ** |   |
| **Home                equity line of credit**        |   | **$**                        | **5,812,000** |   | **$** | **3,720,000** |   |
| **Commercial**                                       |   |                         | **1,653,000** |   |   | **1,533,000** |   |
| **Consumer                unsecured line of credit** |   |                         | **361,000**   |   |   | **316,000** |   |
| ** **                                           |   |                         |          |   |   |   |   |
| ** **                                           |   | **$**                        | **7,826,000** |   | **$** | **5,569,000** |   |

|   | **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.** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**19.**
**SUPERVISORY      AGREEMENT**

**On      December 17, 2007, Delanco Federal Savings Bank entered into a Supervisory      Agreement with the OTS. The entry into the Supervisory Agreement was based      on      the Bank’s 2007 report of examination in which the OTS concluded that grounds      existed for the initiation of administrative proceedings against the Bank.      Without admitting or denying that such grounds existed, the Bank determined      to      enter into the Supervisory Agreement to cooperate with the OTS and as evidence      of the Bank’s intent to comply with all applicable laws and regulations and      engage in safe and sound practices.**

**Pursuant      to the terms of Supervisory Agreement, the Bank agreed as      follows:**

|  | · | **To                refrain from making, investing in, purchasing or otherwise modifying                any                commercial loan without the prior** **written non-objection of the                OTS.** |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | **By                December 31, 2007, to review each commercial loan file with an outstanding                principal balance that equals or exceeds $250,000, and by February                29,                2008 for all other commercial loans, to determine whether all required                documentation has been obtained. All missing or incomplete documentation                must be obtained by January 31, 2008 for all commercial loans with                an                outstanding balance that equals or exceeds $250,000 and by February                29,                2008 for all other commercial                loans.** |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | **By                January 31, 2008, to implement a credit administration process utilizing                an electronic system and checklists to facilitate ongoing reviews                of the                financial condition of borrowers and                guarantors.** |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DELANCO      BANCORP, INC. AND SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH      31, 2008 AND 2007 **

**19.**
**SUPERVISORY      AGREEMENT (Continued)**

|  | · | **To                evaluate, on a semiannual basis, the effectiveness of the Bank’s credit                administration function.** |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | **To                engage an independent, third-party service provider to conduct an                internal                loan review of the Bank’s lending operations on a quarterly basis. As part                of the internal loan review program, the Bank must develop and implement                a                risk rating system for all loans. On a quarterly basis, the Board’s Audit                Committee must provide the Board with, and the Board must review                and                evaluate, a written report documenting the findings and recommendations                relating to the internal loan                reviews.** |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | **By                December 31, 2007, to adopt and implement a written program which                satisfies certain OTS regulations and interagency guidelines regarding                the                identification and classification of problem assets. The program                must (i)                provide for and require the maintenance of an adequate allowance                for loan                and lease losses; (ii) ensure the prompt charge-off of loans when                proper;                and (iii) require the timely and accurate reporting of criticized                assets,                the allowance for loan and lease losses and charge-offs in the Bank’s                Thrift Financial Reports                (TFRs).** |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | **To                prepare TFRs accurately and in accordance with applicable                instructions.** |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

|   | · | **To                ensure that at the end of each quarter, the Bank’s assets have not                increased by an amount greater than 2.5% of the Bank’s total assets at the                end of the prior quarter.** |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | **To                notify and receive the non-objection of the OTS before adding or                replacing                any Board member, employing any person as a senior executive officer                or                entering into or revising any contractual arrangement with any director                or                senior executive officer.** |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**The      Supervisory Agreement will remain in effect until terminated, modified, or      suspended in writing by the OTS.**

----